FC Tokyo's 2023 fiscal year financial report, announced on May 21st. The operating revenue reached a record high of 5.929 billion yen in club history, achieving a growth of 660 million yen compared to the previous year. However, there is also the current situation of four consecutive years of deficit.
What kind of efforts were made there? And what is the current state of the club, looking towards a complete recovery from the pandemic and towards the future?
In the first part, we talked to President Shigeya Kawagishi about the background of record-high sales and four consecutive years of deficit, as well as the support for the drastically changed academy.
Coverage and composition by Kei Sato (freelance writer)
──The financial results for the 2023 fiscal year have been announced. Please share your thoughts on these numbers.
Kawagishi The sales figure is used to indicate the scale of the club's management. In the 2019 fiscal year before the corona, it was about 5.635 billion yen, but in the 2023 fiscal year it will be about 5.929 billion yen. We were able to increase it by about 300 million yen. It is also a record high for the club, and it means that we have exceeded the ceiling so far. We would like to thank not only the players, but also the team staff, club employees, fans and supporters, and partner companies.
──What is the reason for the record high sales?
Kawagishi It can be said that various efforts have been reflected in the numbers, not just one. We have focused on all segments (fields). First of all, how can we increase the advertising revenue, which is the largest source of income? How much can we increase ticket revenue as we recover from the corona disaster? And merchandise revenue. FC Tokyo's merchandise revenue was about 300 million yen (as of fiscal year 2019 before the corona disaster), which was a lower number in the entire J1 league. The same goes for schools. We used to promote it in the context of popularization activities, but we changed our perspective to look at it as a school business. We believe that these efforts in various areas have led to positive results.
──The advertising revenue, which is the pillar, was 2.84 billion yen.
Kawagishi It increased by about 300 million yen from the previous year. It has been two years since I became president, but I believe that we have achieved certain results by reviewing and organizing our sales system to take responsibility for the target numbers. In terms of ticket income, we were able to increase it from about 900 million yen in the previous year to 1.2 billion yen, including the sales of SOCIO (annual tickets). In terms of merchandise income, we had reached 400 million yen in the previous year, but in 2023, we exceeded 600 million yen. This is thanks to the hard work of each person in charge.
- Were there any common improvement points in each segment?
Kawagishi We have been working on a thorough review of our processes and investing in our personnel. In particular, we have been actively investing in our personnel. As I became the president of the football club, I realized that without people, we cannot produce results and cannot grow the club. We consider investing in increasing our excellent staff and nurturing talented personnel as an investment, and we are actually working on it. Although we are not a large company, the number of staff in the business department has increased by 10 people. However, to be honest, I did not expect the overall numbers to grow this much in just 2 years.
──Do you also feel a change in the mindset of employees and staff?
Kawagishi I feel it every day. I am sending a message to think clearly about "why I am doing this" for each job. The "FC Tokyo VISION 2030" formulated in March last season is a guideline for aligning the direction of each individual, but as a result, the managers of each department have organized what kind of numbers they should seek and what kind of efforts are necessary for that purpose, and I think that they have achieved the highest sales ever by working diligently together.
What specific efforts were made to increase the merchandise income, which was relatively low among J clubs?
Kawagishi First, we talked about changing our mindset. For example, about selling uniforms. In the past, there was always a mindset of not wanting to take too much inventory risk, and it seems that the person in charge was struggling every season with the initial purchase quantity. However, uniforms should be items that can be purchased when you want to buy them. I told the fans and supporters, "Let's stop the situation where there are no items for sale when you go to the merchandise shop." Even if we have to take risks with purchasing, we should make sure to have a solid lineup of products. If we have items for sale, our sales will also increase. There are still cases where we run out of stock, but we are now purchasing more products than last season and managing with inventory risk.
- On the pitch, it is often said that "you cannot expect big returns without taking risks", but isn't it difficult to change your mindset to take risks on the business side?
Kawagishi As stated in "VISION2030", when we thought about becoming Tokyo=FC Tokyo, we realized that we cannot move forward if we stay small, and we will never reach that stage. Challenges are necessary. Of course, there will be trial and error in the process, but that is where we can have "realizations". Of course, we will discuss how much return there will be, but we have been moving forward with a perspective that the management team can also accept.
In addition, what was significant was becoming a subsidiary of MIXI. Previously, Tokyo Gas was the parent company and provided support, but in terms of capital relationship, the club was not independently managed and could not absorb losses. However, in discussions with MIXI, if we can explain it properly, it is considered acceptable to even create a business plan with a deficit. In that sense, for the fiscal years 2023 and 2024, we are also planning for a deficit, but MIXI will absorb that amount, so we can have a more aggressive management style. In the past, we may have thought about what to do when the surplus funds run out, or if we need to raise capital. Currently, our thinking is more focused on how to use the money rather than how to save it.
──In the financial report, the operating loss was about 96 million yen and the final profit and loss was 228 million yen. Although this is the fourth consecutive year of deficit, can we consider this number as planned, as mentioned in the current explanation?
Kawagishi Yes, that's right. To explain a little more about the financial results for the 2023 fiscal year, there were changes on the income side. By finishing second in the 2019 season of the Meiji Yasuda J1 League, we received 250 million yen, 250 million yen, and 200 million yen respectively for the next three seasons as part of the J-League's philosophy strengthening allocation. However, this ended with the 2022 fiscal year. In addition, the equal distribution funds have also been reduced by 110 million yen.
These changes in revenue were known before the start of the 2023 fiscal year, and it was important to see how we would respond to these changes in the "premise conditions". With an operating deficit of 87 million yen in the 2022 fiscal year, adding a decrease in distribution income of 310 million yen would result in a deficit of about 400 million yen if we were to do it normally. The management issue for the 2023 fiscal year was how much we could recover from this negative 400 million yen. As I mentioned at the beginning, sales increased by 660 million yen compared to the previous year, but when taking into account the decrease in distribution income, it can be calculated that the club has increased sales by nearly 1 billion yen in terms of its actual strength. I think this number itself is a good number considering the current size and strength of the club, and it has exceeded our plans.
We also conducted impairment, but this was recorded in advance to cover future costs. We implemented this in consideration of future prospects in order to increase management flexibility after fiscal 2024. There is no problem at all as the capital situation is also strong.
──There was a discussion about shifting the focus of the school from promotional activities to business. How about the academy? A new initiative called "Academy Supporters" has started for fans and supporters.
Kawagishi So far, we have been supported by fans and supporters as a club support member. However, in reality, it was a program similar to a fan club organization. Therefore, we have adopted the idea of aligning the reality and content, and have changed the previous program to OFFICIAL MEMBERSHIP. On the other hand, we have also received voices expressing a desire to support the academy, and after discussing what would be the best approach, we have decided to renew it as Academy Partners and Academy Supporters.
──What are the differences between this academy partner and academy supporter?
Kawagishi When divided into large categories, Academy Partners are for corporations, and Academy Supporters are for individuals. We are moving forward while listening to various opinions on whether this is the best form, but we have already received applications as expected, and I honestly think it was good to get started. To be honest, the operating expenses for the academy are very large, and if you only look at that, it will result in a large deficit. In terms of nurturing players who will play in the top team in the future, it is an important investment for the club, but on the other hand, it is necessary to make efforts to expand the activities of the academy while considering the deficit in management. By creating a new program for those who want to support the academy, we can respond to their feelings and make the activities of the academy more active, so we have started these initiatives.
- What is the Academy's role for the club? Please tell us again. Last season, we received the J-League's Best Development Club Award for the third time in six seasons.
Kawagishi Tokyo has a large population, and it can be said that there are the most children playing soccer in one of the prefectures. Not all of our academy students are from Tokyo, but we also have a mission to produce professional players as a capital club, taking into account such facts. Looking at the entire J-League in recent seasons, about 50-60 FC Tokyo Academy graduates are playing as professional soccer players on average per season. I think this is a wonderful thing, and I also think that we must maintain it as a permanent strength of our club.
Currently, when looking at the top team members, there are many academy graduates and the club is in a very good cycle. In terms of team composition, this is a very desirable situation. When acquiring players from outside, it is often necessary to pay a penalty for contract termination, but if you develop players, this is not necessary. Also, if there are many academy graduates, you can spend a lot of money when it comes to acquiring players from outside. We believe that having academy graduates perform at the top level is beneficial in many ways.
Kashif BANGNAGANDE
However, considering the structure of the world's soccer world, the position of the J-League is not at the top. Players will inevitably aim for the top leagues in the world and there is a reality that they want to challenge overseas. Academy-trained players will also inevitably go abroad. If that is the case, it is important for us to develop them well and acquire transfer fees. We believe that it is extremely important to establish a cycle of reinvesting that money to develop players who can play on the world stage and to grow the club.
The second part is here
