The new television rights deal sent Premier League clubs’ revenue soaring to £1,932m in 2007/08 and revenues are estimated to have reached £2 billion in 2008/09 according to the latest Annual Review of Football Finance from the Sport Business Group at Deloitte. In a sign of football’s resilience to the economic downturn, Deloitte expects England’s top clubs will continue to grow revenues in 2009/10, albeit at a slower pace.
Dan Jones, Partner in the Sports Business Group at Deloitte, commented: “The domestic and international popularity of the Premier League continues to generate remarkable revenue growth. Between 1992 and 2008, revenues for the top 20 clubs grew at a compound annual rate of 16%, compared with 5.4% for the UK economy as a whole. Revenue increased by 26% in 2007/08 and Premier League clubs generated £800 million more revenue than their nearest rivals from the other ‘big 5’ leagues.
“It will, of course, be hard to maintain this pace in the immediate future. The new economic realities may lead to flat matchday revenues. While attendances continue to hold up well, many clubs have frozen or reduced ticket prices.
However, the stepped increases in the current domestic broadcast deal and the new UEFA Champions League TV deal make it likely overall revenues will edge up.”
The majority of the incremental broadcast revenue has been spent on player wages and transfers. Wage costs in the Premier League increased by £227m (23%) in 2007/08 to reach £1.2 billion, the largest annual increase recorded by the Premier League. Spending in both the Summer 2008 and January 2009 transfer windows reached new record levels with an estimated £675m investment in new players (gross spending).
Alan Switzer, Director in the Sports Business Group at Deloitte commented: “Despite this increase in wage costs, Premier League clubs improved their wages / revenue ratio to 62% and generated record operating profits in 2007/08 of £185m. However lower revenue growth in forthcoming seasons means clubs will have to focus on improving cost control – both wages and other operating costs – if profits are to be maintained.”
Other key findings of the Deloitte Annual Review of Football Finance 2009 include:
• The total European football market grew by £1.1 billon to £11.6 billion in 2007/08.
• Premier League clubs generated the highest revenue (£1.9 billion) of any league in Europe in 2007/08, followed by Germany, Spain and Italy (each £1.1 billion), and France (£0.8 billion).
• English clubs have regained their status as the most profitable in the world having lost this title to the Bundesliga in 2006/07.
• Total revenues for the 72 Football League clubs exceeded £500m for the first time. These will be boosted from the coming season by an improved broadcasting deal and the presence of Newcastle United. The enhanced broadcasting revenues should help Championship clubs address record losses which reached £102m in 2007/08.
• The top 92 English Clubs invested £187m in facilities in 2007/08, bringing the cumulative spending to well above £2.5 billion since 1992/93. Their high quality stadia has been a key driver of attendances which exceeded 30m from league games alone in 2008/09. The Championship is now the 3rd best attended league in Europe.
• Net debt in respect of Premier League clubs increased to £3.1 billion in 2007/08 up from £2.7 billion the previous season.
• Serie A was the fastest growing league with total revenues increasing by 34% to €1.4bn but posted a third year of operating losses.
• The Government’s tax take from the top 92 professional football clubs rose to £860m and will exceed £1 billion per year with the introduction of the 50% rate for earnings over £150,000.
Paul Rawnsley, Director in the Sports Business Group at Deloitte commented: “Whilst debt in the Premier League has risen, two-thirds of this debt is in respect of just four clubs – Arsenal, Chelsea, Liverpool and Manchester United – and around £1.2 billion is non-interest bearing ‘soft loans’. On the positive side of the balance sheet, these four clubs also had £1 billion of assets in respect of investment in stadia and other facilities and a further £450m from investment in players. Looking forward there will be an increased focus on clubs’ business models and financial sustainability. Debt is not necessarily a bad thing for clubs; as long as it is manageable within a club’s finances and is sustainable and repayable.”
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