STEAUA: We are the CHAMPIONS!!!! (We're back in high life)

I feel soooo bad that I haven't updated my blog in a week now. There has been so many things that went on: FA final exam, grades reported back, parties (I will come back to this) and finally today one of the most amazing days in my recent history.

Why? Steaua, my favorite football club team, has qualified for the Champions League group stage. Why this might not mean anything to you, I will try to analyze the situation and explain it.

1) Steaua Bucuresti is a football club team founded in 1947. It's the most succesfull and popular football team from Romania and the first in Eastern Europe, to win the European Champions Cup in 1986, having also won the European Supercup in the 1987.


2) The UEFA Champions League (known colloquially as the European Champions Cup, changed in 1993) is an annual club football competition organisms by the UEFA for the most successful football clubs in Europe. It is one of the most prestigious club trophies in the sport. It has a global audience of more than 4 billion viewers in 227 countries.

The competition is basically opened to all the football clubs in Europe, which, at first they have to win their internal national league and then play some qualification rounds in order to get there. It's a long road especially if you come from a country which doesn't have the capabilities to invest tens of millions of dollars in this sport. Plus, the format of the competition is such that if you do bad this year, next year will be harder to get in and the situation is getting more complicated as years go by.

3) Steaua is the only Romanian team who has ever made it to the Champions League groups but that was 10 years ago. Since then, no other Romanian team made this performance. It was harder and harder for a Romania team to make it, but as of yesterday Steaua (by winning over Belgium's Standard Liege) has qualified again for the competition making history. I can't tell you in words what this really means: football is like a religion (you ditch your family, money, life, everything just to be there and cheer and live, people go nuts, go crazy on the street and would do anything just to see their idols). This qualification will bring huge advantages: more $$ for our team and country, more tourism, more sales is media and advertising, huge foreign coverage. The benefits can't really be quantified. Share the joy and happiness I felt yesterday by watching these moments after the game:



Being in the business school, I see myself in need to talk about this part of the whole picture. Champions League is all about money, power and fame. UEFA Champions League is a highly profitable competition for the clubs that reach the group stage; it distributes part of the revenue obtained from television deals between these clubs. For example, the payments for the 2004/05 competition ranged from €3.8m (Sparta Prague - who didn't win a point) to €30.6 million (Liverpool who won the competition). UEFA estimates the amount of money to be given to the 32 participants of the 2005/06 group stage at €430 million. Clubs make additional money from ticket sales, corporate hospitality, merchandising, advertising and so on. For a team like Real Madrid or Manchester United who make millions of $ just from selling t-shirts, being in the Champions Leagues is a must in order to financially survive. For these clubs, the UEFA money is pocket change but for small clubs like Steaua, which has an estimated yearly budget of 8 million $, getting a pie of 4 million euros is huge.
Here is some data I found on the impact of a game played to the stock market:
The following table relates stock price variations the day of the champions league game followed by the result of the game after the markets have closed.

Date Variation Game Result

15-Sep-04 + 0.59% Olympique Lyonnais 2-2 away
19-Oct-04 +0.40% Sparta Prague 0-0 away
3-Nov-04 +0.84% Sparta Prague 4-1 home
23-Nov-04 +1.42% Olympique Lyonnais 2-1 home
8-Dec-04 + 0.91% Fenerbahce 0-3 away
23-Feb-05 -4.08% AC Milan 0-1 home
8-Mar-05 -1.40% AC Milan 0-1 away

This is just a day to day result. The conclusion is that a good run in the Champions League can help teams stay financially sound while early exits can spell trouble. Furthermore, unlike national leagues, the consequences of a bad result are immediate. If you lose a game and then draw one at the beginning of the season, it can be overcome, whereas a misstep in the Champions League can be fatal near term. What a business model...