J.League Management Cup 2016

Sports Business Group 2017.9 Contents

Foreword 03 Introduction Databook Growing Expectations for the Evolution of Sports in 04

Overview Four Perspectives of the J.League Management Cup 2016 06

Comparative Analysis of J1, J2, and J3 Leagues 1st Stage: Marketing Performance 08 2nd Stage: Club Performance 09 3rd Stage: Management Performance 10 J.League Management Cup 2016 4th Stage: Financial Performance 11 Databook

Sports Business Group 2017.9 J1 Club Rankings 12 Management Cup Analysis of the The J.League Management Cup 2016 Databook, which 1st Stage: Marketing Performance 14 contains the main data used for this report, has been 2nd Stage: Club Performance 16 made available free of charge by Deloitte Tohmatsu’s Sports Business Group at the following website: 3rd Stage: Management Performance 18 4th Stage: Financial Performance 20 URL: www.deloitte.com/jp/sports-business

J1 Cup Winners Analysis 22

Special Feature 1 Profits from Merchandise Sales 24

J2 Club Rankings 26 Management Cup Analysis of the 1st Stage: Marketing Performance 28 2nd Stage: Club Performance 30 3rd Stage: Management Performance 32 4th Stage: Financial Performance 34 Publisher: Sports Business Group, Deloitte Tohmatsu Financial Advisory LLC J2 Cup Winners Analysis Renofa 36 Address: Shin- Building, 3-3-1 Marunouchi, Chiyoda-ku, Tokyo (postal code 100-0005) Special Feature 2 Telephone: 81-3-6213-1180 Attendance at Away Matches 38 E-mail: [email protected] Website: www.deloitte.com/jp/sports-business J3 Club Rankings 40 Management Cup Analysis of the Supervising editor: Kazuhiro 1st Stage: Marketing Performance 42 2nd Stage: Club Performance 44 Supervising writer: Shin Satozaki 3rd Stage: Management Performance 46 Contributing writers: Takatou Kinoshita, Kazumasa Kawabata, Tatsuya 4th Stage: Financial Performance 48 Kotani, Akinori Kaneta, Yuya Nakajima J3 Cup Winners Analysis Tochigi SC 50 Assistant analysts: Shimizu Masahiro, Kuroishi Shuichi, Yamazaki Daiki, Kishimoto Masaaki, Kozuma Ryohei Special Feature 3 Analysis of SNS Usage among Clubs 52

Editorial Postscript 54

Greeting 55

Deloitte Tohmatsu is J.League Supporting Company.

02 J.League Management Cup 2016 | Foreword

Foreword

'XULQJWKH-/HDJXHVHDVRQDWZRVWDJHDQGSOD\R΍IRUPDWZDV IRUWKHVHFRQGWLPHDGRSWHGE\WKH-/HDJXH$IWHUZLQQLQJWKHȴUVW stage and placing third on the overall table, the Kashima clinched the FKDPSLRQVKLSLQWKHSOD\R΍VZLQQLQJWKHWLWOHIRUWKHHLJKWKWLPHȃWKH most of any club in the league. Kashima then went on to play a surpris- ingly close match against Real Madrid in the 2016 FIFA Club World Cup ȴQDODQGLWVUXQQHUXSȴQLVKGHPRQVWUDWHGWKHLQFUHGLEOHSRWHQWLDORI -/HDJXHFOXEVΖQDQH΍RUWWRKHOSWKHOHDJXHFRQWLQXHWREXLOGRQWKH experience it has gained over many years, Deloitte Tohmatsu’s Sports Business Group has ranked the business performance of every club in the league in this report, J.League Management Cup 2016. $OVRLQWKLVUHSRUWZHORRNDWVWDGLXPRSHUDWLRQVȃDQLPSRUWDQW IDFWRULQWKHVSHFWDWRUVSRUWVEXVLQHVVȃLQOLJKWRIWKHRSHQLQJRI6XLWD City Football Stadium in 2016. It attracted the attention of Japan’s foot- Kazuhiro Fukushima EDOOFRPPXQLW\DVDVHDWVWDGLXPVSHFLȴFDOO\GHGLFDWHGWRIRRW- ball. Unlike stadiums that had been constructed throughout the country Partner with public funds for the purpose of playing sports, City Football Sports Business Group Stadium stood out as a facility designed and built for watchingVSRUWVȃ Deloitte Tohmatsu Financial Advisory LLC QDPHO\IRRWEDOOȃE\WKHSULYDWHVHFWRUZKLFKGRQDWHGLWWRWKHFLW\RI Suita. In the case of ’s Bundesliga, which boasts the highest average attendance among football leagues worldwide, attendance grew considerably after spectator-friendly stadiums increased in number following the renovation and construction of new facilities country-wide in preparation for the 2006 FIFA World Cup. For that UHDVRQZHKRSHPRUHIRRWEDOOVSHFLȴFVWDGLXPVZLOOEHEXLOWLQ-DSDQLQ the future. In the J.League Management Cup, we have examined the results of concrete initiatives carried out by the league and its clubs from an objective standpoint. I hope it provides a basis for discussions and a useful resource for the many people involved in the J.League as well as other spectator sports businesses. As one of the largest groups of business professionals in Japan, and with a sizable roster of business advisors, the Deloitte Tohmatsu Group set up its Sports Business Group in April 2015. Since then, we have been working as a team to help expand markets for sports businesses in Japan and the rest of Asia, following the lead of the Sports Business Group in the . Established more than 20 years ago by 'HORLWWH8.DPHPEHUȴUPLQWKH'HORLWWH*URXSLWKDVDQH[WHQVLYH track record in contributing to the development of sports business markets, especially for ’s Premiere League. Through our activi- WLHVZHDUHR΍HULQJQHZLQVLJKWVLQWRWKHVSRUWVEXVLQHVVPDUNHWDQGΖ DPFRQȴGHQWWKH\ZLOOKHOSEULQJPRUHG\QDPLVPWRVSRUWVEXVLQHVVHV going forward.

03 Introduction Growing Expectations for the Evolution of Sports in Japan

Signs of a Shift toward Business-Driven Sports not the stadium layout itself; instead, the concept of a Having positioned itself as the country’s foremost stadium especially designed for viewing spectators is contact point for commercializing sports, the Japan Sports based on the premise that sports are a form of entertain- Agency published a guidebook on renovating and ment rather than physical training. This standpoint should upgrading stadiums and arenas in June 2017. Although it is be the starting point for actions taken by sports clubs, still too early to know the outcome of this initiative, the leagues and organizations in the future, as it can both guidebook acknowledges the positive impact that sports ERRVWDWHDPȇVSHUIRUPDQFHRQWKHȴHOG )0ȴHOGPDQDJH- FOXEVDQGWHDPVKDYHDVPHPEHUVRIFLYLOVRFLHW\DQGR΍HUV ment) and raise the level of a club’s performance at the box WKHȴUVWFOHDULQGLFDWLRQWKDWVXFKVSRUWVRUJDQL]DWLRQVFDQ RɝFH %0EXVLQHVVPDQDJHPHQW E\LQFUHDVLQJWKHOHYHORI form partnerships with the Japanese government. satisfaction among spectators who watch the games. We believe that beyond the mere words in the manual, The J.League, too, will certainly be able to broaden its the agency’s initiative will eventually prove to be highly business footing if its management can maintain an even VLJQLȴFDQW+LVWRULFDOO\LQ-DSDQDVSDUWRIWKHPDQDJHPHQW greater awareness of all stakeholders from a commercial of sports clubs and teams, these organizations had to try standpoint. and convince sponsors, government bodies and other VXSSRUWHUVRIWKHLUUROHLQWKHFRPPXQLW\DQGWKHEHQHȴWV The Challenge of Providing Solutions for WKH\R΍HUHG$WWKLVSRLQWLQWLPHKRZHYHUWKRVHUROHVDQG Communities EHQHȴWVDUHQRWQHFHVVDULO\FRQYHUWLEOHWRHFRQRPLFJDLQV Fans and supporters are, of course, considered to be the DQGWRH΍HFWLYHO\GHPRQVWUDWHWKDWZLOOUHTXLUHPDQSRZHU main stakeholders of a sports club or team, but there are economic resources and specialized skills. also many other important stakeholders, such as the club’s At present, sports clubs and their management organiza- owners (including shareholders), sponsors, mass media tions are generally not in a position to channel a substantial organizations, local governments, and the club’s athletes amount of operational resources towards activities that are DQGVWD΍6LQFHVRPDQ\GLYHUVHVWDNHKROGHUVDUHLQWHUFRQ- not directly related to holding matches or other spectator nected around the club, there are times when their respec- events. As a result, sports are not viewed purely as busi- WLYHLQWHUHVWVPD\FRQȵLFWΖQRXURSLQLRQDVSRUWVFOXE nesses; instead, the management of sports organizations must play a part in coordinating those interests if it is to in Japan is based on gaining the backing of voluntary spon- grow sustainably as a business. For that reason, clubs sors and other supporters. managed simply for the sole purpose of making money or For this reason, the Japan Sports Agency, a national ZLQQLQJ JDPHV ZLOO EH VXUH WR UXQ LQWR GLɝFXOWLHV $V government body, has publicly recognized sports clubs and mentioned above, sports clubs are members of civil society, teams as community-based organizations through its and from that perspective they have an additional obliga- recently published guidebook. This recognition should tion to help solve problems faced by their communities. greatly alleviate the burden on sports clubs in having to In this regard, the J.League has been ahead of other explain their importance in the community. Indeed, in our sports leagues in Japan, having declared its policy of helping view, the tide has turned toward greater commercialization communities solve problems as a league in its J.League PUB of sports in Japan going forward. Report* (PUB stands for “Participate, Understand and Build”). More than ever, all J.League clubs are now expected Changes Taking Shape in the J.League to explore ways of independently contributing to their Understandably, stadiums will have a major impact on communities with solutions to local issues, based on the the J.League. Following the opening of the Suita City Foot- premise that each club can soundly and independently ball Stadium in the 2016 and the Mikuni World manage itself. Stadium in in the 2017 season, construction of Looking ahead, BM will grow increasingly important in the numerous new stadiums is currently under consideration. management of J.League clubs. We hope that managers of All of these projects share a common feature: the stadiums WKHFOXEVZLOOȴQGWKLVUHSRUWKHOSIXOIRUH[DPLQLQJWKH%0 are designed especially for watching football. of their organizations. Undoubtedly, the concept of designing stadiums for ZDWFKLQJ VSRUWV DV RSSRVHG WR SOD\LQJ VSRUWVȃDV ZDV FRPPRQLQWKHSDVWȃZLOOEHLPSRUWDQWIRUPDNLQJSURJUHVV in the sports industry. Nevertheless, the essential factor is

* The J.League PUB Report (Japanese only) is available at this webpage: http://jlib.j-league.or.jp/

Photo (next page) © URAWA REDS

04

Overview Four Perspectives of the J.League Management Cup 2016

In the J.League Management Cup 2016, we conducted a comprehensive evaluation of the business PDQDJHPHQW %0 RIHDFK-/HDJXHFOXEIURPIRXUSHUVSHFWLYHVȃӪMarketing Performance, ӪClub Performance, ӪManagement Performance, and ӪFinancial PerformanceȃPDLQO\EDVHGRQȴQDQ- cial information and related data for each club published by the J.League.

Evaluation (BM points)

J1: 18 points for 1st place – 1 point for 18th place J2: 22 points for 1st place – 1 point for 22nd place J3: 13 points for 1st place – 1 point for 13th place

1st Stage: 3rd Stage: Marketing Performance Management Performance

Average Attendance Field Wage Costs/Revenue Stadium Capacity Utilization Matchday and other Revenue/SG & A New Attendees/Total Attendance 3URȴWVIURP0HUFKDQGLVHVDOHV Average Spend

2nd Stage: 4th Stage: Club Performance Financial Performance

Field Wage Costs/Points Won Revenue Matchday Revenue/Points Won Revenue Growth Rate Equity Ratio

Four Stages

Just as the J.League divides its season into stages, we received 13 BM points, since the three aforementioned have organized the four perspectives listed above as stages under-23 teams were excluded from rankings. A point was in this report. Our evaluation covers all J.League clubs in the subtracted at each descending rank, with the bottom- J1, J2, and J3 leagues (excluding three under-23 teams that ranked club receiving one point. We ranked the clubs on a competed in the 16-team J3 League, as they were junior league basis because the number of matches and possible teams of J1 clubs). DFFXPXODWHGSRLQWVGL΍HULQHDFKRIWKHWKUHHOHDJXHV Our method of evaluating the clubs is based on key Based on this evaluation method, the club with the most SHUIRUPDQFHLQGLFDWRUV .3Ζ GHȴQHGE\'HORLWWH7RKPDWVX BM points across all four stages was declared the winner of for each of the four stages. Clubs in each league were the J.League Management Cup in each league. (In the event ranked according to their KPI results, and awarded BM of a tie, the title would go to the club with the most points at points corresponding to their respective league rankings. WKHȴUVWVWDJHDQGLIWKHVDPHFOXEVZHUHWLHGDWWKDWVWDJH For instance, a club ranked at the top of J1 for a certain KPI the next stages in descending order would be used to received 18 BM points, since there were 18 clubs in the determine the winner in the same manner.) league. Likewise, a top-ranked club in the 22-club J2 League received 22 BM points. In the J3 League, a top-ranked club

*U23 teams have not been included in these rankings.

06 J.League Management Cup 2016 | Overview Four Perspectives of the J.League Management Cup 2016

1st Stage: Marketing Performance 3rd Stage: Management Performance While looking at the BM of each J.League Under this category, we mainly focused on 8QGHUWKLVFDWHJRU\ZHFKLHȵ\IRFXVHGRQ club from the four perspectives described spectator-related data to evaluate the success of the management of expenses and revenue in above, our aim is not to assess the superiority PHDVXUHVWDNHQE\-/HDJXHFOXEVIRUȴOOLQJWKHLU RUGHUWRHYDOXDWHKRZH΍HFWLYHWKHFOXEVZHUH or inferiority of any given club, but rather to stadiums. While marketing is one of the essential LQJHQHUDWLQJSURȴWVΖQVSHFWDWRUVSRUWVWKH evaluate them comparatively using a common factors of business in general, there is still room PDLQVRXUFHVRISURȴWVDUHUHYHQXHIURP set of indicators. Generally, if we look at a club for all of the clubs to unlock the extraordinary sponsors, ticket sales, television broadcast LQGLYLGXDOO\ LWV %0 FDQ EH GLɝFXOW WR IXOO\ potential of marketing initiatives. With the recog- rights and merchandise sales. By analyzing grasp, but by comparing the performance of all nition of the importance of customer relation- these revenues relative to their associated of the clubs together, we are more likely to gain ship management (CRM) not only by individual costs, we hope to shed light on the business LQVLJKWVLQWRWKHH΍HFWLYHQHVVRIWKHLUEXVLQHVV clubs but by the J.League itself in recent years, policies pursued by each club’s management. initiatives. marketing should become a benchmark for 7KHVSHFLȴF.3ΖVIRUWKLVFDWHJRU\DUHOLVWHGDV Finally, since we have only used published measuring the performance of club manage- follows: information for the data compiled in J.League PHQW 7KH VSHFLȴF .3ΖV IRU WKLV FDWHJRU\ DUH Management Cup 2016, the scope of our anal- listed as follows: Ӫ'JFME8BHF$PTUT3FWFOVF ysis does not include information on club or Ӫ.BUDIEBZBOEPUIFS3FWFOVF4(" league activities that has not been made publi- ӪAverage Attendances Ӫ3URȴWVIURP0HUFKDQGLVHVDOHV cally available. Therefore, please note that the Ӫ4UBEJVN$BQBDJUZ6UJMJ[BUJPO UDQNLQJVLQWKLVUHSRUWGRQRWUHȵHFWDOODFFRP- Ӫ/FX"UUFOEFFT5PUBM"UUFOEBODF plishments of the clubs, such as successful Ӫ"WFSBHF4QFOE initiatives at the local level. The J.League and its clubs are actively promoting the disclosure of information and data, so we expect greater information accessibility in the future, allowing us to more accurately understand how the clubs are being managed.

2nd Stage: Club Performance 4th Stage: Financial Performance Under this category, we primarily looked at Under this category, we primarily examined points accumulated by clubs during the season FOXEȴQDQFHVWRHYDOXDWHWKHEXVLQHVVVFDOH in relation to their spending and revenue as a ȴQDQFLDOVWDELOLW\DQGJURZWKSRWHQWLDORIHDFK PHDQVWRHYDOXDWHKRZH΍HFWLYHWKH\ZHUHLQ J.League club. Financial data is important for winning league points. Accordingly, this enabling the performance of corporate bodies SHUVSHFWLYHUHȵHFWVWKHOLQNEHWZHHQWKHȴHOG across all types of industries to be clearly management (FM) and in the BM, and is there- presented through standardized accounting IRUHXVHIXOIRUH[DPLQLQJKRZH΍HFWLYHO\HDFK procedures and other tools. By making proac- club gained a return on its investment. By tive use of such data, we hope to provide staying on top of these results, each club insights into the clubs’ business operations. should be able to generate better results both 7KHVSHFLȴF.3ΖVIRUWKLVFDWHJRU\DUHDV RQDQGR΍WKHSLWFK7KHVSHFLȴF.3ΖVIRUWKLV follows: category are listed as follows: Ӫ3FWFOVF Ӫ'JFME8BHF$PTUT1PJOUT8PO Ӫ3FWFOVF(SPXUI3BUF Ӫ.BUDIEBZ3FWFOVF1PJOUT8PO Ӫ&RVJUZ3BUJP

07 Comparative Analysis of J1, J2, and J3 Leagues 1st Stage: Marketing Performance

Spectator sports are in the business of entertainment, so selling out stadiums is the most basic objective and important task for an organization’s management. In the J.League, marketing campaigns aimed at ȴOOLQJVWDGLXPVDUHFOHDUO\YLWDODVWKHVWDGLXPFDSDFLW\XWLOL]DWLRQUDWLRDYHUDJHGDURXQGLQWKH- League and only about 20% in the J3 League.

Average Attendances ating stadiums with conspicuously empty seats. Average Spend The average attendance in the J1 and J2 $WWUDFWLQJ PRUH IDQV PD\ EH GLɝFXOW IRU VXFK For the 2016 J.League season, we analyzed leagues rose slightly in 2016 compared with the clubs to achieve on their own, so it will be neces- merchandise revenue as an independent cate- previous year, but jumped 29% in J3. The main sary for this issue to be addressed in coopera- gory after including it under the category of reasons for this increase were initiatives taken tion with the J.League and local governments. “other revenue” in the previous report, and by J3 to attract more spectators during the 2016 incorporated it along with ticket revenue as the season, and a higher percentage of matches held New Attendees/Total Attendance two components of average match day revenue on weekends following the switchover from a Over the past three years, the ratio of new per spectator. Accordingly, this greatly increased three-round format to a conventional two-round spectators to total attendance has increased the levels of average match day revenue per (home and away game) format. or decreased between 4–5% annually in the spectator, while also making comparisons &RPSDULQJWKHGL΍HUHQFHVLQDYHUDJHDWWHQG- J1 League, and declined from 7.1% to 6.7% and between clubs more meaningful. In each of the ance between the leagues, J1 attracted about ȴQDOO\LQ-+DYLQJRSHUDWHGIRUIHZHU\HDUV three leagues, ticket revenue accounted for 2.6 times as many spectators as J2, which was than J1, the J2 League has yet to fully build up its around 70% of match day revenue per spectator, largely unchanged from the previous year, while IDQ EDVH - DOVR R΍HUV PDQ\ H[FLWLQJ PDWFKHV while merchandise revenue accounted for the J2 attracted about 2.2 times more spectators as because its clubs can be either promoted to J1 remaining 30% of the total. J3, down from 2.8 times in the previous season. or relegated to J3. For these reasons, we believe (Yen) the J2 League has even greater potential for From 2015 2016 Average From merchandise attracting new spectators than J1. On the other Spend ticket sales sales hand, since J2 operates on a much smaller scale J1 2,236 916 3,152 Average attendance and with far fewer personnel than J1, it may lack average (71%) (29%) the necessary resources to execute aggressive J2 1,259 622 1,880 J3 marketing campaigns. In our view, the J.League average (67%) (33%) should work to attract new spectators by collab- J3 714 389 1,103 J3 Կ29 % orating more closely with local communities and average (65%) (35%) Overall 1,457 664 making greater use of digital marketing, which it 2,121 has been focusing on in recent years. average (69%) (31%) 3rd round 2nd round Round-robin Round-robin tournament tournament More matches played on weekends New attendees/Total attendance (%) Stadium Capacity Utilization In the 2016 season, stadium capacity utiliza- WLRQ LQ DOO WKUHH OHDJXHV GLG QRW FKDQJH VLJQLȴ- Clubs need to focus on attracting new spectators through digital cantly from the previous season. According to marketing and collaboration with the J.League’s club licensing regulations, clubs local communities DUHUHTXLUHGWRKDYHVWDGLXPVZLWKDFDSDFLW\ of at least 15,000 in J1, 10,000 in J2, and 5,000 in J3. While average attendance in J1 exceeded WKHUHTXLUHGFDSDFLW\RIWKHFOXEVLQ- attracted fewer than 10,000 spectators on average. In J3, with the exception of Oita and , all clubs attracted less than 5,000 J1 J2 spectators on average. This suggests that clubs 4–4.9% 7–7.9% ̔ 5–5.9% in the two lower leagues, especially, are oper- Stagnant Decline

Average Attendances (people) Stadium Capacity New Attendees/ Average Spend (yen) Utilization (%) Total Attendance (%) No. of 18,057 No. of 59.4 No. of 4.4 No. of 3,152 clubs 38,208 clubs 80.9 clubs 8.3 clubs 4,591 J1 18 10,728 J1 18 30.9 J1 18 1.0 J1 18 1,770 No. of 6,988 No. of 33.7 No. of 5.1 No. of 1,880 clubs 14,559 clubs 67.8 clubs 16.7 clubs 3,429 J2 22 3,224 J2 22 12.2 J2 22 1.5 J2 22 1,084 No. of 3,127 ӍClub average No. of 19.7 No. of No. of 1,103 clubs 7,771 ӍMax clubs 41.2 clubs No data available clubs 1,966 J3 13 1,018 ӍMin J3 13 6.2 J3 13 J3 13 391

08 J.League Management Cup 2016 | Comparative Analysis of J1, J2, and J3 Leagues

2nd Stage: Club Performance

Total wage bill per league point won and total match day revenue per league point won are important KPIs for making substantive comparisons, and highly relevant benchmarks for comparing leagues and clubs. The results of our analysis show that the amount of investment needed for each point won by FOXEV ZDV HVSHFLDOO\ KLJK LQ WKH - /HDJXH DQG WKH GL΍HUHQFHV EHWZHHQ WKH WKUHH OHDJXHV ZHUH pronounced.

Field Wage Costs/Points Won reached the highest number in three years, and yen in J1, 3.3 million yen in J2, and 0.8 million yen in The total wage bill per league point won rises wage bills increased on average by about 30%. J3. Accordingly, each point won in J1 was worth according to each tier of the J.League, with the We have also calculated a theoretical amount almost 5 times the amount of J2, on par with the average in J1 amounting to more than triple that of that a club would to have to spend on players in previous year, and about 20 times the amount of -DQGOLNHZLVHWKHDYHUDJHLQ-HTXDOLQJDERXW order to win the most points in its league by multi- J3, compared with 25 times in 2015. three times more than J3. plying the average wage bill per league point won While the primary factor underlying match day In 2016, the number of regular season matches in the J1, J2, and J3 by the points accumulated by revenue is the number of spectators that attend was 34 in J1, 42 in J2, and 30 in J3. Therefore, the the top club in each respective league in the 2016 the games, the level of interest and commitment results are comparatively lower for J2 and higher season. The J1 League came out on top, as shown DPRQJIDQVDQGVXSSRUWHUVLVJUHDWO\LQȵXHQFHG for J3, since the higher number of matches in J2 below. This data also indicates that clubs need a by which league, J1, J2, or J3, their club competes makes it easier for its clubs to accumulate points, VROLGȴQDQFLDOIRRWLQJLIWKH\DUHWRJHWJRRG LQΖQWKDWUHJDUGVSHFWDWRUWXUQRXWPD\ȵXFWXDWH while the opposite is true in J3. enough results to place at the top of the table. In depending on various short-term circumstances, In both the J1 and J2 leagues, the average total that respect, the disparities between the leagues such as when a club is competing for promotion wage bill per league point won has remained rela- are expected to grow even wider due to a change WRWKHQH[WOHDJXHRULVȴJKWLQJWRDYRLGUHOHJD- WLYHO\ȵDWRYHUWKHSDVWWKUHH\HDUVVLQFHWKH in the system for distributing funds among clubs, tion. The biggest challenges clubs will need to season. From 2014 to 2016, the amounts were H΍HFWLYH IURP  $W WKH VDPH WLPH LW ZLOO focus on to stabilize their operations are how to 34.5 million yen, 32.1 million yen, and 34.9 million become more important than ever for clubs to increase the number of loyal supporters and how yen in J1, and 7.9 million yen, 9.5 million yen, and spend wisely on players to improve their team’s to promote a local football culture in which people 9.3 million yen in J2. In J3, however, the amounts standings while getting the most from their feel motivated to support their hometown club at went from 2.0 million yen to 1.8 million yen and investment. the stadium on the weekend, regardless of which then 3.0 million yen, jumping about 1.5 times of the three leagues it plays in. between 2015 and 2016. While the number of Matchday Revenue/Points Won regular season matches was reduced from 36 to Total match day revenue per league point won 30, that was not the only reason for the increase, indicates the commercial value of a single league as clubs with wage bills exceeding 200 million yen point. In 2016, league averages were 15.5 million

Casual fans Attend because of newsworthiness and exposure Theoretical wage bill needed by a club to win the title in each league Newsworthiness Points won of club ranked 1st 74 85 61 × × × × League average KPI 35 9 3 ﾹ ﾹ ﾹ 2.58b 792m 184m yen yen yen Operational foundation is unstable

Loyal fans Support their club all the time

J1 J2 J3 Operational foundation is stable

Field Wage Costs/Points Won (millions of yen) Matchday Revenue/Points Won (millions of yen)

No. of 34.9 No. of 15.5 clubs 66.1 clubs 32.0 J1 18 22.8 J1 18 7.1 No. of 9.3 No. of 3.3 clubs 19.1 clubs 6.5 J2 22 2.9 J2 22 1.3 No. of 3.0 No. of 0.8 ӍClub average clubs 5.4 clubs 2.5 ӍMax J3 13 0.7 J3 13 0.1 ӍMin

09 3rd Stage: Management Performance

Clubs in the J3 League have been struggling to manage themselves due to the comparatively smaller scale of their RSHUDWLRQVDQGDUHFRQVLGHUHGWRKDYHMXVWNLFNHGR΍WKHLUEXVLQHVVHVΖIZHORRNDWPHUFKDQGLVHUHODWHGLQGLFD- WRUVKRZHYHUDPRQJWKHWKUHHOHDJXHVWKHUDWLRRISURȴWIURPPHUFKDQGLVHVDOHVZDVKLJKHVWRQDYHUDJHLQ- ΖQWKDWOLJKWH΍HFWLYHO\ERRVWLQJPHUFKDQGLVHVDOHVFRXOGSRWHQWLDOO\EHQHȴWWKHRSHUDWLRQVRI-FOXEV

Field Wage Cost/Revenue Matchday and other Revenue/SG&A ments. As a ratio of total revenue, the average wage bills For a professional football club, the primary Looking ahead, we believe it will be necessary for in the J1, J2, and J3 leagues were 45.1%, 42.0%, and sources of revenues are from sales of match day the J.League to support its clubs with the business 34.3%, respectively. The results increased compared tickets and merchandise. While the costs associated LQIUDVWUXFWXUHWKH\QHHGWRPRUHHɝFLHQWO\JHQHUDWH with the previous year in every league, rising 0.9 of ZLWKWKHVHVDOHVPD\EHGLɝFXOWWRSLQSRLQWVHOOLQJ match day revenue. At the same time, given that the a percentage point in J1, 1.2 percentage points in J2, general and administrative (SG&A) expenses, which average age of the J.League’s existing fan base is and 5.5 percentage points in J3. The wage bill to total broadly cover the costs of conducting business activ- increasing, all clubs will need to implement measures revenue ratio increases in order from J3 up to J1, ities, can be regarded as a relevant accounting cate- for attracting new spectators. making it clear that clubs tend to invest a higher ratio gory for capturing the cost of sales. The ratio of SG&A of their revenue in player salaries in order to compete expenses to match day revenue indicates how much Profits from Merchandise sales in each higher league, and to aim for the league title operational resources are allocated for securing ticket $YHUDJHG DFURVV DOO WKUHH OHDJXHV SURȴWV IURP and promotion to the next tier. and merchandise revenues through sales operations. merchandise sales came to 40 million yen, merchan- There is no clearly established standard for $VVXFKLWODUJHO\LQGLFDWHVKRZHɝFLHQWO\WKHFOXEV GLVHVDOHVZHUHPLOOLRQ\HQDQGWKHUDWLRRISURȴW management to decide on how much of a club’s reve- are able to carry out their sales operations. to merchandise sales was 27%* in the 2016 season. nues should be allocated for players’ wages. Typically, For the 2016 season, we changed the calculation The amount of merchandise sold in each league this ratio tends to rise for clubs that strategically invest method for this KPI compared with the previous GL΍HUHGVXEVWDQWLDOO\ZLWK-VHOOLQJDURXQGVL[WLPHV LQUHFUXLWLQJVWDUSOD\HUVLQDQH΍RUWWRJHWVKRUWWHUP year’s season, since merchandise revenue had been the amount of J3, and J1 bringing in about three times results. In contrast, for clubs that aim to maintain solid made an independent category after previously WKHVDOHVRI-2QWKHRWKHUKDQGWKHUDWLRRISURȴWWR UHVXOWVIURPWKHLUH[LVWLQJVTXDGVZKLOHIRFXVLQJRQ EHLQJLQFOXGHGXQGHUȊRWKHUUHYHQXHȋ6SHFLȴFDOO\ZH merchandise sales was highest in J3. developing young players over the medium and long replaced the “other revenue” category with merchan- Since many clubs in the J3 League have only limited terms, the ratio of their wage bills to total revenue dise revenue, which was combined with ticket RSHUDWLRQDOUHVRXUFHVLWFDQEHGLɝFXOWIRUWKHPWR tends to be comparatively lower in general. revenue to form the category of match day revenue. LQGHSHQGHQWO\R΍HUDEURDGDQGYDULHGOLQHXSRI A wage bill to total revenue ratio of 50% has been Accordingly, revenue unassociated with sales activi- merchandise, so they generally focus on mainstay considered to be a sound standard for the J.League ties, such as prize money, has been excluded from the goods like team scarves. One possibility is for mainstay as a whole. Nevertheless, the majority of clubs, in DQDO\VLVPDNLQJWKHLQGLFDWRUPRUHDFFXUDWHO\UHȵHFW SURGXFWVWREHVXSSOLHGHɝFLHQWO\IURPDFRPSDQ\ fact, spend less than half of revenues on wage bills, the performance of the clubs’ sales operations. set up by the J.League, and since selling prices are tipi- UHȵHFWLQJWKHHPSKDVLVWKURXJKRXWWKH-/HDJXHRQ Looking at the average results for each league, the cally the same across all leagues, including J1, such an training and player development. That said, in 2016, amount of match day revenue generated by every DUUDQJHPHQWFRXOGHQDEOHUHODWLYHO\KLJKSURȴWUDWLRV the number of J1 clubs with a ratio exceeding 50% 100 million yen spent on selling, general and admin- to be maintained. LQFUHDVHGWRȴYHIURPWZRLQWKHSUHYLRXVVHDVRQ istrative (SG&A) expenses came to 103 million yen in (Millions of yen) This suggests that a growing number of clubs strove in J1, 83 million yen in J2, and 32 million yen in J3. This Profits from Merchandise Profit to merchandise sales merchandise to improve their league standings during the 2016 suggests that clubs in the J2 and J3 leagues have yet to sales sales ratio season. reach the point where they can recover their invest- J1 club 83 305 27% High Recruiting average capable J2 club players League average ratios of matchday and 24 98 24% average other revenue/SG&A (millions of yen) J3 club Healthy 71642% base J1 J2 J3 average level Overall 40 148 27% 1.03 0.83 0.32 average KPI 50% SG&A Focus on expenses developing 1m yen young players * As disclosed in press releases issued by the J. League, some clubs outsource merchandising sales The J2 and J3 leagues can only expect a typical operations to third parties. Such clubs are excluded return—not enough to recover their investment IURPRXUDQDO\VLVRIPHUFKDQGLVHVDOHVDQGWKHSURȴW Low amount to merchandise sales ratio.

Field Wage Cost/Revenue (%) Matchday and other Revenue/ 3URȴWVIURP0HUFKDQGLVHVDOHV SG&A (millions of yen) (millions of yen) No. of 45.1No. of 1.03 No. of 83 clubs 61.0 clubs 1.71 clubs 276 J1 18 34.6 J1 18 0.53 J1 18 Ӛ13 No. of 42.0 No. of 0.83 No. of 24 clubs 55.4 clubs 1.76 clubs 92 J2 22 26.3 J2 22 0.32 J2 22 Ӛ 2 No. of 34.3 No. of 0.32 No. of 7 ӍClub average clubs 61.3 clubs 0.64 clubs 25 ӍMax J3 13 9.0 J3 13 0.10 J3 13 Ӛ1 ӍMin 1M yen

10 J.League Management Cup 2016 | Comparative Analysis of J1, J2, and J3 Leagues

4th Stage: Financial Performance

$WSUHVHQWWKHPDLQȴQDQFLDOFRQFHUQVRIFOXEVLQWKH--DQG-OHDJXHVDUHGL΍HUHQWGXHWRWKHODUJH disparities between the scales of operations in each league. In J3, club management is mainly concerned ZLWKEDODQFLQJWKHERRNVZKLOHLQ-ȴQDQFLQJLVWKHNH\LVVXHDQGLQ-SURȴWVDUHWKHSULPDU\REMHFWLYH Over the medium to long term, the J.League and its clubs will need to work together in order to ensure WKDWHDFKRIWKHWKUHHOHDJXHVDUHPDQDJHGRQWKHEDVLVRISURȴWDEOHRSHUDWLRQV

Revenue a factor underlying the substantial growth in stability; there are three methods of increasing The total revenue of all J.League clubs the J3 League’s revenue, club revenue jumped LW DQGDFFRUGLQJO\ȴQDQFLDOVWDELOLW\ 7KH combined approached the 10 billion yen mark 41.9% on average over those three years, ȴUVWLVWRUHGXFHOLDELOLWLHVȃRUDWOHDVWNHHS in 2016, increasing about 14% compared with indicating that the scale of their operations is them from rising. The second is to increase the amount in 2014. Broken down by league, J1 steadily expanding. Nevertheless, J3 still oper- FDSLWDOE\DFTXLULQJDVVHWV7KHWKLUGLVWR accounted for 65.9% of the total, J2 accounted ates on a much smaller scale than the J1 and J2 increase retained earnings by accumulating for 29.1%, and J3 the remaining 5.0%. Never- leagues, and has a limited number of human LQWHUQDOUHVHUYHVIURPQHWSURȴW$OORIWKHVH theless, only the J3 League’s share of the resources. In order to expand the operations PHWKRGV DUH ȴQDQFLDO VWUDWHJLHV WKDW LQYROYH total has grown over this three-year period, of the J.League as a whole, business infrastruc- the procurement of funds and provide oppor- rising from 3.4% in 2014 to 4.2% in 2015 and ture must be put into place as soon as possible tunities for organizations to demonstrate their ȴQDOO\LQ5HYHQXHJUHZQRWRQO\ by the three leagues. business acumen. Given that the J1 League is because the number of clubs increased, but LQDJRRGSRVLWLRQWRJHQHUDWHSURȴWVLWZLOO also because club revenues have been rising Equity ratio be important for its clubs to increase internal on average, indicating further progress in the ΖQWKHUDWLRRIHTXLW\WRWRWDODVVHWV reserves. In contrast, since internal reserves J.League’s business. improved compared with the previous year in DUHGLɝFXOWWRDFFXPXODWHLQWKH-/HDJXHLWV every league, rising 2.3% in J1, 0.2% in J2, and FOXEVZLOOKDYHWRVWULFWO\FRQWUROFDVKȵRZVVR Revenue Growth Rate 4.0% in J3. Moreover, the disparities in the that liabilities do not increase. Furthermore, Over the three years from 2014 to 2016, HTXLW\UDWLREHWZHHQWKHWKUHHOHDJXHVKDYH whether clubs can increase capital by boosting total revenue grew by 10.5% in J1, 17.5% in narrowed substantially, ranging from 32.7% in spectators as they climb the league table will J2, and 67.7% in J3. While an increase in the J2 to 35.6% in J1, with J3 in between at 33.8%. be a crucial factor. number of clubs from 11 to 13 was certainly 7KHHTXLW\UDWLRLVDQLQGLFDWRURIRSHUDWLRQDO

Total revenue of all clubs in 2016 (millions Revenue growth rates of each league from Average equity ratio in each league of yen) 2014 to 2016 (millions of yen) J3:4,994 J1 J2 J3 J1 J2 J3 2016

J2:28,879 67.7% 35.6% 32.7% 33.8%

99,395 Surpassed J2

J1:65,522 J3 did well

Three-year total revenue shares for each 17.5% league 2015 J1 J2 J3 10.5%

65.9% 29.1% 5.0% 33.3% 32.5% 2016 29.8% 2014 59,300 24,570 2,978 2015 64.2% 31.6% 4.2% ̕ ̕ ̕ ̕ J3 came 2016 65,522 28,879 4,994 close to J1 and J2 *Comparison based on total revenue of each 2014 68.3% 28.3% 3.4% division for each season

Revenue (millions of yen)Revenue Growth Rate (%) Equity Ratio (%)

No. of 3,640 No. of 7.5 No. of 35.6 clubs 6,606 clubs 29.5 clubs 83.7 J1 18 1,523 J1 18 Ӛ 4.8 J1 18 0.8 No. of 1,313 No. of 8.9 No. of 32.7 clubs 3,341 clubs 129.2 clubs 90.2 J2 22 522 J2 22 Ӛ17.4 J2 22 1.8 No. of 384 ӍClub average No. of 0.4 No. of 33.8 clubs 797 ӍMax clubs 52.6 clubs 71.2 J3 13 142 ӍMin J3 13 Ӛ 31.7 J3 13 0.2

11 J.League Management Cup 2016

J1 Ranking

Urawa Red Diamonds recapture the title The Urawa emerged as J1 club champions of the J.League Management Cup 2016. BM point 2016 The club earned solid results in all categories, placing fourth in marketing performance, first in both club performance and management performance, and (for reference) Ranking Total BM points VHFRQGLQILQDQFLDOSHUIRUPDQFH&RQVHTXHQWO\8UDZDQDUURZO\HGJHGRXW*2VDND 2015 ranking to recapture the championship after first taking the title in 2014. J1 Urawa’s excellent results were largely due to its consistently strong attendance, J1 which, in turn, drove up high revenues from sponsors and merchandise. Its profits Urawa 1 Կ 4 171 from merchandise sales, especially, were far above the results of any other club in the league. On the other hand, Urawa had the lowest ratio of new spectators to total G- 2 Կ 6 170 attendance in J1, indicating that the club has not been attracting many new fans. In Kashima 3 Կ 8 150 that light, the kind of marketing initiatives it pursues in the future will be worthy of Kawasaki-F 4 Հ 3 146 attention. 5 Կ 7 141 Iwata 6 Կ 2* 124

* J2 ranking in 2015

© URAWA REDS

12 J.League Management Cup 2016 | J1 Ranking

1st Stage: Marketing Performance 2nd Stage: Club Performance 3rd Stage: Management Performance 4th Stage: Financial Performance

Stadium New Matchday Field Wage Matchday Field Wage Profits from Revenue Average Capacity Attendees/ Average and other Total Total Costs/ Revenue/ Total Cost/ Merchandise Total Revenue Growth Equity Ratio Total Attendances Utilization Spend Revenue/ Attendance Points Won Points Won Revenue sales Rate (%) (%) SG&A

18 10 1 17 46 11 18 ӹ 29 17 16 18 ӹ 51 18 12 15 45

17 12 12 18 ӹ 59 8 16 24 16 18 15 49 16 17 5 38

12 3 10 16 41 9 12 21 18 6 13 37 17 18 16 ӹ 51 14 18 6 13 51 18 8 26 15 10 12 37 12 7 13 32 8 1 16 15 40 14 4 18 14 17 17 48 10 8 17 35 7 16 8 10 41 6 9 15 13 5 14 32 9 13 14 36 15 2 9 14 40 5 14 19 12 11 16 39 14 5 2 21 9 17 14 8 48 15 10 25 4 13 9 26 4 4 10 18 16 5 7 9 37 4 13 17 8 15 7 30 13 2 18 33 11 4 11 11 37 1 17 18 10 2 10 22 15 10 9 34 13 7 2 4 26 3 15 18 11 14 8 33 7 16 8 31 5 8 17 12 42 12 6 18 3 8 6 17 5 15 3 23 3 15 4 5 27 13 7 20 6 12 11 29 2 6 7 15 6 9 18 1 34 2 11 13 5 9 4 18 3 14 6 23 4 14 3 7 28 16 1 17 9 3 5 17 8 11 1 20 2 11 5 3 21 17 5 22 7 7 3 17 1 3 11 15 1 13 15 6 35 10 3 13 1 4 2 7 6 1 12 19 10 6 13 2 31 7 2 9 2 1 1 4 11 9 4 24

13 Management Cup Analysis of the J1 League 1st Stage: Marketing Performance

For its 2016 season, the J1 League adopted a two-stage format for the second time in its history. It also disclosed PRUHȴQDQFLDOLQIRUPDWLRQRQLWVFOXEVLQZKLFKLWVHSDUDWHGPHUFKDQGLVHUHYHQXHDQGH[SHQVHVIURPWKHFDWHJRU\ of other revenue. Accordingly, we included merchandise revenue under average match day revenue per spectator, which increased results for that KPI and allowed us to set a more accurate benchmark for comparing the clubs.

Average Attendances 2,901 and 1,489 more spectators, respec- was substantially expanded from 20,693 to Attracting spectators remained an issue for the tively, than the previous season, although for 27,495 following renovations in 2015. Although J1 League in 2016, as only six clubs posted a year- contrasting reasons. Kashima’s attendance went that contributed to reducing the club’s stadium on-year increase in average attendance among XSEHFDXVHLWWRRNWRSSODFHLQWKHȴUVWVWDJHRI capacity utilization ratio from 80.5% in 2014 to the 15 clubs that competed in both the 2015 the season and then went on to win the cham- 76.4% in 2015, the ratio rebounded back above and 2016 seasons. Meanwhile, average attend- pionship. Nagoya, however, was relegated to J2, 80% in the 2016 season, indicating that the new ance for J1 as a whole increased by 181 specta- but its fan and supporter base turned out in big stadium capacity suits the club’s fan base. tors, or 1%, compared with the previous season. numbers to cheer on the team, which, as one of Meanwhile, G-Osaka succeeded in greatly The biggest factor underlying the increase was the J.League’s 10 original clubs since its launch in increasing average attendance in 2016 by 9,240 average attendance at G-Osaka’s matches, 1993, had yet to experience demotion. spectators over the previous year. Due to the which jumped by 9,240 spectators year on year greater capacity of the club’s new stadium, LQFOXGLQJ SOD\R΍ JDPHV  *2VDND PRYHG LWV Stadium Capacity Utilization however, its stadium capacity utilization ratio home ground for the 2016 season from Osaka In the 2016 season, the average stadium decreased from 76.7% to 63.4% year on year. Expo ‘70 Stadium, a 21,000-seat facility with an capacity utilization ratio for J1 clubs was 59.4% The large new stadium meets the standards for DWKOHWLFVWUDFNVXUURXQGLQJWKHȴHOGWR6XLWD&LW\ (Ӛ0.5P), compared with the previous season. hosting international tier-1 matches, but G-Osaka Football Stadium, a new 39,694-seat stadium The only club boasting a ratio of more than 80% will need to attract even more spectators in order VSHFLȴFDOO\GHVLJQHGIRUZDWFKLQJIRRWEDOOXS was Kawasaki-F, while it and four more clubs to achieve sell-out games. close to the pitch. Thus, the boost in the club’s had ratios exceeding 70%, namely , Iwata, attendance demonstrated the immediate impact Shonan, and Omiya. New Attendees/Total Attendance that a football-exclusive stadium can have on Among J1 clubs, Kawasaki-F has been the In 2016, the ratio of new spectators to drawing spectators. most adept at filling its stadium. The capacity of total attendance for J1 as a whole was largely Meanwhile, the Kashima and Nagoya attracted its home ground, Todoroki Athletics Stadium, unchanged from the previous year, rising just 0.1

Largest increase in average attendance Highest stadium capacity utilization Average Attendance G-Osaka (including attendance to championship series) Kawasaki-F (80.9%) was the only club with a stadium capacity utilization ratio exceeding 80%. Կ 2QO\ȴYHFOXEVKDGDVWDGLXPFDSDFLW\XWLOL]DWLRQUDWLRH[FHHGLQJ 2015 9,240 2016 Avg. 16,102 Avg. 25,342 80.9% 78.5% 77.6% 76.4% 75.8%

80 

Moved home stadium to exclusive soccer stadium Kawasaki-F Sendai Iwata Shonan Omiya

Average Attendances (people) Stadium Capacity Utilization (%)

Urawa 38,208 Kawasaki-F 80.9 G-Osaka 25,342 Sendai 78.5 FC-Tokyo 24,037 Iwata 77.6 FM 24,004 Shonan 76.4 Kawasaki-F 22,251 Omiya 75.8 Niigata 21,181 Kashiwa 69.9 Kashima 19,324 G-Osaka 63.4 Nagoya 17,729 Kofu 63.0 Kobe 17,018 Urawa 60.0 Sendai 15,467 Fukuoka 57.0 Hiroshima 15,464 Tosu 50.5 Iwata 14,611 Niigata 50.1 Fukuoka 12,857 Kobe 49.1 Tosu 12,636 FC-Tokyo 48.1 Omiya 11,814 J1 avg.: Nagoya 47.9 J1 avg.: Shonan 11,530 Kashima 47.3 Kofu 10,833 Yokohama F･M 42.3 Kashiwa 10,728 18,057 Hiroshima 30.9 59.4% (Կ181,Կ1%) (Հ0.6P,Հ1%)

14 J.League Management Cup 2016 | Management Cup Analysis of the J1 League 1st Stage: Marketing Performance

Management Cup J1

of a percentage point to 4.4%. The three highest renovations of the club’s stadium. As the diver- secured the highest average match day revenue ratios among clubs were 8.3% for Fukuoka, 7.5% JHQWȴJXUHVRI*2VDNDDQG.DZDVDNL)GHPRQ- per spectator at 4,591 yen, around 2.6 times for Tosu, and 6.2% for Hiroshima. In the case of strate, rebuilding or remodeling a club’s stadium greater than the lowest amount of 1,770 yen Fukuoka, the ratio has been on an upward trend, is a key for attracting new spectators, but will not posted by Fukuoka. Among all clubs in J1, going from 6.0% and 7.8% in the 2014 and 2015 necessarily guarantee steady results. Therefore, it the proportion of revenues from tickets and seasons, respectively, when the club competed should be accompanied by marketing campaigns merchandise (the two components of match day in J2, and then reaching 8.3% in 2016, after it was aimed at building a new audience. revenue), were at similar levels, and generally in promoted to J1. Similarly, Tosu has consistently close range of the league average. Nowadays, placed in the top three for this KPI since its promo- Average Spend many fans and supporters of J1 clubs tend to tion to J1. Effective from the 2016 season, the J.League purchase merchandise worth around 40% of the Comparing results in 2016 with the previous changed the financial information it discloses and ticket price. If data on spectator purchasing rates season, owing to the success of events incor- began reporting on merchandise revenue, which can be obtained, the information could be used porating ticket sales and replica uniforms, Yoko- had previously been included together with prize as a basis for strategic marking initiatives in the hama F·M boosted its ratio of new spectators to money, revenue from player transfer fees, and future. total attendance by 2.7 percentage points year other items under the category of other revenue. on year, the biggest increase in J1, followed by Therefore, we have excluded such other revenue G-Osaka at 2.1 percentage points. The club with from this KPI and included merchandise revenue the largest year-on-year decrease in new spec- as a component of match day revenue along with Average Spend tators to total attendance was Kawasaki-F, but ticket revenue. Accordingly, the results of average WKHUHVXOWPDLQO\UHȵHFWHGDUHWXUQWRDPRUH match day revenue per spectator are lower than 4,591 moderate level after an extraordinarily high ratio the amounts calculated in the previous season. of new spectators in the previous year following Among J1 clubs in the 2016 season, G-Osaka G-Osaka Largest increase in new spectators Average spend: Performance gap in J1 (yen) 2,821 (2.6x)

G-Osaka Average Spend 3,226 (70%) 1,770 1,969 (2.6x)

Fukuoka

Ticket revenue per spectator 1,258 (71%) 852 Goods revenue (2.7x) per spectator 512 (29%) 1,365 (30%) Opening a new stadium has boosted new spectator numbers

New Attendees/Total Attendance (%) Average Spend (yen)

Fukuoka 8.3 G-Osaka 4,591 Tosu 7.5 Urawa 4,584 Hiroshima 6.2 Kashima 4,050 Kashiwa 5.9 Hiroshima 3,994 Sendai 5.8 Yokohama F･M 3,710 Kobe 5.4 Kawasaki-F 3,453 G-Osaka 4.7 Tosu 3,281 Nagoya 4.5 Nagoya 3,145 Kashima 4.3 Iwata 3,092 Yokohama F･M 4.2 FC-Tokyo 3,059 Iwata 3.9 Sendai 3,008 FC-Tokyo 3.7 Omiya 2,803 Kawasaki-F 3.5 Kashiwa 2,719 Kofu 3.2 Shonan 2,703 Shonan 2.7 J1 avg.: Niigata 2,654 J1 avg.: Omiya 2.5 Kofu 2,188 Niigata 1.4 Kobe 1,925 Urawa 1.0 4.4% Fukuoka 1,770 3,152yen (Կ0.1P,Կ3%) (Հ1,572yen,Հ33%)

15 Management Cup Analysis of the J1 League 2nd Stage: Club Performance

Field Wage Costs/Points Won and tMatchday Revenue/Points Won are KPIs that focus on the relationship between business management (BM) and field management (FM). As in the previous season, the performance DQGVWDQGLQJVRIWKHFOXEVLQWKHOHDJXHWDEOHWHQGHGWREHVHWWOHGUHODWLYHO\TXLFNO\LQGXHWRWKHWZRVWDJH IRUPDW1HYHUWKHOHVVWKH%0RIWKHFOXEVGLGQRWGL΍HUVLJQLȴFDQWO\\HDURQ\HDU

Field Wage Costs/Points Won yen, which was around the midway point among a club’s wage bill and the points it wins during The total wage bill per league point won is an all J1 clubs, and placed second in the overall J1 a season. A club’s league standing is generally LQGLFDWRU WKDW DOORZV XV WR VHH KRZ H΍HFWLYHO\ table with 72 points over the season. As such, it attributed to the performance of its players D FOXE VSHQGV PRQH\ RQ SOD\HUVȃWKH ODUJHVW VSHQWPRQH\H΍HFWLYHO\WRJHWVXFKRXWVWDQGLQJ DQGFRDFKLQJVWD΍ZKLOHLWV%0OLHVEHKLQGWKH SRUWLRQRILWVWRWDOFRVWVȃWRJHWUHVXOWVRQWKH results. Moreover, the club’s total wage bill per scenes. Nevertheless, one should never ignore ȴHOG GXULQJ WKH VHDVRQ $FFRUGLQJO\ VPDOOHU league point won greatly improved from the KRZDWHDPȇVSHUIRUPDQFHLVD΍HFWHGE\EXVL- values are better for this KPI, although it must 2015 to 2016 seasons, with spending on wages ness decisions and strategies, particularly those be noted that the values are only relevant for declining slightly from 1,685 million yen to 1,643 related to spending on player salaries. Gener- analysis on a comparative basis. In that regard, million yen, but points won rising substantially ally, clubs tend to win more games if higher this KPI is important for providing an objective from 57 to 72. In that light, Kawasaki-F was able amounts of money are spent on wage bills as standpoint for comparing the position of clubs to get an excellent performance out of the a result of business-related decisions. This is competing with each other in the J1 League. players it kept on from the previous season, backed up by past data, and, in recent years, by In the 2016 season, Kawasaki-F was the most such as , Yoshito Okubo, and Yu the comparative success of clubs from FRVWH΍HFWLYH FOXE LQ ZLQQLQJ SRLQWV VSHQGLQJ Kobayashi, while keeping salaries at the same or and the Middle East competing in the Asian about 22 million yen per each point it accumu- similar levels as before. Champions League. In the J.League, however, lated. In contrast, Nagoya was the least cost-ef- At the same time, Nagoya’s wage bill came funds needed for investing in club wage bills are fective club, having spent around 66 million WRPLOOLRQ\HQȃWKHIRXUWKKLJKHVWLQWKH limited, and increasing wage bills poses risks as yen for each point it managed to win over the OHDJXHȃDQG\HWWKHFOXEZDVXQDEOHWRZLQDQ\ FOXEVDUHH[SHFWHGWRPDLQWDLQȴQDQFLDOVRXQG- VHDVRQȃDERXWWKUHHWLPHVWKHDPRXQWDV.DZD- more than 30 points over the entire season, ness. Therefore, in our view, it will be vital for saki-F. resulting in relegation to J2. HDFKFOXEWRVWXG\KRZWRH΍HFWLYHO\FKDQQHO Kawasaki-F had a wage bill totaling 1,643 million Obviously, the components of this KPI are OLPLWHGȴQDQFLDOUHVRXUFHVWRZDUGZLQQLQJRQWKH

Comparison of field wage costs/points won (millions of yen)

Yu Kobayashi Kengo Nakamura Yoshito Okubo Kawasaki-F is 2016 J.League J.League Monthly MVP 2016 1/3 Best XI (Feb. and Mar., 2016) Outstanding of Nagoya 2016 J.League Player Award Player of the Year Nagoya Approx. Slight Approx. Kawasaki Same Same -F annual 2.2 wage annual annual 6.6 increase wage wage

Kawasaki-F demonstrated high performance while maintaining the same level of annual wage for existing players

Field Wage Costs/Points Won (millions of yen) [Reference] Field Wage Cost (millions of yen)

Kawasaki-F 22.8 Kofu 736 Kofu 23.7 Shonan 798 Omiya 25.1 Fukuoka 937 Sendai 27.6 Sendai 1,187 J1 avg.: Hiroshima 28.2 Niigata 1,220 Shonan 29.5 Iwata 1,378 Tosu 32.0 Omiya 1,411 m yen Urawa 32.1 Tosu 1,476 1,575 Kashiwa 32.4 Hiroshima 1,553 (Կ110m yen,Կ7%) Kashima 32.6 J1 avg.: Kawasaki-F 1,643 G-Osaka 32.7 Kashiwa 1,753 Kobe 37.6 G-Osaka 1,900 Iwata 38.2 m yen Kashima 1,929 Yokohama F･M 38.5 34.9 Yokohama F･M 1,966 FC-Tokyo 38.9 (Կ2.8m yen,Կ9%) Nagoya 1,984 Niigata 40.6 FC-Tokyo 2,025 Fukuoka 49.3 Kobe 2,068 Nagoya 66.1 Urawa 2,381

16 J.League Management Cup 2016 | Management Cup Analysis of the J1 League 2nd Stage: Club Performance

Management Cup J1

pitch and implement whatever business-related put in solid results and competed for the league points to meet the expectations of fans and measures are necessary for accomplishing that, title each of those seasons. Moreover, Urawa’s supporters given the amount they collectively while maintaining an objective grasp of its own DWWHQGDQFHȴJXUHVGZDUIWKRVHRIDOORWKHUFOXEV spent, which was compounded by the bitter SRVLWLRQȴQDQFLDODQGRSHUDWLQJUHODWLYHWRRWKHU and its management has continuously spear- experience of seeing their club demoted. There- clubs in the league. headed initiatives for keeping and increasing fore, we can assume that the level of satisfaction VHDVRQWLFNHWKROGHUV&RQVHTXHQWO\WRWDOPDWFK among Nagoya’s fans and supporters decreased Matchday Revenue/Points Won day revenue has remained at consistently high compared with the previous season. Total match day revenue per league point levels. Given these results, Urawa has continued We hypothesize that the level of satisfaction ZRQ UHȵHFWV WZR SHUVSHFWLYHV IURP D FOXEȇV to stand out as an exemplary club in terms of DPRQJDFOXEȇVIDQVDQGVXSSRUWHUVLVD΍HFWHG standpoint, it indicates the sales value of each both its standings in the league and its perfor- by the results of this KPI. For instance, even for point won; from the viewpoint of supporters, it mance in the marketplace. clubs posting high results for total match day represents the amount of money collectively It is worth pointing out that the club ranked revenue per league point won, spectators will spent on each point won. Accordingly, this KPI second behind Urawa for this KPI, Nagoya, was DWWHQGOHVVIUHTXHQWO\DQGEHUHOXFWDQWWRVSHQG SRLQWV WR D WUDGHR΍ EHWZHHQ ERWK SDUWLHV DV relegated to J2 in 2016. Nagoya’s match day money on matches if their overall level of satis- the highest possible value is best for clubs, and revenue averaged 761 million yen per game, faction is low. Therefore, it will be important for conversely, the lowest possible value is desirable around the same level as the 727 million yen FOXEVWRFDUHIXOO\FRQVLGHUKRZWRȴQGWKHULJKW for supporters. in the previous season, but its league points balance between results for this KPI and satisfac- Among J1 clubs, the Urawa posted the highest dropped markedly to 30 from 46 as the team tion among fans and supporters. result for total match day revenue per league failed to get results on the pitch. Accordingly, point won for the third consecutive year, far while the sales value of each of those points ahead of its rivals. On the pitch, the club has increased for the club, it did not win enough

Customer satisfaction level and sales unit price per league point (millions of yen)

Nagoya 2015 2016 Decreased customer satisfaction level

15.8 25.3 ﾹ ﾹ Matchday revenue: 727 Matchday revenue: 761 Annual Annual points won : 46 points won : 30 (9th place) (relegated to J2) Nagoya increased in value by one point, but did not perform well in the league Increased —becoming relegated to J2—which resulted revenue per point in decreased supporter satisfaction compared to the previous year

Matchday Revenue/Points Won (millions of yen)

Urawa 32.0 Nagoya 25.3 G-Osaka 23.9 Niigata 22.6 Yokohama F･M 19.7 FC-Tokyo 18.4 Kashima 14.7 Fukuoka 14.4 Sendai 14.1 Iwata 13.1 Kawasaki-F 12.5 Shonan 12.2 Tosu 12.0 Kofu 11.0 Hiroshima 10.2 J1 avg.: Kashiwa 8.0 Kobe 7.7 Omiya 7.1 15.5m yen (Կ0.2m yen,Կ2%)

17 Management Cup Analysis of the J1 League 3rd Stage: Management Performance

$WWKLVVWDJHZHDVVHVVKRZZHOOFOXEVUHDOL]HDUHWXUQRQWKHLULQYHVWPHQWȃWKHEDVLVIRUGRLQJEXVLQHVVȃ by means of KPI, specifically the wage bill to total revenue ratio, which reflects direct investment, and the ratio of selling, general and administrative expenses to match day revenue, an indicator of indirect invest- ment. We have also added profits from merchandise sales as a new KPI starting from the 2016 season. This has made it possible to evaluate how revenues not only from the box office but also from merchandise sales impact club management.

Field Wage Cost/Revenue the other hand, Fukuoka was demoted back to J2 day revenue to ticket revenue and merchandise In the 2016 season, clubs in the J1 League spent despite spending a relatively high proportion of revenue. We did not include advertising revenue an average of 45.1% of their total revenues on wage revenues on its wage bill. This shows how tough because support from liable sponsor compa- bills, up 0.9 of a percentage point compared with it is for clubs to run their businesses, as strategic nies is commonly included in the amount, so we the previous season. Generally, clubs hope to keep investment decisions do not always lead to good wanted to avoid the risk of misleading readers into total player salaries within a range not exceeding results on the pitch. assuming that the regular earnings can be simply half of total revenues, so the fact that the wage bill Meanwhile, the Kashima and G-Osaka reduced compared. Furthermore, we have not included to total revenue ratio was less than 50% for J1 clubs their wage costs to total revenue ratio by 12.4 and funds distributed to clubs by the J.League since on average indicates that the league is currently 8.8 percentage points, respectively, from 2015 the amount of funds is largely constant across being managed on a sound basis overall. to 2016. These results were likely due to strategic the leagues, and they are not strongly related to The average wage bill to total revenue ratio PDQDJHPHQWGHFLVLRQVWRPDLQWDLQȴQDQFLDOVRXQG- SG&A expenses. Finally, we excluded revenue increased mainly because the average ratio for the ness despite increased operating revenues. Both from football academies since it should be treated three clubs that were newly promoted to J1 in 2016 clubs also achieved success during the season, separately with academy-associated costs, as well was higher than that of the three clubs that were with Kashima winning the championship and as other sources of revenue generated by promo- UHOHJDWHGLQ6SHFLȴFDOO\WKHDYHUDJHIRUWKH G-Osaka placing fourth overall. As such, from the tional activities. three promoted clubs, Omiya, Iwata, and Fukuoka, standpoints of business and team performance, In addition, the J.League did not disclose was 45.6%, compared with an average of 38.2% for the Kashima and G-Osaka produced outstanding separate data for merchandise revenue and the three relegated clubs, Yamagata, Matsumoto, results as exemplary clubs in 2016. merchandise-related expenses in 2015, but, and Shimizu. In other words, the KPI result went rather, included these items under other income up since the promoted clubs strategically invested Matchday and other Revenue/SG&A and SG&A expenses, respectively. Accordingly, we PRUHLQWKHLUVTXDGVLQRUGHUWRVXUYLYHLQ-$V 7KLV.3ΖUHȵHFWVWKHH[WHQWWRZKLFKDFOXEȇV calculated results for this KPI by combining the it turned out, Omiya and Iwata both managed to proceeds are used up by costs processed as total of match day revenue and other revenue, remain in J1, and Omiya, especially, produced selling, general and administrative (SG&A) and including merchandise-related expenses as VROLGUHVXOWVSODFLQJȴIWKLQWKHRYHUDOOWDEOH2Q expenses. For that purpose, we have limited match SDUWRI6* $H[SHQVHV(΍HFWLYHIURPWKH

Comparison of field wage cost/revenue

Fukuoka Wage bill to total revenue ratio set highKashima Wage bill to total revenue ratio set low Relegatedto J2 J1 annual champion 2016 2015 % 51.0 46.9%

2015 2016 37.8% 34.6%

Field Wage Cost/Revenue (%)

Kashima 34.6 Urawa 36.0 G-Osaka 36.9 Kawasaki-F 38.6 Hiroshima 40.9 Iwata 41.7 Yokohama F･M 41.9 Niigata 42.0 Nagoya 42.1 Omiya 44.1 FC-Tokyo 44.6 Kofu 48.3 Shonan 49.0 Fukuoka 51.0 Sendai 51.9 J1 avg.: Tosu 53.4 Kobe 53.5 Kashiwa 61.0 45.1% (Կ0.9P,Կ2%)

18 J.League Management Cup 2016 | Management Cup Analysis of the J1 League 3rd Stage: Management Performance

Management Cup J1

season, however, it is important to note that the when the same calculation method used in 2015 VXFKDVVDOHVVWDOOVVHWXSLQVWDGLXPVRɝFLDO FDOFXODWLRQPHWKRGIRUWKLV.3ΖLVGL΍HUHQW is applied, the decrease comes to 1.73 million. goods stores, and E-commerce websites, and the ΖQWKHVHDVRQWKHFOXEWKDWPRVWH΍HF- Considering that Fukuoka’s attendance was up associated costs vary depending on these outlets. tively used its SG&A expenses was G-Osaka. It and its total match day revenue increased, slug- As a matter of policy, the merchandise-related generated 1.71 million yen for every million yen gish merchandise sales were likely behind the costs published by the J.League are, in principle, of SG&A expenses. This was largely the result of result. How the club, which has implemented comprised only of the cost of the goods them- growth in total attendance from around 290,000 various business-oriented initiatives in the past, selves. Since advertising expenses and other indi- in 2015 to about 430,000 in 2016 following the will boost merchandise revenue going forward will rect costs are not included, comparisons should opening of the club’s new home ground, Suita City be worthy of attention. EHPDGHVWULFWO\RQDJURVVSURȴWEDVLV Football Stadium, which garnered attention as a In terms of total merchandise revenue, Urawa stadium built using donated funds. The fanfare Profits from Merchandise sales was at the top of the league with 778 million surrounding the brand-new football-exclusive Among J1 clubs during the 2016 season, yen, unchanged from the previous season, stadium was likely a factor in the substantial WKH 8UDZD JHQHUDWHG WKH KLJKHVW SURȴWV IURP while Kashiwa and Kofu were tied at the bottom increase in the club’s total match day revenue. merchandise sales, at 276 million yen, while Kobe with 61 million yen each. Despite posting a loss, In the case of Fukuoka, match day revenue ranked lowest, posting a net loss of 13 million Kobe’s revenue of 130 million yen was more than per million yen of SG&A expenses fell markedly yen. The average amount for J1 as a whole was double the amount of those two bottom-ranked between 2015 and 2016 from 2.05 million yen to 83 million yen, and seven of the league’s 18 clubs FOXEV7KHFOXEZLWKWKHKLJKHVWUDWLRRISURȴWWR slightly under 1 million yen. Although one of the had amounts above the average. In fact, the top merchandise sales was Iwata, with a ratio of 43%. PDLQUHDVRQVIRUWKLVGHFUHDVHZDVWKHH΍HFW VHYHQFOXEVDFFRXQWHGIRUWKHEXONRISURȴWVIURP From that peak, club results fall gradually down of changing the calculation method for this KPI merchandise sales compared with the remaining to the lowest ratio of 14% for Omiya (Kobe was following the J.League’s disclosure of merchan- clubs. excluded since it posted a loss). dise revenue and merchandise-related expenses, Merchandise is sold through several methods,

Effect of a new stadium on SG&A expenses to match day revenue Status of top 5 clubs in profits from merchandise sales (millions of yen) (millions of yen) G-Osaka opened the Suita City Football Stadium in the VHDVRQUHVXOWLQJLQDVLJQLȴFDQWLQFUHDVHLQWKLV.3Ζ Urawa G-Osaka Ծ2015 2016Ը 1.71 276 Hiroshima Yokohama Matchday and FŗM G-Osaka other revenue/ 173 Iwata 1.34 Goods-related 158 Average SG&A 1390 SURȴW (million of yen) 137 126 83

Approx. 430,000 Goods revenue 778 487 509 588 294 305 SG&A 795 Approx. Total Goods-related expenses 290,000 attendees SURȴWUDWLR 35% 36% 31% 23% 43% 27%

Matchday and other Revenue/SG&A (millions of yen) Profits from Merchandise sales (millions of yen)

G-Osaka 1.71 Urawa 276 Hiroshima 1.46 Hiroshima 173 Urawa 1.36 Yokohama F･M 158 FC-Tokyo 1.28 G-Osaka 137 Niigata 1.17 Iwata 126 Sendai 1.15 Kashiwa 112 Shonan 1.09 Kawasaki-F 98 Yokohama F･M 1.07 Shonan 70 Kawasaki-F 0.99 Nagoya 67 Fukuoka 0.99 Sendai 67 Tosu 0.96 Niigata 55 Kofu 0.95 FC-Tokyo 49 Kashima 0.93 Tosu 49 Iwata 0.92 Omiya 23 Kashiwa 0.73 J1 avg.: Fukuoka 20 Omiya 0.66 Kofu 19 J1 avg.: Nagoya 0.65 Kashiwa 13 Kobe 0.53 1.03 m yen Kobe Ӛ13 (Հ0.23m yen,Հ18%) 83m yen

19 Management Cup Analysis of the J1 League 4th Stage: Financial Performance

$PRQJWKH-ȇVȴQDQFLDOUHVXOWVLQWKHELJJHVWFKDQJHZDVVHHQLQWKHUDWHRIUHYHQXHJURZWKFRPSDUHGZLWK the previous season. Many clubs recorded moderate decreases in their year-on-year revenue growth rate, although WKDWPDLQO\UHȵHFWHGKLJKHUWKDQXVXDOUHYHQXHVLQWKHVHDVRQGXHWRWKHH΍HFWRIWKHWZRVWDJHIRUPDW7KH FOXE WKDW UHDOO\ VWRRG RXW LQ  ZDV *DPED 2VDND DV LWV ȴQDQFLDO UHVXOWV ZHQW XS FRQVLGHUDEO\ IROORZLQJ WKH opening of its new stadium.

Revenue revenues of between 1.9 and 2 billion yen. especially, brought in 595 million yen more In the 2016 season, total revenue for J1 Meanwhile, Tosu recorded the highest year- total match day revenue than the previous clubs came to 3,640 million yen on average. on-year increase in ad revenue as it continued VHDVRQDVWKHEHQHȴWVRILWVQHZIRRWEDOOH[- Amounts were 3,294 million yen in 2014 and WREHQHȴWIURPLWVVSRQVRU&\JDPHVΖQF clusive stadium greatly contributed to growth. 3,343 million yen in 2015, demonstrating an a major smartphone game developer. The In an ideal world, clubs would be able to upward trend in average total revenue over club’s ad revenue reached about 1.6 billion yen maintain operational stability by boosting the past three years. following increases of 428 million yen in 2016 revenues through business-driven measures, Turning to advertising revenue, Nagoya and 414 million yen a year earlier. UHJDUGOHVVRIWKHLUSHUIRUPDQFHRQWKHȴHOG recorded a year-on-year increase of 313 Meanwhile, total match day revenue grew over the season. In the 2016 season, however, million yen, and was the only club to surpass by an average of 54 million yen among the excluding G-Osaka, the three clubs posting the the 3 billion yen mark among all 18 clubs in J1. 15 J1 clubs that competed in both the 2015 KLJKHVW PDWFK GD\ UHYHQXH JURZWKȃ8UDZD Its total was almost 500 million yen more than and 2016 seasons, with seven of those clubs .DZDVDNL).DVKLPDȃZHUHDOVRWKHWRSWKUHH the second ranked club, Urawa. Nagoya and recording year-on-year increases. Although in the overall standings, ranked in the same 8UDZDZHUHDPRQJWKHȴYHFOXEVWKDWSRVWHG the average amount of growth did not change RUGHU7KXVWKHH΍HFWRIZLQQLQJPDWFKHVRQ over 2 billion yen along with Omiya, Yoko- substantially, 11 clubs had posted year-on- WKHER[RɝFHZDVHVSHFLDOO\HYLGHQWLQWKH hama F·M, and Kobe, but Kashima, Kashiwa, year increases in 2015, pointing to widening 2016 season. and FC-Tokyo were not far behind with ad GL΍HUHQFHVLQJURZWKRQDFOXEEDVLV*2VDND Revenue Growth Rate During the 2016 season, the year-on-year revenue growth rate for J1 clubs was 7.5% on Comparison of match day revenue between three clubs (billions of yen) average, down 9.3 percentage points from 2015. While this result suggests that the league’s revenue growth is slowing down,

Revenue (millions of yen)

Urawa 6,606 Kashima 5,582 G-Osaka 5,146 Nagoya 4,713 Yokohama F･M 4,696 FC-Tokyo 4,541 Kawasaki-F 4,254 Kobe 3,865 Hiroshima 3,794 Iwata 3,303 Omiya 3,203 Niigata 2,908 Kashiwa 2,874 Ӎ Commercial Tosu 2,766 J1 avg.: Ӎ Matchday Sendai 2,285 Ӎ Distribution Fukuoka 1,836 Ӎ Goods revenue Shonan 1,627 Kofu 1,523 3,640m yen Ӎ Academy (Կ297m yen,Կ9%) խ and Others

20 J.League Management Cup 2016 | Management Cup Analysis of the J1 League 4th Stage: Financial Performance

Management Cup J1

that fact that year-on-year revenue growth was JURZWKJUHDWO\EHQHȴWHGIURPDVLJQLȴFDQW mulating internal reserves. The Kashima recorded by 12 of the 15 clubs that competed increase in match day revenue, which jumped built up its internal reserves while substan- in both the 2015 and 2016 seasons. Among 74.8% to 1,390 million yen following the tially increasing liabilities, resulting in a rapid them, the Kashima posted an increase of opening of Suita City Football Stadium. This increase in total assets of about 1.5 times over PLOOLRQ\HQRUȃWKHKLJKHVWLQWKH new facility attracted attention as ground- the previous year. OHDJXHȃIROORZHG E\ *2VDND DW  PLOOLRQ breaking project jointly led by the public and 0HDQZKLOHWKHHTXLW\UDWLRUDQJHGEHWZHHQ yen, or 20.2%, and Niigata at 398 million yen, private sectors, and provided an excellent 0.8% and 1.4% among the three lowest ranked or 15.9%. Kashima saw its advertising revenue H[DPSOH RI KRZ D VWDGLXP GHVLJQHG VSHFLȴ- clubs, Omiya, Yokohama F·M, and Tosu, mainly and match day revenue grow by 5.2% and cally for watching football up close can boost due to excessive liabilities. Policies and means 10.3%, respectively, but more than anything, ticket sales and match day revenue. for procuring funds appeared markedly merchandise revenue combined with other GL΍HUHQWIRUHDFKFOXE revenue jumped 93.9% to 2,240 million yen. Equity Ratio The club recording the largest increase in In Niigata, as well, this category of revenue In 2016, the J1 clubs with the highest ratios of WKHHTXLW\UDWLRZDV1DJR\D7KHUDWLRMXPSHG shot up 103% to 768 million yen, more than HTXLW\WRWRWDODVVHWVZHUHODUJHO\XQFKDQJHG 26.1 percentage points to 33.2% year on year doubling and greatly contributing to the club’s from the previous year. Among them, FC-Tokyo owing to an increase in Toyota Motor Corpo- total revenue. PDLQWDLQHGDKLJKOHYHORIHTXLW\E\UHSD\LQJ ration’s ownership stake from around 20% to In the case of G-Osaka, year-on-year revenue loans, while Hiroshima did the same by accu- over 50%.

Impact of G-Osaka’s new stadium on revenue growth Status of equity ratio: Disparity in J1 (millions of yen)

  *2VDND /LDELOLWLHV 1,143

706 377  1HWDVVHWV 5DWLRRIPDWFKGD\ 795 revenue growth 654 PLOOLRQVRI\HQ 481 3,227 1,805 1,933 547 1,878 2,743 1,210 1,267 7LFNHWUHYHQXH 898 SHUVSHFWDWRU 25,342 \HQ

16,102 FC-Tokyo +LURVKLPD .DVKLPD

$WWHQGDQFH SHRSOH ӍӍ 2015խӍӍ 2016 Kashima increased both liabilities and net assets, thereby boosting total assets

Revenue Growth Rate (%) Equity Ratio (%)

Kashima 29.5 FC-Tokyo 83.7 G-Osaka 20.2 Hiroshima 71.6 Niigata 15.9 Kashima 62.2 Tosu 11.1 Urawa 58.9 Fukuoka 11.0 Iwata 57.2 Iwata 10.2 Kawasaki-F 48.9 Urawa 8.5 Kashiwa 45.7 Omiya 6.6 Kofu 40.7 Nagoya 6.0 Sendai 36.7 Kobe 5.5 Nagoya 33.2 Hiroshima 5.1 Niigata 31.6 Kawasaki-F 4.3 Shonan 20.9 Shonan 4.2 Fukuoka 20.8 Yokohama F･M 2.8 G-Osaka 14.3 Sendai 2.1 J1 avg.: Kobe 11.9 J1 avg.: Kofu Ӛ0.1 Tosu 1.4 FC-Tokyo Ӛ 2.9 Yokohama F･M 0.9 Kashiwa Ӛ 4.8 7.5 % Omiya 0.8 35.6% (Հ9.3P,Հ55%) (Կ2.3P,Կ7%)

21 J1 Cup Winner Analysis Urawa Red Diamonds

7KH8UDZDDUHWKHVHDVRQZLQQHUVRIWKH-0DQDJHPHQW&XS7KLVPDUNVWKHLUVHFRQGWLWOHVLQFHȴUVWZLQQLQJ in 2014. As one of the J.League’s 10 original clubs, the Red Diamonds have been a strong pillar for the league WKURXJKRXWLWVKLVWRU\$PLGFDOOVIRUGHYHORSLQJVSHFWDWRUVSRUWVEXVLQHVVHVLQ-DSDQZHDW'HORLWWH7RKPDWVXR΍HU an analysis of the club and its current business-orientated initiatives based on an interview with its chairman, Keizo Fuchita.

Urawa’s environment changes following club’s shares. This move was symbolic of the club’s desire ownership reorganization of build on its ties with the local community more than ever In the 2016 season, the Urawa were in the news not only before. for winning games. For many of the league’s stakeholders, The initiative to include local shareholders was not attention turned to reports that the Red Diamonds were at planned from the beginning. The club’s chairman, Keizo risk of violating the J.League’s rule that a company cannot Fuchita, explained that the reorganization provided an excel- be a majority shareholder in more than one club*. The lent opportunity for considering the relationship between issue arose when Mitsubishi Motors Corporation, owner of each member of the club and its shareholders, and allowed RI8UDZDȇVVKDUHVZDVDFTXLUHGE\1LVVDQ0RWRU many stakeholders to collectively appreciate the fact that Company Ltd., the majority shareholder of Yokohama F·M. the Urawa is a club operating with the support of countless Therefore, to comply with the J.League’s ban on cross-own- people. His positive take on the situation was impressive. ership, Mitsubishi Motors newly established Diamond F.C. Fortunately, the Red Diamonds fought competitively for Partners, Co., Ltd., as a third party and made it owner of the J1 championship over the 2016 season, completely unaf- RI8UDZDȇVVKDUHVWKHUHE\HOLPLQDWLQJDQ\FRQȵLFWRI fected by the issues surrounding the league rules and reor- interest. ganization. Indeed, by handling the business side carefully 6SHFLȴFDOO\WKHUHRUJDQL]DWLRQLQYROYHGDWUDQVIHURIDOORI DQGH΍HFWLYHO\GXULQJWKHVHDVRQWKHFOXEWXUQHGDSRWHQWLDO the club’s shares owned by Mitsubishi Motors to Diamond crisis into an opportunity and achieved a positive outcome. F.C. Partners, in which Mitsubishi Heavy Industries, Ltd., DFTXLUHG DQ RZQHUVKLS VWDNH RI  DQG 0LWVXELVKL 5DLVLQJDZDUHQHVVDPRQJIURQWRɝFHVWD΍ Motors the remaining 39.2%. More noteworthy, however, Another interesting aspect of Urawa’s operations is an was the club’s capital increase, since it allowed more sponsor LQLWLDWLYHIRULPSURYLQJWKHDZDUHQHVVRILWVIURQWRɝFH companies to join Diamond F.C. Partners as shareholders, VWD΍ΖWZDVODXQFKHGLQLQUHVSRQVHWRDQRUGHUE\WKH particularly 15 locally based companies. The shares owned J.League to play a home game without spectators as punish- by these new shareholders amounted to about 10% of all the ment for a discriminatory banner hung in the stadium for an HQWLUHPDWFKZLWKRXWEHLQJWDNHQGRZQE\VWD΍$WDVNIRUFH was set up in order to learn from the incident and make * The rule prohibits a single company from operating more than VXVWDLQHG H΍RUWV WR HQFRXUDJH VWD΍ PHPEHUV WR DFWLYHO\ RQHFOXEDVDVXEVLGLDU\RUDɝOLDWHGFRPSDQ\DQGZDVDGRSWHG think about the role that the club and each of its members by the J.League mainly as a preventative measure against match should play, and the club’s identity in terms of how it wants ȴ[LQJ to be perceived by the public. The taskforce was initially led by Chairman Keizo Fuchita, but over time, various working Mitsubishi Motors Corporation Diamond F.C. Partners, Co., Ltd. groups began acting on their own initiative, with plans to bring their activities to a conclusion in the near future. Mitsubishi Heavy Industries, Ltd. 60.8%

(millions of yen)

2015 2016 50.6% 50.75%

Ad revenue 2,549 2,593

Mitsubishi Motors 2,375 Match day 9.75% Corporation 2,174 39.5% revenue  J.League 270 319 funding

1,319 + Other 1,095 New shareholders revenues 15 sponsoring companies including local companies

Number of spectators ٥٥٥ 38,854 38,208 (QKDQFHGDZDUHQHVVRIFOXEVWD΍LQFUHDVHGDOOUHYHQXHFDWHJRULHV

22 J.League Management Cup 2016 | J1 Cup Winner Analysis Urawa Red Diamonds

Over the 2015 and 2016 seasons, Urawa’s revenue In the spectator sports industry, fans play a very special increased across the board despite sluggish attendance role. Although they are consumers in terms of being spec- ȴJXUHVΖQWKDWFRQWH[WSHUKDSVWKHIURQWRɝFHVWD΍EHFDPH tators, fans are also partners in the sense that they bring more aware of issues that they had not considered before value to the match by creating an exciting atmosphere in the the taskforce. stadium, cheering on the team, and promoting a sense of 0HDQZKLOH8UDZDȇVVROLGȴQDQFLDOUHVXOWVGXULQJWKH unity around the club. For that reason, fans and supporters season were largely helped by the team’s strong perfor- are especially important stakeholders in a club’s business PDQFHRQWKHȴHOG1HYHUWKHOHVVLWLVVWLOOWRRHDUO\WRFRQȴ- pursuits. We would also add that they are key assets for a dently determine whether the club will be able to consist- club. That is particularly true for the Urawa, as it is the only HQWO\JHQHUDWHVXFKȴQDQFLDOUHVXOWVLQWKHIXWXUHJLYHQWKDW club in the J.League with total match day revenue in excess of the team could either reach its peak or falter from now. 2 billion yen, which is on par with its advertising revenue and There is no doubt, however, that increasing the number of accounts for over a third of total revenue. In comparison, ad IURQWRɝFHVWD΍PHPEHUVZKRDUHFRQVFLRXVRIWKHFOXEȇV revenue typically accounts for the majority of total revenue diverse stakeholders will be a necessary condition for Urawa among other clubs in the league. to maximize its growth going forward. As long as the special role of fans and supporters is fully DSSUHFLDWHGE\WKHFOXEDQGLWVIURQWRɝFHVWD΍DQGH΍RUWV Enhanced dialogues with supporters are always made to maximize the value of the club and the Urawa’s vast number of supporters turning the stands into matches its plays, Urawa’s management will be well posi- a sea of red jerseys is an impressive sight, to say the least. tioned to make progress and achieve success going forward. But since the team played its match in an empty stadium due to the aforementioned penalty handed down by the league, Outlook for the Urawa the relationship between the club and its supporters has While Urawa boasts a huge fan and supporter base, the been evolving. ratio of new spectators to its total attendance was only 1.0% In the past, the club held a stance of fully respecting the in 2016, the lowest in J1. This result was not limited to the Red independence of its supporters, but it has been gradually Diamonds, however; a lack of new spectators has become a shifting its approach more recently, putting systems in place serious issue across the entire J.League. Looking ahead, we for promoting a positive stadium environment in cooperation will continue keep a close eye on whether Urawa’s initiatives with supporters. The systems are not meant to take away the to enhance dialogue with its supporters and raise aware- autonomy of supporters; rather, they are for building rela- QHVVDPRQJLWVIURQWRɝFHVWD΍ZLOOFRQYHUJHDQGSURGXFH tions with supporters by having them work together with V\QHUJ\H΍HFWV the club toward making games as entertaining as possible, and allowing them to collectively create a fantastic setting for HQMR\LQJWKHJDPHDVXQLTXHSDUWQHUV

Fans Bringing value to matches by Contribute to revenue creating an exciting atmosphere by attending matches and and promoting a sense of unity Consumerssupporters Partners

23 Special Feature 1 Profits from merchandise sales

The J.League added information on merchandise, including merchandise revenue and merchan- dise-related expenses, to its published financial data since the 2016 season. We think the descrip- tion of merchandise revenue and expenses in their own categories (in contrast to how they were categorized under “other” revenues and SG&A expenses in the past) is a highly meaningful step in information disclosure to carry out club management as a sports business. This is because merchandise is one of the four main revenue sources in the sports business: 1. Match day revenue; 2. Sponsor revenue; 3. Merchandise revenue; and 4. Broadcasting rights revenue.

From a business standpoint, there are two ways of gener- terms of the burden of inventory risk (e.g. risks of dead stock ating revenue from merchandise sales. First, revenue gener- and price fall). The distribution or outsourcing model places ated directly from the sale of merchandise. That is, the clubs the burden of inventory risk on the clubs, while the licensing purchase the merchandise and sell it to fans and supporters, model places the burden of inventory risk on the merchan- operating as a merchandise distribution business. Many GLVHU +RZHYHU LQ WHUPV RI SURȴWDELOLW\ WKH GLVWULEXWLRQ RU -/HDJXHFOXEVXVHWKLVEXVLQHVVPRGHOUHTXLULQJWKHFOXEV RXWVRXUFLQJPRGHOLVPRUHSURȴWDEOHIRUWKHFOXEVEHFDXVH to carry their own merchandise inventory, whether through they retain the sales rights. their own sales operations or outsourced to a sales agent. As described above, each business model has its strengths Second, revenue generated from the sales of rights. In DQG ZHDNQHVVHV DQG VR LW LV GLɝFXOW WR FDWHJRULFDOO\ VD\ other words, clubs run an intellectual property licensing busi- which is superior. The club’s options may be limited based ness in which they sell to merchandisers the right to use their on various factors, such as the club’s brand value, customary FOXEEUDQGRQSURGXFWVSURȴWLQJRQO\IURPUR\DOWLHV8VLQJ industry practices, power relationships with business part- this business model, the clubs do not need to carry an inven- ners, and the club’s resources. We believe club managers tory and the sales operations are carried out by the purchaser need to decide which business model to select according to of the rights. conditions like the changing business environment inside and Both business models share the same characteristic of outside of the industry and shifting power relationships with JHQHUDWLQJSURȴWIRUWKHFOXEVEXWWKH\FOHDUO\FRQWUDVWLQ sales agents depending on the club’s brand power. For example, some clubs may decide to distribute merchan- dise on their own even at the cost of inventory risk when the club’s brand power is still weak, but they may choose to switch Advantages and disadvantages to clubs depending on business model to the licensing model when the club’s brand power reaches Advantages Disadvantages a certain level. Ultimately, once clubs gain considerable brand Distributing or 1RXSSHUOLPLWRISURȴW Merchandiser bears inventory risk SRZHUWKHPDQDJHUVPD\FKRRVHWRPD[LPL]HSURȴWZKLOH outsourcing &HUWDLQDPRXQWRISURȴWLVJXDUDQWHHG minimizing risk by implementing a pay-as-you-go licensing Licensing intel- Club bears inventory risk 8SSHUOLPLWRISURȴW format. lectual property 1RJXDUDQWHHRISURȴW (Possibility of pay-as-you-go license)

Overview of profits from merchandise sales J1 Profits from Merchandise sales J2 Profits from Merchandise sales J3 Profits from Merchandise sales Merchandise Merchandise-related (millions Merchandise Merchandise-related (millions Merchandise Merchandise-related (millions clubs revenue expenses of yen) clubs revenue expenses of yen) clubs revenue expenses of yen) Urawa 778 502 276 Shimizu 318 226 92 Tochigi 52 27 25 Hiroshima 487 314 173 Matsumoto 200 133 67 35 17 18 Yokohama F·M 509 351 158 Yamaguchi 131 78 53 Tottori 16 2 14 G-Osaka 588 451 137 C-Osaka 239 189 50 Oita 13 3 10 Iwata 294 168 126 122 89 33 Nagano 7 0 7 Kashima 540 428 112 173 142 31 20 13 7 Kawasaki-F 476 378 98 58 34 24 Fukushima 17 12 5 Shonan 199 129 70 66 44 22 18 16 2 Sendai 183 116 67 Kitakyushu 71 53 18 4 3 1 Nagoya 187 120 67 Yokohama FC 58 41 17 Fujieda 2 1 1 Niigata 277 222 55 42 26 16 FC Ryukyu 10 9 1 FC-Tokyo 289 240 49 Sanuki 44 28 16 Akita 8 8 0 Tosu 152 103 49 Ehime FC 57 41 16 YSCC Yokohama 11 12 (1) Omiya 165 142 23 Mito 56 42 14 Fukuoka 112 92 20 173 160 13 Kofu 61 42 19 FC 57 45 12 Kashiwa 61 48 13 Gunma 33 24 9 Kobe 130 143 (13) FC Machida 41 33 8 Tokyo-V 45 38 7 46 41 5 Yamagata 82 79 3 54 56 (2)

24 J.League Management Cup 2016 | 6SHFLDO)HDWXUH3URȴWVIURPPHUFKDQGLVHVDOHV

On a side note, merchandise revenue and sponsor revenue EXWDOVRVSDUNVHFRQGDU\H΍HFWVOLNHIRVWHULQJDVHQVHRIFOXE are categorized under commercial income in the Football membership among fans and supporters, who purchase the Money League published every year by Deloitte UK. This is merchandise and create a sense of community in the stadium. likely because the Football Money League is based on the 2ɝFLDO FOXE PHUFKDQGLVH DUH LPSRUWDQW SRLQWV RI premise that merchandise-related revenue uses a licensing FRQWDFWȃDORQJZLWKSOD\HUVDQGWKHVWDGLXPȃWKDWFRQQHFW model in Europe. fans and supporters to the club. Collaboration products with 0HUFKDQGLVHUHYHQXHKROGVJUHDWVLJQLȴFDQFHEHFDXVHLW household merchandise can spread the club’s presence into is one of the few revenue sources that the clubs can control the daily lives of fans and supporters. In this sense, product on their own. In addition, changes in the external environ- development is clearly one of the engines that will boost the PHQWGXHWRWKHUHFHQWGHYHORSPHQWRIΖR7KDVVLJQLȴFDQWO\ business cycle of clubs. enhanced the potential for merchandise business growth, A positive circulation of the business cycle will improve club especially through e-commerce. For example, clubs like Dort- SURȴWDELOLW\DQGJHQHUDWHIXQGVWKDWDOORZFOXEVWRUHLQIRUFH mund and Manchester United boast worldwide popularity, their teams, and this will in turn have a positive impact on the and they position merchandise revenue as an important pillar FM of clubs. of total revenue by selling their merchandise to customers The description of merchandise-related revenue as a KPI around the world. category separate from other revenues does not simply indi- We believe that establishing merchandise revenue as FDWHDVXSHUȴFLDOLPSURYHPHQWLQZKLFKDQDGGLWLRQDOFDWH- a major pillar of club revenue in Japan will mark a big step gory of information is disclosed. We believe it is a noteworthy toward expanding the market. Another keypoint is that club improvement because this KPI can serve as a valuable indi- merchandise sales not only generate merchandise revenue cator to measure the growth level of the J.League as a whole.

Positive spiral Develop attractive products

Generate Increased club Increased points of contact additional funds SURȴWDELOLW\ with fans and supporters Positive impact on FM

Business cycle

Increased match day and goods-related revenue Enhanced interest in clubs

Increased number of stadium visitors

25 J.League Management Cup 2016

J2 Ranking

BM point 2016 5HQRID

© RENOFA YAMAGUCHI FC *Shows the standings in a different division in the 2015 season

26 J.League Management Cup 2016 | J2 Ranking

1st Stage: Marketing Performance 2nd Stage: Club Performance 3rd Stage: Management Performance 4th Stage: Financial Performance

Stadium New Matchday Field Wage Matchday Field Wage Profits from Revenue Average Capacity Attendees/ Average and other Total Total Costs/ Revenue/ Total Cost/ Merchandise Total Revenue Growth Equity Ratio Total Attendances Utilization Spend Revenue/ Attendance Points Won Points Won Revenue sales Rate (%) (%) SG&A

16 14 22 20 72 21 17 ӹ 38 22 21 20 ӹ 63 10 22 13 ӹ 45

21 22 12 19 ӹ 74 6 21 27 9 22 21 52 19 4 22 ӹ 45 20 20 11 21 72 1 22 23 3 20 19 42 21 19 4 44 22 15 7 16 60 12 18 30 17 18 17 52 18 20 1 39

19 21 1 22 63 2 19 21 11 10 22 43 22 14 9 ӹ 45 18 19 2 18 57 3 20 23 18 9 8 35 20 9 15 44 17 18 5 6 46 11 14 25 8 15 18 41 13 16 10 39 1 13 17 17 48 10 7 17 16 7 14 37 9 17 11 37 2 1 21 13 37 17 9 26 6 19 11 36 4 15 20 39 8 17 20 4 49 22 2 24 20 5 5 30 5 21 6 32 12 4 14 9 39 16 12 28 12 11 15 38 7 7 16 30 7 11 4 15 37 13 10 23 14 16 13 43 12 13 3 28 13 6 15 7 41 8 13 21 7 14 7 28 11 6 19 36 10 16 8 5 39 19 5 24 10 17 9 36 2 11 12 25 14 10 9 14 47 9 16 25 21 1 2 24 16 1 8 25 15 12 10 12 49 4 11 15 1 3 16 20 17 5 14 36 3 2 18 8 31 18 1 19 4 13 12 29 6 18 17 41 11 3 6 11 31 7 15 22 19 4 4 27 14 12 5 31 4 5 19 3 31 14 6 20 5 12 10 27 3 10 18 31 6 8 16 1 31 20 4 24 13 8 6 27 1 8 7 16 5 7 13 10 35 5 8 13 2 6 3 11 15 2 21 38 9 9 3 2 23 15 3 18 15 2 1 18 8 3 2 13

27 Management Cup J2 Analysis 1st Stage: Marketing Performance

In the 2016 season, average attendance, which is the key factor for a full stadium, slightly increased for the second consecutive year, but the ratio of new spectators to total attendance decreased slightly for the second year in a row. The sluggish growth of the ratio of new spectators to total attendance presents a major challenge to expanding the market and invigorating a league spirit. We hope the clubs will further enhance their BM measures to improve this KPI.

Average Attendances Okayama has been promoting the Challenge 1 club history in the 2016 season. Still, it main- Average attendance slightly increased by 109 Project since last season, and it set a clear club tained a stadium capacity utilization ratio of over people (+2%) in the 2016 season compared to goal of an average attendance per match of 50% at its football-exclusive stadium that holds the previous year’s average. Looking at the 10,000 people, which it has achieved. We 20,000 people. However, in the 2015 season average of each club, seven out of the 17 clubs consider both of these cases to be examples of when both Matsumoto and Shimizu competed that competed in J2 in both the 2015 and 2016 steadfast BM measures yielding results. in the J1 league, Matsumoto’s stadium capacity seasons increased their total attendance. The utilization ratio was 84.1% while Shimizu’s ratio drivers of the increased growth rate were Stadium Capacity Utilization ZDV7KHVHUHVXOWVVXJJHVWWKHVLJQLȴFDQW Sapporo (+2,599, +21.7%), which stayed at the The average stadium capacity utilization ratio negative impact that relegation to J2 had on top from mid-season and went on to win the of J2 in the 2016 season was 33.7%, roughly the stadium capacity utilization ratio. championship resulting in promotion to J1 for same level as the past three years. C-Osaka improved stadium capacity utiliza- WKH ȴUVW WLPH LQ ȴYH VHDVRQV DQG 2ND\DPD Matsumoto had the highest stadium capacity tion ratio by 7.0 ppt from 47.7% in the previous (+1,605, +19.1%), which entered the J1 promotion utilization ratio at 67.8%. It worked together with season. Although C-Osaka earned a spot for SOD\R΍VIRUWKHȴUVWWLPHLQFOXEKLVWRU\ the local community in managing the club, promotion once again to J1 and increased Since the 2013 season, when it was relegated hosting matches at a football stadium that holds average attendance by 462 YoY in the 2016 to J2 and its president was replaced, Sapporo 20,000 people. The club achieved a stadium season, the improvement in this KPI is mainly has steadily increased average attendance capacity utilization ratio that exceeded its result DWWULEXWDEOHWRWKHIUHTXHQF\WKHFOXEXVHGLWV through measures such as registering anime in the 2014 season (62.4%) when it was two home stadiums. In the 2016 season, characters as players and actively putting SURPRWHGWR-IRUWKHȴUVWWLPHLQFOXEKLVWRU\ C-Osakao used the larger 47,000-capacity non-Japanese Asian players on its team roster. 6KLPL]XZDVUHOHJDWHGWR-IRUWKHȴUVWWLPHLQ Yanmar Stadium Nagai just three times, and

Factors contributing to increased average attendance Appropriate stadium size Sapporo and Okayama were instrumental to the increase Matsumoto works closely with the community to manage in average attendance LWVFOXEDWLWVVWDGLXP FDSDFLW\

+2,599 (+22%) Sapporo Promoted to J1 for the J1 ȴUVWWLPHLQȴYHVHDVRQV 2017 Stadium capacity utilization +1,605 (+19%) Okayama 3URPRWHGWR-DQGPDGHSOD\R΍V Approx. IRUWKHȴUVWWLPHLQFOXEKLVWRU\ Approx. 62% 68% 2016 Average attendance compared to the previous year

+109 (+2%)

2015 2014 2016

Average Attendances (people) Stadium Capacity Utilization (%)

Sapporo 14,559 Matsumoto 67.8 Matsumoto 13,566 Shimizu 55.5 C-Osaka 12,770 C-Osaka 54.7 Shimizu 11,274 Chiba 52.0 Chiba 10,292 Okayama 50.1 Okayama 10,017 FC Machida 48.2 Yamaguchi 6,654 Mito 44.7 Kyoto 6,524 Sapporo 39.4 Yamagata 6,254 Yamaguchi 33.0 FC Gifu 5,662 Kitakyushu 31.6 Kumamoto 5,543 Kyoto 31.5 Tokyo-V 5,402 Yokohama FC 30.3 Mito 5,365 Yamagata 29.4 Nagasaki 5,225 Nagasaki 25.8 FC Machida 5,123 Gunma 23.1 Yokohama FC 4,892 Tokushima 22.4 Gunma 4,744 FC Gifu 21.7 Tokushima 4,565 J2 avg.: Kanazawa 21.0 J2 avg.: Kanazawa 4,313 Kumamoto 18.9 Ehime FC 4,089 Tokyo-V 15.4 Sanuki 3,686 6,988 Ehime FC 13.6 33.7% Kitakyushu 3,224 (Կ109,Կ2%) Sanuki 12.2 (Կ1.0P,Կ3%)

28 J.League Management Cup 2016 | Management Cup J2 Analysis 1st Stage: Marketing Performance

Management Cup J2

made greater use of the 20,000-capacity Kincho Average Spend terms of ratio (2.7x in tickets vs. 4.0x in merchan- Stadium. Okayama, which entered the J1 promo- From the 2016 season, merchandise revenue, dise). WLRQSOD\R΍VIRUWKHȴUVWWLPHLQFOXEKLVWRU\DOVR which used to be part of other revenues along There could be multiple reasons for the exceeded 50% in stadium capacity utilization with prize money and transfer revenue, has its performance gap in this KPI between Shimizu UDWLRIRUWKHȴUVWWLPH RZQ FDWHJRU\ GXH WR D FKDQJH LQ WKH ȴQDQFLDO and Gunma, but one of them is likely to be Shimi- information published by the J.League. As a zu’s superior FM. One point to note is that the New Attendees/Total Attendance result, average match day revenue per spec- sales of the two clubs’ main products (such as In terms of J2 as a whole, the ratio of new tator can now be calculated as an amount VFDUYHV GRQRWGL΍HUJUHDWO\7KLVFRXOGHLWKHU spectators to total attendance went down by 1.6 excluding prize money and transfer fee revenue, mean that Gunma’s attendees have a low ppt from the previous season to 5.1%. The clubs so its face value appears to be less than the purchasing ratio or Shimizu has a high with the highest ratio of new spectators were previous season. purchasing ratio via e-commerce. We believe Yamaguchi (16.7%), Sanuki (10.1%) and FC In the 2016 season, Shimizu had the highest WKHFOXEVZRXOGEHDEOHWRWDNHPRUHH΍HFWLYH Machida (8.7%), all three of which were promoted average match day revenue per spectator in J2 measures by researching data on these WR-RQO\UHFHQWO\FRQȴUPLQJWKHODUJHLPSDFW at 3,429 yen, while Gunma booked the lowest purchasing ratios and getting a grasp of more that promotion from J3 to J2 had on attracting amount at 1,084 yen, approximately 1/3 of detailed information. new spectators. S-Pulse. When looking at the relationship :KHQORRNLQJDWȵXFWXDWLRQVIURPWKH EHWZHHQ WLFNHWV DQG PHUFKDQGLVH WKH GL΍HU- previous season, there were only three clubs ence between Shimizu and Gunma is largely (C-Osaka, Kyoto and Kumamoto) that had an caused by a disparity in average ticket revenue Average Spend increased ratio of new spectators, excluding in terms of value, but there is an even greater 3,429 Yamaguchi and FC Machida that were promoted disparity in average merchandise revenue in to J2 from this season. Two clubs (Tokushima and Mito) maintained a similar ratio to the Shimizu previous year, while 15 clubs had a reduced ratio Average spend: of new spectators from the previous season. 2,346 Performance gap in J2 (yen) Many of the clubs that have been competing in (3.1x) J2 for a long time lowered their ratio of new spec- tators, raising concerns that perhaps their 2,086 (61%) conventional measures to attract spectators Average Spend 1,334 KDYHEHFRPHLQH΍HFWLYH:HEHOLHYHLWLVLPSRU- (2.7x) tant to approach this issue from a perspective of 1,084 ZKDWVKRXOGEHGRQHGL΍HUHQWO\EDVHGRQDYHUL- ȴFDWLRQRIZKHWKHUHDFKFOXEȇV%0PHDVXUHVDUH H΍HFWLYHLQDWWUDFWLQJQHZVSHFWDWRUV Gunma 1,343n (39%) Ticket revenue 1.012 752 (69%) per spectator (4.0x) Goods revenue per spectator 332 (31%)

New Attendees/Total Attendance (%) Average Spend (yen)

Yamaguchi 16.7 Shimizu 3,429 Sanuki 10.1 C-Osaka 2,550 FC Machida 8.7 Yamaguchi 2,511 Kanazawa 8.5 Matsumoto 2,439 Ehime FC 7.6 Chiba 2,341 Kitakyushu 7.3 Kitakyushu 2,230 Gunma 6.6 Sapporo 2,060 FC Gifu 5.1 Yokohama FC 2,024 Kumamoto 4.4 Yamagata 2,010 Tokushima 3.9 Sanuki 1,950 Matsumoto 3.8 Kyoto 1,883 C-Osaka 3.6 Tokyo-V 1,842 Kyoto 3.5 Tokushima 1,783 Yamagata 3.3 Kumamoto 1,726 Mito 2.9 Ehime FC 1,572 Sapporo 2.7 FC Gifu 1,555 Tokyo-V 2.6 Okayama 1,530 Okayama 2.5 J2 avg.: Mito 1,260 J2 avg.: Yokohama FC 2.5 Machida Zelvia 1,236 Nagasaki 2.2 Kanazawa 1,180 Chiba 1.9 5.1% Nagasaki 1,166 1,880 yen Shimizu 1.5 (Հ1.6P,Հ24%) Gunma 1,084 (Հ1,258yen,Հ40%)

29 Management Cup Analysis of the J2 League 2nd Stage: Club Performance

Field Wage Costs/Points Won and tMatchday Revenue/Points Won are KPIs that focus on the relationship between business management (BM) and field management (FM). Sapporo, which finished the 2016 season in first place and was promoted to J1, spent less on its wage bill than the J2 club average for each league point won, demonstrating highly efficient club management.

Field Wage Costs/Points Won 1.4 million yen, C-Osaka by 3.6 million yen, competed in J2 while keeping the same bench The total wage bill of all J2 clubs was 12,402 Kyoto by 2.0 million yen, and Okayama by 0.7 strength as when they competed in J1, so they million yen in the previous season and 12,223 million yen. In particular, Sapporo, Kyoto and ZHUHDEOHWRZLQOHDJXHSRLQWVPRUHHɝFLHQWO\ million yen in the 2016 season, maintaining the Okayama lowered the KPI while increasing than the previous year. same level in both years. The decrease in J2 total wage bills from the previous year. That the Meanwhile, FC Machida and Yamaguchi, average wage bill per league point won was KPI went down even though total wage bills ZKLFKZHUHSURPRWHGIURP-WR-VLJQLȴ- also limited, declining from 9.6 million yen to went up suggests there was a synergistic cantly increased their total wage bills. FC 9.3 million yen. H΍HFWEHWZHHQ%0DQG)0PHDVXUHV machida increased its total wage bill by 26% When looking at the 17 J2 clubs, excluding $PRQJWKHȴYHFOXEVWKDWMRLQHGWKH-IURP YoY to 189 million yen while Yamaguchi boosted WKH ȴYH FOXEV WKDW MRLQHG - IURP WKH  the 2016 season, the three clubs that were its wage bill by 157% YoY to 231 million yen, but season, total wage bill per league point won UHOHJDWHGIURP-WR-ȃLQFOXGLQJ

Comparison of field wage costs/points won (millions of yen)

Sapporo is 1/2 of Shimizu Shimizu Field Wage Costs/ Approx. Points Won 17.5 2nd place in points

Sapporo Approx. 8.2 1st place in points

The wage bill of Shimizu (2nd in point ranking) is approximately double that of Sapporo (1st in point ranking)

Field Wage Costs/Points Won (millions of yen) [Reference] Field Wage Cost (millions of yen)

FC Machida 2.9 FC Machida 189 Yamaguchi 4.3 Gunma 228 Gunma 5.0 Yamaguchi 231 Mito 5.4 Mito 262 Ehime FC 5.4 Sanuki 287 Sanuki 6.6 Kanazawa 296 Kumamoto 6.8 Ehime FC 306 Nagasaki 6.8 J2 avg.: Kumamoto 315 J2 avg.: Kanazawa 7.5 Nagasaki 322 Yokohama FC 7.8 Kitakyushu 343 Sapporo 8.2 9.3m yen FC Gifu 419 556m yen Okayama 8.7 Yamagata 429 (Հ0.3m yen,Հ3%) Հ Հ Kitakyushu 9.0 Tokyo-V 436 ( 8m yen, 1%) Yamagata 9.1 Yokohama FC 464 FC Gifu 9.7 Okayama 568 Tokyo-V 10.1 Sapporo 703 Matsumoto 10.2 Tokushima 731 Tokushima 12.8 Matsumoto 863 Kyoto 13.9 Chiba 899 Chiba 16.9 Kyoto 965 Shimizu 17.5 Shimizu 1,473 C-Osaka 19.1 C-Osaka 1,494

30 J.League Management Cup 2016 | Management Cup J2 Analysis 2nd Stage: Club Performance

Management Cup J2

0DFKLGDUDQNHGȴUVWLQWKLV.3ΖDQG

Customer satisfaction level and sales unit price per league point (millions of yen)

2015 2016 Customer satisfaction level Sapporo increased accordingly

7.4 5.3 ﾹ ﾹ Matchday revenue: 424 Matchday revenue: 457 Annual Annual points won : 57 points won : 85 (10th place) (promoted to J1)

Although revenue per point changed the most for Sapporo, decreasing by approximately 2m yen, supporters paid Decreased less than last year for each point, so their satisfaction level increased accordingly. revenue per point

Matchday Revenue/Points Won (millions of yen)

C-Osaka 6.5 Matsumoto 6.2 Chiba 6.2 Shimizu 5.8 Sapporo 5.3 Yamaguchi 4.1 Yamagata 3.8 Tokyo-V 3.8 Okayama 3.0 FC Gifu 2.9 Kumamoto 2.9 Kyoto 2.8 Yokohama FC 2.5 Sanuki 2.4 Tokushima 2.1 Kitakyushu 2.1 Kanazawa 1.7 Mito 1.7 J2 avg.: Gunma 1.6 Nagasaki 1.5 FC Machida 1.4 3.3m yen Ehime FC 1.3 (Հ0m yen,Հ0%)

31 Management Cup Analysis of the J2 League 3rd Stage: Management Performance

Matsumoto scored the highest among all 54 clubs in terms of match day revenue per million yen of SG&A expenses, which is linked to indirect investments, owing to its strengthening of BM meas- ures. The interesting point about this result is that it demonstrates how even a club in J2 can produce top results in this KPI by taking effective measures.

Field Wage Cost/Revenue ultimately remained more or less the same as wage bill since such investment does not It is generally said to be desirable for this KPI the previous season due to an increase in total always lead to better league results. We believe not to exceed 50%, and indeed 20 out of the UHYHQXH)&0DFKLGDZDVHVSHFLDOO\ȴQDQFLDOO\ it is important for clubs to execute invest- 22 clubs in J2 (the exceptions were Kyoto and sound with the lowest wage bill among clubs ments based on their medium- to long-term Tokushima) kept this KPI below 50%, with an competing in J2 at 189 million yen, but it placed strategies. overall average value of 42%, which is a rela- seventh in annual standings in its promotion tively healthy level. year, generating a high return on investment. Matchday and other Revenue/SG&A Kyoto had the highest value in this KPI in the Meanwhile, Yamagata, which was relegated This KPI indicates the degree to which 2016 season, rising from 42% in the previous from J1 to J2, had the second lowest wage bill to expenses recognized as SG&A expenses are season to 55.4% in this season. The rise is total revenue ratio at 28.7% among the 22 linked to revenue. The revenue included in the mainly attributable to the increase in wage bill clubs competing in J2. We assume that calculation for this KPI only includes match day from 796 million yen to 965 million yen to Montedio kept this KPI low so that the club’s revenue and merchandise revenue, excluding strengthen the club’s FM. Perhaps owing to the ȴQDQFLDOVRXQGQHVVZRXOGQRWEHZHDNHQHG advertising revenue, J.League distributed increase in wage bill, Kyoto was able to enter by the relegation. However, in the end, the funds, academy revenue and other revenues. WKH-SURPRWLRQSOD\R΍VIRUWKHȴUVWWLPHLQ club’s FM also declined so it did not gain the (Refer to the J1 analysis for details) three seasons, though it did not realize its return on investment it aimed for. In the 2016 season, Matsumoto and Yama- long-cherished goal of returning to J1. $VGHVFULEHGDERYHLWLVGLɝFXOWWRGHWHU- guchi scored high in this KPI. Matsumoto had FC Machida and Yamaguchi, which competed PLQHZKHWKHUWRVWULYHIRUȴQDQFLDOVRXQGQHVV the highest value at 176 million yen, which is in J3 until the previous season, increased their by keeping wage bill low or to seek league also the highest value among all 54 J.League wage bills to bolster club strength, but the KPI results by strategically investing in a higher clubs. Matsumoto had a tough season in the

Comparison of field wage cost/revenue

FC Yamagata Wage bill to total revenue ratio Machida Wage bill to total revenue ratio is the second lowest in J2 is the third lowest in J2

Annual ranking fell to Annual ranking was 14th place 7th place

28.7% 30.2%

(Wage costs: 429m yen) (Wage costs: 189m yen)

Field Wage Cost/Revenue (%)

Yamaguchi 26.3 Yamagata 28.7 FC Machida 30.2 Tokyo-V 31.3 Chiba 35.2 Sapporo 37.0 J2 avg.: Kitakyushu 40.1 Nagasaki 43.0 Yokohama FC 43.6 % Gunma 43.7 42.0 Kumamoto 43.8 (Կ1.2P,Կ3%) Shimizu 44.1 Mito 44.5 Matsumoto 44.6 Okayama 44.7 FC Gifu 45.0 Sanuki 46.8 Kanazawa 48.4 Ehime FC 48.6 C-Osaka 49.7 Tokushima 50.7 Kyoto 55.4

32 J.League Management Cup 2016 | Management Cup J2 Analysis 3rd Stage: Management Performance

Management Cup J2

previous year when it was relegated to J2, but Like the previous season, the club’s BM and FM costs incurred differ under each model. In the club’s attendance went up slightly, perhaps mutually reinforced each other. We look principle, the J.League’s policy for the owing to its community-based club manage- forward to the club’s performance in the merchandise-related expenses that it ment that is functioning well. In addition, we future. publishes is to calculate only the cost of the assume that the club’s community-based BM actual merchandise, so the expenses do not measures are creating a positive cycle, Profits from Merchandise sales include indirect costs such as advertising ZKHUHE\ SURPRWLRQ DFWLYLWLHV DUH HɝFLHQWO\ Shimizu had the highest profits from expenses, and therefore comparison of this leading to increased merchandise revenue. merchandise sales among all J2 clubs in the KPI is on a gross profit basis. The club with the second highest value in 2016 season at 92 million yen, while Nagasaki In terms of merchandise revenue standings, this KPI was Yamaguchi, which was promoted was at the bottom booking a 2 million yen Shimizu was ranked top with 318 million yen in from J3 to J2 in the 2016 season. While Yama- deficit. The average amount of profits from revenue, while Gunma came in last place with guchi attracted interest through its promotion merchandise sales in J2 was 24 million yen, and 33 million yen in revenue. With regard to to J2 and increased stadium attendance by seven out of the 22 clubs had a profit exceeding merchandise sales profit ratio, Kyoto ranked approximately 150%, it kept one of its top the average. A characteristic that is more first at 41% with a merchandise revenue of 58 SULRULW\.3ΖVȃZDJHELOOWRWRWDOUHYHQXHUDWLRȃ apparent in J2 than J1 is a scheme where the million yen, while Nagasaki ranked last at Ӛ4% to a little less than 30% despite the tough top four clubs far surpass the others in profits with a merchandise revenue of 54 million yen. FRPSHWLWLRQLQ-%\H΍HFWLYHO\XVLQJ6* $ from merchandise sales. However, given that Kyoto and Nagasaki are at expenses, Yamaguchi generated approxi- There are several ways of selling club the same level on a revenue basis, we believe mately two-and-a-half times the match day merchandise, including stadium shops, official Nagasaki has good potential for growth. revenue compared to the previous season. merchandise shops and e-commerce, and the

Comparison of matchday and other revenue/SG&A Status of top 5 clubs in profits from merchandise sales (millions of yen) (millions of yen)

Highest Highest YoY increase Shimizu Matsumoto Yamaguchi among 53 J.League clubs among 53 J.League clubs 92 Matsumoto Promoted Goods-related SURȴW Yamaguchi to J2 67 C-Osaka 1.48 Okayama 1.76 Average Reduced 53 50 wage bill ratio 33 24 BM measures Goods revenue 318 200 131 239 122 98

Goods-related SURȴWUDWLR 29% 34% 40% 21% 27% 23%

Matchday and other Revenue/SG&A (millions of yen) Profits from Merchandise sales (millions of yen)

Matsumoto 1.76 Shimizu 92 Yamaguchi 1.48 Matsumoto 67 C-Osaka 1.18 Yamaguchi 53 Sanuki 1.13 C-Osaka 50 Sapporo 1.08 Okayama 33 Mito 0.99 Sapporo 31 Yokohama FC 0.89 Kyoto 24 Okayama 0.83 Kumamoto 22 FC Gifu 0.83 Kitakyushu 18 Ehime FC 0.81 Yokohama FC 17 Kanazawa 0.81 Ehime FC 16 Kumamoto 0.79 Sanuki 16 Shimizu 0.79 Kanazawa 16 Chiba 0.74 Mito 14 Gunma 0.73 Chiba 13 Kitakyushu 0.64 FC Gifu 12 Tokushima 0.63 Gunma 9 FC Machida 0.51 J2 avg.: FC Machida 8 Tokyo-V 0.45 Tokyo-V 7 J2 avg.: Kyoto 0.44 Tokushima 5 Nagasaki 0.38 0.83m yen Yamagata 3 Yamagata 0.32 (Հ0.35m yen,Հ30%) Nagasaki Ӛ 2 24m yen

33 Management Cup Analysis of the J2 League 4th Stage: Financial Performance

Compared to the previous season, the average value of year-on-year revenue growth rate increased. We can see that

Revenue Although match day revenue decreased YoY match day revenue, again demonstrating that In the 2016 season, the average total for Yamagata, Matsumoto and Shimizu, which winning leads to increased match day revenue. revenue of J2 as a whole went down by 31 were relegated from J1 to J2 this season, by 99 It should be noted that, in J2, Yamagata, million yen from the previous season to 1,313 million yen, 69 million yen, and 57 million yen, Gunma, C-Osaka and Nagasaki operated their million yen. respectively, it increased for Yamaguchi and DFDGHP\EXVLQHVVHVXQGHUQRQSURȴWFRUSR- In terms of advertising revenue, Shimizu FC Machida, which were promoted from J3 to rations, so their academy-related revenues are realized a total of 1,767 million yen, while the J2, by 128 million yen and 37 million yen, not included in total revenue. average amount among J2 clubs was 674 UHVSHFWLYHO\ 7KHVH UHVXOWV FRQȴUP WKDW Yamagata has a distinctive sales composi- million yen. The club with the lowest adver- have a clear impact tion ratio in which approximately half of its tising revenue in J2 was Mito, which generated on match day revenue. total revenue is comprised of ‘other’ revenues, only about one-ninth of the amount of Shimizu. Thanks in part to its promotion to J2, Yama- but the breakdown of these revenues is not Among the clubs that competed in J2 this guchi nearly overtook Kyoto and Okayama this disclosed. We look forward to active disclosure season, there were four clubs with advertising year, even though it generated less than half of of such information by the clubs. revenue exceeding 1 billion yen, including the match day revenue of these clubs in the Shimizu, C-Osaka (1,738 million yen), Chiba previous year. Excluding the clubs that were Revenue Growth Rate (1,659 million yen) and Kyoto (1,122 million yen), UHOHJDWHGIURP-FOXEVWKDWȴQLVKHGDWWKHWRS In terms of year-on-year revenue growth while Tokushima (991 million yen) came very in the season, including Sapporo, C-Osaka, rate, clubs that were promoted to J2 and clubs close to reaching 1 billion yen. Kyoto, Okayama and FC Machida, all increased WKDWȴQLVKHGDWWKHWRSPDUNHGDVLJQLȴFDQW

Shimizu rebounded from the adversity of relegation to J2

Although Shimizu was relegated to J2, Ad revenue increased ad revenue and the introduction of a new manager and sponsor system— +350m yen with the goal of returning to J1—positively Shimizu impacted both FM and BM

New Goal to return sponsor to J1

Industrial robot manufacturer New manager IAI Corporation

Revenue (millions of yen)

Shimizu 3,341 C-Osaka 3,008 Chiba 2,556 Matsumoto 1,935 Sapporo 1,902 Kyoto 1,743 Yamagata 1,497 Tokushima 1,443 Tokyo-V 1,391 Okayama 1,271 Yokohama FC 1,064 FC Gifu 932 Yamaguchi 880 Kitakyushu 855 Nagasaki 749 Ӎ Commercial Kumamoto 720 Ehime FC 630 J2 avg.: Ӎ Matchday FC Machida 626 Ӎ Distributionխ Sanuki 613 Ӎ Goods revenue Kanazawa 612 Ӎ Academy Mito 589 1,313 m yen Gunma 522 (Հ32m yen,Հ2%) խ and Others

34 J.League Management Cup 2016 | Management Cup J2 Analysis 4th Stage: Financial Performance

Management Cup J2

increase, as they did in previous years, while Yamaguchi, which was promoted to J2 in the 0DWVXPRWRȇVHTXLW\UDWLRZDVMXVWLQ clubs that were relegated from J1 registered a VHDVRQPDUNHGDVLJQLȴFDQWLQFUHDVHRI EXWWKHFOXEUDLVHGWKLVȴJXUHWRLQ sharp decline. 139.1% YoY, with match day revenue exceeding the previous season, and boosted it to over In particular, Yamaguchi and FC Machida, 200 million yen despite not reaching even 100 90% this season. This season, Matsumoto which were promoted to J2 this year, posted million yen in the previous year. As shown in reduced its liabilities by more than 70% while strong year-over-year growth at +129.2% and the examples above, match day revenue is achieving a net income of 210 million yen, +41.3%, respectively. Conversely, Yamagata heavily impacted by promotion and relegation. which far surpasses all other clubs in J2. As a and Matsumoto, which were relegated from J1, Going forward, we believe it will be important UHVXOW LW ZDV DEOH WR VLJQLȴFDQWO\ LQFUHDVH had negative growth of Ӛ17.4% and Ӛ10.0%, for clubs to take measures to improve fan internal reserves. respectively. We should note that S-Pulse, engagement so that the new supporters they Among the three clubs with the lowest which was relegated from J1, improved overall attracted through promotion will continue to HTXLW\UDWLRȃ6DSSRUR1DJDVDNLDQG

Status of equity ratio: Disparity in J2 Comparison of match day revenue growth (millions of yen) (millions of yen)

Liabilities 71 Yamagata Matsumoto Beginning with the 2017 season, 262 Nagasaki will accept investment and support from the Net assets major mail-order company Japanet Holdings

653 506

2014 2016 2014 2016 183 182 295 528 147 201 Same level Supporters 73 as before increased steadily 13 In one year, Yamagata reverted to the same level as before promotion to J1 (in 2014). Conversely, Matsumoto recorded less match day revenue, but steadily increased in supporters who attend matches regardless of Matsumoto Nagasaki promotion level ӍӍ 2015խӍӍ 2016

Revenue Growth Rate (%) Equity Ratio (%)

Yamaguchi 129.2 Matsumoto 90.2 FC Machida 41.3 Tokushima 80.9 Sapporo 33.9 Sanuki 79.3 C-Osaka 10.9 FC Gifu 50.5 Ehime FC 10.7 Kanazawa 50.5 Kitakyushu 10.0 Ehime FC 49.8 Okayama 8.3 Kumamoto 39.6 Sanuki 6.6 Chiba 34.5 Shimizu 6.3 Kyoto 34.4 Yokohama FC 6.2 Yamaguchi 29.4 Tokyo-V 6.1 Mito 28.1 Mito 5.0 Kitakyushu 26.3 Kanazawa 4.8 Okayama 25.7 Chiba 2.1 Shimizu 24.9 Gunma Ӛ 4.7 Yamagata 19.9 Kumamoto Ӛ 4.8 Gunma 12.7 FC Gifu Ӛ 6.7 J2 avg.: FC Machida 10.3 J2 avg.: Kyoto Ӛ 8.1 Tokyo-V 9.2 Matsumoto Ӛ10.0 C-Osaka 9.2 Nagasaki Ӛ16.5 Yokohama FC 6.7 Tokushima Ӛ17.1 8.9% Nagasaki 6.1 32.7% Yamagata Ӛ17.4 (Կ1.3P,Կ17%) Sapporo 1.8 (Կ0.2P,Կ1%)

35 J2 Cup Winner Analysis Renofa Yamaguchi FC

Yamaguchi carried its momentum from the previous season’s victory in the J3 J.League Management Cup (JMC) into LWVYLFWRU\LQ--0&LQWKHȴUVW\HDURISURPRWLRQ'HVSLWHEHLQJDUHJLRQDOFOXEZLWKRXWDSDUHQWFRPSDQ\5HQRID surpassed the club in second place by 20 BM points. What type of BM measures did Renofa implement to achieve this overwhelming victory? At Deloitte Tohmatsu, we have analyzed Renofa’s victory based on an exclusive interview with the club’s president, Takashi Kawamura.

All Yamaguchi’s commitment to regional revital- and the club plays an important role in spreading a sense of ization and development unity and identity among residents. 7KH SKUDVH Ȋ$OO

Strategic Promotional measures activities that feature Renofa players New products New sales at each match methods

RENOFA

Goods Sales Representative

36 J.League Management Cup 2016 | J2 Cup Winner Analysis Renofa Yamaguchi FC

The club’s focus on increasing season ticket holders has body composition tests and blood tests while receiving SURYHQH΍HFWLYHLQLQFUHDVLQJPDWFKGD\UHYHQXHZLWKDSSUR[- support from the local Yamaguchi Prefectural University to imately 20% of the spectators in the 2016 season being season collect data that can be used in future nutritional guidance. As ticket holders. Yamaguchi places more emphasis on having its shown above, Yamaguchi is striving to create an environment fans become season ticket holders than become fan club conducive to player development. At the core of the club’s PHPEHUVΖWKDVEHHQR΍HULQJPRUHDQGPRUHEHQHȴWVWR H΍RUWVLV3UHVLGHQW.DZDPXUDȇVZLVKWRUHDOL]HWKHSULQFLSOHRI season ticket holders every year, including pre-match entry, All Yamaguchi in league performance. We expect the club to giveaways and events. From a BM perspective, we believe IXUWKHUHQKDQFHWKHVHH΍RUWVLQWKHIXWXUH Yamaguchi can expect even greater growth by shifting its management focus to increasing fan club members. Although Promotion of management that focuses on it currently has a relatively low number of fan club members, human resources by increasing this number and collecting customer informa- Yamaguchi has advanced rapidly through the Chugoku tion, it will be able to enhance its marketing measures. League, JFL and J3 in just three years from the 2013 to 2015 In terms of the second pillar, team reinforcement, Yama- seasons, and it competed in the J2 league in the 2016 season. guchi has maintained the same concept as before its promo- As the source of organizational strength to achieve the club’s WLRQWR-7KHFOXEȇVDSSURDFKZLOOFRQWLQXHWREHWKHDFTXLVL- next goal of competing in J1, while adapting to dramatic envi- WLRQRIVSHFLȴFSOD\HUVWKDWDUHQHFHVVDU\WRWKHWHDPZKLOH ronmental changes, Yamaguchi focuses on development of rigorously controlling budget in line with the manager’s envi- human resources. The club provides an environment to inde- sioned team style. At the same time, a limited budget may SHQGHQWO\HQYLVLRQWKHLGHDOVWD΍PHPEHULQFOXGLQJWKHW\SHV weaken league performance when competing in a top division RIVNLOOVDQGNQRZOHGJHUHTXLUHGDOORZLQJFOXEVWD΍WRIUHHO\ like J2, so the club is focusing not to lose the balance between design the training content and training location. budget and performance. The club plans to make a BM deci- The reason the club actively strengthens its management sion on whether to continue the budget-dependent reinforce- personnel is to ensure the scope of club management is not ment policy depending on league results. limited to football business, but also aims for revitalization of In terms of the third pillar, player development, Yamaguchi local communities through stadium business. To raise the has started taking bold steps to realize the following two long- stadium utilization ratio, including for non-football use, we term plans it set forth in its management plan: “preparing an believe it is essential for personnel with wide-ranging exper- environment for a youth team” and “supporting and educating tise to cooperate with each other to strategically manage the \RXWKSOD\HUVȋ6SHFLȴFDOO\WKHFOXEKDVEROVWHUHGLWVFRDFKHV club from a medium- to long-term perspective. to strengthen its U-18 team and has established a player’s As a priority investment area for the future, Yamaguchi dormitory. At the cafeteria adjoining the dormitory, a team focuses on reinforcing management personnel including the nutritionist creates nutritionally balanced menus for players. addition of new recruits. We expect this will not only improve The club also researches the dietary habits and physical its management strength even further, but may also have a condition of individual players. It conducts surveys on food, SRVLWLYHH΍HFWRQLWV)0

Environment for independently envisioning required skills and knowledge Freely design training ΖGHDOVWD΍ content and location

&OXEVWD΍ 3URYLGHGDQHQYLURQPHQWWRLQGHSHQGHQWO\HQYLVLRQWKHLGHDOVWD΍PHPEHULQFOXGLQJWKHW\SHVRI VNLOOVDQGNQRZOHGJHUHTXLUHGFOXEVWD΍FDQIUHHO\GHVLJQWKHWUDLQLQJFRQWHQWDQGWUDLQLQJORFDWLRQ

37 Special Feature 2 Away match attendance

Although the J.League Management Cup ranks teams based on the KPI of average home match attendance, here we will analyze average away match attendance*1. By focusing on the cooperative relationship between clubs to create appealing matches (i.e. products) together, we will examine the degree to which each club contributes to customer attraction of other clubs in away matches.

What are the products in professional overall, clubs with high average home match relegation to J2 resulted in a noteworthy sports? attendance also tend to rank high in average contribution to other J2 clubs and the league In the professional sports league industry, away match attendance. The average away as a whole. C-Osaka was already popular in J1, as represented by the J.League and Nippon PDWFK DWWHQGDQFH RI WKH WRS ȴYH FOXEV featuring many star players, including national 3URIHVVLRQDO%DVHEDOODPDWFKLVHTXLYDOHQWWR exceeded 21,000, underscoring their popu- team members, in each age category. By what is generally referred to in business as a larity in away matches. When looking at the competing in J2, it prompted many fans and product. The obvious fact that this product, or matches with the highest attendance in the residents of other J2 clubs, with low name sports match, cannot be ‘produced’ by a single VHDVRQIRUHDFKRIWKHFOXEVDɝOLDWHG recognition or popularity and uncultivated fan team but must be cooperatively produced WR- 7DEOH 8UDZDZDVWKHRSSRQHQWLQȴYH segments, to attend their matches against between multiple teams is an important char- matches, while Kawasaki-F and Yokohama F·M C-Osaka. We believe this fact also suggests the acteristic of professional sports. In terms of were the opponents in three matches each. H΍HFWLYHQHVVRILQWHUOHDJXHPDWFKHVJRLQJ FM, other clubs are opponents that must be This result highlights how clubs with high beyond J1 to J3, in tournaments like The Emper- beaten at all cost; but in terms of BM, they are customer attraction ability in home matches or’s Cup. partners with whom appealing products (i.e. also to some degree contribute to attracting Another notable point about average away matches) are created together. customers in away matches. match attendance in J2 is that clubs like Yoko- At home matches, the attendance is heavily hama FC, Kanazawa and Sanuki ranked at the LQȵXHQFHGE\WKHRSSRQHQW:KHQWKHRSSR- -&2VDNDFRQWULEXWHGVLJQLȴFDQWO\WR top even though they were at the bottom in nent is a popular club or a club that has famous attracting customers to the home matches terms of average home match attendance. The players (such as players in the Japanese of other clubs reason Kanazawa and Sanuki ranked high can national team), the attendance usually ΖQWKHVHDVRQ&2VDNDUDQNHGȴUVWDQG be attributed to the championship decider increases. In other words, the average away was the only club in J2 with an average away that Kanazawa played against Sapporo at the match attendance of each club gives an insight match attendance that exceeded 10,000. that attracted 33,697 specta- into a factor that has not been given much While the average away match attendance in J2 tors, and match 39 (Sanukie vs. Sapporo) in the DWWHQWLRQXQWLOQRZȃWKDWLVWKHGHJUHHWR was about 7,000, C-Osaka surpassed this ȴQDO OHJ RI WKH FKDPSLRQVKLS WKDW DWWUDFWHG which each club contributes to other clubs and average by roughly 4,000 people. Additionally, 21,582 spectators. the league as a whole in away matches. when looking at matches that recorded the Meanwhile, Yokohama FC has consistently highest attendance in the 2016 season of each ranked close to the top in average away match J1: Clubs with the highest average RIWKHFOXEVDɝOLDWHGWR- 7DEOH &2VDND attendance in the past three years (2015: 3rd attendance in home matches also rank at was the opponent in a third of the matches place, 2014: 3rd place, 2013: 2nd place), and the top in away matches with the highest attendance (i.e. seven out of there is a clear gap between the club’s ranking In the 2016 season, the J1 club that placed 21 matches excluding its home match), high- in home and away match attendance. This is an ȴUVWLQDYHUDJHDZD\PDWFKDWWHQGDQFHZDV lighting C-Osaka’s contribution to the customer interesting result that indicates how having a Urawa, which was also the top club in average DWWUDFWLRQH΍RUWVRIRWKHU-FOXEV famous player like on the home match attendance. We can see that, C-Osaka took a heavy blow in terms of club team positively impacts customer attraction in management when average home match away matches, even more than home matches. attendance dropped from 21,000 when it We believe this fact suggests the importance competed in J1 in 2014 to less than 13,000 as a league of developing and increasing the after its relegation to J2 in 2016. However, its number of popular players.

CLUB A CLUB B

The attractiveness of matches, as products, are HQKDQFHGWKURXJKPXWXDOH΍RUWVE\RQHȇVRZQFOXE DQGRSSRQHQWFOXEV *1 This is based on the total away match attendance rather than the attendance of the away club’s fans.

38 J.League Management Cup 2016 | Special Feature 2 Away match attendance

Table 1: Average attendance of Table 2: Matches with highest away vs. home matches attendance by club Away Home

Average Average Most Club name attendance Standings attendance Standings 'L΍HUHQFH Home Away Match attendance

Yokohama (2) Urawa Urawa J1 22,575 1 38,208 1 ±0 J1 F·M 17th match 56,841 G-Osaka Yokohama Kawasaki-F (1) 22,326 2 25,342 2 ±0 F·M 15th match 46,413 (1) Kawasaki-F 22,124 3 22,251 5 +2 FC-Tokyo G-Osaka 14th match 37,805 Yokohama Yokohama (1) F·M 21,708 4 24,004 4 ±0 G-Osaka F·M 5th match 34,231 (1) Kashima 21,501 5 19,324 7 +2 Kashima Fukuoka 17th match 31,636 (2) Hiroshima 18,797 6 15,464 11 +5 Nagoya Iwata 15th match 30,282 J3: The disparity between clubs is small (2) Iwata 18,135 7 14,611 12 +5 Niigata Urawa 15th match 29,692 compared to J1 and J2 Fukuoka 18,060 8 12,857 13 +5 Kawasaki-F Omiya (1) 26,612 A characteristic feature of J3 is how there is 17th match Yokohama (2) RQO\DVPDOOGL΍HUHQFH OHVVWKDQSHRSOH  Nagoya 17,151 9 17,729 8 -1 Hiroshima F·M 4th match 25,845 (2) between the highest (3,450) and lowest (2,489) Omiya 17,041 10 11,814 15 +5 Kobe Kawasaki-F 14th match 25,722 (2) average away match attendance. Because the FC-Tokyo 16,728 11 24,037 3 -8 Iwata Urawa 16th match 24,896 league’s average away match attendance (1) Shonan 16,444 12 11,530 16 +4 Tosu Shonan 10th match 20,219 (slightly above 3,000) is small, average away (2) Niigata 15,934 13 21,181 6 -7 Fukuoka Tosu 5th match 19,370 PDWFKDWWHQGDQFHWHQGVWREHLQȵXHQFHGE\ Kashiwa 15,677 14 10,728 18 +4 Sendai Iwata (2) 19,315 away matches against clubs that have rela- 17th match (2) tively high customer attraction capabilities Sendai 15,100 15 15,467 10 -5 Kofu Urawa 6th match 15,508 (1) such as Oita, Nagano, and Tochigi. However, in Kofu 14,999 16 10,833 17 +1 Shonan Urawa 4th match 14,419 (1) terms of matches against clubs with average Tosu 14,954 17 12,636 14 -3 Kashiwa Kawasaki-F 11th match 13,977 popularity, we assume elements like league (1) Kobe 14,172 18 17,018 9 -9 Omiya Urawa 11th match 13,880 performance of the club and other game day events have a greater impact on away match J2 C- O s a k a 10,858 1 12,770 3 +2 J2 Sapporo Kanazawa 42nd match 33,697 attendance than which opponent the club Shimizu 9,158 2 11,274 4 +2 C-Osaka Shimizu 34th match 23,781 Yokohama Yokohama 42nd match plays against. FC 8,261 3 4,892 16 +13 Matsumoto FC 19,632 Matsumoto 7,593 4 13,566 2 -2 Shimizu Okayama 41st match 16,740 Summary: Contributing to customer Sapporo 7,311 5 14,559 1 -4 Okayama Gunma 42nd match 15,204 attraction in away matches results in Kanazawa 7,267 6 4,313 19 +13 Yamaguchi C-Osaka 28th match 14,532 contributing to the league as a whole 28th match The analysis of away match attendance has Sanuki 7,095 7 3,686 21 +14 Yamagata Kyoto 14,450 helped us derive a hypothesis that popular Okayama 6,948 8 10,017 6 -2 Chiba Kumamoto 13th match 14,163 clubs and clubs with famous players like Chiba 6,924 9 10,292 5 -4 FC Gifu Tokyo-V 42nd match 12,158 players on the national team not only help FC Gifu 6,750 10 5,662 10 ±0 Kyoto C-Osaka 26th match 12,042 attract customers to home matches but also Tokyo-V 6,740 11 5,402 12 +1 Sanuki C-Osaka 25th match 11,376 make a large contribution to customer Yokohama Kyoto 6,708 12 6,524 8 -4 C- O s a k a 14th match 10,524 attraction in away matches. If this hypothesis is FC 2nd match correct, it would mean that these clubs are not Yamagata 6,683 13 6,254 9 -4 Mito C-Osaka 10,420 only assisting the customer attraction and Ehime FC 6,616 14 4,089 20 +6 FC Machida C-Osaka 1st match 10,112 management of opponents, but also Kitakyushu 6,527 15 3,224 22 +7 Gunma Matsumoto 32nd match 9,804 contributing to the branding of the J.League as Yamaguchi 6,265 16 6,654 7 -9 Tokushima Shimizu 42nd match 9,767 a whole. The J.League’s disclosure of the Kumamoto 6,187 17 5,543 11 -6 Kumamoto Shimizu 6th match 9,727 breakdown of attendance data, including away Tokushima 6,156 18 4,565 18 ±0 Kanazawa C-Osaka 30th match 9,316 match attendance, will make it possible to 1st match carry out a more detailed analysis, and it may Gunma 5,973 19 4,744 17 -2 Tokyo-V Sapporo 9,272 even shed light onto new measures that can FC Machida 5,856 20 5,123 15 -5 Nagasaki FC Gifu 22nd match 9,048 Yokohama Mito Ehim FC 34th match be taken to maximize attendance of the league 5,796 21 5,365 13 -8 FC 8,215 as a whole. Nagasaki 5,741 22 5,225 14 -8 Kitakyushu Mito 41st match 5,689

YSCC 29th match J3 Nagano 3,450 1 5,018 2 +1 J3 Oita Yokohama 11,065 Toyama 3,209 2 3,607 6 +4 Nagano Toyama 19th match 10,377 Akita 3,188 3 2,424 7 +4 Tochigi Akita 18th match 8,586 YSCC Sagamihara Oita 21st match Yokohama 3,123 4 1,018 13 +9 7,582 Tochigi 3,080 5 4,945 3 -2 Akita Sagamihara 28th match 5,371

FC-Tokyo 25th match Oita 2,912 6 7,770 1 -5 Toyama U-23 5,081 Morioka 2,856 7 1,187 12 +5 Kagoshima Morioka 29th match 4,975 C-Osaka Tottori FC Ryukyu 19th match 2,821 8 1,898 8 +0 U-23 4,565 Kagoshima 2,749 9 3,665 5 -4 Tottori Oita 30th match 3,450

FC-Tokyo 29th match Sagamihara 2,667 10 4,344 4 -6 Fukushima U-23 3,052 Fukushima 2,651 11 1,678 9 -2 Morioka Tochigi 30th match 2,888 FC Ryukyu 2,636 12 1,561 10 -2 Fujieda Fukushima 30th match 2,257 YSCC Fujieda 12th match 2,489 13 1,531 11 -2 Yokohama Tochigi 1,614

* (1) indicates 1st sage, (2) indicates 2nd stage

39 J.League Management Cup 2016

J3 Ranking

Tochigi SC tops to win the J3 Cup! BM point 2016 Tochigi won the J3 J.League Management Cup 2016. While Tochigi ranked first in marketing performance, it placed third in club performance and business (for reference) performance and seventh in financial performance. Although it scored the same BM Ranking Total BM points 2015 ranking points as Oita, it came out on top by outperforming Oita in marketing performance, J3 which we consider most important. J3 Both Tochigi and Oita were relegated to J3 in 2016, but Oita placed first in FM Tochigi 1 Հ 15* 102 earning promotion to J2, while Tochigi placed second and will remain in J3. Nonetheless, relegation can be an opportunity for the club and supporters to Oita 1 Հ 19* 102 strengthen unity. We hope Tochigi will bounce back from this setback and reinforce Kagoshima 3 Կ -101 its BM measures to boost performance in the next season. Nagano 4 Հ 2 96 Sagamihara 5 Կ 6 89 Toyama 6 Կ 9 83 Tottori 7 Հ 4 77 Akita 8 Հ 7 71 Fukushima 9 Հ 8 68 Fujieda 10 Ը 10 65 YSCC Yokohama 11 Հ 10 62 FC Ryukyu 12 Հ 5 47 Morioka 13 Հ 12 38

*Shows the rank in a different division in the 2015 season

© Tochigi SC

40 J.League Management Cup 2016 | J3 Ranking

1st Stage: Marketing Performance 2nd Stage: Club Performance 3rd Stage: Management Performance 4th Stage: Financial Performance

Stadium New Matchday Field Wage Matchday Field Wage Profits from Revenue Average Capacity Attendees/ Average and other Total Total Costs/ Revenue/ Total Cost/ Merchandise Total Revenue Growth Equity Ratio Total Attendances Utilization Spend Revenue/ Attendance Points Won Points Won Revenue sales Rate (%) (%) SG&A

11 12 - 11 ӹ 34 6 10 16 6 11 13 30 11 1 10 22

13 8 - 10 31 3 13 16 8 13 10 31 13 4 7 24

9 7 - 8 24 8 6 14 10 12 12 ӹ 34 8 13 8 29

12 11 - 7 30 1 12 13 3 9 8 20 12 10 11 ӹ33 10 10 - 4 24 9 9 18 11 10 6 27 5 11 4 20 8 6 - 6 20 5 8 13 4 8 9 21 10 6 13 29 6 5 - 13 24 2 11 13 7 7 11 25 9 5 1 15 7 13 - 2 22 11 3 14 9 4 2 15 6 9 5 20 5 3 - 9 17 4 5 9 5 6 7 18 7 8 9 24 3 4 - 1 8 13 1 14 12 2 3 17 2 12 12 26

1 2 - 12 15 12 7 ӹ 19 13 1 1 15 3 7 3 13 4 1 - 5 10 10 2 12 2 5 5 12 4 3 6 13 2 9 - 3 14 7 4 11 1 3 4 8 1 2 2 5

41 Management Cup Analysis of the J3 League 1st Stage: Marketing Performance

In the 2016 season, the average stadium capacity utilization ratio in J3 fell below 20% for the second year running. This means that approximately 80% of the seats at most stadiums are empty, underscoring how the league is far from achieving full stadiums, the fundamental source of revenue and profits.

Average Attendances *HQHUDOO\ WKLV .3Ζ WHQGV WR ZRUVHQ VLJQLȴ- the stadium can ‘maximize’ the atmosphere of Due to an increase in the number of clubs cantly when clubs are relegated to a lower divi- matches and create attractive matches. In competing in J3, the J3 league changed its sion, but both Oita (Ӛ66) and Tochigi (Ӛ222) reality, most J3 clubs have no option but to use regulations from a triple round-robin format to experienced a relatively small decline in the stadiums for sports built by local governments a double round-robin format in the 2016 2016 season. This was mainly because both instead of stadiums for entertainment, and VHDVRQ&RQVHTXHQWO\WKHQXPEHURIDQQXDO clubs were in contention for the championship therefore the clubs need to hold matches in matches of each club went down from 36 in FM. Another factor that contributed to the stadiums where the empty seats stand out. matches to 30. In addition, the seven matches high average attendance was that the J3 has Akita, the club with the highest stadium that were held on weekdays in the previous improved its recognition level and popularity capacity utilization ratio in J3 for three years season were held on weekends or holidays in in the three years since its inception in 2014 running, uses a home stadium with a capacity the 2016 season, and this may have resulted in RISHRSOHȃWKHPLQLPXPVWDQGDUG an increased average attendance in J3. In Stadium Capacity Utilization UHTXLUHGIRUD-OLFHQVH7DNLQJWKHFOXEȇV terms of weather, the number of matches held 7KHUH KDV EHHQ QR VLJQLȴFDQW FKDQJH LQ current scope of business into consideration, in the rain halved from 38 in the previous stadium capacity utilization ratio since 2014 this is the most appropriate stadium size. season to 19 in the 2016 season, so the when J3 was established, shifting around 20%. However, if the club aims for promotion to J2 or ZHDWKHU PD\ KDYH DOVR SRVLWLYHO\ LQȵXHQFHG The ideal size of a home stadium should - LQ WKH IXWXUH LW ZRXOG KDYH WR IXOȴOO WKH attendance. match the size of average attendance so that VWDGLXPFDSDFLW\UHTXLUHPHQWVIRUD-OLFHQVH

Clubs that increased average attendance and league ranking Measures taken with local governments to invigorate stadiums Sagamihara’s statistics stand out, showing an increase in average attendance Clubs, the league and local governments need to work together to create the even though it dropped sharply in league ranking option to utilize a spectator-centric stadium 2015 2016 Կ32 % Spectator-centric stadium 4,344 (1,053)

Average 3,291 attendances Sagamihara League ranking Local The governments league 4th

11th Fukushima Fujieda Akita YSCC Toyama FC Yokohama Nagano Ryukyu Clubs

Average Attendances (people) Stadium Capacity Utilization (%)

Oita 7,771 Akita 41.2 Nagano 5,018 Tochigi 32.6 Tochigi 4,945 Nagano 32.4 Sagamihara 4,344 Sagamihara 28.4 Kagoshima 3,665 Morioka 24.0 Toyama 3,608 Oita 19.4 Akita 2,425 Kagoshima 18.4 Tottori 1,898 Toyama 14.3 Fukushima 1,678 Tottori 13.4 FC Ryukyu 1,561 Fujieda 10.0 Fujieda 1,531 Fukushima 8.9 Morioka 1,188 J3 avg.: YSCC Yokohama 6.4 J3 avg.: YSCC Yokohama 1,018 FC Ryukyu 6.2 3,127 19.7% (Կ695, Կ29%) (Կ0.4P, Կ2%)

42 J.League Management Cup 2016 | Management Cup Analysis of the J3 League 1st Stage: Marketing Performance

Management Cup J3

(10,000) and J1 license (15,000), so it would revenue per spectator can now be calculated UHJXODWLRQV UHTXLUH PDWFK GD\ UHYHQXH need to plan and negotiate with local govern- as an amount excluding prize money and including revenue from fans of the away club, ments and other stakeholders for establishing transfer fee revenue, so its face value appears to be pocketed by the home club, a likely cause a new stadium, extending the current stadium, to be less than the previous season. for Fujieda’s low average ticket price is that or preparing to lease existing stadiums. Clubs In the 2016 season, Tottori had the highest there are customers attending with free cannot solve this problem on their own. We average match day revenue per spectator in J3 invitations. We expect the conversion of these believe it is necessary for the clubs, league and at 1,966 yen, while Fujieda had the lowest free invitation customers into paying local governments to work together to create amount at 391 yen, approximately one fifth of customers will be an important point for options for using stadiums for entertainment. Tottori. An interesting point to note is that the Fujieda to consider going forward. average ticket price of Fujieda. Even though It is crucial for clubs to track these free Average Spend Tottori and Fujieda both have around the same invitation tickets and whether they are actually From the 2016 season, merchandise total attendance, Fujieda’s average ticket price being used, so they can take measures to revenue, which used to be part of ‘other’ is 304 yen, which is less than its lowest-priced improve BM. revenues along with prize money and transfer ticket (advance unreserved seat for students) revenue, appears in its own category due to a that costs 500 yen. (Tottori’s lowest-priced change in the financial information published ticket is also 500 yen.) by the J.League. As a result, average match day Taking into consideration that J.League Average Spend

1,966

Average spend: Tottori Performance gap in J3 (yen)

1,575 (5.0x)

1,404 (70%)

Average Spend 1,100 (4.6x) 391

Ticket revenue Fujieda per spectator 304 (78%) 475 562 (30%) Goods revenue (6.4x) per spectator 87 (22%)

NewAverage Attendees/Total Spend (yen) Attendance (%) Average Spend (yen)

Tottori 1,966 YSCC Yokohama 1,636 Tochigi 1,491 Oita 1,458 Fukushima 1,152 Kagoshima 1,127 Nagano 1,062 Toyama 1,053 FC Ryukyu 854 Sagamihara 813 Morioka 785 Akita 549 J3 avg.: Fujieda 391 1,103 yen (Հ1,074yen, Հ49%)

43 Management Cup Analysis of the J3 League 2nd Stage: Club Performance

Field Wage Costs/Points Won and tMatchday Revenue/Points Won are KPIs that focus on the relationship between business management (BM) and field management (FM). Sagamihara is an interesting example where total match day revenue per league point won increased owing to the significant growth of attendance, but customer satisfaction level was maintained despite the increased unit price of one league point.

Field Wage Costs/Points Won increased wage bill by 31% YoY to 281 million highest following Parceiro at 266 million yen, On average, the total wage bill per league yen, but performed poorly in the league, which is approximately twice as much as the J3 point won in J3 went up by 62% from 1.9 million winning 52 points in 2016 compared to 70 the average). By doing so, Oita won 61 league yen in the previous season to 3.0 million yen in season before. We believe Nagano’s low score points, resulting in the club’s victory in FM. the 2016 season. Total wage bills of the 10 for this KPI is mainly attributable to having Many of the clubs competing in J3 have a clubs, excluding the three clubs that joined J3 raised its wage bill in an aim to earn promotion, limited budget, so the strategy employed by from the 2016 season, rose by 17% from 966 but failing to achieve this in the previous Trinita may not be sustainable in the worg million yen to 1,128 million yen. season due to gaining fewer league points team for them. We believe it is important for In the 2016 season, Fujieda (0.7 million yen) than expected. these clubs to keep wage bills within budget in ZDVWKHFOXEWKDWZRQOHDJXHSRLQWVPRVWHɝ- Oita, which earned promotion to J2 in the terms of BM, while simultaneously imple- ciently for the second consecutive season. 2016 season, also scored high in this KPI. While PHQWLQJ )0 PHDVXUHV WR VWULYH WR HɝFLHQWO\ Meanwhile, Nagano struggled the most to win it recorded the third highest amount in this KPI gain league points. league points, spending 5.4 million yen on following Nagano and Tottori at 4.3 million yen, wage bills for each league point won. Nagano it invested in a relatively wage bill for J3 (second

Comparison of Field Wage Costs/Points Won (millions of yen)

281

Nagano 5.4 (Points won: 52) Fujieda 0.7 Total wage costs per league point won (Points won: 45)

Wage costs 32

Field Wage Costs/Points Won (millions of yen) [Reference] Field Wage Cost (millions of yen)

Fujieda 0.7 YSCC Yokohama 17 YSCC Yokohama 0.8 Fujieda 32 Akita 1.8 Sagamihara 80 FC Ryukyu 1.9 J3 avg.: FC Ryukyu 84 J3 avg.: Sagamihara 2.2 Morioka 87 Kagoshima 2.3 Akita 94 Morioka 2.9 3.0m yen Kagoshima 119 134 m yen Tochigi 3.8 (Կ1.1m yen,Կ62%) Fukushima 120 (Կ33m yen,Կ33%) Toyama 3.8 Tottori 142 Fukushima 4.0 Toyama 191 Oita 4.3 Tochigi 228 Tottori 4.7 Oita 266 Nagano 5.4 Nagano 281

44 J.League Management Cup 2016 | Management Cup Analysis of the J3 League 2nd Stage: Club Performance

Management Cup J3

Matchday Revenue/Points Won VFRUH IHOO E\  PLOOLRQ \HQ FRQȴUPLQJ WKH hara’s results may include the club’s BM meas- The J3 average rose by approximately 40% negative impact that relegation has on this KPI XUHVVXFKDVDFTXLULQJ

Customer satisfaction level and sales unit price per league point

2015 2016 Sagamihara Matchday 1.0m yen revenue 0.5m yen per point +81%

Average 3,291 4,344 attendance

Match day 32m yen 35m yen revenue

Famous player Increased exposure Increased interest Points won 58 acquisition of club personnel 35 () (Chairman Mochizuki’s media Motivation+ to visit appearances, lectures, etc.)

Matchday Revenue/Points Won (millions of yen)

Oita 2.5 Nagano 1.4 Tottori 1.3 Tochigi 1.1 Sagamihara 1.0 Toyama 0.7 YSCC Yokohama 0.7 Kagoshima 0.5 Fukushima 0.4 Morioka 0.3 Akita 0.2 FC Ryukyu 0.2 J1 avg.: Fujieda 0.1 0.8m yen (Կ0.2m yen,Կ39%)

45 Management Cup Analysis of the J3 League 3rd Stage: Management Performance

J3 has a considerably smaller sales revenue size compared to J1 and J2, and the average wage bill to total revenue ratio is reflective of the club’s direct investment strategy. At under 40%, it is the lowest among J. League’s three divisions. Furthermore, in terms of match day revenue per 1 million yen of SG&A expenses – which represents the club’s indirect investment strategy – even the top clubs had a KPI below 1 million yen, showing that the J3 league is a difficult market for clubs to recover investments.

Field Wage Cost/Revenue million yen), resulting in the high value of this Matchday and other Revenue/SG&A In J3, most clubs operate on a tight budget, KPI. Although it is considered desirable for this This KPI indicates how much revenue is and in that sense the ratio of wage bills to total .3ΖWREHNHSWEHORZIURPDȴQDQFLDO being generated from expenses categorized revenue is an important KPI in club manage- soundness perspective, when considering under SG&A expenses. The revenues calcu- ment, because it highlights the important how Morioka’s wage bill is below the average lated for this KPI only include match day points in the club’s BM and FM strategies. value of J3 (134 million yen), it is crucial for the revenue and merchandise revenue, excluding It is generally considered desirable for this club to raise its total revenues through BM advertising revenue, J.League distributed KPI to be kept below 50%. Out of the 13 clubs measures. funds, academy revenue and other revenues. in J3, 12 clubs except for Morioka maintained Additionally, Oita experienced the sharpest (Refer to the J1 analysis for details.) this KPI under 50% while the average value was drop in this KPI in the 2016 season. Trinita The average match day revenue per 1 million 34.3%, indicating a more or less healthy level. decreased its wage bills from 366 million yen in \HQRI6* $H[SHQVHVDPRQJFOXEVDɝOLDWHG In the 2016 season, Morioka had the highest the previous season to 266 million yen. We to J3 was approximately 0.32 million yen, value in this KPI for the second consecutive assume that this is a result of the club’s stra- GHPRQVWUDWLQJ KRZ -DɝOLDWHG FOXEV DUH year at 61.3%, which is the highest value even WHJLFH΍RUWVWRNHHSZDJHELOOVORZWRPDLQWDLQ JHQHUDOO\QRWVHHLQJDQH΍HFWLYHQHVVLQWKHLU DPRQJDOOFOXEVDɝOLDWHGZLWKWKH-/HDJXH ȴQDQFLDOVRXQGQHVVLQDQWLFLSDWLRQRIDGHFOLQH VDOHVSURPRWLRQH΍RUWVXQGHUWKHFXUUHQWVLWX- Even though wage bills remained at the same in total revenues owing to its relegation to J3. In ation. level (2015: 88 million yen, 2016: 87 million the end, Oita earned a spot to return to J2 in When looking at the average value among yen), due to the poor league results in the one year, so it generated a high return on -DɝOLDWHGFOXEVWKHDPRXQWRI6* $ previous season, the club’s advertising LQYHVWPHQWZKLOHPDLQWDLQLQJȴQDQFHVRXQG expenses exceeds wage bills, indicating how revenue went down while operating revenue WKH\DUHVSHQGLQJDVLJQLȴFDQWDPRXQWRIWKHLU also dropped (2015: 200 million yen, 2016: 142 budget on SG&A expenses, though there are

Wage bill to total revenue ratio

Oita recorded high return on investment by keeping KPI low and generating positive results in FM, GHVSLWHGL΍HUHQFHVLQDEVROXWHYDOXHRIWKHLUZDJHELOOV

Morioka Oita

13th place in Returned to J2 2016 season in one year

Highest rate of increase of wage bill Highest rate of decline of wage bill to total revenue ratio to total revenue ratio

Field Wage Cost/Revenue (%)

YSCC Yokohama 9.0 Fujieda 19.4 Sagamihara 30.4 Kagoshima 31.6 J3 avg.: Akita 32.6 Oita 33.4 Tottori 34.5 34.3% Tochigi 35.7 (Կ5.5P,Կ19%) Fukushima 36.8 Toyama 37.1 Nagano 40.9 FC Ryukyu 43.3 Morioka 61.3

46 J.League Management Cup 2016 | Management Cup Analysis of the J3 League 3rd Stage: Management Performance

Management Cup J3

GL΍HUHQFHVEHWZHHQFOXEV+RZHYHUJLYHQWKH the initiative to prepare a business infrastruc- not include indirect expenses such as adver- OLPLWHGQXPEHURIVWD΍WKDWFDQEHHPSOR\HG WXUHȃVXFKDVDQΖ7HQYLURQPHQWDQG tising expenses, and comparison of this KPI is due to the small business size of J3 clubs, the personnel training opportunities. We look RQO\RQDJURVVSURȴWEDVLV FOXEV DUH XQDEOH WR VSHQG WKHLU H΍RUWV RQ forward to the league’s future initiatives. Meanwhile, from the viewpoint of merchan- measures to increase revenue, leading to a dise revenue standings, Tochigi also placed VLWXDWLRQ ZKHUH 6* $ H[SHQVHV DUH QRW Hɝ- Profits from Merchandise sales ȴUVWZLWKPLOOLRQ\HQLQUHYHQXHEXW)XMLHGD ciently linked to revenue. ΖQWKHVHDVRQ7RFKLJLSODFHGȴUVWLQ- came in last with 2 million yen in revenue. Although Tochigi and Oita both experienced LQSURȴWVIURPPHUFKDQGLVHVDOHVUHFRUGLQJ Nagano reported zero merchandise-related DVLJQLȴFDQWGHFOLQHLQWKLV.3ΖRZLQJWR million yen, while YSCC Yokohama stood at the expenses, but as explained in a press release decreased media exposure and sluggish ERWWRPERRNLQJDGHȴFLWRIPLOOLRQ\HQ7KH by the J.League, this is most likely due to selling match day revenue after relegation to J3, they DYHUDJHSURȴWLQ-ZDVPLOOLRQ\HQZKLOHVL[ its merchandise by outsourcing sales opera- still maintained a top-class score among J3 RXWRIFOXEVUHFRUGHGSURȴWVH[FHHGLQJWKH tions. clubs. In addition, Kagoshima, which joined the average. ΖQWHUPVRIPHUFKDQGLVHVDOHVSURȴWUDWLR- J3 from the 2016 season, received a lot of There are several ways of selling club has a higher average value than J1 and J2 at interest and attention, raising its KPI owing to PHUFKDQGLVHLQFOXGLQJVWDGLXPVKRSVRɝFLDO above 40%. This could either be the result of increased match day revenue (approximately merchandise shops and e-commerce, and the bulk production and supply of basic merchan- double the previous season) and greater FRVWVLQFXUUHGGL΍HUXQGHUHDFKIRUPDWΖQ GLVHE\WKH-/HDJXHRUWKHLQGLYLGXDOH΍RUWVRI merchandise sales. principle, the J.League has a policy to aggre- clubs. Further detailed analysis in this area Going forward, we believe it is not only gate the cost of actual merchandise in its may need to be carried out in the future. essential for each club to implement their own calculation of merchandise-related expenses measures, but also for the entire league to take that it publishes; therefore, the expenses do

Challenges to using SG&A expenses effectively Status of top 3 clubs in profits from merchandise sales (millions of yen)

Tochigi Prioritize 25 Goods-related Kagoshima Team strengthening measures SURȴW 18 Tottori

/LPLWLQJWKHQXPEHURIWHDPVWD΍ 14 Average

Measures to Do not lead 7 increase revenue to revenue

Goods revenue 52 35 16 16

Goods-related SURȴWUDWLR 48% 51% 88% 42%

Matchday and other Revenue/SG&A (millions of yen) Profits from Merchandise sales (millions of yen)

Oita 0.64 Tochigi 25 Kagoshima 0.56 Kagoshima 18 Tochigi 0.53 Tottori 14 Sagamihara 0.41 Oita 10 Nagano 0.36 Toyama 7 Toyama 0.34 Nagano 7 YSCC Yokohama 0.27 Fukushima 5 Tottori 0.24 Sagamihara 2 Fukushima 0.23 FC Ryukyu 1 FC Ryukyu 0.18 Morioka 1 Akita 0.17 Fujieda 1 Morioka 0.13 J3 avg.: Akita 0 Fujieda 0.10 YSCC Yokohama Ӛ1 J3 avg.: 0.32m yen (Հ0.36m yen,Հ53%) 7m yen

47 Management Cup Analysis of the J3 League 4th Stage: Financial Performance

Due to the full-fledged implementation of the financial fair play (FFP) regulations in the club licensing system since the previous season, all clubs have now eliminated excessive liabilities, thereby improving HTXLW\UDWLRIRUWZRFRQVHFXWLYH\HDUV*LYHQWKDWPRVW-FOXEVDUHUHJLRQDOFOXEVZLWKRXWPDLQVKDUH- holders, we believe future BM measures will be the key to financial performance.

Revenue yen. On average, clubs that have been Tochigi and Oita that joined J3 from the 2016 In the 2016 season, the J3 as a whole competing in J3 for the past two years recorded VHDVRQȃZDVPLOOLRQ\HQ3DUFHLUR recorded an average total revenue of 384 a total revenue of 184 million yen, marking a recorded a match day revenue nearly three million yen. When looking at each club, both slight decrease from 186 million yen in the times as much as the average. It can be said Oita (797 million yen) and Tochigi (639 million previous year. As the ratio of advertising that Nagano earns a very high amount of yen), which were relegated from J2, saw a sharp revenue to total revenue is higher in J3 than J1 match day revenue for a club that has never drop in total revenue from the previous year, and J2 (J1: 47%, J2: 51%, J3: 58%) and match day been promoted to J2 before. We believe this is but both clubs still far surpassed the average revenue is smaller, we can infer that the attributable to the new stadium. value of J3 clubs, and their revenues pushed up DPRXQW RI DGYHUWLVLQJ UHYHQXH KHDYLO\ LQȵX- the overall average. ences the total revenue of J3 clubs. Revenue Growth Rate In terms of advertising revenue, Tochigi, Nagano increased match day revenue by &OXEVDɝOLDWHGWRWKH-LQWKHVHDVRQ Nagano and Oita booked revenues above 400 using the Minami-Nagano Sports Park Stadium recorded an average year-on-year revenue million yen. Nagano, which was the only club from the previous season, but this year it growth rate of 0.4%, a sharp drop of Ӛ21.5ppt among them that was not relegated from J2, dropped match day revenue by 24% YoY to 73 compared to the previous year. Tochigi and EHFDPH WKH ȴUVW FOXE ZLWKRXW H[SHULHQFH RI million yen. However, considering how the Oita booked a year-on-year growth rate of being promoted to J2 to surpass 400 million DYHUDJHPDWFKGD\UHYHQXHLQ-ȃH[FOXGLQJ Ӛ31.7% and -16.8%, respectively, owing to

Increasing match day revenue through effective use of stadiums

Nagano J3 top class Match day revenue 73m yen J3

J3 avg.: 25m* yen

BM measures using the Minami-Nagano Sports Park Stadium

*Avg. of teams excluding Oita and Tochigi, which joined J3 from the 2016 season

Revenue (millions of yen)

Oita 797 Nagano 687 Tochigi 639 Toyama 515 Tottori 412 Kagoshima 377 Fukushima 326 Akita 288 Sagamihara 263 FC Ryukyu 194 խ YSCC Yokohama 189 Ӎ Commercial Fujieda 165 J3 avg.: Ӎ Matchday Morioka 142 Ӎ Distributionխ Ӎ Goods revenue 384m yen Ӎ Academy (Կ53m yen,Կ16%) խ and Others

48 J.League Management Cup 2016 | Management Cup Analysis of the J3 League 4th Stage: Financial Performance

Management Cup J3

their relegation to J3, while Morioka (Ӛ29.0%) Oita, which were relegated to J3, experienced a negative retained earnings without accumula- and FC Ryukyu (Ӛ25.7%) also experienced a sharp year-on-year decline of Ӛ48.4% and WLRQRIQHWSURȴWV LHLQWHUQDOUHVHUYHV  decline in revenue exceeding 20%. Morioka Ӛ56.1%, respectively. While match day revenue XQGHUVFRULQJWKHOHDJXHȇVWRXJKȴQDQFLDOVLWX- (Ӛ35.4%) and FC Ryukyu (Ӛ71.1%) particularly of clubs that were relegated from J1 to J2 in the DWLRQ :HGRQRWNQRZWKHHTXLW\UDWLRRI<6&& posted a noticeable drop in advertising 2016 season declined by an average rate of

Impact of newly joining the league Status of equity ratio (millions of yen)

Year-on-year revenue growth rate Kagoshima Toyama 2015 2016 Achieved 53% Liabilities J3 Ad revenue new 252m yen 153 members J3

42 Net assets Kagoshima generated 104 more than the 94 previous yearˏs total revenue of 247m yen through ad revenue alone

In J3, Controlling liabilities is important due to the GLɝFXOWRIDFFXPXODWLQJSURȴW LQWHUQDOUHVHUYHV

Revenue Growth Rate (%) Equity Ratio (%)

Kagoshima 52.6 Toyama 71.2 Fujieda 17.9 Fujieda 62.3 Sagamihara 17.4 Nagano 54.6 Nagano 15.1 Tochigi 49.3 Akita 9.9 Fukushima 48.2 Fukushima 2.8 Kagoshima 43.7 YSCC Yokohama Ӛ1.6 Oita 39.0 Toyama Ӛ 3.0 FC Ryukyu 32.1 Tottori Ӛ 3.3 Akita 16.0 Oita Ӛ16.8 Sagamihara 11.5 FC Ryukyu Ӛ 25.7 YSCC Yokohama 7.5 Morioka Ӛ 29.0 J3 avg.: Morioka 3.7 J3 avg.: Tochigi Ӛ 31.7 Tottori 0.2 0.4% 33.8% (Հ21.5P,Հ98%) (Կ4.0P,Կ13%)

49 J3 Cup Winner Analysis Tochigi SC

Tochigi became the J3 cup winner in J.League Management Cup 2016. Although Tochigi made the J2/J3 promotion-rel- HJDWLRQSOD\R΍LQWHUPVRIOHDJXHSHUIRUPDQFHLQLWVȴUVW\HDUVLQFHUHOHJDWLRQIURP-WR-XQIRUWXQDWHO\LWEDUHO\ missed the spot for promotion back to J2. However, in terms of BMpoints, it slightly outperformed Kagoshima and Oita and won the J3 cup. Here, we will provide an analysis of Tochigi based on the original perspective of Deloitte Tohmatsu, introducing some of the points covered in our interview with Tochigi’s president, Daisuke Hashimoto.

'HYHORSLQJFDSDEOHFOXEVWD΍IURPDPHGLXPWR Additionally, the club marked a stadium capacity utiliza- long-term perspective tion ratio of 32.6% at its home stadium, Tochigi Green Hashimoto became president & CEO of Tochigi on March 6WDGLXPZKLFKKROGVDSSUR[LPDWHO\SHRSOHVLJQLȴ- 1, 2016, after Tochigi was relegated to J3 based on its results cantly exceeding the J3 average of 19.7% and placing in the 2015 season. Hashimoto has focused on reconsid- second in the league. ering the club’s goals, formulating its vision as well as setting As shown in the examples of attendance and stadium its mission and strategies from a medium- to long-term capacity utilization ratio above, we believe it is remarkable perspective to tackle serious problems arising due to relega- KRZ7RFKLJLNHSWWKHQHJDWLYHH΍HFWVRIUHOHJDWLRQRQ tion like the discouragement of fans and supporters as well customer attraction to a minimum. as lost interest from the local community. We believe several factors contributed to the consider- Hashimoto pointed out that the relegation in the 2015 DEOH VXFFHVV RI 7RFKLJLȇV FXVWRPHU DWWUDFWLRQ H΍RUWV season was not only a problem of league performance but including the positive team performance recording 17 DOVRHTXDOO\DWWULEXWDEOHWRWKHODFNRIDELOLW\RIWKHFOXEVWD΍ consecutive wins or draws and 10 consecutive wins, as well who are responsible for club management. He therefore set as various activities to maintain and increase visitors, such his goal to spreading a sense of responsibility toward results as stadium improvement projects and initiatives by club DPRQJFOXEVWD΍ȃWKDWLVWRLQIXVHDVHQVHRIFOXERZQHUVKLS VWD΍WRLQFUHDVHVSRQVRUDWWHQGDQFH Hashimoto strove to share the need to create unity not only In terms of stadium improvement projects, the club among team players but also as an organization, so that it can focused on the needs of fans and supporters rather than return to J2 and furthermore strive to join the J1. We believe changes that the club wanted to make. To gather needs from WKDW7RFKLJLȇVVWHDGIDVWH΍RUWVLQULJRURXVO\EXLOGLQJDVWURQJ the perspective of customers, the club ran surveys on points RUJDQL]DWLRQHVSHFLDOO\LQIRVWHULQJFDSDEOHFOXEVWD΍ZKLOH WKDW IDQV DQG VXSSRUWHUV ZHUH GLVVDWLVȴHG ZLWK DQG LW creating a culture that will become the foundation for the continued to implement changes based on the feedback of club’s performance not just over a single year but over a span IDQVDQGVXSSRUWHUVLQWKRVHVXUYH\V6SHFLȴFDOO\WKHFOXE of three years, led to its exceptional performance in the JMC. DQDO\]HGWKHVXUYH\VTXDQWLWDWLYHO\DQGTXDQWLWDWLYHO\VHSD- UDWLQJWKHIUHTXHQWO\UHFHLYHGUHTXHVWVLQWRWKRVHWKDWFDQ and cannot be implemented in the 2016 season, and it thor- oughly focused its management resources to only execute ٥ .the changes that were achievable ٥ We understand the club took this approach based on the ٥  premise that there is not only one cause of dissatisfaction, but if one element of dissatisfaction is resolved, a new problem will arise again due to the change in environment. Therefore, WKHFOXEIRFXVHGRQȴUVWWDFNOLQJWKHFRPSODLQWVWKDWZHUH urgent and had high priority. It is also linely that Tochigi’s earnest attitude in grasping the genuine needs of customers by not only relying on survey results, but also holding discus- sion sessions with fans and supporters, is an indispensable Spreading a sense of responsibility toward results, i.e. sense of element in community-based club management. RZQHUVKLSDPRQJFOXEVWD΍ In terms of sponsors, Tochigi strove to visualize the usage Concentrating resources on the needs of fans and supporters As described previously, clubs relegated to a lower divi- VLRQXVXDOO\IDFHWKHVHYHUHLVVXHRIDVLJQLȴFDQWGHFOLQHLQ attendance because of the wide gap in customer attraction capability between J.League divisions. Obviously, clubs also QHHGWRGHDOZLWKWKHȴQDQFLDOSUHVVXUH However, Tochigi’s average attendance only dropped by slightly more than 200 people, from 5,167 in the 2015 season when it competed in J2 to 4,945 in J3 (including play- R΍V ZKLFKIDUVXUSDVVHVWKH-DYHUDJHRIDQGSODFHV third in the league. Furthermore, according to the club’s press release, we see the following interesting result: Despite relegation to J3, Tochigi recorded a slight increase in average home seat attendance compared to the 2015 season from 4,763 to 4,804. Focusing initiatives on meeting the needs of fans and supporters

50 J.League Management Cup 2016 | J3 Cup Winner Analysis Tochigi SC

status of the complimentary tickets that it distributes to spon- VWDUWHGSXEOLVKLQJLWVTXDOLWDWLYHLQIRUPDWLRQVLQFHWKH sors as part of their privileges. As a result, it found out that ȴQDQFLDOUHVXOWV  there were many tickets that were left unused, so the club We consider it is an extremely meaningful step for clubs to VWD΍IRFXVHGWKHLUH΍RUWVRQSURPRWLQJDWWHQGDQFHE\ increase transparency through disclosure of information on contacting the sponsors before each match, and we assume their activities, given their position in promoting initiatives for WKLVVLJQLȴFDQWO\FRQWULEXWHGWRWKHFOXEPDLQWDLQLQJWKHVDPH public welfare through community contribution activities in level of attendance as the previous year. their hometowns as partner organizations of the J.League’s As illustrated above, it is an essential and crucial point for 100 Year Plan. clubs in lower divisions with small scale of management to narrow down the keytasks that they tackle, so that they can Challenges in the second season after relegation focus their limited management resources on those tasks. Tochigi had a very tough season in 2016 in terms of league performance, losing the spot for returning to J2 just by a slight Visualization of club management PDUJLQDVDUHVXOWRIWKH--SURPRWLRQUHOHJDWLRQSOD\R΍ After his appointment as president, Hashimoto set forth HYHQWKRXJKLWVWRRGDWȴUVWSODFHXQWLOWKHȴQDOOHJRIWKH goals on KPIs mainly related to customer attraction and spon- championship. sors, and he developed a system of sharing information In BM, Tochigi maintained an average attendance compa- EHWZHHQDOOVWD΍ZKLOHLPSOHPHQWLQJ3'&$F\FOHVEDVHGRQ rable to the 2015 season when it competed in J2 owing to those KPIs. Furthermore, he regularly gathered all club H΍RUWV RI SUHVLGHQW +DVKLPRWR DQG WKH FOXE DV DOUHDG\ members together, such as players, manager and coaches discussed above. However, Tochigi’s challenge lies ahead in LQYROYHGLQ)0DVZHOODVFOXEVWD΍LQYROYHGLQ%0WRVKDUHWKH ZKHQLWZLOOFRPSHWHLQ-IRUWKHVHFRQG\HDUΖQWKHȴUVW club’s policy and situation including the status of the year after relegation, fans, supporters, sponsors, the local above-mentioned KPIs. community and local government all strove together toward :HEHOLHYHWKHVHH΍RUWVWRYLVXDOL]HFOXEPDQDJHPHQWSOD\ the goal of supporting the club’s return to J2 while maintaining a very important role in achieving the club’s goals in solidarity, strong motivation. However, because the club failed to achieve EHFDXVHLWUDLVHVWKHVHQVHRIRZQHUVKLSRIHDFKVWD΍PHPEHU WKDWJRDOLQWKHȴUVWVHDVRQLWJLYHVULVHWRFRQFHUQVWKDWWKH to a higher level and also promotes understanding between motivation of stakeholders may be weakened at least to a FOXEȇVWHDPDQGVWD΍PHPEHUVZKRRIWHQKDYHOLPLWHG certain extent in the next season. communication and are subject to misunderstanding. Against this backdrop, president Hashimoto will need to )XUWKHUPRUHZKLOHDOOFOXEVDɝOLDWHGWRWKH-/HDJXHIURP steer the club through rough waters, aiming for promotion J1 to J3, publish a summary of the income statement and back to J2 in terms of FM while positioning the club in the J3 EDODQFHVKHHWVRIHDFK\HDURQWKHLURɝFLDOZHEVLWHV7RFKLJL market in terms of BM. Additionally, breaking away from DOVRDGGVLWVRZQTXDOLWDWLYHLQIRUPDWLRQRQLWVFOXEZHEVLWH management that is dependent on league results will be DQGSXEOLVKHVDVXPPDU\RILWVȴQDQFLDOUHVXOWVΖQWKLVVHQVH another important theme. We will continue to follow how it can be said that Tochigi boasts one of the highest levels of 7RFKLJLGHDOVZLWKWKHVHGLɝFXOWFKDOOHQJHV transparency to the public among J.League clubs (Tochigi  P  A D C

ΖQLWLDWLYHVWRLPSURYHFOXEPDQDJHPHQWWUDQVSDUHQF\UDLVHWKHVWD΍ VVHQVHRIRZQHUVKLSDQGSURPRWHXQGHUVWDQGLQJ between FM and BM, which tends to be limited and prone to miscommunication

51 Special Feature 3 SNS Analysis

In the J.League Management Cup (JMC) 2015, we featured a column on SNS analysis that described the standings of each club based on their number of Twitter and Facebook followers. In addition, we observed the correlation between the number of followers and average attendance to consider how digital marketing activities are carried out. In JMC 2016, we have analyzed the factors contributing to an increase in the number of followers of club accounts in the current season. In addition, we have organized our views on SNS from a BM perspective, and we give our insight on ways to use SNS.

Increase/decrease in Facebook and Twitter followers in the past year In 2016, Mito (+146% YoY), Kashima (+114%) Increase or decrease in Facebook followers Increase or decrease in Twitter followers No. of Increase No. of Increase and Tosu (+111%) increased the number of Club name 2015/12 2016/12 increase rate Club name 2015/12 2016/12 increase rate Facebook followers by the largest margin. In C- O s a k a 627,759 1,019,296 391,537 62.4% Yokohama FC 140,328 260,097 119,769 85.3% terms of Mito, we believe the increase is mainly G-Osaka 62,007 88,565 26,558 42.8% Nagoya 65,694 180,022 114,328 174.0% DWWULEXWDEOHWRWKHDFTXLVLWLRQRI1JX\͂Q&¶QJ Kashima 20,976 44,895 23,919 114.0% Kashima 82,113 191,256 109,143 132.9% 3Kɢ͠QJIURP9LHWQDPDVZHOODVWKHODXQFKRI Kawasaki-F 35,557 55,302 19,745 55.5% Kawasaki-F 139,009 216,544 77,535 55.8% its club website in Vietnamese, attracting many Sapporo 17,245 32,773 15,528 90.0% Urawa 104,724 171,559 66,835 63.8% Yokohama Vietnamese fans. Kashima gained 40% of the FC 30,811 44,670 13,859 45.0% Hiroshima 73,632 124,443 50,811 69.0% 114% increase in followers in December after Hiroshima 55,537 68,530 12,993 23.4% G-Osaka 51,797 97,861 46,064 88.9% the Club World Cup, suggesting the large impact Urawa 51,894 63,084 11,190 21.6% Shonan 36,970 82,154 45,184 122.2% that the club’s excellent performance had on its FC-Tokyo 32,608 43,214 10,606 32.5% FC-Tokyo 104,250 146,360 42,110 40.4% followers. Tosu increased its followers by 111%, Mito 6,676 16,420 9,744 146.0% Fukuoka 27,409 62,103 34,694 126.6% while 79% of this was gained in March, when the Tosu 8,709 18,414 9,705 111.4% Shimizu 41,565 72,961 31,396 75.5% club launched a campaign to spread use of a Kashiwa 13,512 23,097 9,585 70.9% Yamagata 21,867 49,863 27,996 128.0% SURȴOHSKRWRIUDPHIXQFWLRQRQ)DFHERRN Niigata 20,647 29,460 8,813 42.7% Iwata 38,346 64,965 26,619 69.4% Nagoya C- O s a k a On Twitter, Nagoya (+174% YoY), Kumamoto 41,722 50,287 8,565 20.5% 69,494 96,100 26,606 38.3% Fukuoka 11,062 15,977 4,915 44.4% Sapporo 16,548 36,454 19,906 120.3% (+143%) and Kashima (+133%) gained the Kobe 15,832 20,659 4,827 30.5% Tosu 21,621 39,540 17,919 82.9% highest margin of increase in followers from the Iwata 20,661 25,376 4,715 22.8% Matsumoto 39,904 57,241 17,337 43.4% previous year among clubs with at least 10,000 Omiya 10,235 14,735 4,500 44.0% Kumamoto 11,588 28,145 16,557 142.9% followers. Nagoya performed poorly in the Yamaguchi 4,785 9,169 4,384 91.6% Niigata 48,773 63,989 15,216 31.2% OHDJXHDQGZDVUHOHJDWHGWR-IRUWKHȴUVWWLPH Yokohama FC 14,248 18,601 4,353 30.6% Kashiwa 49,775 63,952 14,177 28.5% in club history, which may have in turn increased Shimizu 23,248 27,543 4,295 18.5% Kobe 10,697 23,928 13,231 123.7% newsworthiness of the club. Likewise, Fukuoka Kumamoto 5,222 8,711 3,489 66.8% Chiba 12,176 25,384 13,208 108.5% (+127%) and Shonan (+122%), which were rele- Tokyo-V 10,711 13,768 3,057 28.5% Kofu 15,966 28,483 12,517 78.4% gated to J2, increased the number of followers, Chiba 10,532 13,414 2,882 27.4% Omiya 36,438 48,940 12,502 34.3% while Sapporo (+120%), which was promoted Matsumoto 12,592 15,418 2,826 22.4% Mito 15,667 24,886 9,219 58.8% IURP-WR-DOVRVLJQLȴFDQWO\LQFUHDVHG Oita 9,146 11,796 2,650 29.0% Nagasaki 13,400 21,840 8,440 63.0% followers. We believe the large increase in Shonan 14,115 16,314 2,199 15.6% Machida 12,794 19,770 6,976 54.5% followers of Kumamoto was attributable to fans Ehime FC 4,209 6,202 1,993 47.4% Kyoto 20,062 26,591 6,529 32.5% across Japan who followed the club’s account in Kofu 11,115 13,056 1,941 17.5% Yamaguchi 8,879 14,730 5,851 65.9% sign of support toward the club in the wake of Kyoto 3,652 5,549 1,897 51.9% FC Gifu 8,814 14,030 5,216 59.2% WKH  .XPDPRWR HDUWKTXDNHV 0HDQZKLOH Nagasaki 9,148 10,910 1,762 19.3% Kitakyushu 9,749 14,415 4,666 47.9% Antlers most likely increased followers owing Kanazawa 5,840 7,566 1,726 29.6% Yokohama FC 12,025 16,568 4,543 37.8% to their exceptional performance in the Club Kitakyushu 4,630 6,350 1,720 37.1% Ehime FC 8,211 12,745 4,534 55.2% World Cup as described above. Machida 4,078 5,671 1,593 39.1% Toyama 5,137 9,547 4,410 85.8% Gunma 2,974 4,512 1,538 51.7% Tokyo-V 19,775 24,032 4,257 21.5% Characteristics of Facebook and Twitter Nagano 4,428 5,913 1,485 33.5% Tochigi 8,828 12,976 4,148 47.0% and how to use them for BM measures Kagoshima 10,510 11,988 1,478 14.1% Kanazawa 9,270 12,725 3,455 37.3% Sapporo and Kashima marked a huge increase Tochigi 5,096 6,527 1,431 28.1% Sanuki 10,149 13,521 3,372 33.2% in both Facebook and Twitter followers. Kashiwa Sagamihara 3,807 5,214 1,407 37.0% Sagamihara 8,008 10,972 2,964 37.0% RQO\VLJQLȴFDQWO\LQFUHDVHG)DFHERRNIROORZHUV Toyama 5,590 6,969 1,379 24.7% Nagano 8,076 10,686 2,610 32.3% while Nagoya, Shonan and Fukuoka noticeably Tokushima 6,878 8,094 1,216 17.7% Tokushima 9,191 11,604 2,413 26.3% increased only their Twitter followers. FC Gifu 11,689 12,740 1,051 9.0% Morioka 4,556 6,933 2,377 52.2% While it is understandable that Sapporo and Sanuki 3,566 4,354 788 22.1% YSCC Yokohama 2,587 4,653 2,066 79.9% Kashima, which performed well on the pitch, Akita 3,365 4,077 712 21.2% Akita 3,793 5,852 2,059 54.3% increased the number of both Facebook and Morioka 1,765 2,467 702 39.8% FC Ryukyu 287 1,905 1,618 563.8% Twitter followers, but it is an interesting result Tottori 3,676 4,280 604 16.4% Fukushima 175 182 7 4.0% how Nagoya, Shonan and Fukuoka, which did Fujieda 1,762 2,241 479 27.2% Tottori 225 212 Ӛ13 Ӛ5.8% QRW SHUIRUP ZHOO LQ WKH OHDJXH VLJQLȴFDQWO\ YSCC Yokohama 1,940 2,356 416 21.4% Kagoshima ȃ 8,296 8,296 ȃ increased the number of Twitter followers. Sendai 9,174 9,540 366 4.0% FC-Tokyo U-23 ȃ 6,917 6,917 ȃ )DFHERRNDQG7ZLWWHUKDYHGL΍HUHQWFKDUDF- Fukushima ȃ 888 888 ȃ Oita ȃ 6,361 6,361 ȃ teristics: Facebook connections mostly consist of Yamagata ȃȃȃȃ Gunma ȃ 2,448 2,448 ȃ actual friends and colleagues, and thus conver- Okayama ȃȃȃȃ Fujieda ȃ 1,175 1,175 ȃ sation is usually between people who know each FC Ryukyu ȃȃȃȃ Sendai ȃȃȃ ȃ other at least to a certain extent, while Twitter FC-Tokyo U-23 ȃȃȃȃ Okayama ȃȃȃ ȃ

52 J.League Management Cup 2016 | Special Feature 3 SNS Analysis

followers mainly include actual friends as well as have joined their fan clubs, how many have ZKRDUHVWLOOXQGHFLGHGDQGHQVXULQJWKHH΍HF- online friends with common interests, and a lot purchased merchandise and, ultimately, how tiveness of each of those points of contact. of communication takes place between people much they have purchased, rather than the Furthermore, clubs can increase the amount who do not know each other. increase or decrease in the number of Face- purchased by consumers by gathering greater Based on these characteristics, one can infer book and Twitter followers. However, this logic attention at the entrance of the funnel and that the number of followers of Nagoya, Shonan is based on the purchasing funnel model of the increasing the amount of consumers who DQG)XNXRNDRQ7ZLWWHULQFUHDVHGVLJQLȴ- past, and the purchasing behavior of current ȵRZLQWRWKHIXQQHO616LVRQHRIWKHIDFWRUV cantly owing to discussions by a large group of consumers is said to be a little more complex. contributing to this process, and the large or XQVSHFLȴHGSHRSOHRQFRPPRQWRSLFVVSDUNHG &RQVXPHUV WRGD\ FDQ DFTXLUH LQIRUPDWLRQ small number of followers on SNS can serve by the negative event of their relegation to J2, from wherever they like, whenever they want, DVKHOSIXOGDWDWRHYDOXDWHWKHH΍HFWLYHQHVVRI resulting in retweets of messages expressing thanks to the spread of the Internet and smart- HDFKFOXEȇVH΍RUWVRQ616WRDWWUDFWDWWHQWLRQ support, criticisms toward the team as well phones. Therefore, consumers are said to go and create points of contact. as rumors and news about transfers and club back and forth during the purchasing process, circumstances. In terms of BM measures, it will rather than go straight down the conventional Instagram can be used to convey be necessary to take advantage of this charac- SXUFKDVLQJ IXQQHOȃIURP DZDUHQHVV LQWHUHVW emotional value teristic of Twitter to transform adversities like VHOHFWLRQWHVWWRSXUFKDVHȃFDUU\LQJRXWQHZ Meanwhile, in recent years, thers are many relegation into opportunities for attracting new types of behaviors in the process, such as examples of where simply creating digital points customers by temporarily focusing manage- searching on the Internet, looking at reviews RIFRQWDFWGLGQRWOHDGWRVXɝFLHQWUHVXOWV7KH ment resources on Twitter. DQGFRPPHQWVFRQVXOWLQJIULHQGVDQGLQTXLULQJ reason for this is said to be the shift in focus to by email. consumer lifestyle before deciding to purchase The role of SNS in management and the To adapt to these changes, clubs need to products. Consumer decisions are starting to VLJQLȴFDQFHRIWKHQXPEHURIIROORZHUV reduce the exit rate of consumers from the EHVWURQJO\LQȵXHQFHGE\HPRWLRQDOHOHPHQWV Next, let us look at how SNS contributes to purchasing funnel by creating a consumer such as the desire to experience something in management. In terms of BM, we believe clubs journey map of how consumers decide to personalized comfort or making decisions based are most interested in how many followers purchase products, setting up many points of on lifestyle and values instead of product speci- have visited the stadium, how many of them contact where products are seen by consumers ȴFDWLRQΖQRWKHUZRUGVLWLVEHFRPLQJKDUGHUWR FDWHJRUL]HFRQVXPHUVLQWRȴ[HGVHJPHQWVVXFK as by age, gender and occupation. Conventional purchase funnel To cope with this change in purchasing style, ΖQFUHDVHGWUDɝFWRIXQQHO ΖQFUHDVHGWUDɝFWRIXQQHO it is vital for clubs to have consumers properly understand their emotional values (i.e. what TV, newspapers, magazines kind of feelings and experience the club wants to R΍HUWKURXJKIRRWEDOO LQVWHDGRISURPRWLQJWKHLU Awareness functional values (i.e. when and where they will have matches). Therefore, before discussing the Interest use of digital channels like mobile phones, clubs need to clarify their fundamental values like their Selection ideals and philosophy. Furthermore, rather than Customer journey sending generic messages, they will need to FRQWLQXHWRGHOLYHUVSHFLȴFWDUJHWHGPHVVDJHVWR Website Word of mouth points of contact over and over again. ΖQVWDJUDP LV VDLG WR EH WKH PRVW H΍HFWLYH SNS tool in conveying these values. Unlike Face- Smartphone PC book and Twitter, Instagram is a social media for posting mainly photos and videos instead of text, Email delivery Photos and it places importance on the sensibility of the SNS posts. Therefore, as part of BM measures, it is SRVVLEOHIRUFOXEVWRXVHΖQVWDJUDPWRH΍HFWLYHO\ convey their sensibility to its followers through Test photos that express their emotional values, such as a photo of a family going to the stadium together holding hands or a photo of a group Purchase of friends rooting for the club from the stadium seats.

53 Editor’s Note

We are delighted to issue J.League Management Cup (JMC) 2016, the third report in this VHULHV7KLVHQGHDYRUVWDUWHGRQHDQGDKDOI\HDUVDJRZKHQZHȴUVWLVVXHG-0&LQ March 2016. Each time, we have received positive feedback from our readers, including people who are involved in sports business as well as many others. Thank you very much for your continued support of this report. From the beginning, the goal of our activities has been to contribute to the expansion of the sports business market in Japan and other Asian countries. We believe that the enthusi- astic response we have received regarding JMC, far surpassing our expectations, is a sign that we have been able to contribute toward this goal. Therefore, we plan to continue issuing this report in the future. In the 2015 version we issued last year, in consideration of the comments that we received from readers, we focused our analysis on covering the following two points:

  3URYLVLRQ RI LQIRUPDWLRQ WKDW FRQWULEXWHV WR ȴ[HG SRLQW REVHUYDWLRQV EDVHG RQ consistent indicators   3UHVHQWDWLRQRI.3ΖVWKDWZHFRQVLGHUH΍HFWLYHLQFRQGXFWLQJ SUDFWLFDO EHQFKPDUN analyses

In the 2016 version, we continued to follow the above-mentioned points, while we also setting the following theme as a goal: timely information disclosure. We believe that timeliness is vital for business information. Even if we provide an elaborate DQDO\VLVLWVXVHIXOQHVVZLOOEHVLJQLȴFDQWO\FRPSURPLVHGLILWLVQRWGLVFORVHGLQDWLPHO\ PDQQHU:HDLPWRLVVXH-0&LQWKHVKRUWHVWVSDQRIWLPHSRVVLEOHDIWHUGLVFORVXUHRIȴQDQFLDO reports by each club. In addition, we would like to note the fact that the Japanese sports business world lags in the visualization of KPIs, which are the basis of club management. Through our original JMC reports that we issue, we hope to support the visualization of such KPIs, as well as allowing readers to see the results of club activities in a chronological manner. In recent years, we have seen drastic and unexpected changes in the environment surrounding the sports business market. In the JMC, we hope to continue pursuing the most suitable KPIs according to the environment at the time. ΖQ-XQH'HORLWWH*URXSEHFDPHDQRɝFLDOVXSSRUWLQJFRPSDQ\RIWKH-/HDJXHΖIRXU ongoing JMC activities attract greater interest and become a helpful resource for the opera- tion of sports as a business, in turn leading to the expansion of the sports business market, ZHEHOLHYHWKLVFRXOGOD\WKHIRXQGDWLRQIRUDVLJQLȴFDQWQHZLQGXVWU\ )XUWKHUPRUH ZH believe that this will help increase the funds of clubs to improve their league performance, as ZHOODVWKHIXQGVWRWDFNOHWKHRYHUZKHOPLQJGHȴFLHQF\RIWDOHQWHGVWD΍LQWKHLQGXVWU\ In this sense, we hope JMC will serve as a link that connects all of you, including stake- holders who are currently not directly connected to sports, with the sports business market.

We continue to look forward to receiving your comments and feedback on the JMC.

Deloitte Tohmatsu Sports Business Group

J.League Management Cup Back Issues J.League PUB Report Back Issues

J.LEAGUE PUB Report 2015 J.LEAGUE PUB Report 2016 J.LEAGUE PUB Report 2016 J.League Management Cup J.League Management Cup Summer Winter 2014 2015

54 J.League Management Cup 2016 | Greeting

Greeting

'HORLWWHKDVKDGDXQLTXHIRFXVRQWKHVSRUWVVHFWRUOHGIURPWKH8. and regularly teaming with other Deloitte colleagues around the world. )RUPRUHWKDQDTXDUWHURIDFHQWXU\DFURVVRYHUFRXQWULHVZH have worked with more organizations in sport than any other advisor. Our experience, long-standing relationships and understanding of the industry means we bring valuable expertise to any project from day one.

Our work with international and national sports governing bodies, federations, leagues, clubs, governmental organisations, event organ- isers, sports marketing agencies, stadia, investors, sponsors and rights holders means we are widely acknowledged as leading industry H[SHUWV:HSURYLGHDZLGHUDQJHRIFRQVXOWLQJDQGȴQDQFLDODGYLVRU\ VHUYLFHVLQFOXGLQJVWUDWHJLFFRPPHUFLDOȴQDQFLDOUHJXODWRU\WD[DWLRQ Dan Jones and general business knowledge from major sports. Global Lead for Sport The Sports Business Group also publish thought leadership that is Deloitte LLP recognised as authoritative analysis within the sports industry. 2017 saw the 26th edition of the Deloitte Annual Review of Football Finance, documenting the business and commercial performance of English SURIHVVLRQDOIRRWEDOODVZHOODVSURȴOLQJWKHZLGHU(XURSHDQJDPHΖQ DGGLWLRQHDFK\HDURXU'HORLWWH)RRWEDOO0RQH\/HDJXHSURȴOHVWKH KLJKHVWUHYHQXHJHQHUDWLQJFOXEVDURXQGWKHZRUOG7RȴQGRXWPRUH about our publications, services and experience, please visit www. deloitte.co.uk/sportsbusinessgroup

Interest and investment in football from the Asian market has continued to grow unabated since the publication of the second edition of the J.League Management Cup in 2015. On a domestic front, WKLVLVQREHWWHUH[HPSOLȴHGWKHQE\3HUIRUP*URXSȇVWHQ\HDUEURDG- cast rights agreement to broadcast all matches from the J1, J2 and J3 leagues from 2017 onwards. As investment in the game continues to grow, the third edition of the J.League Management Cup provides a timely reminder of the importance in understanding the relationship EHWZHHQWKHȴQDQFLDODQGIRRWEDOOZRUOGV

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55 Contact Information

Deloitte Tohmatsu Financial Advisory LLC Sports Business Group (SBG) Shin-Tokyo Building 3-3-1 Marunouchi, Chiyoda-ku, Tokyo 100-0005 TEL: 03-6213-1180 E-Mail: [email protected] URL: www.deloitte.com/jp/sportsbusiness

Deloitte Tohmatsu Group (Deloitte Japan) is a collective term that refers to Deloitte Tohmatsu LLC, which is the -DSDQPHPEHUȴUPRI'HORLWWH7RXFKH7RKPDWVX/LPLWHG '77/ D8.SULYDWHFRPSDQ\OLPLWHGE\JXDUDQWHH DQGȴUPVDɝOLDWHGZLWK'HORLWWH7RKPDWVX//&WKDWLQFOXGH'HORLWWH7RXFKH7RKPDWVX//&'HORLWWH7RKPDWVX Consulting LLC, Deloitte Tohmatsu Financial Advisory LLC, Deloitte Tohmatsu Tax Co., DT Legal Japan, and Deloitte Tohmatsu Corporate Solutions LLC. Deloitte Tohmatsu Group is known as one of the largest SURIHVVLRQDOVHUYLFHVJURXSVLQ-DSDQ7KURXJKWKHȴUPVLQWKH*URXS'HORLWWH7RKPDWVX*URXSSURYLGHVDXGLW DVVXUDQFHULVNDGYLVRU\FRQVXOWLQJȴQDQFLDODGYLVRU\WD[OHJDODQGUHODWHGVHUYLFHVLQDFFRUGDQFHZLWK applicable laws and regulations. With about 11,000 professionals in nearly 40 cities throughout Japan, Deloitte Tohmatsu Group serves a number of clients including multinational enterprises and major Japanese businesses. For more information, please visit the Group’s website at www.deloitte.com/jp/en.

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Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by JXDUDQWHH Ȋ'77/ȋ LWVQHWZRUNRIPHPEHUȴUPVDQGWKHLUUHODWHGHQWLWLHV'77/DQGHDFKRILWVPHPEHU ȴUPVDUHOHJDOO\VHSDUDWHDQGLQGHSHQGHQWHQWLWLHV'77/ DOVRUHIHUUHGWRDVȊ'HORLWWH*OREDOȋ GRHVQRW provide services to clients. Please see www.deloitte.com/about to learn more about our global network of PHPEHUȴUPV

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