The dream of PEC Zwolle
Competing as an underdog in modern world soccer
In today's globally connected world, many believe the rich are getting richer and the rest are being forced to make do with what they have. The world of soccer seems to be the same with an increasingly established set of elite clubs that have formed an upper class to which others can only aspire. Even such elite clubs are separating into global nobility and national barons. Big European clubs like Manchester United, Real Madrid, Barcelona and a small number of others are global powerhouses that continue to pay more for the elite players they acquire. National big clubs like Benfica (Portugal) and Ajax of Amsterdam (The Netherlands), while growing their dominance domestically, struggle to stay competitive globally. At the same time, other less financially-endowed clubs desperately try to find ways to keep up. With this evolving class structure, it has become even more surprising when a small club shockingly upsets one of the elite.
The probability of small clubs emerging out of the peasant class continues to grow smaller. While not entirely new, the world of soccer is full of domestic leagues where some of the world's growing elite clubs compete against clubs that feel lucky just to be on the same field. Today in England, Burnley FC is challenged in its struggle to stay in the Premier League against the likes of Manchester United, Chelsea, Liverpool and other growing financial powerhouses. In Italy, AC Cesena attempts to compete against Juventus as well as other global aristocrats from Milan and Rome. In Spain, tiny AD Eibar competes for the moment against the world powers of Real Madrid and Barcelona. In Brazil Chapecoense, a small club from the little city of Chapeco in the State of Santa Catarina, continues to play in the Brasileirão (Brazil's top level) for its second year, competing against Brazil's national barons from São Paulo, Rio de Janeiro, Belo Horizonte and Porto Alegre. For most of these small clubs, staying in top level competitions is a success itself.
While the concept of promotion and relegation in domestic leagues was intended to allow growing clubs to enter and compete at the elite level, the modern realities of finance have, in fact, supported the establishment and solidification of a new feudalistic class system in soccer. It seems the fans of small clubs, that form the peasant class today, need to be satisfied with just appearing on the same field with the best clubs, as a reward for promotion until, at some point, being relegated again.
Even when small clubs, like TSG 1899 Hoffenheim, are given the opportunity to compete through outside financial support, fans of the elite clubs complain and demand laws to keep it from happening again. Hoffenheim, in Germany's Bundesliga, is a club from a small village that owe its success to financial support from Deitmar Hopp, the billionaire co-founder of German software company SAP. At the same time, when outside financial support is lost, clubs like Parma FC in Italy crash spectacularly into bankruptcy.
PEC Zwolle – a tiny club that wants to grow
While it may be common to see small clubs play elite clubs domestically, it is not often that a small club can succeed in winning a trophy against them. PEC Zwolle did just that in the Netherlands when the team won the KNVB Beker (the main cup tournament in The Netherlands) in 2014 against the globally famous Ajax of Amsterdam and by the score of 5-1. That achievement sent shock waves throughout the Netherlands because PEC Zwolle had just completed its second year in the Eredivisie (the top league in the Netherlands). The club then opened the 2014-2015 season by adding another 1-0 victory over Ajax in the Johann Cruijff Schaal (a single game competition between the KNVB Beker winner and the Eredivisie Champion from the previous season). In the current 2014-2015 Eredivisie season, PEC Zwolle have already achieved a club record in wins and points in an Eredivisie season and are virtually assured of a fourth consecutive season at the top level.
Just how small is PEC Zwolle? From its own published 2014 annual financial statements (reflecting the 2013-2014 season), PEC Zwolle's revenues were less than 9% of those Ajax was able to generate during the same period. Its payroll was under 14% of the payroll of Ajax. For comparison purposes, Wigan's revenues were about 15% the revenue of Manchester United’s and its payroll just over 24% for the 2012-2013 season when the club was relegated.
PEC Zwolle's challenge of growth
PEC Zwolle, originally founded in 1910, is a small club with ambition. Without a financial backer like Hoffenheim, ambition in a small club can be dangerous because it can lead club management, if not disciplined, to commit to expenses that cannot be covered by revenues. PEC Zwolle itself in 1990 fell victim to unsupported ambition and had to declare bankruptcy. At that time, the club was immediately reformed as FC Zwolle so it could continue playing professionally in the lower of the two professional divisions (the Eerste Divisie).
While FC Zwolle appeared at the top level (Eredivisie) for two seasons, in 2002-2003 and 2003-2004, it never escaped the threat of relegation in first year and was relegated in second. The club, on promotion, changed its name back to PEC Zwolle for the 2012-2013 season. The 2014-2015 season marks PEC Zwolle's third consecutive season in the Eredivisie. With its less than perfect club history in mind, club executives have openly stated that they intend for PEC Zwolle to grow and be stronger both financially and competitively.
Smaller clubs from smaller cities that have experienced long-term growth at the highest level are hard to find. However, PEC Zwolle's neighbour to the north, SC Heerenveen, is one. The city of Heerenveen has a modest population of about 30,000. SC Heerenveen achieved promotion to the Eredivisie in 1993 and has been able to remain there since. They moved to a new stadium for their 1994-1995 season and eventually became a regular participant in the UEFA Cup competition. Along the way, it also became a big name in player development. In fact, the CIES Football Observatory website listed the club as having the 17th best youth academy in Europe ahead of many elite clubs including Manchester United, Paris Saint Germain, Bayern Munich, Arsenal and PSV Eindhoven. The quality of Heerenveen's youth academy has allowed it to derive a growing revenue from selling players on to bigger clubs.
Discipline and good management
It takes a lot of discipline to remain competitive as a small club and even more so if that club wants to grow. To begin with, managers of small clubs need to understand their club's limitations and find innovative ways to level the playing field. There are big clubs with big budgets that will always be the favourites in leagues and tournaments. Occasionally, a middle class club, that has put together a quality team, can challenge them for a year or two. A small club management, regardless of competitive disadvantages, must stay within its financial limits but also find ways to safely increase those limits over the long-term.
While in pursuit of wins and championships, a small club, without big financial backers, needs to be careful not to take risks that could prove to be financially fatal. The first step to sustaining long-term competitiveness is to understand that some success does not, by itself, eliminate the inherent financial limitations that a small team faces. Even with their recent success, PEC Zwolle continues to face financial challenges. In March this year, it was placed in the Category One of the KNVB's financial stability ranking along with 11 other professional clubs. Category One indicates that there is some financial concern and that the club in question needs to submit a financial plan showing how it will continue to focus on strengthening its finances.
The search for innovative ways to compete on a budget is not limited to just small clubs. Most clubs in Europe are constantly looking for ways to compete against the big budgets of clubs like Manchester United, Real Madrid and Barcelona. In the Netherlands, a recent example is the announcement that Billy Beane was joining AZ Alkmaar as an advisor to assist them in finding innovative ways to compete. Beane's story, as an American baseball executive, was made famous by the baseball movie, Money Ball, where he was played by actor Brad Pitt. Beane succeeded in baseball with a small club (Oakland Athletics) by introducing innovative ways to find hidden or discarded talent.
Key managers at PEC Zwolle
The ongoing challenge for Adrian Visser (chairman) is to maintain a long term growth strategy that reflects the club's financial limitations and not be overly influenced by competitive success. This is a balancing act that the club has been able to manage so far. Visser is the former CEO of SITA Northern Europe Waste Services. While not at all similar to professional sport, it is a larger and more complex one than the club he leads today and that experience should help in providing disciplined professional leadership.
On the technical side, he is assisted by technical director, Gerard Nijkamp. Nijkamp has done an admirable job since 2012 in bringing in high quality players and coaches. But unlike big clubs, the challenge is made even greater as he knows the most attractive developing players will eventually move on to bigger clubs, while replacements that fit the budget also need to be found.
Ron Jans is currently the head coach of PEC Zwolle. Jans is a highly respected and experienced coach. His personality and apparent relationship with his players resembles that of a US college coach where teams are assembled with the knowledge that players will move on after a few years. Like the personalities of US college teams, the personality of PEC Zwolle seems to have become that of the head coach.
Growing a small club in a modern world
To compete at the highest level over a long period of time, a club needs to have excellent players and top class coaches. Small clubs are limited by the budget their revenues allow them. For a club like PEC Zwolle that has a solid technical team, it all seems to boil down to growing revenues. For the most part, revenues are directly linked to developing a growing fan base and increasing its willingness to spend. However, as Heerenveen has shown, player development and player trading revenues can also be substantial.
Growing revenues from fans
Small clubs from small cities, like PEC Zwolle, start with a small local population from which to draw fans. This limits the potential for revenue growth from primary sources like ticket sales and broadcast revenues. Revenues coming from merchandise sales and concessions are also limited by a club's fan base.
In the case of PEC Zwolle, the club expands the market it intends to represent by aligning itself with the economic region called Zwolle Area. By doing so, it expands its market from the city's population of about 123,000 to a regional population of about 650,000. Zwolle Area is also considered to be one of the top economic regions of the Netherlands. The club has also a relatively new stadium called the Ijsseldelta, with a capacity of only 12,500. It currently ranks 11th in attendance among Eredivisie clubs and average attendance is just below stadium capacity.
Businesses can also be expected to align themselves with organizations and activities that attract the attention of potential customers. If a soccer club has been successful in attracting significant attention from a large fan base, businesses will consider paying sponsorship money in return for considerations that will put their identity in front of the fans. Big clubs have larger fan bases so sponsors are willing to pay more to be associated with that club. Small clubs can expect attention from sponsors only when their fan base is attractive. The fact that PEC Zwolle comes from a strong economic region should help them in building sponsorship revenues.
Growing player trading revenue
Most successful small clubs become more competitive and add to revenues from fans by leveraging high quality youth academies for competitive talent and revenues. SC Heerenveen has been able to do this. PEC Zwolle currently does not have the reputation of top player development clubs like Heerenveen and the big Dutch clubs. Consequently, PEC Zwolle has been faced with building its academy's reputation from bringing in and developing local talent. Actually the club has had some success with regard to that: Jesper Drost and Mustafa Saymak. While regular starters and significant contributors to the club's competitive success, Drost and Saymak are also potential sources of revenue when larger clubs eventually come to buy.
A second source of player trading revenue comes from identifying talents that have been discarded by clubs with larger reputations or are simply unsigned. PEC Zwolle has been able to sign multi-year contracts with Ben Reinstra (Heracles Almelo), Jody Lukoki (Ajax), Rick Dekker (Feyenoord), Wouter Marinus (Heerenveen) and Boy De Jong (Feyenoord). It also supplements this talent by bringing in young professionals from outside Europe like Ryan Thomas (New Zealand) and Trent Sainsbury (Australia). All of these players are also potential sources of revenue if and when other clubs come to buy.
Success in generating player trading revenues comes from judiciously and decisively offering contracts to a number of players and then developing them in a way that, on the whole, generates a profit. This comes from knowing that some will fail, others will contribute to the club's success and some will grow to a level where attractive offers are received from big clubs. Player trading profits result when transfer fees are large enough to offset transfer fees and salaries paid to acquire developing players, including players that fail.
Some lessons from elsewhere
• Tapping the broader market for fans beyond the local market: the Green Bay Packers, an American football team (NFL), are a global power from a small city. In Forbes magazine rankings, the Packers are estimated to have market valuation of over $1.3 billion. The Packers' home city, Green Bay, has a metropolitan area population of just over 300,000 and the nearest metropolitan area with over one million in population is Milwaukee. Milwaukee is almost two hours away from Green Bay. In addition to their long tradition of success, the club has successfully created an extremely loyal fan base that is spread across the whole of the United States and to some extent globally.
• Be innovative in building a fan base: Gremio Osasco Audax is a club from the greater metropolitan area of São Paulo, Brazil. Today, it has a professional team playing at the top level in the state competition of São Paulo (Paulistão) which compete against globally recognized clubs like Santos, Palmeiras, Corinthians and São Paulo FC. While it hasn't yet broken into the national pyramid of competition, it seems to be only a matter of time. Gremio Osasco Audax is particularly interesting today because of how it makes its games accessible through online streaming as well as its youth games and affiliated clubs’ games. Its Facebook page has collected almost 100,000 likes which is more than some much bigger clubs playing nationally.
• Clubs developing young players can attract fans: the universities and colleges in the United States and one in Canada are governed by the National Collegiate Athletic Association (NCAA) when it comes to competitive sports. NCAA team sport competitions in American football and basketball have become as popular as any national competition in the world. People outside of the United States would be shocked to discover that the three largest stadiums in the country are university football stadiums. In fact 8 university stadiums have capacities that exceed 100,000. University basketball is the same with some schools having indoor stadiums that easily match those of NBA teams. In both sports, head coaches are well paid and at big schools, they attain celebrity status. Student athletes are not paid and maintain amateur status although the best later leave to become professional superstars. Such players are often still associated to the school they had played for (eg. Michael Jordan with the University of North Carolina, Magic Johnson with the Michigan State University, Tom Brady with the University of Michigan, etc.) Fans of university teams are a combination of university alumni and people living nearby. Many of these universities are located in smaller cities which means stadiums are filled by fans coming from places other than the home city and the university's student population.
• The diaspora are available fans: soccer fans in Canada purchased the 11th highest number of tickets to the 2014 World Cup in Brazil despite the fact that Canada did not qualify. Most in Canada attribute that to soccer fans having ethnic loyalties in addition to those they have for Canada. While cities often have identifiable ethnic populations, there are also thinly spread ethnic populations that can still be substantial in total. Some larger European clubs have already started to investigate how they might tap into these potential fans.
In the end, small soccer clubs that are attempting to compete against large global powerhouses are facing a monumental challenge. If they want to be perennially competitive, they need to grow their revenue base so that they can narrow the gap in the quantity of talent available to them. Fan bases and consequently, revenue bases grow slowly. Still, evidence elsewhere suggests that it is possible although the task requires innovative thinking and a long term view. For inspiration, a club like PEC Zwolle only needs to look at its neighbour, S.C. Heerenveen. PEC Zwolle has also some other options it could explore to tap into a source of fans that go beyond the Zwolle area (the region's diaspora and the interested people in the home countries of some of the players, for example). With new internet and social media channels, even a small club may be able to access geographically diverse audiences and convert them into regular fans. It is possible to grow but it is also a long climb that requires both discipline and patience.
PEC Zwolle website (in Dutch): www.peczwolle.nl
2014 KNVB Beker Final highlights (commentary in Dutch): www.youtube.com/watch?v=sESTrAsz93o&feature=youtu.be
Top 100 training clubs in Europe from CIES Football Observatory: www.football-observatory.com/IMG/pdf/wp100_eng.pdf
Zwolle Area: a top economic region in The Netherlands (promotional video): www.youtube.com/watch?v=Xf9JNk1nNm4&feature=youtu.be
Top 5 most loyal fan bases in the NFL: www.cheatsheet.com/sports/forget-seattle-and-the-12th-man-here-are-the-nfls-5-best-fanbases.html/?a=viewall#ixzz3VhBxtBqq
The Facebook page of Gremio Osasco Audax (in Portuguese): www.facebook.com/goaudax?fref=pb&hc_location=profile_browser
NCAA American football attendance: www.mlive.com/wolverines/index.ssf/2014/12/michigan_football_season_atten.html
Dutch Soccer Fans in Toronto Celebrate Advance over Costa Rica in the 2014 World Cup: www.citynews.ca/2014/07/05/dutch-soccer-fans-celebrate-world-cup-advance