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Chapter 18

The Long and Widening Road of the Football Industry in Chile

Sebastian Soria

Andres Maldonado

To Marcelo Bielsa

Football is by far the most popular sport in Chile. According to Adimark (2008),

62.3% of the country’s population mention it as their first sport, followed by basketball, with

only 9.1% of the preferences. This passion has not been reflected in the results: the Men’s

Football National Team had failed to win any official title, until the recent victory on Copa

América 2015, and at the club level the achievements can be counted with the fingers of

one hand. Moreover, in the last decades Chile has shown economic stability and sustained

growth, establishing an optimal scenario for the development of the industry. However,

despite the popularity of football and the growth in economic development, the industry

has not been able to consolidate a sustainable growth. Continuous changes in the

administrations of both the professional football league and the Men’s National Team have

not allowed the development of a long-term plan. For this reason, coupled with the debts

owed by the clubs to the national treasury, the government decided to intervene by forcing

clubs to become Public-Listed Companies (PLC) or investment funds in sports.

Over the last decade, the country has witnessed the discussion on the effects of

Law No. 20.019, enacted in 2005. Different leaders and officers have criticized this new

management model; for instance, René Orozco (Bruna, 2012), former president of

Universidad de Chile, one of the biggest clubs in the country, asserts that “public-limited

companies are killing football” (para 1), this given that they see football as business and
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“...the essence of sport is lost” (para 1). In the same vein, Raúl Labán (2014), the current

president of Club Social y Deportivo Colo Colo, states that “professional football has never

been so poor, undercapitalised, indebted and so less transparent than today” (p. 44). On

the other hand, Ricardo Abumohor (2014), former president of the Asociación Nacional de

Fútbol Profesional de Chile (ANFP) (Association of Professionals Football of Chile) and

current president of O’Higgins, points out that the law “established a framework of rights

and responsibilities” (p. 44) and highlights the significance that new organizations are

controlled by the Superintendencia de Valores y Seguros (SVS), which is the equivalent to

the Securities and Exchange Commission in the United States. This, in theory, implies

more accountability and higher levels of transparency and clarity in the responsibilities of

the clubs’ management.

Although these opposing views coexist in the industry, there is a consensus on the

fact that the ownership structure of clubs is just one piece of a rather complex puzzle. In

fact, there are a number of problems that remain in the management of clubs: lack of long-

term planning, shortage of qualified professionals, low investment in infrastructure, and the

lack of a vision of the fan as a customer to be retained. In other words, very low

investment on increasing customer loyalty. Moreover, a weak leadership from the league

has undermined the potential growth of the clubs. There has not been a clear intention to

coordinate their members to take advantage of economies of scale. There has been little

interest in generating projects that value the tournament and its associated services. There

is a paradoxical situation in Chile. Technically, the league (ANFP) administers the Chilean

Football Federation (FFCH) and therefore manages both professional football and the

Men’s National Team. However, about 90% of the league’s revenues come from the Men’s

Football National Team (PricewaterhouseCoopers, 2010). Therefore, the league is

secondary when the strategies of the organisation are planned.

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Given this situation, this chapter critically discusses the development of the industry

in the country, first, from a historical perspective, addressing the transformation from non-

profit football clubs to for-profit corporations and, then later, through an analysis of the

management problems that remain after this transition is occurred. Then, the creation of

the Chilean Football Television Network or Canal del Fútbol (CDF), the league’s own

television network, is presented and its success is reviewed. Finally, the authors examine

the recent decision of ANFP to regulate clubs’ expenditures from the league. Since one of

the chapter’s authors was the Head of the Financial Control Unit at ANFP during the

creation of these rules, the writers have a privileged and practical view of that process.

From Non-Profit Football Clubs to For-Profit Corporations

It is possible to say that the idiosyncrasies of those who have managed Chilean

football are short-sighted and not very innovative (Gutierrez, 2010). Football institutions

have been administered in the same way for a long time, and due to an ongoing football

industry crisis (see next section), they have become what they are now, mostly

professional sports organizations that aim to organize, produce, market and participate in

sporting shows in order to obtain a profit. That is, partly, the definition that the article 1 of

Law No. 20019 (Congreso Nacional, 2005) gives them.

Chilean football has been changing since the beginning of this century, basically

following foreign models given the opportunity that arose with the crisis that occurred

during that time. Those events will be reviewed in this section of the chapter in an attempt

to illustrate a situation where the loss of value of the National Team and the

mismanagement of some clubs, especially the most popular ones, created the necessary

conditions to promote the changes. The outcomes of this complex process are the main

subject of this chapter, and these will be analysed from two perspectives: the Men’s
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National Team and the clubs, since the economic performance of both is particularly

entwined, without a clearly defined boundary between them (Sturgess, 2009).

In this regard, based on a chronology of events, this chapter will refer to the

institutional modifications of the football clubs. Special emphasis will be placed on the two

major changes that emerged during the crisis: first, the enactment of Law No. 20019 and

its subsequent amendments; and second, the foundation of the Canal del Fútbol (CDF), a

private company which purpose is to broadcast Chilean professional football (Sturgess,

2009). However, there will be a review of other initiatives that have arisen aiming to

develop the football industry, such as the Proyecto de Estadios Bicentenario (Bicentennial

Stadiums Project) and the Plan Estadio Seguro (Safe Stadium Plan), both led by the

government.

The Crisis

The crisis of Chilean football sprouted in parallel with its apparent success. In the

late 1990s, the Men’s National Team had qualified for the 1998 FIFA World Cup in France

and the country euphorically celebrated its return to this global event after 16 years.

Football was in vogue, large contracts were signed, more jerseys were sold, and football

attracted the attention of most of the population. The country stopped and watched the

performance of the National Team attentively. Meanwhile, the domestic league was

enhanced with great foreign players, and teams tried to improve year after year on a scale

of ever-increasing investment. The Asociación Nacional de Fútbol Profesional de Chile

(ANFP) (Association of Professionals Football of Chile) seemed to consolidate this

successful situation toward a future of prosperity, carrying up the whole industry in its

development (Guarello, 2012). However, all the brightness of that time collapsed in

sporting in administrative and economic terms. Chilean football, at both clubs and the

Men’s National Team, experienced its own crisis. During the last 15 years there has been
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a relatively joint response to this crisis. Leadership has been taken by the government

rather than by the football governing body and, as it is discussed below, many of the clubs

continue to suffer the same problems they suffered from before.

The Men’s Football National Team

The Men’s Football National Team was highly valued because of its classification

to the 1998 FIFA World Cup. The pairing of Iván Zamorano and Marcelo Salas led Chile to

the global elite. Nevertheless, no one paid attention to the way the Chilean team qualified.

At that time, it was important to have qualified and not how. It was 1997 and after 16 years

out of World Cups, Chile achieved one of the four South American spots for France 1998.

The National Team ended those qualifications with 25 points in the fourth place among

nine teams (notwithstanding that Brazil did not participate since they were the reigning

world champions), beating Peru with only a goal difference. That moment of excitement

seemed to predict a successful future. However, after that, Chile was relegated to the last

place with 12 points out of 54 in the Korea – Japan 2002 classifications. Then, in the

Germany 2006 FIFA World Cup classification process, the Men’s National Team was

ranked seventh among ten participants with 22 points, being eliminated from both events.

Only in the classifications for the 2010 and 2014 FIFA World Cups did Chile get enough

points to secure a place. At that time, Chile obtained 33 points and an extraordinary

second place among ten teams, competing with Brazil, Argentina, and Uruguay among

others. Four years later, during the qualifications for Brazil 2014, Chile obtained a

meritorious third place totalling 28 points.

The same sporting crisis can be seen in the results obtained in Copa América, the

most important tournament for men’s national teams organized by Conmebol (the South

American Football Confederation). In Paraguay 1999, Chile was ranked fourth (two

victories, three defeats, and one draw). In Colombia 2001, the team finished seventh (two

victories and two defeats). In Peru 2004, an indecorous tenth place (one draw and two
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defeats). After that, the recovery process started with an eighth place in Venezuela 2007,

a fifth position in Argentina 2011, and the first trophy in Chile 2015 (Segurola, 2015).

The evolution of the Men’s National Team has been addressed because there are

no clear boundaries between the Chilean Federation and the league, as it was mentioned

before. This confusion has led to a number of conflicts between the economic interests of

the National Team and the professional football clubs. Moreover, the transformation of the

clubs to for-profit corporations has created greater tensions and increased the

contradictions of this form of organization. In short, the new millennium brought a

diminished and devalued the Men’s Football National Team with it. The failures of clubs,

reflecting the lack of long-term ideas and proposals, have negatively affected the income

of ANFP, and created a profound disaffection between the public and football (Sturgess,

2009).

The Clubs

The crisis at the club level transpired more or less in the same period, and in this

case, the collapse was not only in sporting performance but also in the economic realm.

Between 2002 and 2006, the Chilean league witnessed the bankruptcy of its two most

popular clubs, notwithstanding that they received the greatest benefits of what the industry

produced. The failure of Colo Colo was declared on January 23 of 2002, and the collapse

of Universidad de Chile occurred on May 26 of 2006. Both reflected a partial view of what

was happening across professional clubs, but the magnitude and impact of these two

clubs’ failures shed some light on the inherent economic weakness of the industry, which

once seemed healthy and prosperous. These events, in the public view, seemed to be just

the tip of the iceberg: if both clubs – the most popular, successful on the pitch, and with

more revenue than ever before – had such important deficits, the rest of the clubs should

be experiencing a worse situation. The industry’s insolvency became evident when, in

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2002, professional football was squelched with a nearly one-month strike in which players

and coaches unanimously participated (Emol, 2002). The debts of the teams to the

Treasury of the Republic were unsustainable and showed an underfunded industry that

was surviving subsidized by financial privileges (Congreso Nacional, 2005).

As a result, the interest in professional football dwindled (Gutierrez, 2010). Its

image was poor, with stadiums often in appalling conditions, violence problems, an

increasing insecurity, constant changes to the league format, and lack of positive results in

international events. Disinterest affected the industry’s revenue, and broadcasting rights

lost appeal from previous years.

The Crisis as an Opportunity

The sport and economic crisis had an impact on both the public and private

sectors. Being that football is the most popular sport in Chile, this is an industry that is

generously subsidized by the state. Thus, the stadiums are mostly owned by the state, the

cost of maintaining order and security within them is assumed by the law enforcement

personnel of the state, and there are also a number of benefits for the clubs regarding their

debts to the Treasury. All these privileges the football industry has form a highly

anomalous situation with the new institutional framework of the clubs based on their

recently mandated pursuit of profit. It is difficult to understand the persistence of this logic

– that privatizes profits and socializes the costs – in the context of Chilean neo-liberal

economic system, without understanding how football is rooted in the national culture.

In addition, football, despite being considered a private spectacle, is very attractive

and important for the government. As noted, the crisis rocked the sporting institutions, but

it also affected the government’s image. The diverging paths between the successes of

the Chilean economy in the past thirty years and the failures of the football industry turned

on a warning light that should be considered. Football had failed to follow the path of other
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economic activities of the country and had not been able to capitalize on the economic

bonanza that had been generated in the country as a whole.

Early on, safety issues were discussed at a political level. Thus, the Law of

Violence in Stadiums was enacted (Law No. 19.327 of 1994), which was enhanced in

2011 by the Safe Stadium Plan under the Ministry of Home Affairs and Public Security. It

works "to improve the law, the operational and security management related to

professional football, and invest in infrastructure to increase control and run awareness

campaigns" (Estadio Seguro, n.d.a, para 1). Moreover, the state also attempted to

modernize the failed institutional framework. In 2005, Law No. 20019 was enacted. It

essentially aimed to create sports organizations that are attractive for private investors.

With regard to the organisation of the FIFA U-20 Women’s World Cup in 2008, it

established a plan for remodelling or rebuilding a network of state-owned stadiums, which

filled a historical debt to the sporting venues in the country, virtually abandoned by football

clubs which, not having owners, almost did not invest in their improvement or

maintenance. All these measures were taken and managed by different administrations,

often accompanied by a strong support from the private sector.

All these projects were conceived from the public sector, this reflects the

importance that lies behind football. However, this contrasts with the incongruity generated

by the fact that a spectacle that is now a more private economic activity is supported by

the society as a whole. This, as it was mentioned before, was more evident with the

enactment of the Law 20019 and its amendments, establishing for-profit clubs as a way to

modernize the industry by creating incentives to attract private investors.

Moreover, through the football league’s governing body, ANFP, the same clubs

saw this crisis as an opportunity to make changes that could lead to a modernization in the

industry. The creation and commercial success of the Canal del Fútbol (CDF) is by far the
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most important result and demonstrates the most effective way to recognize the potential

income of this intangible asset that underlies a society prone to consume football.

The modernization of the institutional framework created in recent years can

convert clubs into financially sustainable organisations in order to develop an industry that

has been under-exploited and poorly managed. However, it seems to have flaws or

defects that may threaten the project.

New Ownership Structure Not a Panacea

After this forced process of conversion, a radical change in how the clubs were

managed was expected. The influx of new capitals supplied by investors from other

industries would mean not only fresh resources to the clubs, but also know-how and new

skills. However, the process has been slower and more complicated than imagined. After

nearly a decade since Law 20019 took effect, several management problems persist. For

instance, the new rules force the clubs to send their financial information to the

Superintendencia de Valores y Seguros (SVS). Even though during the first years this

governmental entity relaxed the application of sanctions and fines, professional football

accumulated 509 sanctions and fines between both until July 2013, mainly because they

did not even bother to send the information (Obregón, 2013). This reflects a complex

problem: despite the new law, many clubs work with a sense of impunity. Hitherto, they

believe, or what is worse, they have some degree of certainty that regulators will not

punish them with the severity that they deserve. Nevertheless, this is slowly changing;

there have been some signs in that direction from both governmental agencies and the

ANFP. This will be reviewed in greater detail in the last section of this chapter. But, despite

the aforementioned breaches of the law, there is much more public information about the

clubs’ finances than even before, which helps to analyse trends in revenue, their

composition and the effects of these new management teams.

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Revenue Analysis

As mentioned before, some clubs have not published their annual reports or have

not broken down the different revenue streams. However, there is enough information

available from 2010 onward to shed some light on the current situation of the clubs’

management. Only 16 out of 18 clubs released their complete annual reports for the 2011

and 2012 seasons. Bearing this in mind, it is possible to identify four main revenue

streams within the Chilean industry: Broadcast, Commercial, Match day and Transfers.

This is slightly different from the situation of the English Premier League, where teams are

importing talent and therefore have only three main streams (Deloitte, 2013,). If these

different streams are analysed, it is possible to identify an outstanding growth in transfers

during 2012 (see Table 1). This phenomenon is explained by the success experienced by

Universidad de Chile in 2011. Jorge Sampaoli’s team was crowned as Copa

Sudamericana champions, the first South American title for a Chilean team in 20 years,

but they were not able to retain their best players. This created a bias in the overall

industry analysis since their transfers represented more than 50% of those made by the

entire industry. In fact, if the three biggest clubs are not considered in this analysis, the

significant losses of both commercial and match day streams is remarkable (see Table 2).

This is a key point in the discussion of this chapter. Its explanation is clear: both

commercial and match day revenue streams are not growing at the same pace as the

other two are; hence they are losing presence in the revenue mix of the Chilean clubs. A

full diagnosis indications deficiencies in commercial management: shortage of qualified

personnel in the area, lack of appropriate technology tools, and, most importantly, absence

of clear business strategies.

<<Insert Table 1>>

<<Insert Table 2>>

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Moreover, the great inequality in clubs’ income is also a problem that has not been

addressed properly, and this is undermining the long-term competitive balance. The

industry’s revenue is concentrated mainly in the three biggest clubs. In 2011, the top

Chilean tier reported a 57.6% of the total income. Meanwhile, in 2012, this proportion fell

to 54.9%, still over half of the total revenue. In fact, the ratio between the clubs with

highest and lowest incomes was 12.8 times in 2011 and 19.4 times in 2012, and if the Gini

coefficient is analysed for these two seasons, the numbers are explanatory: 0.50 and 0.51.

This sheds a negative comparison with the major European leagues. For instance, during

2009-2010, the Premier League showed an index of 0.33 and Series A showed 0.41; only

La Liga, which showed an index of 0.57 (Deloitte, 2011), was more unequal than the

Chilean League. In this regard, it is critical to review the distribution pattern of broadcasting

revenue which, as will be discussed in the next section, favours the big 3 Clubs (Colo Colo

Universidad de Chile and Universidad Católica) with a larger share for them (. This harms

the attractiveness of the league and affects the competitive balance and, as a result, the

long-term potential earnings of the industry as a whole.

Football in Perspective

Despite the great media impact of football clubs, their frequent coverage in

newspapers and the high ratings of the week’s highlights, teams have not been able to

monetize this exposure. As Kuper and Szymanski (2012) wisely compare, not even the

richest clubs on earth are fairly close to getting the income of a company in the FTSE 250.

Clearly, football brands are often more powerful than many companies from other

industries. Nevertheless, when financial statements are compared, these differences

cannot be appreciated.

In Chile, the situation is exactly the same or worse than what has been illustrated

by Kuper and Szymanski. In fact, if the top tier clubs are compared with an average store
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like SODIMAC, a Chilean home improvement retailer and constant football sponsor, the

evidence is clear: average club revenues are approximately between 20 and 25% of those

of the average store (see Table 3). This is not surprising given the high level of maturity

and development that the retail industry has experienced in Chile. Unlike the football

industry, they have invested in knowing their customers, improving their service and

shopping experience, CRM systems, customer loyalty and targeted communications.

<<Insert Table 3>>

As a matter of fact, if the internet presence is analysed, the picture is not positive.

For instance, the growth of e-commerce in Chile has been enormous in recent years.

According to Cristino (2013), the country has the second highest penetration rate in Latin

America, with sales over US$1 billion in 2012. Despite this fact, football clubs seem

oblivious to this situation. Only 5 out of 18 top tier clubs have developed their own e-

commerce, and, just recently in 2014, the league is building its own online shop. This is

not due to lack of resources - it is possible to find inexpensive solutions today, but rather

due to low investment in knowing their customers, developing new technologies and

employing qualified personnel.

Moreover, back to the comparison with SODIMAC, each store would certainly not

be able to generate the current revenue without the support of the corporate trademark

and organization. Centralized management of commercial, financial, marketing and

logistics aspects generate significant economies of scale that are exploited by all

branches. This explains much of the individual success of the average store. In countries

with more developed football industries, this phenomenon has been acknowledged and

league brand has taken a leading role in the commercialization of football. The English

Premier League and the Champions League are perhaps the best examples of how the
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tournament can add value to the individual clubs. Although there are some signals in this

line, the Chilean league is far from having a clear plan to address this matter in depth. This

would require a level of coordination and cooperation between the clubs that does not

exist today. In general, the short-term individual interest is above the long-term collective

interest and this prevents any attempt to change.

Attendance Analysis

In light of the above-mentioned, and given the development experienced by Chile

economically, it is useful to draw a parallel between the football industry and other

entertainment industries. As the most popular sport, football has become part of the

entertainment industry, competing with films, concerts and other leisure activities. If it is

compared with the development of cinemas in Chile, the underdevelopment is evident.

The latter has invested in infrastructure and services, achieving great growth in annual

attendances to movies. Since 1997, cinema attendence has increased from 2,947,269 to

20,122,604 spectators per year, a growth of 582.75%. On the other hand, during the same

period, professional football has only managed to increase its audience 65% from

2,489,344 to 4,110,451 (see Table 4). In other words, professional football attendance has

declined from 84.5% of cinema attendance to 20.4% in terms of number of visitors.

<<Insert Table 4>>

Indeed, Chilean stadiums have very low rates of use. During the first half of 2013,

Colo Colo, the most popular team in the country, had an average attendance of 13,104

spectators (Estadio Seguro, 2013) with an average occupancy rate of 30.4%. Moreover,

Union Española, a team that was crowned champion during that time, reported an average

attendance of 5,097 (Estadio Seguro, 2013) with an occupancy rate of under 30%. This
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landscape affects not only match day revenue, but also the other income streams. For

example, potential commercial partners avoid empty stadiums or pay less for the

sponsorship programmes offered.

Furthermore, it is possible to detect an increase in the proportion of income spent

on leisure activities if the behaviour of Chilean families is analysed. In 1997, the average

spending was about 5.5% of the total expenditures (INE, 1998b). Meanwhile, in 2012, this

share grew to approximately 6.6% (INE, 2013). This represents great opportunities for

football clubs as the country gets richer; its population has more disposable income for

entertainment and leisure. Herein lies the great challenge: how the industry may be able to

capture a larger share of that spending. The efforts have not been enough so far.

The Role of the State

Beyond Law No 20019, in recent years the state has been a leader in terms of

changes in the football industry. Not only it has enacted changes in the ownership

structure of the clubs, but it has also taken a leading role in security in the stadiums and

infrastructure investment.

In terms of safety and security, Plan Estadio Seguro (Safe Stadium Plan) is a

government program under the Ministry of Home Affairs and Public Security. Its main

objective, according to its website (Estadio Seguro, n.d.b), is “that families across Chile

can attend stadiums safely” (para 1). This initiative has forced football clubs to take certain

steps to ensure a safer environment. Probably, the most important steps have been the

end of the links between the clubs and the barras bravas or the hooligans, with tough

sanctions involved, and the reserve the possibility to apply the right of admission to

stadiums. Previously, it was common to find clubs funding away trips and giving away

tickets to their core (and many times violent) fans (see, for example, La Segunda, 2012).
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Although this program has laid the foundation for the eradication of violence in stadiums, it

has lacked sufficient planning and funding required to accomplish the objectives set.

Moreover, recently, different government administrations have been very active in

improving sports infrastructure in the country. Since Chile hosted the FIFA U-20 Women’s

World Cup in 2008, the government of that time planned the construction and renovation

of different stadiums across the country. The plan was called Red de Estadios

Bicentenario (Bicentennial Stadiums Network), since Chile celebrated 200 years as an

independent country in 2010. The first stage of this plan was the construction of four new

stadiums (Temuco, Chillan, La Florida and Coquimbo) and the upgrade of the National

Stadium. The second stage included another nine stadiums with an estimated investment

of US$250 million (Emol, 2010). Lastly, given that Chile will host the Copa America and

the FIFA U-17 World Cup in 2015, other six stadiums are being renovated almost

completely, with an estimated investment of US$120 million (Acosta, 2012). Although

these investments have been conceived with the aim of organizing these international

events, they have directly benefited the professional football clubs and the league. With

nearly 20 new stadiums under FIFA standards, the first and second divisions will show a

renewed face to the public. This will undoubtedly have a positive effect on the income of

the clubs, which have not contributed to the development of new infrastructure. Certainly,

this is a promising scenario; however, this is due to the leadership taken by the state in

both the development of new regulations and the investments made.

Chilean Football Television Network (CDF)

More Resources to the System

The history of Chilean football will probably be marked by the launch of the Chilean

Football Television Network or Canal del Futbol (CDF). As it was noted before, its

establishment and its unusualness of being majority owned by the ANFP were only
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possible in the context of the crisis suffered by Chilean football, where the financial stability

of the sport had a precipitous drop in its valuation within the market (Garcés, 2013). Such

a deep devaluation scenario could enable clubs to postpone their short-term vision to

venture into a medium-term business, which, if successful, promised to be the panacea for

the financial debt of the professional league.

While the establishment of the CDF has been successful in funding clubs (Garcés,

2013), is not by itself a solution to the problems of their management. The evidence

suggests that clubs, even those with higher incomes, may have negative financial results.

Even worse, most of them show zero growth in terms of infrastructure and no new

management models. This shows that, without institutional changes, the football industry

could remain one with great income but be underexploited.

Historically, football has been subjected to constant changes. Clubs often fluctuate

between success and defeat. The crisis saw a particular paradox that highlighted the

deficient administration in the Chilean football: while the country has enjoyed steady

economic growth for almost thirty years, the football organization was not able to capitalize

on this bonanza and the resulting economic stability. As noted before, the football industry

declined while the entertainment industry, such as cinemas, maintained significant growth.

As movie theatres were remodelled and innovated with new technologies, Chilean

stadiums were left to deteriorate.

Since the crisis onwards, Chile has intended to follow the innovations that other

countries had implemented in order to yield the inherent interest in football and to

capitalize on the relationship between the clubs and the Men’s Football National Team. In

this scenario, the establishment of the CDF became the tool to capture the income that

football generates in a permanent and systematic manner.

Before the establishment of the CDF, broadcasting rights were traded as follows:

the ANFP to television operators exploiting the broadcast rights for the national
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championship over a period of time. And while there were bids which once were

considered successful, an analysis of the bids showed that there was a low level of

certainty between a negotiation and one without exponential growth (Garcés, 2013). In

fact, under that system of the sale of broadcasting rights, the maximum amount achieved

was US$12.7 million (De La Fuente, 2009). On the other hand, CDF has achieved to

distribute nearly US$60 million to the clubs in 2014 (Oliveros, 2015), and this figure has

shown a steady growth. Unfortunately, most of the new revenue has been used to finance

the growing salaries of players and coaching staff. This has not resulted in improved

competitiveness of the Chilean teams, but an inflation for purchasing and hiring players.

Moreover, the current TV revenue sharing model, which runs until the end of 2015,

intensifies the economic differences among the clubs. It distributes 25% of the proceeds to

the three biggest clubs, 57% to the other 15 clubs in first division, and 18% to the 14 clubs

in second division (Capital, 2013).

It is undeniable that CDF has been a success for the industry; the product of

football has appreciated, allowing the clubs to reinvest in themselves. However, it does not

guarantee that clubs use this money well and efficiently. To do this, more profound

changes are required: more and better management staff and long-term planning.

Regulation from ANFP

Based on the situation described in the previous sections and at the requested of

the ANFP, Econsult, a prestigious consulting firm in finance and economics, produced a

report on the financial situation of the industry during the period 2008-2011. This report

could only considered 24 out of 32 teams in the first two divisions, given the breaches of

the clubs in sending the information to the SVS. Among its findings, it highlighted the

strong growth in operating revenue experienced by the clubs, increasing 62% in those

years. However, operating expenses during the same period were up by 69%, increasing
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the operational deficit that clubs already showed in 2008. Although the new state

regulations have led to an increase in the costs of organizing matches, the big concern

raised by the clubs’ expenditures is that teams have not been able to properly regulate the

proportion of their budgets allocated to players and coaching staff (Econsult, 2012). For

this reason, Econsult recommended establishing a salary cap in Chilean professional

football.

In this line, the ANFP formed the Financial Control Unit (FCU) in January 2013,

which aims to regulate and supervise the financial activities of clubs. As mentioned before,

this unit was led by one of the authors from its inception to July 2013. In practical terms,

the FCU began overseeing the monthly payments of sporting staff salaries and the annual

budgets of the clubs. However, the big challenge was to develop new regulations in order

to curb the exponential growth evidenced primarily by players’ salaries. Bearing this in

mind, the work was focused on analysing different cases and regulations that exist in

different parts of the world, starting with professional leagues in the U.S. and going

through the regulations implemented in Europe. Finally, the decision was to follow a model

proportional to the income of clubs. In other words, the FCU established a maximum limit

for spending on salaries for players and coaching staff, which is 70% of operating

revenues. The control system was structured thinking on prevention rather than

punishment. For this reason, from the 2013/14 season, clubs must submit semi-annual

budgets of their cash flows and performance reports. As a last requirement, an audited

income statement must be submitted at the end of the season.

Clearly, this regulation aims to address two critical issues, first, that clubs can avoid

reporting losses in a systematic, as they currently do; and second, that part of the funds

generated can be invested with a longer-term vision. In theory, these objectives should be

achieved, but it will depend on the willingness of the ANFP to enforce their

implementation. Historically, ANFP, the governing body of the league, has not been
 19

sufficiently severe with its affiliates. The system of democratic elections has generated too

many compromises with their constituents, the clubs. Moreover, the idea to continue with

those elected officials for more than one term limits the scope of power that the elected

representatives choose to use.

Conclusions

The development of the Chilean football industry has been reviewed in this chapter.

The development plan is an attempt to modernize this sport on a par with the economic

growth of the country in the last thirty years. Although the changes that appear to be the

most significant experienced by the industry have been identified, such as the renovation

of the infrastructure, improved security at events, changes in the legal constitution of the

clubs, and new revenue streams, most of them have not been promoted by industry

players but by external agents who, for one reason or another, have a significant interest

in the development of this sport. Thus, many of the changes come from the initiative of

different government administrations that, as discussed, have an important role in issues

such as public safety and sporting infrastructure. But they have also been active in

instances that may be outside their purview, including the enactment of the Law

establishing the football Public Limited Companies, which attempts to give a solution to the

deficit of clubs, encouraging private investment and giving greater responsibility to the

clubs’ directors.

Another element that was analysed is the creation and consolidation of the CDF,

which has become the largest financing vehicle of professional football, due to the regular

and progressive increase in the generated income, therefore creating huge opportunities

for the development of the league and the clubs.

The sum of all these policies creates certain expectations that the challenges of the

football industry will be resolved by the ANFP and clubs in the short and medium term, and
 20

will decide the maturity of the Chilean competition. First, given the legal transformation

undertaken by the clubs structure, it seems natural that the risk of profit and loss has been

granted to clubs’ owners. It is still a mystery how this situation will be resolved,

notwithstanding that the program Estadio Seguro has progressively given the clubs the

responsibility for security. Another challenge for the industry is to improve the financial

management of the new investors, an issue still underdeveloped. In recent years, great

potential for modernization has been opened to Chilean football. This is a new opportunity

for the entire industry. In the light of the information displayed in this chapter, it is not

possible to assert whether the key players will take this chance or will squander it again.
 21

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Table 1: Revenue Mix Comparison (Source: Deloitte, 2013, p. 7, and Clubs’ Annual

Reports)

Revenue Mix Comparison

100%
23% 32% 29%
80% 43%
60% 27% 24%
21%
18%
40% 20% 17%
13%
20% 50%
27% 30% 26%
0%
Premier League Primera División Primera División Primera División
2011/2012 2010 2011 2012

Broadcast Commercial Matchday Transfers

Table 2: Revenue Mix Comparison without Big 3 (Source: Deloitte, 2013, p. 7, and Clubs’

Annual Reports)

Revenue Mix Comparison without Big 3

100%
23% 31% 25%
80% 32%

27% 16%
60% 16% 15%
16% 11%
40% 17%

20% 50% 44% 42%

37%
0%
Premier League Primera División Primera División Primera División
2011/2012 2010 2011 2012

Broadcast Commercial Matchday Transfers

 27

Table 3: Football vs Retail (Source: Clubs’ annual reports and Falabella’s annual reports,

2011 & 2012)

Football vs Retail
€ 35.000.000 € 31.458.877 € 31.439.644
€ 30.000.000
€ 25.000.000
€ 20.000.000
€ 15.000.000
€ 10.000.000 € 6.174.579 € 7.092.702
€ 5.000.000
€0
2011 2012

Average Club Average Sodimac Store

Table 4: Attendances (Source: INE, 1997-2012)

Attendances
25000000
20000000
15000000
10000000
5000000
0

CINEMA PROFESSIONAL FOOTBALL