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The economics behind English hegemony in European club football

Leicester City's English striker Jamie Vardy (C) celebrates their win on the final whistle in the English FA Cup semi-final football match between Leicester City and Southampton at Wembley Stadium in north west London on April 18, 2021 (AFP)Premium
Leicester City's English striker Jamie Vardy (C) celebrates their win on the final whistle in the English FA Cup semi-final football match between Leicester City and Southampton at Wembley Stadium in north west London on April 18, 2021 (AFP)

  • English football clubs are in the midst of a golden run, and their dominance on and off the field is now upending the world of football.

After months of secret talks, 12 big football clubs of Europe declared on Sunday that they are launching a breakaway European club competition, upending the world of football as we knew it.

It’s telling that 6 of the 12 clubs who have come together to form the European Super League are English. English clubs are in the midst of a golden run, on and off the field. First came the money. The talent followed. The results are, increasingly, flowing. Each is feeding into the other, expanding the circle of football as sport, entertainment and commerce.

English club football has already increased the revenue gap with the other four main leagues—in Germany, Spain, Italy and France. All this has happened in less than a decade, piece by piece.

The origins of this hegemony was a broadcast deal. For the 2013-14 season, the English Premier League (EPL), the top club football league in England, got Sky Sports and BT to shell out 80% more for TV rights over 2012-13. Three years later, it negotiated another 45% hike, shows Uefa data.

Both deals boosted England’s financial standing in Europe. In 2012-13, the gap between the EPL broadcast deal and the next best TV deal in European club football was 30%. By 2016-17, when EPL got its second raise, that advantage had increased to 115%. Even in 2020-21, the EPL deal was 77% higher than the next best.

Spending Spree

EPL has one of the more equitable structures in Europe for distribution of TV money. In the financial year 2018, the ratio of TV rights earned by the top EPL club to the median EPL club was 1.4—the lowest among the five top leagues. In Spain, this was 3.1. For the rich EPL clubs, the new TV deals meant a revenue kicker. For the less-rich EPL clubs, it meant financial muscle to think bigger.

Within three years of the first deal, top managers like Pep Guardiola, Jurgen Klopp and Jose Mourinho moved to the EPL. Big clubs like Manchester City and Liverpool began reimagining the scale of their ambitions, and spent big to buy players. Today, the EPL is the best-paid league. According to transfermarkt.com, five of the 10 clubs with the most-expensive squads are English. Further, among the top 30 clubs that pay the most to their players, 14 are English.

Broadcast Boost

Even though English clubs are paying big money, their wages to revenue ratio (59%) is lower than all top leagues except Germany (53%). By comparison, France was 76%, Italy was 65% and Spain 64%. This is largely because of the revenue advantage enjoyed by EPL. In 2018-19, according to Uefa, the EPL’s total revenues were 5.4 billion euros—72% more than the next best (Germany). In 2008-09, the revenue advantage of the EPL was about 40%.

TV rights have been the key differentiator. In the EPL, TV rights account for 53% of all revenues. For the other four leagues, it ranged from 34% to 47%. Money from TV rights is sticky and offers healthy growth. As various sporting leagues including cricket’s Indian Premier League (IPL) have shown, TV rights can be the main driver of a revenue surge. It’s also more resilient to external shocks like the ongoing pandemic.

Field Clout

After cash and talent, the EPL is now navigating its third leg of dominance: on the field. Among domestic leagues, the EPL is seen as the most competitive. However, in Europe, success has eluded English clubs. Even that is now changing. In the first half of the last decade, English clubs filled only four of the 40 quarter-finals slots of the Uefa Champions League. In the second half of the decade, this increased to 11—the most among all leagues.

This year too, English clubs led, with 3 teams in the last eight. Last week, two of them advanced to the semi-finals: Manchester City and Chelsea. A win will burnish City’s credentials as a super-club. It could also make it more attractive to Lionel Messi, the world's most bankable player who currently plays in the Spanish league and whose contract comes up for renewal later this year. If City manage to lure Messi, it will further cement its hegemony in Europe.

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