By Jonathan Copping, Sports Lawyer, Bolt Burdon Law Firm, London, United Kingdom
In a recently published report by Deloitte’s, the English Premier League clubs’ combined revenues increased to £3.6 billion for the 2015/16 season; an increase of 9% on the 2014/15 season.
However, wage costs increased by 12% on the 2014/15 season, with clubs spending a total of £2.3 billion. The fact that wages are increasing at a quicker rate than revenues should be a slight cause for concern for the clubs and appears to be the main reason why they posted a combined pre-tax loss of £110 million for the 2015/16 season.
The importance of both the Manchester clubs in the League was highlighted by the fact that 50% of the increase in revenues was attributed to Manchester United and Manchester City. Manchester United returned to the Champions’ League, having not qualified for the 2014/15 season. Manchester City reached the semi-finals of the Champions’ League and earned £76 million in the process, more than Real Madrid, who won the competition.
The success of English teams in the Champions’ League is a considerable factor in determining the financial results of the English Premier League clubs. The Champions’ League distributes participation/prize money to the clubs, in addition to “market pool” payments. Market pool payments are distributed according to the proportional value of each television market. Because the television market in England is much more lucrative than the television market in other European countries, the English clubs receive a larger share of the market pool. The performance of the clubs in the Champions’ League also impacts on the level of market pool payments.
One potential contributing factor towards the operating loss is the television rights deal that was struck for £5.136 billion for the three seasons from 2016. Due to the fact that clubs wanted to make sure that they were in the Premier League for the 2016/17 season, to take advantage of the increased television monies, clubs were more willing to pay high transfer fees and wages.
It is likely that, once the new television rights monies are distributed to the clubs for the 2016/17 season, the Englsh Premier League clubs will return to profitability; however, that profitability may not be as high as it possibly could be, due to English clubs not performing particularly well in European competitions this season. Only Leicester City reached the quarter finals of the Champions’ League, whilst Manchester United is the sole remaining English representative remaining in the less lucrative Europa League.
Thus, another combined loss may be expected for the current 2016/17 season!
Jonathan Copping can be contacted by e-mail at ‘JonathanCopping@boltburdon.co.uk’