Apologies for a long post but wanted to share my thoughts.
Jokes aside. Many of you guys do not know how to bussiness works, or you just don't want to believe that Milan is now a company. Lets be frank here. RB is not here to run the club and to use a club as a personal PR (read Berlusconi) or "wash" the money (ready PSG, City, Juventus). They are here to make a profit. Now there is a two way you can make a profit: A) making sure your annual revenues are trending over annual cost or B) selling the club a higher value that was purchased (Including all the losses you may accumulated over the way). Obviously one doesn't exclude, as a matter of the fact the best strategy is to combine them. IMO the latter is exactly what is RB plan.
Now to sell the company at best possible value the key is to have meet couple of economic KPI's. First of all increase the revenues and make sure that revenues are growing at higher pace than your expenses (example. if you increase your revenues by 10%, a rule of the thumb is that your expenses should not grow at higher or same pace). Before i explain furtger please note that Milan was in a loss making position for a decade, with additional 100M loss in 2022 (revenues 240M, cost 340M). Please note that this is for a season we ended winning scudetto and included all the premiums, but it is true that matchday revenues were small due to Covid restrictions still in place. This year it is expected for our revenues to be close to 400M. Assuming that cost structure has been pretty much the same, it will be a first breakeven year. Way to go. However, extension of the contracts for our key players (theo, Tomori, Kalulu, Bennacer, Tonali, Leao), will have an impact on the paycheck bill in the next seasons. At the same time, we also brought Origi and CDG who are having significant impact on our cost, between the paycheck and the acquisition fee (CDK).
In terms or revenues that are couple of relevant sources. Matchday revenues, TV Rights, Sponsors and Stadium. With us winning the Scudetto last year, increasing the average attendance to 72k and reaching CL final, we are already at peak with Matchday revenues and TV rights. Sponsors are expected to pay higher fees for their name on the shirts and stadium now that Milan is back to top 15 clubs, but there is no large window. TV revenues may grow, but impossible to compete with EPL. And finally stadium. We do not have one and it is not going to happen before 2027. What I am trying to say that Milan revenue limit without the stadium is 500M max and this means that we have to play CL football every single year.
Now lets review the cost structure. Main drivers are services (administration, legal, …) 65M, Stadium rental 25M, Amortization of the players acquisition fees 76M, and salaries 162M. Now acquisition of a player like Halland would hit that line by approx. 50M per year (30M gross salary and 20M amortization of the 100M fee over 5 years contract). Thus, forget about 100M mercatos, especially as the expensive players are also seeking expensive salaries. Thus this is out of reach for Milan at the moment!!!!
Also you need to think about KPI.s, If company is making 100M in revenues and has a cost structure of 50M this is a 50M profit but also a 50% GM. If the company is making 500M in revenues but has a cost of 450M it also makes 50M in profit but GM is only 10%. What do you think which company is worthed more on the market?
What I am trying to say that increasing cost in line with our increase in revenues will not work as a strategy if we want to be competitive and profitable. Thus is why we have to look for alternative way and this is creating value. In the company players are “assest” and if you buy an asset for a cheap price and sell expensively or at least his real market value is increase this is how brand is growing. We do not need to sell leao for 150M. What is important is that his true market value is not 100M+ and we purchased him for 35. Also if you find a prospect like Thiaw, you purchase for 6M and his value today is 20, you made an instant “unrelized” profit of 14M. Now this is a bussiness and this is what now attacts the attention of investors.
So long story short. I do not see Milan selling key players as this will be a big risk to our secured sport in CL every year. Maldini paid the price as he purchased “expensive” players (ORIGI and CDK) whose market value didn’t increase and at the same time we are paying their high salaries. This is why we have a big no to Arnautovic, Berardi and similar players that will not significantly increase the level but will significantly increase the cost!!! Yes, we all want instant glory but are we really expecting that owners will pay for that our of their pocket. Those times are gone. Let think about sustainability. We can grow at easier pace but organically and set ourself on a strong foundation for the future. Minimal risk and secured growth. This is now the philosophy, and the only way to succeed is for all of us to be on board! Once again, hard to accept that we are not at Madrid, United and Bayern levels, but we made so many wrong decisions since 2007, and we are more down than we think. One scudetto is not going to cure our problems, as well as once scudetto will not make Napoli or Leicester a big European club!
