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Football is undoubtedly the most watched sport in the world. Although that’s a little hard to believe in our country where Cricket is a second religion, it is in fact the truth. Quite contrary to cricket where international matches make up the calendar (with a 2-month dash of IPL), in football, the domestic leagues of each country take up nearly 8 months of the year. 

And The English Premier League of England is the undisputed leader in viewership across the globe. It is considered to be the toughest league in the world with legacy clubs like Manchester United, Chelsea FC, Liverpool FC, and Manchester City in it. The EPL brings in an astounding viewership of 3 billion globally each season, with games being broadcasted to over 800 million homes. Compare that to the roughly 250 million viewers of the Indian Premier League, and it becomes clear how big the EPL is.

That is still not the most interesting part of it. The EPL in its current format has been running for over 30 years and consistently churns out the best quality of the sport out there. The total revenue for the 2021-22 season of EPL was  € 5.45 Billion. This money is distributed among the 20 teams almost equally with a slight difference based on league ranking. 

Still, almost all of the 20 clubs are in financial shambles. It was estimated that in 2018-19 only 9 of the 20 teams managed to be in profit  Despite being touted as a league of 20 “equal” teams, the 6 richest clubs account for 62% of the total revenue of all clubs. Chelsea FC (2017 PL winner), one of the top teams, is sitting on a massive $1.8 billion of debt, while Tottenham Hotspurs, one of the profitable teams, has a $800 million pile of debt on its books. None of the clubs are in a financially healthy state to justify their costs.

Manchester City with Abu Dhabi’s gulf money sponsoring it is perhaps the biggest spender of them all. This justifies Manchester City’s 4 trophies out of the previous 5 seasons.

What changed? How did the top football league of the world come from being a consortium of equal clubs to this point where none of them are in good health? And why is a single club so dominant?

All of this boils down to the details of the money trail over the last 30 years. But, first, we’ll have to go through the history of the English Premier League to find out what led to such a situation.

History of Premier League

The Premier League was officially founded on February 20, 1992, after 22 clubs in England’s then top tier, the First Division, decided to break away from the English Football League (EFL), which had 92 teams and 4 divisions.

The English Football league system like any other league is a pyramid structure with Premier League on top followed by The EFL Championship (Tier 2), League One (Tier 3) & League Two (Tier 4) with the bottom 3 tiers still controlled by the EFL.

Currently, the PL is contested by 20 teams and works on a system of promotion and relegation. At the end of every season, the bottom 3 clubs are relegated to the EFL Championship and are replaced by teams from EFL Championship (Tier 2). A PL consists of each team playing 38 matches in a season, twice with every other team, which typically runs from August to May. The top 4 teams at the end of the season get to play in the UEFA Champions League, which has top teams participating from different national leagues across Europe.

This UEFA Champions League is quite different from the EFL Championship mentioned above. While the EFL Championship is the 2nd tier competition within England only, the UEFA Champions League is a much bigger tournament. It is played by the top European clubs across European nations who have won or done well in their respective nation’s domestic leagues. The exact selection process is quite complicated but the UCL serves as a World Cup for all the European clubs from different countries.

So who exactly owns the Premier League?

Legally known as The Football Association Premier League Limited, the Premier League itself is the organizing body of the PL. The responsibility for a fair competition lies on it. Besides that, it maintains the rule book, has full ownership of broadcasting and commercial rights. In short, PL is a company that the 20-member clubs completely and equally own in a given particular season.

The Premier League AGM takes place at the close of each season, at which time the relegated clubs transfer their shares to the clubs promoted into the Premier League from the Football League Championship. Each of the 20 clubs is entitled to one vote and all rule changes require at least a two-thirds majority for approval.

Business Model

Now it is time to get down to the money business. Any business model can be explained with just the revenue and its costs. We’ll do just that

Revenue

A Premier League club’s revenue comes from three main sources – 

Broadcasting

This is the major revenue stream for all clubs. The PL sells its broadcasting rights to major TV networks globally. The domestic and international contracts are sold separately. For the ongoing 3-year period of 2022-25, the domestic broadcasting deal was worth UK£5.1 billion while the international rights were sold at UK£5.3 billion. This comes out to be nearly UK£3.5 billion annually. The broadcasting revenue is distributed as below

PL revenue sharing

As evident, the only difference between teams arises from the Merit and Facility Fees. Since not all matches are broadcast, each team is paid a facility fee based on its number of broadcasted matches. The Merit fee is paid out based on the league standing of the team. In the 2020/21 season, Manchester City (1st) received £153 million while Everton (10th) received £115 million, and Sheffield United the last placed club received just £96 million. A detailed breakdown of the broadcasting revenue is available here. With such a focus on parity, it is quite hard to believe that such disparity among teams should arise where the top 6 clubs earn 62% of the revenue.

However, the point to note here is that the top teams also play the UEFA Champions League which has higher intensity matches leading to more per-match viewership. Manchester City earned an additional £140 million in broadcasting revenue from playing in the UCL. This money is significant for the top teams as although the PL does what it can to apportion equally, there is little it can do in this case.

Premier league tv rights revenue

Commercial

Commercial revenue includes sponsorship, merchandising, advertising, and other activities that a club engages in through its brand value. This revenue stream is primarily responsible for the overall revenue disparity among teams as only the top players and teams can attract lucrative sponsorship deals. 

For instance, Manchester City made £240 million in commercial revenues in 2020, which rose to £280 million post the pandemic in 2021, accounting for 48% of its total revenue in the 2020/21 season. 

Matchday Revenue

Matchday Revenue constitutes mainly the revenue generated from the sale of stadium tickets. Usually, this is the smallest of the three streams and was in fact near zero at the peak of Covid shutdowns. The usual matchday revenues can range from £3-5M per match.

Costs

The major costs of a Premier League club are its spending for acquiring and then retaining its players., and then their salaries. For example, 

Transfer Spending

First, they have to buy the best players from the transfer market. This is not exactly similar to the IPL auction as clubs can directly buy from and sell players to other clubs behind closed doors. For example, Gabriel Jesus, a forward striker at Manchester City, recently signed to play with Arsenal for the 2022/23 season at a reported £14 million per year contract. Arsenal also had to pay £45 million to Manchester City to release him.

The transfers are an equally interesting time for the fans. Rumors, agent meetings, and even player movements are tracked on a minute-by-minute basis as the deadline approaches. For those emotionally attached to a player-club pair, transfers could mean the difference between an all-nighter and a good night’s sleep. 

Wages

Wages in the PL context mean the same as in any other business with the employee cost. In the European football world, player wages are often quoted as a per week number. For the who’s who of the soccer world, it is common to even command more than $500k per week as wages. 

Kylian Mbappe puts up the highest wage bill to his french club PSG at over $1.1M per week! His teammate Lionel Messi comes at second $800k per week. 

Apart from these two, the clubs also have to bear administrative costs, travel, upgrading facilities, and upkeep and maintenance of the stadium.

New UEFA rules -FSCLR aims to limit a club’s total expenditure on transfers, wages, and agent fees to 70 percent of its revenue.

The competitiveness of the Premier League

Historically, the PL had been one of the most competitive competitions out there, not just in football but across sports. Each season there are surprises and the championship most definitely changes hands. Even on dull match days, there have been upsets where a 13th placed Newcastle Utd would hand a defeat to champions Manchester City in 2019. However, more recently the number of such upsets has drastically gone down. In the past 5 seasons, the winners have lost just 3,6,3,4, and 2 games which are unseen in the Premier league.

Since the 2000–01 season, 6 different teams have won the Premier League (Man Utd, Arsenal, Chelsea, Man City, Leicester & Liverpool), and 7 different teams have finished in the top 3 (the six plus Tottenham).  For instance, in Bundesliga, the German league, the last season marked the 10 consecutive titles for Bayern Munich. The story is no different if we see La Liga, the Spanish League, which has seen only 3 winners in the last 10  years. These are FC Barcelona, Real Madrid, and Atlético Madrid. Hence, the Premier League always stood out genuinely as a competitive league where anyone could win.

The reason for the top-quality football in PL is that it boasts the best talents in the world.

You might think that names like Messi, Mbappe, and Neymar play for clubs in other nations outside of England, but we all know football is a team sport. 15 of the top 25 most valued players currently in the world come from the Premier league.

In Euros international competition 2012, the EPL supplied 74 players, almost 20% of the total number, whilst the Bundesliga came second with 48 players, La Liga (Spanish League) with 32, and Serie A (Italian League) with 31. You’ll find similar figures for the World Cup tournament as well. The English Premier League is way ahead of the others when it comes to supplying the creme de la creme for major competitions.

But recently things have not been the same. Manchester City has won 4 out of the last 5 seasons. The only other team in contention over 5 years has been Liverpool who won in 2019.

This season, the betting market has outright made Manchester City the clear favorite to win the league. Manchester City has 1:2 odds to win this season at the time of writing, which is an astounding 66% chance. And that too at the start of the season, only followed by Liverpool at 22%. No wonder there are already memes about Manchester City having won the title just 2 matches into this season.

What has changed in PL?

Football fans and pundits around the world have all been saying the same thing about PL turning into one of the league monopolies as we have in other leagues. 

The rise of Manchester City, who have won the last 4 out of 5 titles, and Chelsea, both of which have been predominantly fueled by oil money.
Manchester City was bought in 2008 by Sheikh Mansour’s (the deputy PM of UAE) Abu Dhabi United Group. The City Football Group now owns 10 other football clubs across the globe in other nations. 

Chelsea, till recently was owned by Roman Abramovich, the Russian oligarch and oil tycoon who was forced to sell the club after the backlash to Russia’s invasion of Ukraine. In 2021, Newcastle United, a predominantly mid-table club was taken over by Saudi Arabian Public Investment Fund for 300 million pounds making it the richest club. It would be no surprise if Newcastle starts winning the title soon.

Conclusion

The formation of the PL in 1992 has definitely helped the English top-tier clubs have a mark on Europe and the world to increase their fan base internationally. But as we have seen, in just 30 years the Premier League has reached a stage where the top teams earn the maximum on the back of their superior performance which allows them to afford top players and maintain their dominance. 

It is generally tough for the PL or any organizing body to break away from this cycle. A general belief is that the top teams earn more broadcasting interest when they play against each other rather than in dull matches against lower-placed teams in the PL. This is why the top 6 teams of the PL attempted to start their own European Super League  (in the works for 3 years) after the pandemic wrecked their finances. But this idea collapsed soon due to contractual obligations and wider fan protests.

UEFA has also tried to bring more parity into the competition by introducing the new Financial Sustainability and Club Licensing Regulations (FSCLR) that mandate a club to limit its expenditure on transfers, wages, and agent fees to 70% of its revenue. However, with teams often finding creative ways to bypass the regulations it remains to be seen how this goes in the future. More globally, almost all sports have suffered from a set of teams dominating a competition over many years. The Formula One management introduced fixed team budgets from 2021 after the Mercedes domination of winning 7 consecutive seasons, which seems to have worked well so far. But this is not a simple problem to solve simply with regulations.

Be it business or sports or the business of sports, money attracts money. And money will flow where the eyeballs are. So, as the audience, one thing is sure to happen – more fun with every kick-off!

This article has been co-contributed by Rajat Srivastava. BusinessBar thanks him for his contributions.

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