Premier League club revenues up again as European progress pays off
By Tariq Saleh
The clubs in English soccer’s top-tier Premier League generated record combined revenue of £4.8 billion ($6.2 billion) in the 2017-18 season, according to new analysis from Deloitte, the professional services firm.
The 6-per-cent rise from £4.6 billion in the 2016-17 campaign has been attributed in part to England having five teams in the Uefa Champions League, Europe's elite clubs competition, as Manchester United joined the top four teams from the previous season's Premier League, after winning the Europa League, the continent's secondary tournament.
Manchester United, Manchester City, Chelsea, Tottenham Hotspur and Liverpool all reached the last 16 of the Champions League or beyond, with Liverpool finishing as runners-up to Real Madrid in the season in question.
This resulted in an increase of £71 million in Champions League distributions to Premier League clubs. On top of the rise in Uefa distributions, matchday and commercial revenue in the English top flight increased by 8 per cent and 12 per cent respectively.
Income from European competitions is expected to remain high this season with all four participating clubs having reached the quarter-finals, and Liverpool and Tottenham now through to the semi-finals, while Arsenal and Chelsea are in the last four of the Europa League.
Dan Jones, partner and head of the Sports Business Group at Deloitte, said today: “Premier League clubs’ revenues continued to reach new heights in 2017-18. Tottenham Hotspur’s relocation to Wembley Stadium and increased commercial activity, including the commencement of their new kit deal with Nike, contributed more than half of the Premier League’s matchday revenue growth and almost a quarter of the Premier League’s commercial revenue growth respectively, driving the club’s record levels of pre-tax profitability.”
Tottenham played at Wembley, England's national stadium, for the entire 2017-18 season, and did so for the majority of this campaign as they awaited the opening of their new 62,000-capacity ground in North London. Following a delay, the stadium has been staging its first matches this month.
Tottenham recently announced a world record profit of nearly £113 million ($148 million) after tax for the 12 months ending on 30 June, 2018. The previous record of £106 million was set by Liverpool (for the same time period) earlier this year.
Nike, the US sportswear giant, replaced Under Armour as Tottenham’s kit supplier in the 2017-18 season in a multi-year deal reported to be worth £30 million per annum. Last October, the two parties extended the agreement to 2033.
Across the Premier League, Deloitte calculated collective pre-tax profit for 2017-18 at £400 million, down from the record £500 million in the previous year.
Combined operating profits were also down, from a record of £1 billion in 2016-17 to £900 million last year, albeit this was still the second highest figure in Premier League history.
The surplus was impacted by a 15-per-cent rise in wage costs to £2.9 billion. The revenue to wage ratio of 59 per cent was up from 55 per cent in 2016-17, which was the lowest figure in 19 years, owing to increased broadcast revenues in the first year of a new three-year commercial rights cycle.
Almost half of the Premier League clubs recorded a revenue to wage ratio of 70 per cent or more last season.
Jones said: “We have seen clubs’ wage expenditure increase at a faster rate than revenue growth in 2017-18. This is the same pattern as observed in the second year of the previous Premier League broadcast rights cycles, as clubs continue to invest in playing talent. 59 per cent is the lowest wage to revenue ratio outside the first year of a broadcast rights cycle since the 1998-99 season.”
It was noted that the Premier League clubs have collectively made a pre-tax profit four times in the last five years, with three clubs - Arsenal, Liverpool and Tottenham - contributing over 75 per cent of the most recent surplus. However, the analysis also showed an increase in the number of clubs reporting a pre-tax loss.
Tim Bridge, director in the Sports Business Group at Deloitte, said: “With the total value of Premier League broadcast rights expected to only marginally increase in the 2019/20-2021/22 broadcast rights cycle, increases in wage and [player] transfer expenditure may be expected to slow in the medium term, as already signalled by the reduced estimated £1.4 billion gross transfer spend in the current season.
"With the emphasis now on clubs to generate revenue growth from sources other than central broadcast distributions, it may be that we see the levels of pre-tax profit diminish over the next few years.”
The value of the Premier League's domestic live television rights, awarded to pay-TV's Sky and BT Sport, plus internet giant Amazon, in the next cycle, does not match the £5.1 billion raised in the current cycle, albeit the difference is expected to be more than compensated for by an increase of around 25 per cent in international rights revenues, which presently amount to £3.3 billion.
The league is thought to be on track for £9 billion in media revenue in the 2019-22 cycle, up from £8.6 billion in the current three-year period.