How important is Inter's reaching the Champions League final for the Nerazzurri? Fans have ended a 13-year long wait, with their home team last appearing in the Champions League 'Bright Top' back in 2010's Treble season. For club owners and management, this season's Champions League fantasy journey has meant a lot of revenue, which has relieved the Nerazzurri with serious financial problems.
Last season, Inter reported a loss of 140 million euros, down from the previous record 245 million in 2020-21, but mainly by two important player sales: Romelu Lukaku and Ashraf. The two stars traveled to London and Paris respectively to stage a tale of two cities, bringing Inter a huge transfer fee of 180 million euros, of which the total profit from the sale included in the financial report exceeded 100 million. The problem is that Inter, even if they sell people every year, are unlikely to expect such input every year, and selling people will inevitably affect the team's immediate combat power on the field. Therefore, it is imperative to be "open source" in other ways.
How do you cut a Champions League cake?
This is Inter's fifth consecutive season in the Champions League. In the 2018-19 season, the team returned to the Champions League for the first time under Spalletti, but ended up in the group after being placed in the group of death, and a similar episode took place in the next two seasons, until Inzaghi Jr. led the team to the knockout stage last season. In the three seasons out of the group, Inter have earned an average of around €53 million a year from the Champions League, up from 62.3 million last season after reaching the last 16.
The Champions League is the most profitable and "generous" football event in the world. Every time you pass a hurdle here, it means a lot of extra income. In the 2022-23 season, UEFA's prize pool for the main stage of the Champions League is a total of 2 billion euros, which can be divided into four small prize pools:
1. Participation in the prize pool: a total of 500 million euros, everyone has a share, and the 32 teams participating in the group stage can share 15.64 million euros, and Inter are no exception.
2. Results pool: a total of 600 million euros, linked to the results of each team in this Champions League.
The value of each group stage is €2.8 million, and the prize money goes to the winner if the winner is divided, and 930,000 in the case of a tie, since the draw prize is less than half of the winning prize, so the total prize money will be left after the draw, and these amounts will be distributed proportionally according to the number of wins won by each team in the group stage. Inter, who have won 3 wins, 1 draw and 2 defeats in the group stage, can receive a prize of 9.33 million euros at this stage.
After reaching the knockout rounds, further rewards are tied to qualification, with the team reaching the quarter-finals receiving €9.6 million, compared to €10.6 million in the quarterfinals. Coming to the semi-finals, the amount rose further to 12.5 million, while both sides received 15.5 million euros in prize money in the final. After reaching the Champions League final against arch-rivals AC Milan, Inter received €48.2 million in promotion prizes.
UEFA also has an additional €4.5 million in prizes for the winner of the Champions League final, and that's not all the winners get – they will also receive a direct ticket to the UEFA Super Cup in August of that year, where the two teams will each receive €3.5 million and the winner will have an additional €1 million, although for most clubs, including Inter, even if they can eventually win the title, the revenue related to the UEFA Super Cup will need to be counted into the next financial year.
3. Historical ranking prize pool: a total of 600 million euros, to be divided according to the team's European performance over the past ten years. Here, UEFA splits the total prize money into smaller portions, each worth 1.137 million euros. The lowest-ranked team in the last 32 in the past decade can only receive one reward, i.e. 1.137 million, while the highest-ranked team can get the most 32 shares, or 36.38 million euros.
Inter suffered a bit in this category. With the team having no European games to play in previous years and having been out of the Champions League group in recent seasons, the Nerazzurri do not have an advantage in the UEFA club standings, only 19th out of 32 teams, so they can only receive 14 bonuses, or 15.93 million euros. Inter may envy Juventus at this point, and although the Bianconeri are out of the Champions League group this season, they can still receive 29 prize money worth 32.99 million euros due to their fourth place in the all-time points table.
4. Market prize pool: €300 million, which will be distributed according to the TV market share of the countries participating in the Champions League, while the countries with multiple teams will divide the prize money among the teams. Among them, half of the amount is distributed according to the league ranking last season, because Serie A has 4 participating teams, the top four in the league can be divided into 8 million, 6 million, 4 million and 2 million euros respectively, Inter, as the runner-up in Serie A last season, received 6 million euros in this area; The other half is divided according to the proportion of the games played by each team in the Champions League, where Inter can receive about 6.3 million euros.
In addition, one factor that has to be taken into account is that Inter, like AC Milan and Juventus, have suffered UEFA's fines for previous violations of UEFA's Financial Fairness Act. Of this, the Nerazzurri have to bear a fine of 4 million euros, while Milan and Juve have a fine of 2 million and 3.5 million respectively, which need to be deducted from the European income of each team this season.
The following table shows the income of the four Serie A teams in the Champions League this season (in euros):
As a result, reaching the final in Istanbul, even without taking into account the possible $4.5 million prize money, already generates a whopping €98.09 million for Inter – which is nearly €36 million higher than the previous 2021-22 season. How important is the big cake of the Champions League for clubs with high costs to operate? FIFA Council member Christillin, who has been in the Italian sports industry for many years and has close ties to Juventus, said in an interview the other day: "Real Madrid's Champions League victory last season brought the team 130 million euros in revenue, compared to Argentina's World Cup win prize money of only 42 million US dollars. ”
A soccer temple full of them
The big cake from UEFA is not all. Inter have reached the finals of both the Champions League and the domestic cup this season, as well as the Italian Super Cup, and Inzaghi Jr.'s side will complete as many as 57 official matches this season! Between 2011 and 2017, the Nerazzurri suffered from a prolonged slump in results, confusion in management and a bleak squad, with an average attendance of around 45,000 in the league. Now, with the results picking up, the San Siro is almost full, the two legs of the Champions League semi-finals are hard to come by, tickets are being hyped up in the secondary market, and even the price of accommodation in Milan City has risen several times on the night of the second leg of the semi-finals – a scenario unimaginable in previous years.
Inter's "home" Champions League semi-final second leg against AC Milan also set a new box office record for a single match in Italian football history: 12.55 million euros. The record was previously set by AC Milan in the first leg of the semi-finals (10.46 million), but the Nerazzurri opted for a more aggressive pricing strategy. Previously, in the Champions League knockout matches against Benfica and Porto, Inter's home box office revenue also reached 8.2 million and 6.76 million respectively, ranking in the top ten in the history of Italian football. Previously, Juve were often full in the Cristiano Ronaldo era, compared to San Siro who could always see empty seats; Nowadays, with Juve's results fluctuating, it is difficult to sell out of 40,000 seats per game, and the huge capacity "football Scala" has a full advantage when it is full.
The box office is high enough in a single game, and there are enough matches - these two factors combined have led to a significant increase in Inter's stadium revenue this season. Between 2011 and 2017, the club's stadium revenue fluctuated between €18 million and €27 million, and with Spalletti finishing in the top four and qualifying for the Champions League in 2017-18, fan enthusiasm was rekindled: Inter's pitch revenue reached €33.77 million that season. In 2019-20, that figure could have reached more than €50 million, but as the last third of the season was delayed due to Covid, the Nerazzurri had to refund money to fans, and stadium revenue ended up stuck at $44.38 million.
Inter's stadium revenue has not returned to pre-pandemic levels due to the overall empty stadium in the 2020-21 season and the fact that stadium attendance in the first half of last season was also controlled by epidemic prevention policies. With the San Siro back this season, Inter are expected to reach around €80 million in matchday revenue, more than double last season's 37.66 million!
Towards the "400 Million Club"
The "excess revenue" achieved in the Champions League fills a huge gap in Inter's sponsorship level this season. On February 28 this year, Inter released its semi-annual report for the 2022-23 financial year, confirming that the main sponsor Digitalbits has not paid a penny of sponsorship fees since last summer, and according to the cooperation agreement between the two parties in September 2021, the blockchain company should have paid the Nerazzurri club in three installments this season, plus bonuses. At the end of last month, Inter finally decided to remove the Digitalbits name from the chest of the first-team shirt, and a breakup between the two sides was inevitable.
In addition, Suning's sponsorship contract for Inter's training base expired last summer, which reduced the club's sponsorship fee by about 5 million euros (2.6 million less in the first half of the year's financial report). Inter, on the other hand, reached a global sponsorship deal with Konami last summer, which in turn meant more than 5 million inputs. At the end of last year, the Nerazzurri also agreed with eBay on a half-year sponsorship + one-year renewal option, which is also around €5 million a year, reflecting an impact of about €2.5 million in the 2022-23 financial year. Despite failing to find a main sponsor to replace Digitalbits in the season, Inter has been effective in sourcing other sponsorship levels, reducing some losses, and the total sponsorship fee this season is expected to be 20 million euros lower than the previous season.
Inter Milan reported a total of 440 million euros in last season's financial report, excluding the gains from the sale of players, net revenue was 335 million euros. As mentioned earlier, Inter have a shortfall of €20 million in sponsorship fees this season, but at the same time, the club has seen an increase of around €42 million in matchday revenue, and the cake from UEFA is 36 million more than in the previous season (not taking into account possible championship bonuses). This means that the Nerazzurri can push revenue above €390 million in 2022-23, approaching the "400 million club" – previously only Juve in the Cristiano Ronaldo era could reach this level of revenue.
What's next for management?
In terms of expenditure, Inter's important signings last summer were mostly free transfers, Onana, Archerby and Mkhitaryan all played a huge role in the team's progress to the Champions League final, Lukaku is a low-cost loan + salary reduction return, his use cost for the club is about 20 million euros a year. Overall, Inter's personnel expenses (salary before tax + depreciation) this season will be about 17 million euros lower than in the previous quarter.
Of course, compared to city rivals AC Milan, the Inter team's salary cap is still much higher, the club's salary structure has not yet reached the ideal model in CEO Marotta's eyes, and the financial costs caused by issuing bonds are quite high. Even so, the rush on the Champions League has given Inter the opportunity to keep deficits below €100 million in the summer without "bleeding" – the Nerazzurri have never had deficits below nine figures since the 2019-20 season.
The improvement of the club's financial situation has another significance for Suning, the capital. In the summer of 2021, Suning borrowed 275 million euros from Oaktree Capital at an annual interest rate of up to 12%, a three-year loan that will mature in a year. However, so far, Suning has not injected all this money into the Nerazzurri coffers, but immediately after the money was credited, they injected 75 million euros into the club in the form of shareholder loans, and used the remaining amount of 22 million euros to clear the cost of sponsoring the Pinetina training center and Inter training uniforms, and then injected a further 10 million euros in the financial year.
Of the €275 million Suning's borrowing, 168 million remain unused — a core asset that will ensure the group's debt repayment next summer and avoid the club's takeover by Oak. Does this mean that Suning wants to continue to hold Inter Milan for a long time? Over the past two years, Nerazzurri investors have bet on the "European Super League" plan and hoped that the rapid landing of the new stadium will provide a boost to the club's valuation, but both expectations have now been disappointed. On the one hand, Inter's business situation has passed the "darkest hour" of two years ago; On the other hand, the club's basic loss of 100 million yuan per year is difficult to fundamentally change under the existing income model and expenditure structure. For Suning, taking advantage of the high position to shoot the club is still an option worth considering.