BackHow money helped English football clubs find their groove again in Europe
The resurgence of English football clubs rides on new TV deals and ownership changes, which kicked in earlier this decade and gave them new money powerThis season, all four finalists in the two premier European club competitions are from England
PremiumBarcelona and Everton in the same sentence is a rarity. One is a club that epitomizes imagination and success in modern-day football. The other is consigned to find beauty in gritty environs. And yet, they come together on a page in the annual document of the body that governs club football in Europe.
That page lists the top 20 clubs in Europe by their TV revenues in 2017. Of those 20 clubs, 17 are English. Barcelona is the highest-ranked non-English club. Ranked number seven, it earned €154 million that season. One spot below high-flying Barcelona sits middling Everton, with just €1 million less in TV revenues earned.
That dichotomy between success and TV revenues is palpable. A middling club like Everton is earning big TV revenues simply because of the league it plays in: the English Premier League (EPL). Those large, and growing, TV revenues are not only changing the financial complexion of English clubs, it’s also a big reason propelling English clubs back to the highest echelons of success in Europe.
This season, all four finalists in the two premier European club competitions are from England and an English club will win the top prize for the first time since Chelsea in 2011-12. It’s premature to say whether this power shift is for good. What can be said is that EPL clubs, who have historically enjoyed a financial advantage, are in a new trajectory.
Worryingly for clubs from other countries, EPL clubs are opening a financial gap to them. As recently as 2012, EPL clubs accounted for 21% of revenues earned by tier-I clubs in Europe. It led the other four powerhouse leagues: Spain, Germany, Italy and France. In 2017, the share of England increased to 27%, even as it remained stagnant for the other four countries while countries lower down saw an erosion.
A broadcasting deal drove this shift. For the three-year period beginning 2013-14, EPL managed to sell its broadcasting rights for £3 billion, a 69% increase over the preceding three-year period. For the subsequent three-year period beginning 2016-17, once again, it negotiated a 70% increase to £5.1 billion.
Those two TV deals placed a lot more money in the hands of clubs, some of whom also had new ownership or were showing more ambition. This set into motion a phase of spending on players and managers that was unmatched.
One measure of this is managerial movements, some of which traces to the two standout English clubs today: Manchester City and Liverpool. In October 2015, Jurgen Klopp joined Liverpool. In the summer of 2016, Pep Guardiola took charge at Manchester City, Jose Mourinho at Manchester United and Antonio Conte at Chelsea. They joined Arsene Wenger at Arsenal and Mauricio Pochettino at Tottenham Hotspur.
It was an intriguing field of top-flight managers, and they spent big. English clubs were always spending ‘slightly more’ to buy players than their counterparts. As the new managers shaped their ambitions, that ‘slightly more’ changed to ‘a lot more’. In 2012-13, EPL clubs spent a collective €775 million on new players, with the next league (Italy) being 27% behind. In 2017-18, EPL clubs spent €2.1 billion, for a 53% advantage to the next league (Italy).
EPL clubs have the money to spend, both in absolute and relative terms. In the fiscal year 2017, Spain’s La Liga, the next best league in terms of financial health, was 46% behind the EPL on revenues and 70% on net profit (see chart 3).
Much of this creeping advantage of the EPL is built on new broadcasting revenues. Fiscal year 2017, the first year of a new TV deal, saw EPL post its largest-ever year-on-year increase in domestic broadcast revenues: €1.2 billion (or 19%). By comparison, the first year of the current La Liga (Spain) and Ligue 1 (France) domestic rights cycles added €314 million and €116 million, respectively.
That year, TV accounted for 54% of the revenues of EPL clubs, the highest among top leagues. In the EPL, some part of broadcast revenues is distributed equally among clubs, and some part is based on performance and the number of times a team is selected for TV coverage.
TV money has more leverage than any other revenue head in rubbing off on other revenue heads. Greater visibility drives sponsorship and commercial deals. Footballing success also means more prize money, something that Manchester City, Liverpool and Tottenham Hotspur will benefit from this year. Come 1 June, when Liverpool and Tottenham take the field in Madrid for the biggest prize in European club football, it will symbolize how far English clubs have come this decade—and how far they can go with this money ballast.
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