Giuseppe Marotta Calls For Urgent Changes To Italian Soccer

Giuseppe Marotta, Inter Milan’s Sports CEO, sounded the alarm about the precariousness of the business model that is currently governing Italian soccer.

“Now, it is essential to combine financial sustainability with sports competitiveness, setting aside, if necessary, the sporting results achieved on the pitch,” said Marotta last week during our conversation at Inter Milan’s headquarters, just a few days ahead of the UEFA Champions League semifinal clash against their city rivals AC Milan.

“We need a new business model that guarantees a balance between revenue and costs.”

The High Labor Cost

Marotta, 66, has been operating in Italian soccer for over four decades, spending the last 13 of which as a C-suite executive at Juventus and Inter Milan. He engineered the transfer move that brought Cristiano Ronaldo to Juventus in 2018 and Romelu Lukaku to Inter Milan in the year that the Nerazzurri clinched the much coveted Scudetto after a 13-year drought.

Marotta, who is widely regarded as one of the most experienced and influential figures in Italian soccer, has no doubt when he claims that wage bills represent the industry’s most pressing issue.

“The biggest problem of Italian soccer is not the organizational costs but rather the labor cost,” he said.

Italy’s wealthiest clubs, Juventus and Inter Milan, respectively have a wage-over-revenue ratio of 84% and 82%, Deloitte Football Money League 2023 reveals. Those percentages rank them above all of the world’s top-10 wealthiest soccer clubs with the sole exception of French powerhouse Paris Saint-Germain.

These problems exacerbated with the arrival of the pandemic, when most of the clubs’ revenue streams shut down while the operating costs remained unaltered, causing wages to increase dramatically with respect to the club’s income.

That unfortunate event highlighted how unsustainable it has become to run a soccer team in Italy.

“Today, salaries represent too high of a percentage of a club’s total costs, which would bring any company to default,” Marotta concluded.

The Problem With Boosting Stadium Revenue

While the labor cost remains high, Marotta emphasized the Italian clubs’ inability to exploit matchday ticketing and hospitality, a key revenue stream in elite soccer but one in which Italy still lags behind with respect to the rest of Europe.

Only four out of 20 Serie A sides currently own a stadium, while the remaining 16 teams are just tenants of outdated venues that offer limited on-site services and a modest matchday experience compared to what soccer fans are used to feeling, watching and doing at live events in stadiums abroad.

Building new facilities or upgrading the existing ones, however, can be very tricky for Italian clubs. Many Serie A foreign owners – most of whom hail from the U.S. – have tried getting new stadium projects underway but ended up butting their head against the sturdy wall of Italian bureaucracy.

In fact, there are several layers to getting a stadium project approved in Italy, as it needs to go through bureaucracy at the municipal, provincial, regional and national levels. What’s more, Marotta explained, old stadiums are often cataloged under “national monuments” due to their age, and as such, they cannot be easily demolished or restructured.

“Bureaucracy in Italy is much, much slower than it is in any other nation,” said Marotta. “All these steps cause hitches that discourage even the well-intentioned investors, which is what’s happening in Milan.”

Inter Milan have been attempting to build a new home and move away from San Siro, a 97-year-old stadium that is still owned by the city council. While the historic venue has experienced record-high attendance numbers over the last season, Marotta is convinced that privately operating their own stadium would raise much larger proceeds and contribute to easing Inter Milan’s financial burden.

Revisiting The Business Model

The disproportion between revenue and costs makes the Italian soccer clubs’ finances incredibly reliant on their ability to succeed on the pitch, as teams raise a big chunk of their annual revenue through the prize money allocated for international and domestic tournaments.

“Sporting results play too big of a role with respect to a club’s total potential proceeds. On both the domestic and international level, the revenue distribution is affected by a team’s position at the end of the season,” said Marotta.

This season, for instance, Inter Milan have racked up over €80 million for having reached the UEFA Champions League semifinal and could pocket another €20 million for going all the way, a sum that would represent about a third of their total amount considering that last year’s revenue added up to €308 million per Deloitte. In turn, being left out of Serie A’s top-four race, and thus failing to qualify to the next UEFA Champions League edition, would be a massive financial hit.

“If we finish the league in fifth rather than fourth position, we are missing out on about 30% or 40% of the club’s annual revenue,” said Marotta. “Not taking part in the UEFA Champions League means forgoing revenue for about €60 or €70 million, which means modifying the club’s business plan.”

Considering the key role played by sporting results in accounting for a club’s annual budget, Marotta believes that players should actively participate in the club’s business risk.

More specifically, he talked about how player contracts should include “maluses,” that is financial penalties affecting the players’ retribution in case the club fails to meet specific performance benchmarks in the season. Functioning as the opposite of bonuses, these negative incentives would allow clubs to reduce their financial liability towards players when the team comes up short in European and national competitions.

Speaking long-term, Marotta strongly believes in the salary cap system as the best measure to contain costs in Italian soccer. He has been an advocate of this format for over three years now, even though he admitted it would require time and significant regulatory adjustments.

What is crystal clear for Marotta is that the current system has reached a breaking point in Italian soccer.

For him, it is unreasonable that a club’s balance remains so heavily contingent on whether or not players are successful on the pitch, as this complicates all kinds of efforts to create a sustainable business model for the years to come.

“In Italy, the sports model is still predominant over any kind of economic and financial control tool,” said Marotta.

“It’s too aleatory. There should be a much more stable system.”