Exciting battle for a place in the Premier League: these financial interests play a role for FC Groningen

It has to happen on Friday evening. With a victory over Roda JC, FC Groningen will be promoted to the Premier League. If that works, the Euroborg will burst at the seams. In addition to cheers, there will probably also be a sigh of relief in the boardroom. Because there they know how much depends on promotion of the FC.

Drama

To explain this, we have to go back to the summer of 2022. FC Groningen then has ambitions to join the sub-top of the Premier League and is increasing its expenditure. The plan fails completely, because FC Groningen ultimately finishes last and is relegated.

This is not only a sporting disaster, but also a financial disaster for the club. In the first division, income is much lower than in the premier league, mainly due to declining media funding and sponsorship.

But FC Groningen’s spending pattern is still at Premier League level. Many player contracts, concluded in the hope of storming the sub-top of the Premier League, continue.

As a result, FC Groningen will face an important choice in the summer of 2023. Will the club make major cuts after relegation to balance income and expenditure? Or does it take a gamble by playing in the first division with Premier League expenditure, in the hope that the expensive selection will achieve promotion?

‘Financial risks’

It will be the latter. There is little or no skimping on the initial selection and personnel organization. The management will explain this in the annual accounts at the end of 2023: “In this way, FC Groningen chooses to take financial risks to strengthen its sporting objective – to return to the Premier League within one year.”

In an accompanying letter from the supervisory board (SB), which supervises the management, concerns are expressed about the situation: “It is very important in the coming period to also keep a finger on the pulse financially.”

The supervisory board’s concerns are justified, because FC Groningen only budgets 16.5 million euros in income for the 23/24 season. The expenditure is no less than 23.5 million.

Money box

FC Groningen can afford such a deficit, thanks to the club’s savings pot, its equity. At 11.8 million euros, that is a lot, because the club made a lot of profit on transfers in the years before the relegation.

However, the budgeted difference between income and expenditure this season is so large that FC Groningen needs more than half of the savings pot to cover the deficits. The situation is therefore crystal clear: FC Groningen must be promoted to avoid financial problems next year.

Jackpot

In the winter the club receives a few windfalls that significantly relieve the financial pressure. Former players Cyril Ngonge and Azor Matusiwa change clubs abroad for large amounts of money. FC Groningen benefits in both cases through bonus agreements.

FC Groningen itself also sells some players after the annual accounts. But it is mainly thanks to the jackpot for Ngonge and Matusiwa that the club has seen the budgeted deficit drop significantly, from seven to two million euros. This leaves approximately ten million in the piggy bank after this season.

Negative spiral

However, these incidental windfalls do not change the structural situation. FC Groningen is following a course that is unsustainable in the long term in the first division. If the club does not get promoted this season, the club will still burn through most of its savings next season with an unchanged policy.

In addition, FC Groningen will probably face a further decline in income if promotion is not achieved. Research by the KNVB football association has shown that the income of relegated clubs falls by an average of thirty percent in the first year after relegation, and by another twenty percent the following season.

Interest from supporters and sponsors usually declines in the second year. The club will also receive less safety net money, an arrangement for relegants to alleviate the financial blow of relegation.

Due to the combination of high expenses and declining income, FC Groningen must put on the brakes if they miss out on promotion. By selling players, or by cutting back on player salaries. Either way, the club will work with a cheaper and therefore normally less strong selection, which in turn reduces the chance of promotion.

In summary: the longer the stay in the first division, the more difficult it becomes to promote.

Plenty of opportunities

It also works exactly the other way: the faster FC Groningen is promoted, the better the club will perform in the Premier League again. This mainly has to do with television funds, which are a very important source of income for Premier League clubs. Last season in the Premier League, TV revenues amounted to almost a quarter of FC Groningen’s total income.

These TV funds are not divided equally among the eighteen Premier League clubs, but on the basis of a ranking. This ranking is based on the performances of the past ten seasons. The leader of this ranking receives the most TV funds, while number eighteen receives the least.

Playing in the first division, FC Groningen does not score any points for the TV ranking of the Premier League this season. But because the club usually finished in the middle of the Premier League in the previous nine years, FC Groningen still has many historical points that count towards this ranking.

Competitive position

If FC Groningen is promoted this season, the club will be in tenth place in the TV rankings next season, worth more than four million euros, thanks to those historic points. This financial boost immediately gives the club a good competitive position compared to other clubs.

Every season that FC Groningen does not promote, valuable historical points are lost. As a result, FC Groningen will end up lower in the TV rankings in the event of promotion, earn less money and will have a worse starting position upon its return to the highest level.

Huge interests

For FC Groningen, the difference between being promoted or not is between a flywheel and a threatening downward spiral. It makes the outcome of this season crucial for the sporting and financial future of the club.