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Premier League is Football’s Financial Powerhouse

August 2015

One of the interesting topics regarding the discussion of finance in football is that revenue growth does not appear to be slowing down and the money from TV rights seem to be propelling the Premier League clubs further apart in terms of wealth from the majority of clubs in the world.

Interestingly, when compared to big companies, football clubs are just a drop in the water and there appears to be an imbalance in the way they operate when compared to the generic company, in a football club the employees hold all the cards and are the main beneficiaries from any revenue generated. The post-tax profit of the football clubs are minute compared to the money generated as is usually filters through to the players, agents and manager and any surplus is usually reinvested into the transfer market.

In Deloitte’s annual review of football finance (2013/2014), they discovered that the Premier league now boasts the following statistics:

It appears that the new TV rights deal, worth £5.1bn has turned around the fortunes of all Premier League clubs. The League reported a record collective revenue in 2013/2014, the first year of the new deal, of £3.26bn – a 29% increase on the previous year with clubs such as Man Utd posting revenues of £433m and Cardiff City £83m.

It seems the Premier League clubs have had their calculated gamble of heavy investment in players and staff pay off with the money they stand to gain over the coming seasons. The price of success was becoming so much that club owners such as Man Utd’s Glazer family were willing to fall to regions of over £700m in debt with the promise that the TV deals would help them pay off the debt and secure their investment.

Turning to a local club, Norwich City has benefitted incredibly with their recent run of success. With three seasons of Premier League earnings, maintaining player wages at between 39-40% of revenue and continued strong matchday attendance they managed to eliminate all external debt and announce a £6m surplus at the end of the year (2013/14) to reinvest in the squad after earning promotion back to the Premier League.

One of the staggering figures announced by Deloitte in the annual survey of football finances is the new deal beginning in 2016/17 for the Premier League represent a £26.5 rights fee per head of the population, £11.80 higher than the NFL and £18.40 above Ligue 1.

Another interesting announcement was that 2013/14 was the slowest recorded growth in wage costs/revenue since the 2007/08 season. It appears the Championship are outspending their revenue with their wages to revenue ratio reported at 105%, only the third occasion a ratio over 100% has been recorded in English Football.

Some of the key figures announced in the report:

The outlook for the future of all Premier League clubs has risen since the announcement of the new TV rights deal. The increase in revenue and operating profits across a number of clubs has allowed 9 teams, including Aston Villa, Arsenal and Tottenham to reduce their net debt by £205m. On top of this, the overall level of expenditure on capital investment by Premier League clubs as a collective totalled £212m, the highest since the Premier League began. This news means clubs are investing in facilities to improve their club facilities and the stadium, with Manchester City leading the way investing £94m on the Etihad expansion and the City Football Academy Project.

The comparison between figures from the English Premier League and the other 4 top European leagues is staggering. The commercial power of the EPL has meant that clubs such as Stoke City now have the ability to compete for top players and rather than the top four teams in the league taking all the commercial revenue, as is the case in La Liga, the struggling teams such as Sunderland and West Brom are benefitting from the commercial deals.

Other leagues are now taking a close look at how the EPL has maneuvered itself into such a commanding commercial position and are looking at how they too can emulate the success. The figures do show however that the Premier League looks likely to dominate on a financial level for the next few years.

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