A look into the most watched sports league, having an estimated viewership of over 4 billion.
The English Premier League is very likely the most popular sports league in the world. It is the most watched sports league, if television viewership numbers are anything to go by. 643 million homes and and an estimated viewership of over 4 billion. Closer to 4.5 billion, according to some estimates. And most non-football fans only hear players’ names when they are associated with the Premier League. EPL is, of course, inspiration for the IPL in India, which is how many cricket fans came to know of it.
So let’s do a quick history of the EPL to understand this behemoth of sport. It was started in 1992 when members of an older league called the Football League First Division broke away to form something called the FA Premier League. Now, by old, I mean really old. The older Football League was around since 1888 and now goes by the name EFL or English Football League, now a second level division, one notch below the EPL.
The FA Premier League was formed by the clubs to take advantage of lucrative television broadcast deals. Another reason was that football in England was crumbling. Bad stadiums, hooliganism, poorer facilities than European clubs all came to a head in 1985 with the Heysel Stadium disaster. Liverpool fans charged at Juventus fans during a European Cup final and eventually 39 Italian football fans died when they were crushed against the wall. English clubs were banned from Europe for five years. English players moved abroad.
That five year break was followed by Manchester United winning the UEFA Cup in 1991. By this time, English football clubs had started approaching their business like a, well, business. The top clubs were dictating television and sponsorship income. The first "big money" deal, in hindsight, was in 1988 when ITV signed a 44 million pound contract, or 142 million dollars in today's money.
Soon, the top clubs, like all good businesses, realized the potential of what they had and broke away to form the FA Premier League. TV rights for the first five seasons went to BSKyB for 304 million pounds. One instance of irony here - the previous broadcaster ITV, which helped form the new league, lost out on television rights to Rupert Murdoch's BSkyB. The inaugural season of the premier league had 22 clubs.Basically, it was about the money. And it was a good decision. According to a report from the Ernst & Young Economic Impact Assessment, the EPL and its 20 clubs contributed a massive £2.4bn to the UK Exchequer in the 2013/14 season. The EPL now generates around 2 billion euros in television rights. By the end of the 2014-15 season, the 20 teams in the EPL earned a combined 1.6 billion pounds. Two years later, that rose to 2.4 billion pounds.
The FAPL, or Football Association Premier League Ltd, is the main body, owned jointly by 20 clubs.
Each club is a shareholder and has a say in contracts and changes. It’s a rather corporate structure at the agency that runs the EPL. A chairman, a chief executive, and a board of directors oversee the daily operations of the league. The present chairman is Dave Richards, a businessman and a man who ran engineering industries before joining Sheffield as director in 1989, with no history of playing top flight football. That should give you an idea of the top echelons of the Premier League. Businessmen run the show.
The EPL has the highest revenue as far as football leagues go. It places fourth highest in a list of professional sports leagues as per revenue. In 2016-17, the EPL generated 5.2 billion euros of revenue. Only the NBA, Major League Baseball and the NFL make more money. The Bundesliga and La Liga are way behind at around 3 billion euros. For a simpler perspective, the IPL made only 480 million euros in 2016. In 2010, the EPL won an award for business.
Yep, the sports league won an award from the Queen for business. The official entry reads, “Queen's Award for Enterprise in the International Trade category.” The press relase reads, ‘‘The Premier League has been recognised by Her Majesty The Queen for its outstanding contribution to international trade, and the value that it brings to English football and the UK broadcasting industry.” The article notes that the Premier League was conferred the Queen's Award for Enterprise primarily for the sale of television rights to foreign broadcasters and doubling overseas income from £108m per annum in 2007 to £250m per annum in 2009.
There you go. Even the Queen Of England is a football fan and watches the EPL. I wonder what she makes of the fact that England haven’t done well in World Cups for 20 years now…In 2014, the league made a net profit of 78 million pounds.
Which brings us to the teams themselves. The clubs, and the crazy passionate fans that are at the heart of this ridiculously popular football league.
The EPL has 20 clubs. We know most of them. Nine of the twenty-two founding clubs are competing in the 2018–19 season. Six of them – Arsenal, Chelsea, Liverpoool, Man U, Tottenham and Everton – have competed every year since ‘92.
Fun Fact: Cardiff City and Swansea City are founding members but are considered Welsh clubs. Why Wales is considered a separate thing, I’ll never know.
Deloitte, those analyst guys, have a list they call the Football Money League. It lists the top football clubs by revenue. The most recent list had 30 entries and 14 of them were English clubs with a combined revenue of 4.4 billion euros. These clubs essentially split the money the league earns as a whole. They have a ratio where the top club earns a percentage higher than the lowest performing club. When the EPL started, this was around 2.1 but the gap closed to around 1.6 in 2017-18. What this means is, when total central revenues were distributed in 2017/18, the ratio between the maximum and minimum a club received was 1.6:1, i.e. the highest-earning club received 1.6 times the amount received by the lowest-earning club.
Yet, the EPL story only gets better. Amazon recently acquired the rights to show Premier League matches in the UK. Press reports says this confirms “a new era in which digital platforms increasingly compete with traditional broadcasters to screen live sport.” In layman terms, most young people have ditched the TV and replaced it with the internet.
And now Amazon has signed a deal for streaming 60 EPL matches over three seasons. Amazon secured one of the secondary, 20-match packages that remained unsold when the successful bids were announced for broadcast rights. Once again, the EPL wins, making money off matches that enjoy limited viewership. Prior to that, in February, came an announcement that broadcasters Sky and BT had paid a combined £4.46bn for domestic screening rights. The Financial Times noted that “For the Premier League, huge increases in the value of its domestic television rights made it the richest division in world football, allowing English clubs to make record transfer signings and offer higher wages to superstar footballers than their European rivals.”In addition to this, the Premier League announced that member clubs agreed to a new formula for sharing any future increase in international broadcast revenue from the 2019-20 season onwards. The League currently distributes all international broadcast revenue equally between the clubs.
So I’ll explain in bullet points how the member clubs of EPL share their revenue from the league:• 50% of UK or domestic broadcast revenue is split equally between the 20 clubs
• 25% of UK or dmomestic broadcast revenue is paid in Merit Payments (or prize money as per the standing in the table)
• 25% of UK broadcast revenue 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 among the 20 clubs.
Now, remember that maximum-minimum ratio we talked about? “The ratio between the maximum and minimum a club receives is 1.6:1, i.e. the highest-earning club receives 1.6 times the amount received by the lowest-earning club.”
From 2019-20, member clubs will continue to share current levels of international revenue equally, but any increase will be distributed based on where they finish in the League. The new formula for sharing any future increase in international revenues caps the ratio at 1.8:1. This means the maximum that a club can receive in total central revenue payments is 1.8 times the amount received by the lowest-earning club. If future revenues rise to a point where the limit is reached, additional income will be distributed so the 1.8:1 ratio is maintained.
The Ernst & Young Economic Impact AssessmentI mentioned earlier – it stated that, in 2014, the League and its clubs supported over 100,000 jobs while making a contribution of £3.4bn to the United Kingdom’s GDP. Another estimate stated that the Premier League attracted 800,000 visitors to the UK to attend matches. An average of $433M was bet on Premier League games every month. And the guys at EY are convinced this will hold steady for a while. EY’s then chief economist Mark Gregory said, “The success of the Premier League, which is grounded in the quality of the football competition, has created a ‘cycle of growth’. This should help ensure that the significant contribution to the UK economy and society will continue to increase in years ahead.”
As one sports website observed a couple of years ago, Spain’s La Liga, home of Real Madrid and Barcelona, earns around €1 billion less than the EPL. Real Madrid and Barcelona, which have individual contracts with broadcasters, earned around €140 million per year - considerably more than the Premier League top-earners - but the financial distort in La Liga is imbalanced to a fault. At the end of the 2013-14 season, Valencia made €48 million and Atletico Madrid earned €42 million, compared to €74.5 million – the lowest in the Premier League - made by Cardiff City, which was relegated! Cardiff’s Spanish counterparts Almeria earned a relatively paltry €18 million.Any talk of big bucks needs a comedic analogy, so here goes - the Premier League’s massive monetary contribution could pay the salaries of 93,000 British policemen – that’s over 90% of all policemen in England and Wales.
Big bucks in the EPL are a result of big spending by the clubs. And the biggest clubs spend a ton of money on players and make a ton of money off these players. The EPL’s top flight is swimming in money, and clubs like Chelsea, Manchester United and Manchester City spend most of their moolah to bring in quality players. The financial heft of English clubs was largely thanks to Premier League contracts worth over £8 billion across three years. For instance, Everton - 20th richest club in the world last year, according to some reports – is worth €199.2 million or $244 milllion. Massive broadcast revenues of £130.5 million played a large part in Everton's total earnings last year. However, its big training ground sponsorship deal added a big chunk to its commercial earnings. Southampton is worth 212 million euros. Again, largely because of broadcasting revenue which accounts for £143 million of the club's total revenue. Tottenham Hotspur, runners up two years ago and third place this year, are worth €355.6 million or $435.5 million. Tottenham placed second in the Premier League last season and its run in the Champions League this season has caused a financial windfall. Broadcast revenue alone increased to £77.8 million. Liverpool’s players alone have an estimated worth of 397 million pounds.Arsenal are worth 450 million pounds. Manchester City are at 527 million pounds. And the most valuable club in the EPL - Manchester United at nearly 850 million dollars. Manchester United topped estimates for the 10th time since records began. Man U’s 12 sponsorship deals and improved broadcasting contracts were key in boosting revenue figures from £515.3 million to £581.2 million or 828 million dollars. Deloitte says "the clinching factor" was securing the UEFA Europa League title in Stockholm.
Not to forget the prize money, for playing well from August to May every year. 2016-17 winners Chelsea were rewarded a total of £150m from the Premier League, £38.8m of which was based on the fact that they finished first in the division. Tottenham, who finished second that year, pocketed £145 million, with £36.8 million coming as their reward for their final league position. Manchester City and Liverpool earned £34.9 million and £33 million for finishing third and fourth respectively, but they received a marginally larger figure overall than Spurs, who finished above them.
Given the ridiculous amounts of money in the EPL, it is no wonder there are innumerable discussions around which premier league club had the best net spend. Player incomes are extremely popular and fans know them well, but let’s take a look at the just the latest news. England captain Harry Kane recently signed a bumper new contract with Tottenham Hotspur, becoming the club's highest-paid player amid interest from Real Madrid. Kane landed a six-year contract worth up to £62.4 million, according to the Daily Telegraph. It is believed that Kane's new six-year deal could earn him £200 000 per week including bonuses, which is about double his previous deal.However, Kane remains far behind the EPL's current record earner Alexis Sanchez, who reportedly pockets £500 000 per week. Mesut Ozil follows in second place with weekly wages of £350 000, while Paul Pogba completes the top three with earnings of £290,000 per week. All of the 10 highest earners in the EPL make upwards of 200,000 pounds per week.
The other interesting angle to examine, as far as the EPL, is concerned, is the presence of billionaires as team owners. When billionaire Roman Abramovich became Chelsea new owner 15 years ago, he said, “I don’t want to throw my money away but it’s really about having fun and that means success and trophies.” Only one other Premier League club – Fulham – were then under foreign ownership. In 2018, 14 of the 20 clubs have foreign owners. Alongside Abramovich, the list included billionaires from Iran, Thailand, the United States and the United Arab Emirates.
To quote Tim Wigmore, who wrote in iNews, “The surge in foreign ownership reflects the global cachet of the league. There are psychic rewards – benefits that can’t be measured financially – to owning an elite sport team: the free publicity; the public goodwill; the simple allure of being able to hang out with players. And, for figures in the shadows, the visibility can make them safer: for Abramovich, owning Chelsea was like an insurance policy, James Montague argues in the book The Billionaires Club.”
Yet, As Tim Wigmore observes, the real shift in the nature of the ownership of football clubs has been driven by something else. The awareness that football clubs can reliably make money. Manchester United executive vice-chairman Ed Woodward reportedly told investors “playing performance doesn’t really have a meaningful impact on what we can do on the commercial side of the business.”That then is the English premier League. A money-maker that rolls on relentlessly.