#360business: EPL ends years of excess

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Di Maria (l) is the most expensive player in Britain.

For many in England, Financial Fair Play Regulations were four dirty words and a concept at odds to a league that had thrived with millions spent on some of the world’s best talent. 

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Here was Michel Platini, a man who it was long suspected had an anti-English agenda, trying to curb the spending power of the planet’s richest football league. It was a levelling of the playing field nobody wanted and greeted with anger, followed by scepticism over just how vigilant UEFA would be. 

Four years since it was implemented the jury is still very much out on Platini’s baby. The UEFA president admitted last month that while there is need for reform and a slight relaxation of the rules, the practice is “here to stay”.

However, what has been underplayed during the debate has been the beneficial effect it has had. That’s certainly the conclusions that have been drawn from Deloitte’s Annual Review of Football Finance, released this month. 

After 23 years meticulously studying the financial welfare of the English top flight in comparison to their European rivals in Spain, Germany, Italy and France, the figures for the 2013/14 season leapt out. Most notably the Premier League’s overall spending on wages compared to revenue, which fell from a concerning 70.6 per cent to a more manageable 58.4 per cent. 

In a presentation of the review at the Sofitel Dubai Downtown, Lead Partner of the Sports Business Group, Dan Jones, said: “The reason this has changed, in the numbers we’ve looked at, is UEFA brought their FFP regulations which requires people to spend only what they can afford, that requires balancing the books. 
“Historically, almost every dollar the clubs could find they’d spend on wages. So, the change over the last couple of years has been that for every extra $100 they’ve added $30 onto the wage bill. The previous two seasons it was for every $100 it was $60 onto the wage bill, so it’s a real turnaround and FFP has made that change.

“The wages to revenue ratio is a rough rule of thumb that’s proven to be remarkably resilient – 70 per cent is our red light level. If you’re spending more than 70 cents in the dollar on the wage bill it is unbelievably hard to balance the books. 

“If you’re spending under that figure it’s actually quite difficult to lose money. Which sounds blunt and far too generalistic but we’ve done the stats for 25 years and that’s what shows, regardless of how fast revenue grows.”

The Premier League’s wealth in football is unprecedented and it’s a figure that is only going to rise with the latest £5.14bn (Dhs29.7bn) TV deal struck this year with Sky and BT Sport, while the foreign broadcast rights are up for grabs next year and are likely to add, at least, another £2bn (Dhs11.6bn). 

Foreign money – 10 of the 20 clubs competing next season are owned by overseas investors – remains strong, and positive financial growth will only increase the level of interest from outside Britain in wanting a slice of the pie.
Jones added: “The league has always been fantastic at growing revenue but equally as that has increased, the costs have grown. 

“But in the season we looked at operating profits leapt from £80m to over £600m, which is a £500m turnaround in profit and that has been the biggest surprise to us. Nineteen of the 20 clubs have made a profit. A lot of that is down to the broadcasting contract, which boosted revenue substantially but the big clubs also made huge commercial deals, the league remains extremely strong on the attendance side – grounds are 95 per cent full every week – and, most importantly, they have controlled costs. 

“The revenue has gone up 29 per cent, normally that would see the wage bill also go up something between 25-30 per cent… but  the wage bill in the Premier League went up seven per cent. That is the key transformation that had happened in English football finances.  

“The crucial point is this – is this a turning point or a blip? 

“We think it’s a turning point and we think we’ve seen a seminal moment in football finance.”

But what of the rest of Europe?  The Bundesliga’s wage to revenue ratio fell below 50 per cent while there was a €147m (Dhs608m and 16 per cent) increase in sponsorship and commercial revenue. However, from a broadcasting point of view, the Bundesliga is the least successful of the ‘Big Five’ with just 32 per cent of their revenue from TV deals (Dhs2.96bn), compared with 59 per cent in Italy (Dhs4.13bn), 54 per cent in England (Dhs8.7bn), 49 per cent in Spain (Dhs3.92bn) and 40 per cent in France (Dhs2.5bn).

Jones said: “The Bundesliga has a fantastic reputation for being extremely well run and managed. 

“They have fantastic stadium facilities and very strong corporate relationships with it being Europe’s biggest economy but, in regards to the broadcasting, pay-for TV doesn’t work in Germany.”

The Premier League has the wealth, the Bundesliga stability but the most glamorous is arguably La Liga with the presence of Barcelona and Real Madrid, who dominate the competition (although the season in question was Atletico’s La Liga winning campaign) and the country’s football finances with the Clasico rivals’ revenues exceeding Dhs2.4bn compared to Dhs703m for Atletico and just Dhs177.9m, on average, for the remaining 17 clubs. It’s that divide that has seen the Spanish Government step in to try and address the distribution of TV rights. 

Jones added: “On one level you would look at La Liga and say it’s a spectacular success. They have probably the two most glamorous and well-followed brands in world football but the league is undergoing a major change with the move to redistribute the TV rights. 

“One of the things that gives the Premier League the lead is the intensity of the competition. Yes, the Premier League can only be won by three or four clubs but the key is that when I turn on my TV to watch a game, or whenever I’m thinking of buying a ticket, am I certain of the outcome at that point? If Burnley are playing Manchester United, you expect United to win but you don’t know, you see those shocks every season. 

“In Spain it’s much more of a pattern. It’s Barcelona at home and how many will they score? That makes it harder to sustain the interest and the value of the league.”
The 15 per cent revenue growth of Ligue 1 (Dhs831m) has been driven by the emergence of Paris Saint-Germain with commercial deals up 42 per cent and attendances at their highest since 2008/09.

But the most interesting case is that of Italy. Once the heavyweight competition on the continent, Serie A has gone through an identity crisis in recent years.

“Italy has a few problems it really needs to handle,” Jones added.

“One, it has a very successful and thriving broadcast market but it’s overly dependent on that, and the reason is that Italia ‘90 was the last wave of stadium development.  So it now looks pretty tired and they have the crowd control issues that England was suffering in the 1980s. 

“Because of their struggles to create revenue, they’re also struggling to control costs as they’re competing for the same players in that very intense global market. 

“The good thing is change is happening with investors coming and there is a shining example for the rest, which is Juventus. They came from being in a terrible position because of the Calciopoli scandal, to developing a new stadium – and they were very rational about the way they did that – to then returning to success on the pitch. 

“Juve have shown the way and I’m sure the Milan clubs, Roma and the rest will follow.”

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