Not All That Glitters is Gold



So many people got so upset about the recent coaching change. While there are still a few who inexplicably don’t understand why Giampaolo needed to be sacked, more fans were simply disappointed that a “better” coach than Pioli wasn’t appointed. Far more shocking, though was Milan’s balance sheet that was just released yesterday. A disappointing number of people think that just because we are owned by a hedge fund worth $35 billion means that Milan have no money problems. But the news yesterday demonstrated that not all that glitters is gold.

He asked for time, but with a €4m salary, he should have done something last year

There are a lot of misconceptions going around and a lot of people painting images of Milan's finances one way or the other with those misconceptions. No, Milan are not going bankrupt. They would have with Yonghong Li, had Elliott Management not stepped in. In fact, Elliott has invested about €325m so far in Milan, and is firmly still backing the club. In doing so, Milan have no debts with the banks, which is incredibly rare in football, especially in Serie A. Also, the club’s consolidated shareholder’s equity has actually increased from -€36m in June of 2018 to €83.3m in June of this year. That is all very positive.

The shocking part for many is the negative €146m on Milan’s balance sheet ending June 30, 2019. As a separate issue to previous debts and also Elliott’s capital increases, this means that Milan spent €146m more than they brought in for the 2018-19 season. That is €20m more in the red than the Yonghong Li year in 2017-18, and is a record annual loss for the club. More shocking is that there were estimates at the end of the summer that the loss would only be about €90m, so this truly surprised most everyone.

Thank goodness for our sugar-daddy-vulture-fund-owning Paul Singer

The figure is absolutely staggering for some. Many clubs would have to incur new debt to pay that amount. For Milan, however, the big concern with that figure is FFP. UEFA’s concern is not how much your sugar daddy owner has in his bank account, but rather that your club is being run in a fiscally sound way: clubs should bring in as much as they spend. After making a deal with UEFA to clean our FFP slate and give up the Europa League this season, there is still a chance they would give Elliott a settlement agreement for this egregious loss. But given the way they treated Milan in the past, and how concerned they were about Milan being owned by a hedge fund, there is also an excellent chance that they will not give us a settlement agreement, and instead we will receive sanctions. So there’s that.

But more disconcerting than a record loss was the fact that operating costs for the club went up 5.1% and revenue dropped 6.1% from the previous year. That means that Ivan Gazidis, a very experienced football executive, did a worse job running Milan last year than the clowns called Fassone and Mirabelli. Think about that for a minute. During the Yonghong Li year of purchasing/loaning €250m worth of players, estimating €90m in new revenue from China, of which none ever came in, and doing basically nothing to get new revenue, Fassone’s numbers were better than Gazidis. That is literally insane.

Snake oil salesmen, overpriced underperforming player, and stupid handshake? Still better numbers than Gazidis

Some of the obvious expenditures people have pointed out were the loan costs of Higuain and Bakayoko, €13.1m alone compared to the loan costs of the prior year. Much of the increase in costs is on infrastructure – improving the training grounds, as well as improving the press room and digital communications (like developing the new app.) But one people are talking less about in the personnel costs are the salaries of Gazidis, Leonardo, and Maldini, which were €9.3m last year. Also not being discussed as much are the costs incurred by Leonardo’s spending on players. He has always liked a blank check and autonomy, and I think being reigned in financially and otherwise is why he left. But it is strange that Gazidis took a salary reportedly 20 times that of Fassone, and yet failed to improve revenue and increased costs.

Like people are wont to do when there is bad news, many are spinning this into a “clean-up” year, spending all at once now to improve future budgets. However, there is little to no evidence that they actually did this. Most of the costs will still be there in this year’s budget, but what will the income look like? Much of the revenue loss was due to not renewing with one sponsor, Telecom. And there were no new sponsors brought in. Sponsors and revenue was the area Milan suffered for years in under Galliani’s reign of terror, why Milan had such debt in the first place. And obviously under Fassone, too, he did nothing to increase revenue. This is the area that they should have targeted first, particularly since the €4m/year earning Gazidis brought his experienced buddies in from England. Gazidis said from the beginning this will take time, meanwhile his Italian speaking colleagues on the other side of Milan have brought in all kinds of new sponsors to their club. But hey, at least we have a new app to tell us how badly the players are playing on the pitch.

Leonardo non vinci earned €3.5m and spent so much more. Good riddance.

Other gross misconceptions include rumors being created in the press that we will have to sell players in January. That doesn’t even make any sense. The loss happened, nothing can change it now. Selling players would bring in temporary one-time income, but cost us more income in the form of growth as a club and qualifying for Europe. The more likely and sustainable sources of new revenue are to have the team qualify for Europe and building a new stadium, which is, gratefully being worked on very hard. Sponsorships will be key into making budget every year, too. Which is why that revenue drop is so scary, because it’s not a good start at all to a foreign marketing team we are paying a lot for.

The news is not all bad. Since the closing of that record loss 2018-19 fiscal year, the squad has been pared down in size and wages, with some bench players with big salaries pushed out. They cut a whopping €25m from the wage bill, and Leonardo leaving opened up €3.5m in wages in management, too. Gattuso also left without taking any wages or severance pay, which was so classy of him to do. Although they took a gamble with Giampaolo and lost, they corrected it with Pioli, who is a sure bet and a cheap one at that. Actually, so far, they have done most of the things they set out to do, well within the timeframe they gave themselves. The team is built to be young and talented, hopefully to grow with Milan and have success. But also, the players were purchased carefully to have a high resale value, too. Fans look at individual errors and results on the pitch, but look again, it’s a good team that they are building. Certainly, it’s the most well-planned and football coherent team we have seen at Milan in years.

"Listen, I didn't find any new revenue, so you're going to have to cut the squad and wage bill"

For me, the big concern is the revenue. Gazidis is not Italian, nor are the chaps he brought in from England. Their previous work was done in the magical marketing world of the Premier League, where you wake up with new sponsors lined up at your door and TV rights monies that teams in Serie A could only dream of. Can they cut it in Italy? Can they figure out the Italian ways of doing business (the legal ones) and bring in the big numbers? Obviously, the stadium will help. We all need some good results on the pitch. And the app, let’s not forget the app. Literally, Gazidis, show me the money. Because not all that glitters is gold.


This post inspired by the music of The Stone Roses’ “Fools Gold”


Our next match is
Serie A Week 8
Milan vs. Lecce
Sunday, October 20 • 20:45 CEST (2:45pm EDT)

Not All That Glitters is Gold Not All That Glitters is Gold Reviewed by Elaine on 4:58 PM Rating: 5
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