How Does Premier League Television Deal Affect Chelsea’s Finances?

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Updated: February 19, 2015

“In 1986 there was no one that wanted to broadcast football. There was not even a highlights programme. From the dark days of stadium disasters and other things, it’s an amazing rise. We now put on a show that people want to watch and attend – and in ever increasing numbers. There’s more interest than ever before.”
– Richard Scudamore to BBC Radio 5

The Premier League television rights were auctioned off last week with Sky and BT winning the contract for a cumulative £5.136bn over a period of three seasons, starting 2016/17. In addition, BBC held the rights for ‘Match of the Day’ at £204m. The winning bid saw a 70% increase from the current deal at £3bn for three seasons, the period of which began in 2013. It is noteworthy that this television rights includes only the United Kingdom. The Premier League earns an additional £2.23bn from overseas broadcasting revenues currently. The overseas rights for the period starting 2016/17 season has not been auctioned yet, but it is expected to see a similar increase especially in the Asian and European markets.

There has been a lot of debate over how the new deal will impact the broadcasting revenues of other top European football leagues, with the authorities of some even expressing concern about the unprecedented increase in the revenues. While some publications have focussed on how the other leagues are planning to respond, some have opined that this might make the money won from participating in the Champions League redundant as more and more Premier League clubs will be able to afford top drawer players without qualifying for UEFA’s prestigious competition.

It is a given that this deal plays straight into the hands of the Premier League clubs, especially in the modern era of Financial Fair Play, but how much does it increase their revenues, in comparison to their European counterparts?

In order to make the comparisons convenient, henceforth we will deal with all financial figures in euros. For instance, the Premier League broadcasting revenues are currently worth €4.08bn and will be worth €6.9bn from 2016/17 onwards.

Financial Accounts of European Clubs - 2013/14

Financial Accounts of European Clubs – 2013/14 (In Million Euros)

The commercial revenues generated by the top five is what sets them apart from the rest. Barcelona’s case is unique as their total revenue is dependant on all three sources more or less equally. The only Premier League club featuring among the top five last season was Manchester United, who in spite of finishing seventh and getting a smaller cut of the broadcasting pie, broke into the top two of the Money League. It is obvious from the above infographic that clubs like Chelsea, Arsenal, Juventus currently rely on the revenue generated from the broadcasting rights to consolidate their positions in the top ten. Theoretically, only an increase in commercial revenues can put clubs like Chelsea, Manchester City and Arsenal in the same bracket as that of Real Madrid, Bayern Munich or Manchester United, when it comes to earnings. However, the new broadcasting deal will ensure that the Premier League clubs will have lesser dependence on player sales, match day revenue and (to a small extent) even commercial revenue to stay competitive while ably negotiating Financial Fair Play.

Revenue Distribution Plays A Crucial Role

The Premier League’s global appeal and the Premier League Founder Members’ Agreement ensures there is a parity between the broadcasting revenue earned by each of the clubs based on their seasonal performances. In other words, 50% of UK broadcast revenue is split equally between the 20 clubs, 25% paid in Merit Payments (depending on where a club finishes in the final League table), and the final 25% paid in Facility Fees each time a club’s matches are broadcast in the UK. All international broadcast revenue and central commercial revenue is split equally amongst the 20 clubs. On the contrary, in Spain, the La Liga clubs negotiate individually which allows Barcelona and Real Madrid to monopolize on the television rights money. Recently, both clubs have agreed to a clause which will allow them to receive only four-times the broadcasting revenue of the club with the least revenue.

In Italy the revenue is divided, with 40 per cent shared equally among all 20 clubs, 30 per cent based on clubs’ appeal and a further 30 per cent on the position in the previous season, the previous five years and historic classifications. Germany uses a point-based approach giving 40% weight to the running season (at the moment 2014/15), with its league position for each matchday for each club, added together. 30% weight is given to the preceding season (2013/14), 20% to the season before that(2012/13), and 10% to the one 3 years ago(2011/12).

The Serie A clubs negotiated their broadcasting revenues individually until 2010, following which they struck a deal with Sky and Mediaset worth €843m/season upto the end of this season. Starting next season, the broadcasting revenue will increase to €943m annually. In La Liga, €755m (national + overseas revenue) went to the clubs in 2013/14, but as we already know €386m (more than 50%) went to Real madrid and Barcelona alone with Atletico Madrid clinching another €96.5m. Overseas broadcasting revenues vary between €70-90m in Italy and Germany. The Premier League however, split €716m as overseas television revenue among its twenty clubs last season.

In the last negotiated deals, Bundesliga saw an increase of 40% revenue (the deal runs until 2016) while Lega Serie A saw an increase of mere 12% (the deal begins next season and runs until 2018). If we try to project the increase in broadcasting revenue of the Bundesliga for the next TV deal which will begin in 2016/17, same time as the latest Premier League deal kicks off and calculate a 50% increase (in a conservative manner) Bundesliga will set to earn €942m per season. That will still be less than half of the broadcasting revenue of the Premier League clubs. Holistically, the Premier League clubs will be far ahead of their European counterparts on broadcasting revenue. Except for a handful of clubs from Spain, Italy and Germany (namely Real Madrid, Barcelona, Bayern Munich, Atletico Madrid, Juventus) the Premier League clubs are bound to attract the hottest talents and will grow more competitive at the domestic as well as continental level.

How Much Do Premier League Clubs Stand To Earn?

Manchester United earned £60.8m in broadcast revenues in their title-winning 2012/13 season. The second-placed City earned £58m while Chelsea, who came third, received £55m. Last season, Chelsea again finished third but received £94.1m in TV revenue. The winners Manchester City walked away with £96.5m while runners-up Liverpool earned £97.5m (the highest among all clubs) because of an extra televised match. Twentieth-placed and relegated Cardiff City earned £62m, a sum slightly more than United had earned the previous season.

Next year, when the new deal comes into place, the Premier League winner will stand to earn upto as much as £155m/€210m while the wooden spoon clincher will receive £100m, an exorbitant amount for a club who will get relegated to the Championship.

To quote Dan Jones, editor of Deloitte’s Football Money League 2015, “Substantial broadcast revenue continues to be critical, especially that generated from participation in the UEFA Champions League. The most significant story in this year’s Money League is the influx of Premier League clubs as substantial uplifts in the league’s broadcast deals have translated into sizeable revenue increases at all clubs across the league, with every Premier League club reporting record revenues in 2013/14.”

All twenty Premier League clubs are already in the top 40 of the richest football clubs on the planet and if the trend continues, ninety percent of them will soon break the top 30 barrier. As money starts trickling down into the lower leagues, it will ensure better facilities and development of youth academies for those in the lower tiers of English football. A more competitive setup in the top tier, more available funds will ensure talented players from overseas come flooding in while lesser dependence on matchday revenues will be a boon for the matchgoing supporters, most importantly the new broadcasting deal will act as a FFP boost for the English clubs.

Author’s Note: The information about revenue distribution system has been sourced from Premier League’s official website, ESPN (Serie A) and Bundesliga Fanatic (Bundesliga).

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