Written by Umberto Pelà (16.01.2024)
It is unquestionable that the Serie A, today, is not the most prestigious league in the world. Long gone are the days where kids all over the world, regardless of age or cultural background, dreamt of playing for giants AC Milan, Inter Milan, or Juventus. Compared to other leagues like the Premier League, over the past 20 years, the league has lost ground in terms of talent, revenue streams, and overall prominence. Even though it isn’t easy to come to a single, clear conclusion, I strongly believe that this has been the result of one big factor: the flow of money within Italian football.
Think about it. Why was Serie A so successful in the period between 1995 and 2005? Why did all the stars in the world want to play there?
The answer is simple: because other big stars were there. And why were other stars there? Because of the money.
The past 20 years have seen a massive change in how clubs are run. What made the difference 20 years ago, specifically, is that Italian club owners were conscious and willing of the losses they were going to incur when acquiring an Italian team.
Club presidents like Inter’s Massimo Moratti and AC Milan’s Silvio Berlusconi, in particular, led with a lot of heart — just like any fan would. They kept pumping in money as part of financing activities to make the books balance and until the club had won all there was to win. In those days, the rational mind kicked in rather late for these owners. Their desire to influence the fans and bring success to their clubs surpassed any worry of losing money — regardless of how many zeros that number from operating activities may have had.
Today, we live in a completely different world. Clubs all over the world, not just in Italy, are run like true businesses, rather than simple football teams. It is increasingly common to see Private Equity Firms or Investment Funds take the reins of organizations, setting new club strategies that aim to be more financially sustainable. The most prominent example that comes to mind from the past couple of years is AC Milan, with Elliot Management. Whilst these circumstances make the future landscape for football in Italy relatively promising for a variety of reasons, it would have been questionable to argue that a simple strategy change would have attracted the greatest stars that have graced stadiums around Italy over the past 4-5 years. To me, a change in philosophy across all of Italy would have had to wait 10-15 years before being able to see the results clubs are aiming for.
Luckily for all clubs around Italy, the Italian government played a huge role in accelerating this process of attracting stars and in increasing the value of the league with a simple move.
By passing the law, “Decreto Crescita”, in 2018, clubs were given huge tax breaks when signing contracts with talent from outside of Italy. The “Decreto Crescita” law allows income taxation to drop from around 45% (in the case of the highest tax bracket in Italy) to around 25% for players who haven’t lived in Italy for the 2 years prior to their arrival and sign an agreement to stay for at least 2 years following their arrival.
The law was originally passed to mitigate Italy’s “fuga dei cervelli”, or better, the “brain drain”, trying to encourage top Italian talents who had gone abroad to come back home.
Whilst it is tougher to determine the impact for corporate businesses around Italy due to income figures being confidential matters, it isn’t as complicated with the world of football. In fact, with a simple example, we can start to imagine the magnitude of this law for all the big clubs in Italy.
A player earning €10M, without the “Decreto Crescita” law, would have cost the club €4.5M in taxes, 45%. Instead, with this law, the club would only pay €2.5M in taxes. That saves a net €2M euros for a club. The player is still getting paid €10M. The club is now spending €12.5M instead of €14.5M on the players’ wages. Now imagine that over a contract of 5 years. €10M saved — not exactly pennies.
This law quickly became game changing for Italy and its clubs without a shadow of a doubt. Instantly, players like Cristiano Ronaldo, Romelu Lukaku, and Paul Pogba were all lured in to moves with clubs from Serie A. This is because these same clubs were able to match (or even surpass) offers from other clubs around Europe despite lesser revenues or financial capability.
To me, the “Decreto Crescita” law had been a fix that worked immaculately. Whilst in its essence, it highlighted all that was wrong with Italy and the financial situation of the country by having to give tax discounts to lure in talent, I personally believe it was a great short-term solution. Short-term because in the scenario that other countries copied this same move, Italy and the Serie A would be in a sticky situation, as the playing field would be leveled. In that case, you would have to restructure the Italian football system under various points of view — but that’s a topic for another day.
With all of this in mind, you might be surprised to hear that the Italian government, in an attempt to promote domestic talent, has removed the “Decreto Crescita” law starting January 1st 2024 — barring the individuals who had been already signed to a contract with an Italian club before that date.
This will affect Serie A and produce huge repercussions. The league isn’t filled with stars, and while it is right to say it has grown to be arguably the “2nd league in the world” behind the Premier League, the distance with other leagues like the LaLiga isn’t immense. For this reason, I can easily see a reality where players choose other leagues (and especially the Premier League) over the Serie A — ultimately moving England’s maximum division closer than ever towards the ultimate Super League status that has been despised by all football fans over the past couple of years.
This move, to me, comes with a subtle tone of arrogance. It suggests to me that, in terms of football, people in power believe that Italy is still able to produce talent like no other country in the world. This idea is deeply flawed to me. What significant, jaw-dropping talent has Italy produced ever since its World Cup win in 2006? It has lived off a generation of talent which had been produced when other countries weren’t fully developed like they are now. Remember, Italy played their EURO 2020 (2021) Final with Chiellini (36) and Bonucci (34) starting.
Aside from examples like La Masia of FC Barcelona, other clubs in Europe, at the time, hadn’t developed facilities and utilized resources too differently from Italy in terms of talent production. This meant that the playing field, in terms of solely domestic talent, wasn’t too different.
Today, the music is different. Portuguese clubs like Porto, Benfica, and Sporting Lisbon keep dishing out talents which end up dominating world football year-after-year. Why? Because they have invested in that sector appropriately, and due to their “smaller” league status, allow youngsters to get experience within the first team. For example, in a recent article by Forbes, we understand that Benfica spends upwards of €10M per year on improving its youth sector.
In Italy, this isn’t fundamentally part of the football culture. Talents find it extremely hard to break through. Further, the only real club that has been able to provide next-level facilities that may start to change this is Fiorentina with their brand new Viola Park, one of the best football facilities in Europe today.
Then won’t the removal of the “Decreto Crescita” law force clubs to focus on in-house domestic talent? Unfortunately, it isn’t that straightforward. Serie A Clubs, with all that’s at stake, will find it hard to bet on many different Italian youngsters. Instead, like Udinese and Venezia have done in recent years, I see clubs scouting for players in remote countries to tackle the wage-and-tax issue that exists now. As a result, this is likely to be detrimental in all cases.
A simple solution to the problem would be to simply keep the “Decreto Crescita” law and invest in our development centers for young players. With that not being possible anymore, I would propose a solution which might initially raise some eyebrows: set the threshold for the “Decreto Crescita” at around €300K. Setting a threshold for which the “Decreto Crescita” law applies would make Serie B the hub for development of talent. This is because Serie B clubs, with their limited financial capability, would not be enticed to bring talent from abroad as it would cost them significant amounts of money. The level in Serie B, to me, would be a perfect hub for Italian talent to earn that highly-valued experience Serie A clubs are looking for. As a result of this move, Serie A clubs would still be able to bring in international stars – as the chances of them asking for more than €300K are higher – and keep increasing the value of the league overall.
“But wouldn’t this create a Super League format in Italy, Umberto?”
Yes. But that can be easily avoided. If Serie B clubs have to develop domestic players and refrain from acquiring international talent with the same frequency as Serie A clubs, we could argue that they are in a position of disadvantage in the short-term. Until Italy starts investing considerable resources into youth development centers and produces talent, that same disadvantage will remain. To solve this issue, we have to make the transition to Serie A from Serie B smoother.
How do you do this? Provide adequate funds to clubs that get promoted to the Serie A — just like the Premier League does. This would help Serie B clubs boost their rosters and be able to put up a greater fight to stay in Serie A. Funds to allow this to happen would come around by increasing the value of the league – with star players and by winning European competitions – to generate more revenues from TV rights and other streams.
At this point, we go back to the original issue. The same issue that popped up around about 8 years ago, when Juventus was the only club from Italy that had somewhat a good reputation across Europe, and Serie A’s value had hit an all-time low.
How can we attract these great players, who are so crucial in generating more revenue?
Bring back the “Decreto Crescita”, simple.