The Economics Behind Mega Stadium Projects

Just a few decades ago, football stadiums were seen as nothing more than a place where a club would play their games and the fans could feel at home. Today, many of them have become mega projects worth millions and even billions of dollars. With these huge investments (which often involve large loans), clubs including FC Barcelona, Real Madrid CF, and Everton FC are betting that these stadiums will bring large amounts of revenue into the club. However, the question is will these investments pay off?

The Logic Behind the Investments

For many of these clubs, the primary aim is to diversify their income. These modern stadiums are not only built to host football matches, but also other events including concerts, conferences, and even boxing matches. For example, the Tottenham Hotspur Stadium (completed in 2019), is built to host NFL matches. Furthermore, with new and modern stadiums, football clubs are able to charge a premium for match day tickets and are also able to charge a higher price for advertising and naming rights.

In Spain, it seems this philosophy has hit the ground running. Real Madrid CF's renovation of the Santiago Bernabéu (set to be fully completed in 2026) has already doubled match day revenues as of the 2023-2024 season (Al Jazeera). Moreover, FC Barcelona has spent over 1.8 billion dollars on their renovation of the Spotify Camp Nou thus far with the project nearing its completion date (New York Times).

The Risks

Financially, the situation for many of these clubs isn't always pretty. When renovating a stadium, clubs must take on enormous amounts of debt, and as a result are betting that future revenues will outpace payments on loans. For FC Barcelona, this means paying back loans provided by 20 investors (including JP Morgan and Goldman Sachs) valued at 1.7 billion dollars (Reuters).

Additionally, trade-offs are another key issue. Capital which is used to fund construction is not spent on the academy, transfers, wages, or training facilities. In the long run, this can end up harming many teams rather than benefitting them.

Who Enjoys the Benefits?

Large investment into stadium infrastructure is a gamble for any football team, but for some teams, the risks are much higher.

For the biggest clubs in the world, these stadium projects can be a source of immense revenue on match days and can even generate profit outside of the football sector entirely.

On the other hand, for smaller clubs which do not generate as much revenue, the debt they must take on to complete such a construction just may not be worth it.

What Can We Take Away From This?

As football continues to commercialize, large stadium construction projects may become the norm for teams in the highest ranks of football. If this does become the norm, it is very likely we will see the gap between the top clubs and their opposition increase, resulting in a less competitive football landscape across Europe.