Revolution Annual Review Of Football Finance – Highlights
RevolutionAnnual Review ofFootball Finance – HighlightsSports Business GroupJune 2015Annual Review of Football Finance 2015 Sports Business Group1
Deloitte Annual Review ofFootball Finance 2015Our first football finance report was produced inJune 1992, a couple of months ahead of the start ofthe inaugural Premier League season. For more than20 years we have documented clubs’ business andcommercial performance, striving to provide the mostcomprehensive picture possible of English professionalfootball’s finances, set within the context of theregulatory environment and the wider European game.The Sports Business Group at Deloitte provides anin-depth analysis of football’s finances in its 52 page fullreport, which includes:Europe’s premier leaguesScale of the overall European football market;Comprehensive data and analysis of trends for clubs inthe ‘big five’ leagues including revenue breakdowns,wage costs, operating results, and match attendances;Factors impacting on clubs’ future revenues; Keyfinancial indicators for six more European leagues.Industry insightsOur perspectives on six topics facing football, includingthe reasons for continued interest from investors inEnglish football clubs, the challenge of the EuropaLeague, the importance of measuring player academysuccess, the development of the Indian Super League,the continued strength of premium sports rights andthe increased involvement of Middle Eastern investmentin football.DatabookThe full report, incorporating a pull-out Databook,includes over 8,000 data items, prepared on the basis ofour unique and long-established methodologies.The following sections of the full report includecomprehensive data and analysis of the business driversand financial trends for clubs in the top four divisionsof English football, with a particular focus on PremierLeague and Championship clubs. The analysis coversthrough to the end of the 2013/14 season and we alsoinclude some pointers to future financial results.Revenue and profitabilityAnalysis of matchday, broadcasting and commercialrevenue streams; Revenue projections to 2016/17;The financial impact of participation in UEFA clubcompetitions, promotion and relegation; Operatingresults and pre-tax profits and losses; Averageattendances and stadium utilisation in the PremierLeague and Football League.Wages and transfersAnalysis of clubs’ total wage costs; The relationshipbetween revenue growth and wage costs; Club-by-clubanalysis of wage costs including rankings, comparisonto on-pitch performance, and wages to revenue ratios;Estimated total player wages; Cost control regulatorydevelopments; Player transfer spending; Transfer flowsbetween the top four divisions and to agents.Club financing and investmentAnalysis of the sources of net debt financing, profilingthe aggregate net debt position of Premier League andChampionship clubs, as well as an analysis of the topten clubs; Capital investment by clubs in the top fourEnglish divisions over the five years to 2013/14, with afocus on the clubs with the highest levels of investmentin 2013/14.Please visit our website at www.deloitte.co.uk/sportsbusinessgroupto access/download a free copy of theDeloitte Annual Review of Football Finance 2015 – Highlightsand/or to purchase a copy of the full report.Full report price 1,000Discounted price for students and educational establishments 100.Half of all profits from sales of the report will be donated to Prostate Cancer UK.Prostate Cancer UK is a Deloitte National Charity Partner for 2013-16.2Prostate Cancer UK is a registered charity in Englandand Wales (1005541) and in Scotland (SC039332).Registered company 2653887.
Contents2Foreword4Delivering results worldwide6Distinctive advice to football7The Wanted8Highlights: Europe’s premier leagues & Revenue and profitabilty11Visionary leadership12Highlights: Wages and transfers & Club financing and investment14Sphere of influence15It’s just not cricket16The Academy rewards?Edited byDan JonesSub-editorAdam BullAuthorsAlex Bosshardt, Matthew Green, Chris Hanson, James Savage,Chris Stenson and Alexander ThorpeSports Business GroupPO Box 500, 2 Hardman Street, Manchester, M60 2AT, UKTelephone: 44 (0)161 455 8787E-mail: tsbusinessgroupJune 2015Annual Review of Football Finance 2015 Sports Business Group1
ForewordWelcome to the 24th edition of the DeloitteAnnual Review of Football Finance, compiling ouranalysis and commentary on the recent financialdevelopments within and prospects for the world’smost popular sport.New Power GenerationWe have chronicled the development of the business offootball in England and across Europe for over twentyyears. In that time we have seen two consistent trendsrun in tandem; first, spectacular and relentless revenuegrowth across Europe’s biggest clubs and leagues andsecond, what we termed “football’s biggest challenge”as far back as 1995, an even more rapid increase in playercosts. In recent years we’ve observed and welcomed thedevelopment, implementation and subsequent effects ofcost control regulations within the game.We suggested last year that Financial Fair Play couldbe the most significant development in the footballbusiness since the Bosman ruling. Early signs are thatthis is the case. Indeed the change in club profitabilityin 2013/14 was more profound than anything we couldhave forecast. This year’s edition may mark a turningpoint in football finance and the dawn of a new age ofsignificant profitability for Premier League clubs.England’s top division has passed the 3 billion revenuemark for the first time and widened the gap to its nearestrival, the Bundesliga, to over 1 billion. The PremierLeague now generates more revenue than La Liga andSerie A combined.The Premier League’s virtuous circle of compellingcontent attracting ever increasing broadcast revenues,which in turn attracts some of the best coaches andplaying talent from around the world, complementedby capacity attendances at its stadia is a familiar one toreaders of this publication.Previously, the biggest failing in a business sense ofEngland’s top flight was its failure to convert its brandand market leadership into profits. This year changesthat, with the Premier League reporting its first pre-taxprofit since 1999. This record breaking profitability maymove clubs from being seen as exciting and enticingtrophy assets to being recognised as businesses capableof delivering consistent profits.2From a costs perspective, UEFA’s Financial Fair Playbreak-even requirement continues to make an impact.In the past two seasons only 31% of revenue growthacross Europe’s ‘big five’ leagues has been spent onwages, in the two years preceding that it was 61%.The path to profit for the Premier League has not beenone solely of regulatory led cost control; these factorshave coincided with substantial revenue increases acrossthe league. All 20 Premier League clubs are now rankedin the top 40 globally in terms of revenue, with eventhe smallest still earning enough to rank in the top sixof any of the other ‘big five’ European leagues. Thiscontinues to be underpinned by the strength of thePremier League’s broadcast deals, driving a 48% upliftin the combined broadcast revenues of Premier Leagueclubs in 2013/14.Sign of the TimesThe scale of the financial superiority of the PremierLeague is clear and explored in greater detail in Europe’spremier leagues and Revenue and profitability.However, such is the size of the Premier League’s financiallead, that it is important to consider what this meansfor the wider football industry, including other majorEuropean leagues as well as the rest of the Englishfootball pyramid.On a continental level, it is difficult to see any of theother ‘big five’ European leagues closing the gap to thePremier League in the near term, let alone catching upwith them.Unsurprisingly, the growth of England has causedEuropean peers to cast their eyes across the Channelto see how this financial success has been achieved.There is clear evidence emerging in some leagues ofchange in areas that have traditionally hindered the sortof league wide growth English clubs have benefitedfrom. For example, Spain’s La Liga is closer than everto moving to the collective selling of broadcast rights,intended to deliver more equal and increased revenuesacross the league. Meanwhile in Italy, Juventus continueto demonstrate the benefits that could be achieved forSerie A clubs through investment in, and improvementof, clubs’ matchday facilities. More recently in Germany,leading football figures have commented on their desireto see more competition in, and hence more revenuefrom, the broadcast market.
Nonetheless, while there are undoubtedly areas ofpotential further growth for Europe’s top leagues, thisyear’s report reconfirms that the Premier League hascemented its place as the “world’s favourite league.”The Premier League and its clubs have gained first moveradvantage in becoming the leading imported league ina number of key foreign markets, leaving other leagueswith the difficult task of not only competing against thePremier League but also domestic football properties aswell as the UEFA Champions League for the hearts andminds of broadcasters, sponsors and fans alike.Diamonds and PearlsThe most obvious threat for these leagues fromEngland’s increased wealth is in the global arms race forplaying talent. With relatively few barriers to movementfor players, particularly within Europe, England’sincreased means clearly gives Premier League clubs agreater purchasing power than ever before.There are of course very notable exceptions to thisbroad picture of market leadership for England; whilethe general observation that Premier League clubs havegreater financial firepower than ever compared withtheir continental peers is true, it is still the case that afterboth the 2012/13 and 2013/14 seasons the PFA Playerof the Year ultimately left the Premier League for LaLiga. Therefore the battles for the greatest talents willstill rage amongst Europe’s elite clubs, but the PremierLeague’s resources will continue to allow it to have anunmatched level of strength in depth, as demonstratedby the fact it provided more players than any otherleague for the 2014 FIFA World Cup, as we expect it willagain at both Euro 2016 and the next World Cup.Despite this, Europe’s other leagues can boast ofbeating the Premier League’s finest where it reallymatters. While the Premier League appears in rudefinancial health relative to its European peers, this hasnot been reflected by performances in Europe on thepitch by its clubs. 2014/15 is the third consecutiveseason in which no Premier League team has featuredin the UEFA Champions League final. Similarly thecompetition where the Premier League’s purchasingpower should arguably be of greatest advantage, theEuropa League, has only had one winner and two otherEnglish finalists in the last ten years.Under the Cherry MoonWhile the emergence of the Premier League clubsinto profit is of both continental, and even globalsignificance, this year’s numbers again bring into sharpfocus the impact the league has domestically. The sizeof the Premier League prize grows ever greater and thisyear again demonstrates that the desire to reach theleague, by those clubs in the Championship has neverbeen greater. While we saw all bar one of the PremierLeague clubs achieving operating profits, only threeChampionship clubs were able to achieve this. Withwage costs still exceeding revenues across the divisionas a whole, only increases in Premier League parachutepayments were able to stop the league from having atruly disastrous financial picture. For all the dreams thathave been turned to reality at Bournemouth, The FootballLeague is right to be trying to prevent dreams turning tonightmares at other clubs through overspending.The Beautiful ExperienceWe have previously remarked that “despite the generallack of profitability, investors continue to be attractedto European football clubs”. The transformation ofPremier League club profitability reported here will fueleven greater global investor interest in Premier Leagueclubs. With significant future revenue growth alreadysecured through the recently agreed domestic broadcastrights deals from 2016/17 to 2018/19, as well as thesuccess of cost control regulations, the risks associatedwith investment in Premier League clubs seem to bediminishing. However, as other investors have found totheir cost, there are no guarantees. It is a fact that 15%of Premier League clubs will be relegated each year andwhile parachute payments ensure the fall should not befatal there is no guarantee of a rapid return to the richesof the Premier League.For YouFinally, I would like to thank my colleagues, Henry Wongand all those from across the football community whohave helped us compile this year’s report.We hope you enjoy this edition.Dan Jones, l Review of Football Finance 2015 Sports Business Group3
Delivering results worldwideTournament financialreviewFinancial review andbenchmarking of themen’s professional tennistour tournaments.Strategic ProgrammeManagementAssistance to the BritishOlympic Association inits preparations for theOlympic Games inRio 2016.4Economic impact studyStudy regarding theeconomic impact of theNFL International serieson London and the UK.Feasibility of hosting amajor eventFeasibility study of Irelandhosting Rugby WorldCup 2023.Sports media strategySupport in developingITN’s strategy within sport.Tender processassessmentAssistance with the ECB’sdesign of a tender processfor the award of MajorMatches.Economic impact studyEconomic impact study ofthe 2014 FIBA BasketballWorld Cup in Spain.Economic impact studyEconomic impact studyof the Alltech FEI WorldEquestrian Games 2014in Normandy.Strategic adviceSupport to FIBA onstrategic projects.
Deloitte has a unique focus on the sports sector, inthe UK and across the world. Our experience,long-standing relationships and understanding ofthe industry mean we bring valuable expertise toany project from day one.StakeholderconsultationsAssisting the InternationalCycling Union with itswide-ranging stakeholderconsultation programme,“A Bright Future forCycling”.OrganisationalbenchmarkingProvision of consultancyservices for FC Zenitregarding governance andorganisational structure.Major eventfeasibility studyFinancial feasibility studyof a European Games.For over 20 years we have worked with more sportsorganisations than any other advisers.Our specialist Sports Business Group at Deloitte providesconsulting, business advisory and corporate financeservices including: Business planningRevenue enhancement and cost controlMarket analysis and benchmarkingStrategic reviewEconomic impact studiesVenue feasibility and development servicesSports regulation adviceDue diligenceCorporate finance advisoryBusiness improvement and restructuringForensic and dispute servicesDeloitte are also audit and tax advisers to manysports businesses.For further details on how Deloitte can add value toyour project and your business, visit our websitewww.deloitte.co.uk/sportsbusinessgroup orcontact Dan Jones.Telephone: 44 (0)161 455 8787Email: sportsteamuk@deloitte.co.ukDue diligenceCommercial due diligenceto support the acquisitionand re-financing ofInfront Sports & Media.Commercial planningAssistance with theRussian OlympicCommittee’s commercialstrategy post Sochi 2014.OrganisationalstructuringAssistance with thedesign of the optimumorganisational structurefor the Saudi ArabianFootball Federation .Annual Review of Football Finance 2015 Sports Business Group5
Distinctive advice to footballDeloitte bring an unparalleled breadth of services,expertise and experience to support our clients inthe football business.Our clientsClubsConfederationsLeaguesInvestors, owners andfinanciersNational associationsBroadcastersSports marketingbusinessesLocal and nationalgovernmentSponsors andcommercial partnersOur servicesBusiness planningand strategyBenchmarking and bestpractice adviceClub licensing and costcontrol regulationsEconomic impactstudiesGovernance andorganisational designFinancial and commercialdue diligenceLeague and competitionrestructuringBusiness and venuefeasibility studiesFinancial budgetsand projectionsTicketing and hospitalitystrategyAdvice on thedevelopment of stadiaand training facilitiesAcquisition, disposaland debt advisoryCustomer data analyticsand fan surveysTheir resultsWell informedinvestment decisionsIncreased matchday andnon-matchday revenuesGreater commercialincomeEffective leaguestructure, operation andcompetitionImproved costmanagementPowerful informationto influence keyshareholders6Improved governanceand risk managementHigher ticket sales,stadium utilisation andattendancesCompetitive advantagefrom better data andindustry insightsSound broadcast andcommercial rightsstrategiesSuperior businessperformanceSmooth transitionto new investmentand financing
The WantedInvestors have consistently been attracted toPremier League football clubs, with two-thirdsof the 2014/15 season’s top flight clubs havinghad a change of majority ownership in the lastdecade. This attraction has often been based on theprestige of owning a Premier League football club,seen by many as a global trophy asset, providingenhanced business profile and access to importantrelationships. However, where potential investorshave tried to justify an acquisition with a rationalbusiness case, most have been left disappointed, orat least reliant on profiting on the sale to anotherinvestor, as despite the annual record revenues, thelosses have also continued to grow.It is likely that the list of interested investors, in bothPremier League clubs and Championship clubs withaspirations of promotion, will have grown significantlyfollowing the announcement that – for the first time in15 years - Premier League clubs generated a collectiveprofit in 2013/14. Particularly as this profit was spreadacross the clubs, with all but one making operatingprofits and once player trading, net interest chargesand the amortisation of player contracts have beenaccounted for, 14 making a pre-tax profit.Investor interest will have been strengthened further bythe knowledge that the factors required for this profit tobe achieved on a consistent basis are already in place,both in terms of revenue generation and cost control.The 2013/14 profit was predominantly driven by thefirst year of the much improved three year domesticand overseas Premier League broadcast contracts.The next deals will commence in the 2016/17 season,with the value of the live domestic element alreadyconfirmed to be 70% higher than the current deal.This gives investors certainty that this is not a bubbleabout to burst; the opposite is true with demand frombroadcasters continuing to grow.Equally important to many investors are the financialregulations, introduced by UEFA at a European level andby the Premier League and Football League domestically,which encourage a more substantial balance betweenclubs’ costs and revenues. Whilst these rules doallow some overspend on the income generated, andactively encourage investment in facilities and youthdevelopment, they also provide some limitations onthe amount investors may be expected to lose. This isespecially useful during negotiations with players andagents and in helping to set fans’ expectations of theowners’ spending.Given the increasingly global nature of Premier Leaguefootball many of these interested suitors will be investorsfrom overseas. With matches broadcast to 645 millionhomes across 212 territories, appearances by playersfrom over 50 countries and the majority of clubs withmain sponsors from overseas, it is unsurprising that morethan half of the 2014/15 Premier League clubs have amajority owner born outside the UK. Improved financialresults will only serve to increase global inte
both the 2012/13 and 2013/14 seasons the PFA Player of the Year ultimately left the Premier League for La Liga. Therefore the battles for the greatest talents will still rage amongst Europe’s elite clubs, but the Premier League’s resources will continue to
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