Financial problems in European club football have been long-lasting (1–5). However, the implementation of European and national regulations has curbed some of the spending and helped clubs compete under more balanced financial conditions (6). For the top clubs in the big five leagues (England, France, German, Italy, and Spain), increased media revenues have also contributed to fewer deficits in the accounts. In the non-big-five leagues, the clubs are still struggling with major financial problems. The same is true for the clubs below the top tier of the big five, especially in the English Championship (7). The average revenue per club in English Premier League was in 2018 almost 300 million euros. The corresponding figure for a small league such as the Norwegian one was 10 million euros (6). The financial gap between powerful and poor clubs is, therefore, substantial.

For a football club, the primary strategic choice is to be made between profit and win maximation (8). There is a consensus in the sports economics literature that win maximization seems to be the objective of European clubs (9–13). Haugen and Solberg (14) illustrate that European clubs can end up in a dilemma because there is substantial pressure on them to overspend to pass needle eyes, that is, to win the league, avoid relegation, acquire promotion, or qualify for lucrative European tourna­ments.

However, in recent years state-owned football clubs and sports washing has become a more prominent strategy in European football (15). We use the term sport washing to describe the practice of individuals, corporations, or governments to improve dubious reputations. Accordingly, sport washing is a form of propaganda. Late in 2021, a Saudi Arabia-led consortium headed by the Saudi sovereign wealth fund purchased Newcastle United. Newcastle United is not the first Arab takeover of a European football club. Wealthy Arab owners now own top clubs like Manchester City (United Arab Emirates), Paris-Saint Germain (Qatar), Aston Villa (Egypt), and Sheffield United (Saudi Arabia). Arabian aviation companies like Emirates, Etihad Airways, and Qatar Airways all have signed deals with top European football clubs.

Storm and Nielsen (16, 17) argue that European clubs operate in a regime with flexible or soft budgets. In the local community, the club has characteristics of a social institution through its relationship with key stakeholders, primarily the supporters. For them, the club is a vital identity marker (18) and considered too important to fail (19). Consequently, one or more stakeholders will bail it out once the financial problems seem insurmountable (20). The club is, therefore, likely to receive free cash from an owner, creditor, or benefactor to stay liquid and in business. The subsidies can, for example, come in the form of equity without normally required return, loans with abnormally favorable interest and installment terms, donations, overpriced sponsorship contracts, and underpriced stadium rent to make the budgeting constraint (BC) of the club softer (21). However, a soft BC (SBC) undermines one of the most essential financial coercive drivers for a firm in a market economy, that is the threat of bankruptcy (22). The syndrome, therefore, encourages clubs to take excess risks, downplay the significance of good governance, and allow the emergence of bad management practices (21).

This archive-based in-depth case study mapped and analyzed the financial intentions (talk) and behavior (walk) of the case club, Tromsø IL (shortly named TIL), and its close allies, that is, its environment. The objective was to gain deeper insight into the antecedents and consequences of an SBC syndrome. During the period studied, the club and its allies made several momentous interventions that shaped the transformation of its BC syndrome. The club gained promotion to the top-tier in the national football league in 1986 with local players on a minimum budget. During the approximately first ten years that followed, the club experienced sportive success with small funds under an HBC syndrome. The league's cash flow then gradually increased in the form of more significant media, sponsorship, and gate receipts revenues. As the financial threshold for competing at the top level was raised, the club's BC syndrome softened. The softness was further reinforced by a relegation and subsequent promotion in the 2001/02 seasons.

In the years that followed, the club again experienced great sportive success, now supported by financial injections from a benefactor. However, in 2008, the finances collapsed again. To solve the problem, the commercial part of the club was reorganized into a hybrid sport/business enterprise—the so-called Dual Model (23, 24). The intention was to eliminate the financial problems once and for all through increased professionalization and commercialization of the top football operation. However, the added cash flow that followed did not make the BC harder but even softer as it enabled the overspending to continue. In 2011, the national football association (NFA) realized that Norwegian clubs could not manage their finances by themselves and introduced a variant of a financial fair play (FFP) control and monitoring system. Despite good intentions, this system had inherent weaknesses that allowed the club to continue overspending, though only to a certain extent.

In particular economics, the influence of the SBC approach has been significant (25). This will also become evident in the literature review of this paper. This article aims to expand on existing literature as the SBC field of research is still in its initial stages in the area of sports economics and management (26).

Moreover, in the SBC literature, there have been, to this point, few in-depth case studies that explore the evolution from an HBC to an SBC syndrome over a long period of time. This paper argues that to dampen the financial problems of European football, a better understanding of why an SBC syndrome occurs, how it occurs, and what characterizes its development is crucial. Accordingly, the following research questions are raised in the present study:

RQ1: Which budget constraint syndrome was advocated by the hierarchy of Tromsø IL?

RQ2: What characterized the financial and administrative budget interventions made by the club and its allies, and how did the interventions impact the budget constraint syndrome of the club?

This case study thus explores the evolution of an SBC syndrome at a specific football club, Tromsø IL (TIL). The case club is exceptional in its unique geographical context with a cold and harsh arctic climate. Nevertheless, TIL is the northernmost professional football club worldwide to have won national trophies (27). It may be of particular interest to study the financial management of a football club that has to operate in such an extreme environment as it may require special measures to succeed in sport and at the same time survive financially. SBC theory has not previously been applied to this specific geographical, climatic, or population-wise context. Storm et al. (26) argue that more case study evidence of SBC is needed. They further state that, in particular, more case studies should be applied to new empirical context such as countries.

The paper proceeds as follows. A literature review is provided first. Second, the historical context of the club is described. Third, a chapter on methods and data follows. Fourth, findings are presented and discussed consecutively, and finally, a discussion of the contribution of the results ends the paper.

A professional football club that aims to be financially sustainable must break even over the course of a few years (28). To do so, the club must limit its spending on player wages to finance these and other operational costs through current revenues (29). If this is the case, the club controls its finances through an HBC syndrome (30). A club that does not break even over time will experience recurring deficits. Consequentially, its finances are regulated through an SBC (16). The club can finance deficits through equity issues or donations from benefactors (31). The remaining option is loans if these capital sources are unavailable or insufficient. Net debt will occur in the club's balance sheet if its liabilities exceed its assets. However, after some time, the net debt accumulation may not be economically sustainable (32). The club will then be at risk of becoming insolvent, illiquid, and eventually bankrupt.

A European football club rarely goes bankrupt despite ongoing financial problems (20). When it is on the brink of bankruptcy, an insolvency process is avoided through a bailout. The club is regarded as too important a social institution in its local community to be allowed to fail (19). Institutionalized bailout practices have added fuel to the never-ending spending race. Overspending gives a club a financial competitive advantage over rivals that do not adopt a similar strategy (6).

Storm and Nielsen (16, 17) use the SBC theory to explain why most European football clubs survive despite persistent deficits and growing debts. They argue that many clubs are similar to banks and financial intermediaries as they may be regarded too big to fail by the authorities. In a football context, though, it may be that other stakeholders believe that the club is too important to fail. Among these are fans, TV viewers, sponsors, benefactor, investors, local government, tax authorities, local banks, or any other benefactor (21). Individually or together, these stakeholders can be willing to inject the cash flow required to rescue a club in financial trouble or help a club buy an attractive player that it could not afford otherwise. According to Andreff (21), this is precisely what the SBC syndrome is about. From a club's point of view, the management can feel reasonably assured that one or more external stakeholders will step in and bail the club out when needed.

The presence of the SBC syndrome in an industry can be measured by the frequency of deficits, bailouts, and bankruptcies (30). Thus, Franck (32) claims that the SBC syndrome results in detrimental managerial incentives and moral hazard in that overspending and recurring deficits have no consequences for the decision-makers. He thus argues that the SBC approach encourages the “financial doping” of football clubs; that is performance-enhancing social practices (33, p. 73). Storm and Nielsen (17) underline that clubs that do not focus on balancing the books will pay less attention to efficiency and waste scarce financial resources. Terrien and Andreff (34) support this argument.

Kornaï (35) lists soft ex-post bargained subsidies, soft ex-post bargained taxation, soft ex-post bargained credit and soft administrative pricing with authorities as different ways to soften a club or firm's BCs. In some cases, SBC support may be considered an effective political strategy to get more voters (36). When politicians support their local football club through some form of subsidy, they can strengthen their reputation among supporters and fans who can form a large constituency at the next election.

If many clubs mimic each other's soft financial behavior, this will create an excess demand for critical input, such as player talent (6). A subsequent pay pressure in the industry will then occur as clubs overbid for talent and engage in an arms race for input that is in short supply. This is especially true for superstars (37). A club's ability to buy players financed by a benefactor or other supporting stakeholders can dramatically expand its demand for talent. This can, in turn, lead to shortages and increased transfer prices. Accordingly, the SBC syndrome encourages the propensity to overinvest in players.

Kornaï et al. (38) claim that a true SBC syndrome is at work only if organizations can expect to be rescued from financial problems. Such expectations will create an SBC mentality in the club's management team. The SBC syndrome occurs if the club's management knows, guesses, or is beforehand aware that one or more supporting stakeholders will repeatedly and sometimes unwillingly cover all or part of the deficits or past due debt (21).

Kornaï (39) claims that an HBC is characterized by economic coercion where “proceeds from sales and costs of input are a question of life and death for the firm” (p. 303). BCs are also hard if the firm's growth depends on its profits or what it can receive from conservative owners and lenders only for profitable investment purposes (17).

SBC syndromes, manifested through ongoing overspending and subsequent bailouts, have been ongoing for decades in European football (16, 21). The two interrelated and self-destructive economic practices constitute a vicious financial circle (40). Bertheussen and Solberg (6) argue that a dominant sportive and a subordinate financial institutional logic underpin the practices. These conflicting logics form a Gordian knot, which the clubs themselves cannot cut off, as they strive to gain a competitive advantage over their rivals by paying more in transfer fees and player salaries. The relative competition is, however, a zero-sum game. If one club improves its table position, this will always be at the expense of another (41). Rivals responding to this pay game through mimetic behavior will make the wage level throughout the league increase without anyone having achieved a sportive advantage. Thus, a strategy that initially seems rational for the individual club can later turn out to be irrational overspending for the industry (42). Industry regulations are required to cut this Gordian knot (6).

UEFA's Financial Fair Play (UEFA FFP) regulations introduced in 2011 aim to tackle the problem of clubs that do not themselves manage to break even. This is thus an attempt at hardening the BC (29). UEFA FFP was intended to curb clubs’ spending and help them compete under the most comparable financial conditions. Its purpose is to reduce overspending and make the clubs’ finances more sustainable (28). Furthermore, several domestic leagues have introduced club licensing schemes based on criteria similar to the UEFA FFP regulations (43). After implementing financial regulations at both national and European levels, a significant improvement has been observed in club finances across Europe (see Figure 1) (44).

However, many small and medium-sized clubs are still struggling with their finances. The regulations introduced are therefore criticized for being too soft (45).

Andreff (21) argues that what is wrong with UEFA FFP is its tolerance of an annual €5M deficit, as wealthy clubs can take advantage of this threshold and distort sportive and economic competition to the detriment of clubs that do break even. Andreff further asserts that UEFA FFP has not gone far enough in fulfilling HBC that is not distortive. This will require that the break-even rule is strictly adhered to as for businesses in general in market-based economies.

Other aspects of FFP have also been criticized in the literature. Drut and Raballand (46) discuss the impact of FFP on the quality of all teams and argue that financial regulation is critical to explain performance differences in football competitions. Their empirical findings from the big five leagues show that clubs allowed to operate with red numbers hired better playing talents and obtained better sportive results. Franck (29) argues that FFP prevents substantial injections of external financing and thus facilitates a fairer competition arena. Taking a game theoretical approach, Preuss et al. (45) examine the impact FFP could have on player wages. They found that the clubs had strong incentives to bypass the new regulations. Sidestepping would, however, cause extra costs for clubs to hide a violation of rules and for UEFA to expose dishonest behavior. These added costs might deter smaller clubs from cheating and thus provide a competitive advantage for larger clubs. The impact of FFP on the competitive balance of domestic leagues is discussed by Plumley et al. (47). They found a significant decline in the competitive balance after FFP was introduced in France, Germany, and Spain but not in England and Italy. Syzmanski (48) questions the legality of the regulations. He argues that the objectives of FFP are not fairness but financial efficiency. He further claims the rules introduced are unable to improve efficiency.

In 2022, UEFA's FFP was replaced by new Financial Sustainability Regulations (49). UEFA justifies the new regime by stating that sustainable financial management has become even more important for the clubs in the wake of the COVID-19 pandemic, increased globalization, and technological innovations. According to UEFA, the new regulations will ensure that the clubs must be stable, solvent, and keep their costs under control. The new regulations consist of three distinct pillars. The no overdue payables rule tightens the clubs’ requirements to pay outstanding debts. The football earnings rule is a modified version of the Break-even rule. The squad cost rule, which is new, restricts spending on player and coach wages, transfers, and agent fees to 70% of club revenues.

The Arctic climate is characterized by long, cold, dark, and snowy winters. Thus, TIL accrues high costs in the winter for electricity and to clear the pitch from snow. In the summer, however, the sun shines 24 h a day, and life is easier. The gentle Gulf Stream flows along the coast and keeps it ice-free year-round. The long coastline is rich in fish, and the spawning migration of cod from the Barents Sea to the coast from January to April has historically formed the basis for the coastal settlement.

Consequently, there is a saying up north “In cod, we trust.” The club's strategic plan document (2017–2020) explicitly states that player recruitment shall reflect the harsh Arctic climate, and players raised locally should therefore be prioritized. The document also states that the club's playing style shall be offensive in line with the optimistic temperament of people living in the Arctic. The formally expressed strategic vision of the club is, in this way, closely linked to the identity of the locals.

When the club plays an away derby match, the supporters must travel about 50 min by plane, 530 kilometers by car, or 27 h on the coastal line boat. TIL was founded in 1920, and its stadium Alfheim is named after the residence of the Norse god Freyja. It has a capacity of some 7,000 spectators. Recently, on match days, it has hardly been half full. The club's best historical table positions are two second places in the top national league in 1990 and 2011.

Furthermore, it has twice been the national cup champion (1986 and 1996). The national cup trophies make TIL the northernmost club in the world to have won a national title (27). Additionally, TIL participated in the group play of the Europe League in 2009, when Atletico Bilbao narrowly beat it, and in 2013 the club participated unsuccessfully in the same competition. In the 2019 season, the club was relegated to the second level; however, the following season, it was again promoted to the top tier.

When this case study started about 1985, TIL was a pure membership club. In 2009, the club structure expanded and became part of a group of cooperating joint-stock companies. The companies were TIL Fotball AS, TIL Spiller AS (“Spiller” translates to “Player” in English), and TIL Holding AS (“Holding” translates to “Group” in English). TIL Spiller AS was eventually terminated during this long-term case study, and so was TIL Holding AS.

The present case study explores the economic history of the Norwegian football club TIL. More precisely, the study delves into the how's, why's, and what's of the evolution of an SBC syndrome at this specific club. Thus long-term data was needed, and a historical in-depth case study research design was selected.

Case studies are rich empirical descriptions of a phenomenon based on various data sources (50). The basic idea is to use one or more cases to develop theory inductively (51). In case studies, the theory is emergent because it is situated and developed by identifying patterns or relationships among constructs and their underlying logical arguments.

A strength of case study research is its ability to integrate objective and perceptual data (52). This study used document analysis (53) to provide relevant data on the relationships between the intended vs. realized BC syndrome at a professional football club. The study integrates and triangulates several sources of secondary data for the period between 1986 and 2019. This involves the club's strategic business plan documents, annual reports such as the board's report, financial statements, reports from the Control Committee, and reports from the NFA about the club's financial status and development (the national FFP report). Moreover, an investor prospectus was presented in 2009 when the top football part of the club was converted from a membership organization to a joint-stock company. Finally, the study has followed industry media such as newspapers and web pages to obtain additional relevant information.

Data were gathered and analyzed concurrently by data reduction, collecting key information in sections based on topics of interest. The data amount was voluminous, as often is the case of qualitative data collection. It was, however, necessary to go in-depth as this study's theoretical contributions are being nourished through thick descriptions (54) of the club's SBC interventions (see next chapter).

The findings of the study are presented and discussed consecutively and separately. The interplay between the results will finally be addressed in the Overall discussion chapter.

This chapter is a response to RQ2 of the study: What characterized the financial and administrative budget interventions made by the club and its allies, and how did the interventions impact the budget constraint syndrome of the club? Characteristics of the implemented financial interventions and their impact on the BC syndrome of the club will be discussed one by one in this chapter.

The first soft intervention was introduced in 2006 and represented a generous distant benefactor who has provided the club with more than 120M NOKs in donations since then (27). The second soft intervention discussed integrated the membership club's operations with a new joint-stock company structure in 2009. The membership organization and the limited company jointly constituted a hybrid or so-called dual organization model (23). This Model is the most common form of organization among the top teams in the nation involved (24). The third and final soft intervention addressed a national FFP system (hereafter national FFP in contrast to UEFA's FFP) aimed at curbing club overspending. This system was imposed on all professional clubs of the top-two tiers in 2009. This external control and monitoring intervention can be interpreted as an NFA attempt to create a counterweight to the drift toward developing SBC syndromes at most professional football clubs in the nation.

This historical in-depth case study explores the evolution of an SBC syndrome in the world's northernmost professional top-tier football club (that is, TIL) over several decades. The individual impacts on the SBC syndrome of significant budget interventions made by the club and its allies were discussed together with current findings independently in the previous chapter. This chapter will discuss the overall impact of the interventions on the club's SBC syndrome, provide theoretical and practical implications, and outline some limitations.

The shift in BC behavior of TIL from hard to soft was triggered initially by the gradual increased financial thresholds necessary to compete in the sport after the club was promoted to the top level of the football pyramid more than thirty years ago (27, 41). The promotion highlighted that a continued hard BC behavior could not maintain a sustainable sportive venture at that historical point. The new soft BC institution was thus founded on one that was successful in economic terms but was doomed to fail in sports (21).

The HBC institution initially contributed to economic and sportive sustainability. But in the face of a radically more cost-intensive competition arena, an institution based on competing on more or less equal financial terms failed (47). Money mattered more and more to the club's sportive competitiveness. The centuries-old high-quality HBC institution at TIL degraded to a low-quality SBC institution, especially in the decades after the turn of the millennium.

The overall objective of soft financial management of football clubs is to secure improved sportive success still combined with economic survival (16, 17, 21, 29, 32). In the case club TIL, significant interventions were introduced that directed the club's financial management towards an SBC syndrome. The chrono­logy of the interventions showed that the club's dominant BC syndrome changed from being relatively hard in the period before 2005 to becoming significantly softer after that. This change in BC syndrome was related to ongoing financial injections from a distant benefactor (Intervention 1: Benefactor support, also see Table 4). The transformation of the formal structure of the club from a membership organization to a combined membership and limited liability structure embracing soft equity was another significant intervention (Intervention 2: The Dual Model, also see Table 5). Implementing a national FFP system with significant soft spots could not turn the SBC tide.

A (BC) institution has the potential to affect a club's performance (46, 62). In 2007–2012, the club performed very well in sports (see Table 6, rightmost column) as it became more competitive due to soft funding (47). The club did, however, perform poorly financially as its economic stability was threatened (see Table 6, leftmost column).

The overall aim of the present study was to contribute to a better understanding of the long-term underlying drivers behind an SBC syndrome in a team sports club [e.g., (16, 17, 21)]. Thus, this historical analysis focuses on why an SBC emerged in an individual football club, how it expressed itself in terms of financial and administrative interventions, and finally, why it eventually became persistent and thereby institutionalized. The following section will discuss the potential contributions of the study in more detail.