New TV deal spells trouble for bigger EPL clubs as financial gap closes
One of the more amusing spectacles that followed the announcement of the mammoth new Premier League television deal was league and club officials holding press conferences to scowl at the impecunious relatives and dependents who had come rushing toward them, hands outstretched.
On Tuesday, the Premier League announced that it had sold its UK television rights for the three seasons from 2016-19 for £5.17 billion, or $7.8 billion. That’s an increase of more than 70 percent. It dwarfs the deals of every other league in Europe.
At once, the league faced demands from pundits, politicians and former players to share the wealth with fans, lower-division clubs, amateur and youth soccer and employees.
Richard Scudamore, the league’s chief executive, seized the opportunity to indulge his hobby: convincing the British public that he is a thoroughly horrible human.
The league, he said, “is not a charity.” Though what charity has to do with paying club staff a “living wage?” That is the question he was asked and the answer is still not clear.
“It would be much easier to PR a 25 percent increase,” Scudamore said.
Ed Woodward, the executive vice-chairman of Manchester United, responded to demands that it lower ticket prices by saying United “believe our tickets are fairly priced, appropriate to market."
United has every reason to be scared. The huge increase in revenue will make it easier to beat its traditional Champions League rivals in the transfer market, but the new deal will also make it more difficult for the club to qualify again for the Champions League because its domestic opponents will improve as well. Cutting ticket prices will only make matters worse.
The Premier League shares its TV money more evenly than any other league in Europe. The top clubs makes 1.6 times what the bottom club does. In Germany the ratio is 2:1, in Italy it’s 10:1 and in Spain its 14:1.
The four clubs that have won the league every year since 1995 gain their financial edge from other sources of revenue: rich owners, bigger stadiums, higher ticket prices, Champions League money and the greater sponsorship and merchandise revenue that success brings.
The increased TV revenue erodes those advantages.
Financial Fare Play rules are already cramping wealthy owners. This season, UEFA, the governing body of European soccer, fined Manchester City £50 million and made it play with a smaller squad in the Champions League as punishment for spending more than it earns.
This week, the Premier League was quick to say that it does not expect the foreign rights, which make up 40 percent of TV revenue, to rise as much when they are auctioned at the end of the season. They said that last time. Then the jump in international revenues pretty much mirrored the UK market.
For United, TV money represents just a third of revenue, even in years when it qualifies for the Champions League. For Southampton under the old contract, the figure, even without a UEFA Euro, was two thirds and for Everton 70 percent. A 70 percent jump in TV revenue won’t close the absolute gap between United and Everton. But it will mean that Everton’s total revenue will climb from around a quarter of United’s to more than a third.
In 2012-13, the Premier League clubs spent 71 percent of revenue on player wages and much of the rest on transfer fees. That’s unlikely to change. Lord Sugar, the former Tottenham owner, last week called the TV money “prune juice” because it will come straight out of the clubs.
Under pressure from parliament, the Premier League is reluctantly introducing its own Financial Fair Play rules.These set the deficit threshold way higher than UEFA’s but they do include a provision limiting clubs with a wage bill above £52 million (probably everyone except Burnley and Leicester) to a £4 million annual increase in player wages. But £4 million is a much bigger percentage increase at Everton or Southampton than at the Manchester clubs. And we won’t know until 2016, the date when enforcement begins, how serious the clubs are about following their own rules.
Under the Glazer family, United has been spending less of its revenue on player wages than anyone else.
Even so, the extra TV money may make United more willing to pay £120 million to Real Madrid for Gareth Bale, though that price probably went up as soon as Real heard about the new deal. But United is still shopping in the same store. Everton can upgrade.
Everton was 20th in the most recent soccer rich list published by Deloitte, the accounting and consulting firm. The extra revenue will lift the Toffees at least four places, past Galatasaray, Inter Milan, Napoli and Atletico Madrid. Those are clubs it can now outspend. The new deal also helps make every Premier League club look not just richer but more glamorous to any ambitious player.
There is little immediate prospect of any of the Premier League’s European rivals matching its growth.
The leagues with the second and third biggest TV revenues, Serie A in Italy and Ligue 1 in France, are both about to start new deals that represent only 10 percent rises in revenue. Their international rights are worth peanuts compared to the Premier League.
The Premier League contract threatens to cause chaos in Spain. La Liga remains the only major European league that allows the clubs to sell their own rights. That means Real Madrid and Barcelona earn more from TV than any English club: €140 million, or $159 million, each per year. That's more than 40 percent of the total in Spain. But in a country suffering an economic crisis, they have been under pressure to share.
The day after the Premier League deal was announced, Joan Collet, the president of Espanyol, Barça’s poor neighbor, called for the Spanish parliament to hurry through a law forcing collective bargaining.
"We are ready to halt La Liga if this does not come out in one, two or three weeks," Collet told Spanish radio.
The gorilla in the room remains the Bundesliga. Germany has more fans—it has twice the population of England and Wales—and those fans are richer. For the moment, they aren’t prepared to pay as much to watch.
While their team thrashed Hamburg, 8-0, on Saturday, Bayern fans held up a sign, in English and German, which read: “This ain’t no Premier League—No to the English model.” The fans own Bayern, as is the case at most German clubs, so they are likely to get their way.
The current TV rights, owned, as are most of the rights in England and Italy, by an arm of Rupert Murdoch’s Sky empire, are worth just €2.5 billion and that includes second division clubs.
The average attendance in the Bundesliga this season is almost 41,000. In the Premier League, it’s just over 36,000. But while the cheapest ticket at the most expensive English club, Arsenal, costs £96, the average price per match for Borussia Dortmund season ticket holders in £9.
That’s why, even though it fills its 80,000-capacity stadium each week and sells bratwurst that put Old Trafford’s prawn sandwiches to shame, Dortmund makes less than half as much in matchday revenue as either Manchester United or Arsenal, the two European clubs that make most from matchdays.
English fans look at the 25,000 fans forming the “Yellow Wall” in the South Stand at Dortmund and feel envy and nostalgia. Manchester United feels fear.
At Everton, matchday revenue will fall to just over 10 percent of the total under the new deal. It is just another financial area where most clubs in the Premier League cannot compete with United, Arsenal, Chelsea or City. But with the massive increase in TV revenues, that matters less. That money means Everton has more chance of competing where it counts: on the field.