EPL Finances - Revenues, Income & Profits

Posted in Finance Articles, Total Reads: 1875 , Published on 05 January 2015
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The English Premier League is the most watched Soccer League in the world. The Premier League is broadcast in 212 territories around the world and works with 80 different broadcasters. The League consists of 20 clubs competing for the coveted prize of Premier League Trophy each year. With a global following estimated around 1.4 Billion Users & turnover of 2.4 Bn £(both of which seem increasing every year), it stands out as a rich case study for all branches of management. What makes it more interesting is with such huge proportions of capital involved, the league still manages to be a ‘Fair League’ compared to other Soccer Leagues in the World.

Here is an analysis of the EPL or English Premier League season 2012-13


A Soccer Club’s income is divided into 3 broad sources & the share of revenue earned from each of them differs for each club:



1)Match Day Revenue:

Each Premier league Club has its own Soccer Ground termed as Home Ground .So for every match of the club back Home, the strength of the stadium & club’s popularity determines the Match Day revenue for the club. This amounts to revenue earned via tickets ,Sandwiches,pies etc. Tickets being the most important of these, clubs like Manchester United, Liverpool, Arsenal & Chelsea ,with their large stadia & premium ticket prices, earn a good pie compared to others. The ticket prices are further divided into Season tickets & match-day tickets,the prices depending on whether or not you are a member of the club. The following chart ranges lowest adult member ticket- highest non-member ticket .

Club Name

Position in(2012-13)

Strength of Stadium

Match-day ticket price Range(£)

Seasons Ticket price Range(£)

Revenue Earned(£)

Man Utd

1

75731

30-57

532-950

102m

Arsenal

4

60362

25-62*

985-1955

93m

Chelsea

3

41798

36-87

595-1250

71m

Liverpool

7

45276

38-52

725-780

45m

Man City

2

47405

20-58

275-745

40m

*Arsenal priced 1% of ‘A’ category tickets at 126£, but has been excluded above to project major pricing range.


All the rest of the clubs have match-day revenues less than 30m £, with the lowest being 5m£ for Wigan Athletic.


Thus, the more the club following, the more the stadium is filled, the more revenue the club earns. Add to this the Stadium Utilization of 95% for season 2012-13, and we know, why Home Games are important for clubs 


2) Commercial Income:

For a fan base so strong & viewership breaking records each year, a Football Club Sponsorship is also the most sought after deal for a business trying to make a global mark. As observed by Deloitte, seven of the 20 highest earning Soccer Clubs in world are sponsored by Middle East Business.

Barcelona

Qatar Airlines

Real Madrid

Fly Emirates

AC Milan

Fly Emirates

Manchester City

Etihad Airlines

Paris Saint German(PSG)

Fly Emirates

Arsenal

Fly Emirates


A reason attributed to this is these nation are trying to break the shackles of their unstable region & break into Global Corporate Picture.

Commercial Revenue for top flight EPL clubs

Club Name

Position in(2012-13)

Revenue Earned(£)

Primary Shirt Deal Sponsors

Current 2013-14 Deal(£)

Man Utd

1

153m

Aon(20 m)

20m

Man City

2

143m

Etihad(20 m)

20m

Liverpool

7

98m

Standard Chartered(20 m)

20 m

Chelsea

3

84m

Samsung(13.8)

18m

Arsenal

4

44m

Fly Emirtares(5.5m)

30 m


The Sponsorship deals include International Deals as well as Regional Deals. The primary sponsors are Shirt & kit Sponsors, which bring majority of revenues. The deals include Official TimeKeepers ,Beer ,Wine , Logisitics , Carrier, Snacks, etc Partners. There also deals with region specific brand like Airtel being a regional partner for Arsenal.


Add to this the Merchandising & Retail Revenue for each club. Thus while Man Utd has 21 different sponsors , it raked in 36m £ for year 2012-13 via sale of its merchandise. This includes jersey, other apparels, kits, various other consumer products. Chelsea close-in second followed by Liverpool.


A few Clubs do have other source of revenue like property development(Arsenal-38m),conferencing, hospitality etc which they may specify exclusively and not as a part of Commercial income.


Like the match day revenue, the lower-rung clubs take a beating in this Commercial Revenues too. With an exception of one or two each season, all the rest of clubs have Commercial Revenues less than 20 m £.



3) Media & TV broadcasting Income:


Method of Distribution:

While the above two source of revenues are a club level dealings, this source is dealt by Premier League Body and tries to even out the revenue sharing among all the clubs. The Broadcasting revenue is a very large chunk of revenue in EPL which is dealt at Premier League Level .Thus, the money is distributed as Central Funds from Premier League. This is unlike other leagues like the Spanish League(La Liga), where Barcelona & Real Madrid make their own Broadcasting Deals raking fortunes while the remaining clubs collect left-overs. The following is the ratio of highest to lowest revenue making clubs in various Leagues, dubbed as ‘fairness share’


EPL

1.55:1

La Liga

14:1

Italian Serie A

10:1

French league

3.5:1

German League aka BundesLiga

2:1


While German league does seem to be close enough, the difference between the revenue distributed by both leagues is very large.


The TV & Broadcasting Revenues in EPL can be divided into Domestic (UK) & Overseas. The entire Overseas revenue earned from Broadcasting is equally distributed among all the 20 clubs. This has been debated as the major clubs form the important source of popularity for EPL overseas.


The Domestic Revenues earned are distributed into ratio 50:25:25.

50: Equal share distributed among all the 20 clubs.

25: Facility fees which depends on the number of times a clubs match was broadcasted Live on TV.

25: The merit fee which depends on the clubs standing at the end of league. Thus the Premier league winner earns 20 times as much as the last club, the 2nd team gets 19 times the last club and so on.


This makes the Broadcasting revenue an important chunk for the lower rung clubs in EPL. A part of this revenue, though small, is given to relegated* clubs as parachute payment.

*(The next lower- tier of Football League in England is Championship League. Each season the bottom three clubs of the EPL are relegated to Championship League, replaced by top 3 of Championship League. Any club that makes it to EPL for a season & gets relegated, receives this parachute payment for next 4 seasons. )


Due to EPL’s even distribution of Broadcasting revenue, the revenue earned by a Championship Club which makes it to EPL, increases many fold.


Media & Broadcasting Earnings for year 2012-2013 for top 5 clubs (in pounds £):

Clubs

Final Position in Season.

Equal Share(£)

Facility Fee(£)

Merit Fee(£)

Overseas TV(£)

Total(£)

Arsenal

4

13,803,038

11,525,944

12,849,977

18,931,726

57,110,685

Chelsea

3

13,803,038

8,654,602

13,605,858

18,931,726

54,995,224

Liverpool

7

13,803,038

11,525,944

10,582,334

18,931,726

54,843,042

Manchester City

2

13,803,038

11,047,387

14,361,739

18,931,726

58,143,890

Manchester United

1

13,803,038

12,961,615

15,117,620

18,931,726

60,813,999


While these revenues form around one-third of the revenue for these top-flight clubs, they form more than 50% for the rest of the clubs in EPL.

The following table shows the different sources for just next rung of clubs after the above five*.

Clubs

Premier League Standing in 2012-13

Match Day(£)

Commercial (£)

Broadcasting Revenues(£)

Tottenham H.

5

33m

57m

57m

Everton

6

17m

14m

56m

West Bromwich

8

7m

10m

53m

Swansea

9

10m

6m

51m

West Ham United

10

18m

20m

52m

*Source: The Guardian’s Football Premier League Finances Document.

The broadcasting revenue is, as is visible for some clubs, twice/thrice the sum of their other sources of income!


Expenditures:

The largest chunk of expenditure for a club is its wage bill i.e. salaries to all the employees of club. These include players, managers, assistant coaches etc.

Also almost all the top flight clubs have massive debts on shoulder and annually pay their interests (exceptions exist). After all these expenditures, a club’s profit/loss before tax payment is calculated.


The following table gives a picture:

Clubs

Premier League Standing in 2012-13

Wage Bill(£)

Wage bill as % of total turnover

Net Debt on club(£)

Profit/Loss(Before tax) (£)

Man Utd

1

181m

50%

295m

Loss(9m)

Man City

2

233m

86%

54m

Loss(52m)

Chelsea

3

179m

69%

958m

Loss(56m)

Arsenal

4

154m

54%

93m

Profit(7m)

Liverpool

7

132m

64%

114m

Loss(50m)

Interesting as they look , one can easily account for the acquisitions made by the clubs in season 2012-13 to the rise in wage bill. Man Utd signed Robin Van Persie and Shinji Kagawa while Chelsea signed Eden Hazard and Oscar for 51m£ combined. Man City with likes of Aguero, Silva,Toure,Negredo,Nasri and Milner pays heavily. While Liverpool didn’t have major signings, the existing costs were a burden too. Arsenal too had Cazorla,Giroud and Podolski being signed and so had significant rise in wage bills.


If the profit for Arsenal makes you bet for it as an investment, please consider this- humble clubs who have punched above their weight are the best investments for 2012-13.

Clubs

Premier League Standing in 2012-13

Wage Bill(£)

Wage bill as % of total turnover

Net Debt on club(£)

Profit/Loss(Before tax) (£)

Swansea

9

49m

73%

Nil(4m cash in bank)

Profit(21m)

Newcastle United

16

62m

65%

133m

Profit(10m)

West Bromwich

8

54m

77%

Nil

Profit(6m)


So the next time you see a star player playing for your club, you know how much it costs to the Club. And yes, do not let your emotions influence your decision of investment.


This article has been authored by Tanul Thanvi


Reference:

http://www2.deloitte.com/uk/en/pages/sports-business-group/articles/deloitte-football-money-league.html

http://www.theguardian.com/football/2014/may/01/premier-league-accounts-club-by-club-david-conn

http://www.sportingintelligence.com/2014/02/24/premier-league-goals-worth-915k-each-last-season-and-1-5m-now-240201/

http://www.sportingintelligence.com/2012/06/19/premier-league-tv-rights-qa-including-where-the-money-goes-and-what-next-190601/

ticket prices:

http://www.theguardian.com/football/2012/may/22/premier-league-ticket-prices-2012-13

http://www.arsenal.com/news/news-archive/club-announces-changes-to-ticketing-approach

http://www.bbc.com/news/uk-23723537



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