INCOME ROCKETS TO ú670 MILLION
TRANSFERS BREAK THE ú+ BILLION BARRIER
*Average club income rises to ú33.5 million
*FA Premier League matchday income double Serie A
*49% of transfer spending goes overseas
The 20 clubs comprising the English Premier League in 1998/1999 generated a combined turnover of ú670 million representing an 18% growth rate or ú101 million increase, which is another stunning off-field performance by the football industry according to Gerry Boon, Chairman of the Football Industry team at Deloitte & Touche.
Profitability continued to increase as a result of enhanced sponsorship deals from corporate backers of the game, greater revenue from the fans (gate receipts up), ú20 million more from domestic television monies and greater European monies for those clubs in UEFA competitions. However, increased transfer spending has helped halve pre-tax profitability at ú18.7 million compared to the previous seasonÆs ú41.4 million.
The report suggests that there are effectively three financial groupings within the Premier League. Manchester United remain the giant with Arsenal, Chelsea, Liverpool, Newcastle, Spurs, Aston Villa and Leeds in the next tier and then the rest. The financial polarisation can be seen most starkly in comparing the cumulative five year turnovers of Manchester United and Charlton Athletic. Manchester United’s turnover outstrips Charlton Athletic by eightfold. Put into context Manchester’s turnover over the five years makes up 58% of the other 19 clubs put together.
‘The gap between the ‘haves’ and ‘have-nots’ continues to grow,’ warns Gerry Boon. ‘This polarisation is not solely within the Premier League. The move from Division One to top flight football could be likened to expanding from a convenience store into a supermarket over a two month period. That financial challenge remains the most difficult to overcome. Big clubs are dominating û size does matter.’
‘Polarisation also occurs between leagues. Internationally thereÆs an economic imbalance between a clubÆs market for revenue û the local economy, and its market for talent û the global player talent pool. Whilst football clubs such as Rangers and Celtic play in front of full houses in modern stadia, and Ajax, Feyenoord and PSV occupy similar positions in Holland, their television ‘market value is a mere fraction of the Premier League. This has significant implications for the competitive landscape of European Club football,’ he advises.
The Premier League, in totality, stands out against Spain’s Primera Liga, Germany’s Budesliga and Italy’s Serie A. Average club gate receipts are twice Italy’s, treble Germany’s and four times those in France. The Premier League’s advantages in stadium ownership and more developed corporate and merchandising business have given it ‘first mover status’. Economically it is the best League in the world. Despite Premier League clubs’ success in opening and developing new revenue streams, broadcast rights revenues have a big impact and English clubs are still relatively disadvantaged by comparison to countries (eg Spain and Italy) with less egalitarian broadcasting rights share-outs. Manchester United, Arsenal, Chelsea, etc. will each receive approximately 7%-9% of total domestic broadcast rights fees on an annual basis, in absolute terms, between ú10/ú12 million, compared to ú50 million and c. ú80 million respectively for top Spanish and Italian Clubs.
The Bosman ruling in 1995 is now having a massive impact in terms of player trading and wages by its creation of a fully fledged cross-Europe transfer market. In 1998/1999, a total of ú268.8 million was spent on Premiership transfers, ú55.6 million more than in the previous year. Of the total, ú136.2 million was spent on players from English Clubs with ú132.6 million being spent on players from non-English clubs. This compares with just ú84 million on players from English clubs and ú28.5 million on players from non-English Clubs in 1994/1995.
‘Four years on the Bosman ruling continues to have a huge impact. The European transfer market is massively fluid. In 1995/1996, there were 62 foreign players in the Premiership, rising to 122 in 1998/1999. Without a doubt, the financial success of the Premiership has driven up transfer expenditure as so much depends on retaining Premiership status. Undoubtedly, this transfer spend (Bergkamp, Zola, Stam etc) has greatly assisted this financial success. 1998/99 offered a glimmer of hope for The Football League. The trickle down to Football League clubs had almost dried up, in 1997/98 it was ú1.5 million net. Thankfully, in 1998/99 it jumped to ú27.5 million. We shall have to see whether this is repeated in the current season or if it was a one-off boost to the Nationwide clubs,’ he adds.
England’s Premier Clubs is a comprehensive review of the finances of the 1998/99 Premier League clubs only. The 1999 Deloitte & Touche Annual Review of Football Finance, featuring 92 English professional clubs, will be published as usual, later this year.
-Ends-
For further information, please contact Emma Thorogood in National Communications on 0207 303 6264 or Phil Smith on 0207 303 3048.
Note to Editors
Over the last decade the Deloitte & Touche Football Industry Team has developed a unique focus on the business of sport. The team offers a multi-disciplined expert service with people and skills capable of adding significant value to the business of sport. Whether it is benchmarking or strategic business reviews; operational studies or stadia development plans; flotations, acquisitions, due diligence or tax planning; we have worked with more clubs, governing bodies, stadia, players and owners than any other adviser.
This press release has been prepared from the full report, on various bases set out in that report. Certain adjustments have been made to figures reported by the clubs for comparison purposes, however, where this occurs explanations have been made in the report.
Should you wish to purchase a full copy of the report, it is available at a cost of ú45.00. To order a copy please contact:
Jo Daly, tel: 0161 455 6303
or email Jo.Daly@deloitte.co.uk
KEY FINDINGS
Profitability
* The 1998/99 season saw turnover growth of 18% with revenues increasing by ú101 million to ú670 million.
* Twelve clubs managed to record an overall pre-tax profit for the 1998/99 season. This is the same number as the season before.
Revenue Streams
* Revenues for matchday remained stable at 37% of total revenues, broadcast revenues grew faster than commercial/other revenues making up 29% of the total (contrasting with 21% in 1996/7). The relative contribution of commercial/other revenues has decreased from 41% in 1996/7 to 34% last year. * A positive sign is that, barring the promoted clubs, over half of the clubs and the average Premier League club have increased income from ‘club-controlled’ activities faster than overall turnover has grown. This shows a slight reduction in dependency on ‘central income’, such as TV rights, for a number of clubs.
1) Match day income
* The gate income of the average FA Premier League club rose to over ú12.4 million in 1998/99, continuing the growth experienced every year throughout the 1990s and a big jump of 22% from ú10.1 million in 1997/98.
* The renaissance in demand for live League football since the mid 1980s is clear. Average top division attendances have risen from 19,600 in1985/86 to 30,600 last season û a 56% increase.
2) Broadcast Income
* The total broadcast income flowing to the clubs comes to ú196 million, of which around three quarters (ú149 million) is still derived from the FA Premier League centrally negotiated deal.
* Despite growth from a ú44 million four year deal for 1988-92 to a ú743 million four year deal for 1997-2001, there is still great growth potential. Several factors point to a large increase in income. These include digital TV, Internet rights, the reduced need for an exclusive deal on the clubsÆ part, increased competition among broadcasters, and the likelihood that pay-per-view TV will be introduced in one shape or form.
3)Commercial Income
* The largest single element of commercial income is merchandising. This contributed an estimated ú88 million (around 39%) of the ú226 million classified as commercial/other in 1998/99.
* However, average merchandising revenue has declined for those clubs disclosing it û from ú5.3 million to ú4.9 million per club. If Manchester United are excluded, there is a small underlying increase of 3%.
Wage Costs
* The total wage bill for the Premier League has increased by 31% to just over ú397 million in the 1998/99 season. The growth in wage costs continues to outstrip the 18% rise in turnover, as more of a clubÆs income is paid out to staff.
* Only two clubs have a wages/turnover ratio of under 50% û the benchmark which Deloitte & Touche regards as being sustainably healthy. Manchester United had the lowest ratio with wages making up 33% of total turnover.
Player Trading
* The rise in transfer spending continued in the 1998/99 season. Record amounts were spent by Premiership clubs. The total spent by Premiership clubs on transfer fees reached ú268.8 million û a massive increase of ú55.6 million on the previous year.
* The Football League in 1998/99 received much more in transfer fees from the Premiership (ú38.8 million) than it paid back (ú11.3 million) û a ‘balance of payments surplus’ of ú27.5 million. Premiership spending on imports was pushed to a net ú132.6 million.
Other
* Clubs paid an estimated ú194.6 million in tax (PAYE, National Insurance and VAT) to the Government, 27% up on 1997/98.
* Over the 5 years to summer 1999, the clubs in the Premiership for 1998/99 had had an income of ú2.32 billion, paid ú1.22 billion in total wages, made operating profits (before transfers) of ú316 million and paid out ú477 million net in player transfer fees.