An Assessment of Football within the Media Industry
The fact that football clubs are classified within the movies and entertainment sector of the larger media industry may come as a surprise to some. Actually there are quite a few diverse industries and companies that fall underneath this GICS classification which is classified as “Companies that engage in producing and selling entertainment products and services”, this includes:
- Distribution and screening of movies and television shows
- Producers and distributors of music
- Entertainment theaters and sports teams
With this in mind, we have conducted a credit assessment of the movies and entertainment sector, using 1,329 corporations. Within this subset, we compared the 99 football clubs to the remaining 1,230 industry peers. The key finding; football teams seem to hold higher credit risk than the remaining movies and entertainment peers. And here are the results.
Key Findings: Football vs. Rest of Movies and Entertainment Sector
- Even though football clubs’ median total revenue of $50 million is five times the size of the movies and entertainment industry’s median of $10 million, as the largest club in the world, Real Madrid’s $766 million revenue pales in comparison to the $48.8 billion revenue of one of the largest movies and entertainment company, The Walt Disney Company (NYSE:DIS).
- Football clubs are a risky business*. Using S&P Capital IQ®’s proprietary model we calculated that the median probability of default (PD) of football clubs is 19.03%, which is mapped to a lower-case credit score of ‘ccc’**. This is over four times higher than the global movies and entertainment industry median of 3.69%, which is mapped to a lower-case credit score of ‘b’.
- Out of the 1,230 companies in the movies and entertainment industry, 153 - 12.4% - have a PD lower than 0.5344% which is above a mapped credit score of ‘bbb-’. In comparison, out of the 99 football clubs, only 5 - 5.1% - have a PDFN at this equal or better quality. In other words, there are more movies and entertainment companies with good credit quality than there are football teams.
Please contact the author for more information.
Behind The Data
We looked at a group of 99 public and private corporate football clubs – 97 European and two Latin American clubs – from the movies and entertainment sector. We compared these 99 clubs to 1,230 global movie and entertainment companies using key financials reported over the last two years and a proprietary quantitative credit model, ‘Probability of Default Fundamentals’ (PDFN), which shows the probability of default for a company over a one year period. We use the newly calibrated PDFN model as it allows the assessment of both public and private corporations / clubs, allowing the analysis of a larger subset of companies, and lending itself to an industry comparison.
*The credit risk was calculated using S&P Capital IQ’s Probability of Default Fundamentals (PDFN), a quantitative model using financials, country risk and industry risk. This model is used by corporates, banks and insurance companies to assess counterparty credit risk. The model expresses a one year forward looking probability of default percentage. For more information about credit analytics, please go to: http://www.spcapitaliq-credit.com/
**The letter grade ‘ccc-’ as well as any other credit score is reported in lower case letters in order to differentiate the quantitatively derived ‘PD Model Market Signals’ from ratings issued by Standard & Poor’s Ratings Services.
Data Source: S&P Capital IQ Platform, Credit Analytics Platform, As of March 15, 2015