The woes of AC Milan

Berlusconi in happier times

At first glance, AC Milan looks to be a club that has it all. Probably, the most successful club of all time as far as titles are to be reckoned. The only other club apart from Liverpool and Real Mardrid to own a Champons League trophy by virtue of having won it 7 times (five or more). This is the club of Sacchi, Ancelotti, Van Basten, Kaka, Sheva and old legends such as Gunner Nordahl and Nils Liedholm.

As far as history is concerned, few can boast of one as rich and proud as Milan can. However, things haven't always been rosy and matters have come to a head in recent times. The story would have to begin in 1980, when the club were relegated to Series B as punishment for their invlovement in the Totonero scandal. They quickly returned but were relegated again the following season due to their poor performances, standing 18th.

This led to huge debts that were absolved when a certain Silvio Berlusconi bought the club in 1986, taking measures such as the appointment of Arrigo Sacchi (we'l come back to this gentleman in another article) and the start of an era of European dominance thanks to the Dutch trio of Rijkaard,Gullitt and Van Basten. The 90's and the new decade passed by with considerable success and brought stability to the club. Indeed, Champions league victories in 1994, 2003 and 2007 would have you believe that all was rosy and the future bright.

Today is a very different story. Despite finishing second to Juventus in the Scudetto, Milan are at a financial crossroads. Berlusconi's initial willingness to plonk down huge sums of money has all but vanished and now the club are paying careful attention to balancing their books.

The financial turnaround can best be seen by the net spend over a certain period.
While Milan spent over €250 million from 1999-2003, their net spend over the next nine years amounts to a profit of a few million, made by selling of Thiago Silva and Ibrahimovic. The days when Milan bought superstars such as Seedorf ($24.35 million), Inzaghi ( £17M), Rui Costa ( £30 million), Nesta ( €30.9M) and others such as Pirlo and Shevchenko. As long as these players stayed at the club, Milan were moderately successful reaching three CL finals in 2003, 2005 and 2007, winning two of them. The rise of Kaka helped to prolong this period even though domestically, Inter's five consecutive titles showed that all was not well. With the retirement of Maldini and sale of Kaka to keep the finances in check, the team became an ageing group of superstars with the only bright spots being Ibrahimovic and Thiago Silva who were sold in this transfer window. With the departure of these two, Nesta, Seedorf and Van Bommel, Milan is horribly short on squad depth and first team quality. One wondered what replacements would be signed, but was left dumbfounded when Pazzini and Bojan Krkic were brought in.

Off To PSG

Even Antonio Cassano opted to join Inter because he felt Milan didn't have a chance of challenging for the title. So, what exactly is the reason for this enforced austerity even at the cost of success ?

Here are some stats that may help:

• Revenue grew by 7% to €234.8 million, but this was matched by a €13.7 million increase in the wage bill to €206.5 million, a record high for Milan(for the fiscal year 2011).

• The last time that the club made money was 2006 and even then the €11.9 million profit was heavily influenced by once-off factors, namely the €40 million profit from selling Andriy Shevchenko to Chelsea and a €27 million once-off payment for an option on future TV right.

• Milan are not the only leading Italian club to find themselves in this situation. Indeed, in 2010/11 the losses were even higher at Juventus (€95.4 million) and Inter (€86.8 million). The big three contributed 89% (€252 million) of the total Serie A losses of €285 million.

• Since 2005 Milan have managed to grow their revenue by just €20 million (9%), which is only ahead of Juventus among leading European clubs. In that period they have been overtaken by Barcelona, Bayern Munich and  Arsenal. Most strikingly, Barcelona’s revenue was €7 million lower than Milan in 2005, but is now far over the horizon at €216 million higher, while the investment in new stadiums at Bayern and Arsenal has really paid  dividends.

• The most glaring revenue weakness for Milan is match day revenue. Even though this is the highest in   Italy at €36 million (ahead of Inter €33 million, Napoli €22 million and Roma €18 million), it is dwarfed by major clubs in other countries, especially England. Chelsea earn more than twice as much €81 million, while Manchester United €130 million and Arsenal €112 million generate around three times Milan’s figure.

• Although Milan have the highest average attendance in Italy of 51,400, this was a 4% reduction from the previous season and means that only 64% of the stadium’s capacity was filled. In fact, Milan’s crowds have dropped         significantly from the 64,500 average achieved in 2002/03. In fairness, this is a generic problem in Italy, where total attendances in Serie A have slumped from 9.4 million in 2008/09 to 8.9 million in 2010/11 (per the  FIGC), despite low ticket prices, due to a combination of obsolete stadiums, poor views and the match fixing cloud.

• The most important challenge for Milan is the wage bill, which rose €14 million in 2011 to a totally unsustainable €206 million. Even though most of this increase was due to higher bonuses for winning the scudetto in 2011, the fact remains that this is the highest wage bill in Milan’s history and the second highest ever for Serie A, only surpassed by the €234 million paid out by Inter in their 2009/10 treble winning season.

Can he replace Ibra??

All these facts sum up the malaise that dogs Milan. It could be said that Germany's successful bid for WC 2006 gave them government funds for new and modern stadiums and ditto will happen for Euro'16 in France. Italy seems bound to be the poorer cousin of all these nations due to a combination of mismanagement and lack of long term planning. However, there are certain bright spots in the shape of Napoli and Juventus who have managed to achieve considerably on a moderate budget and revenue generated from new stadia.

The erosion of world class talent from Milan looks set to continue and even as this is being written, there is hardly a single world class player on the books at Milan. When transfer targets start to include Nicklas Bendtner, you know things have gone downhill for the club that gave us Sheva, Kaka, Maldini and Van Basten.