Infrequently Answered Questions: Football’s Magic Money Tree

Football is awash with money but does funnelling most of it to players and agents improve the game?

An article posted yesterday on this blog posed the question whether we would ever get to see West Ham participate in the Champion’s League and, like many others, I believe that this can never happen without the club receiving significant external  investment.  Unless that is we manage to get into the Europa League again and make it all the way through without meeting part-time Romanian opposition.

Much is made of the money that has flowed into the English game over the years and it is normally presented as a major success story for the Premier League as it has created a global brand on the back of a few major clubs.  With more cash being splashed than ever, however, it also raises a number of questions in my mind.

Who actually benefits most from the magic Premier League money tree?

Without doubt there is a simple answer to this and it is players and agents.  As revenues have increased, mainly from broadcasting and commercial activities, then player wages have risen extraordinarily.  From the last published accounts, Premier League clubs earned combined revenues of £3.65 billion of which 61% went directly to player’s wages, with each of the five wealthiest clubs spending close to or in excess of £200 million on wages.   At West Ham revenues were £142 million (7th in the league) with a wage bill of £85 million (8th in the league), equivalent to 60% of earnings.  As these figures relate to the period before the signing of the new TV deal and before West Ham’s move to a larger stadium then we should expect to see significant increases in future years.

At about the same time that Trevor Francis became the first million pound footballer in 1979, Nottingham Forest also made Peter Shilton the highest paid player in English football, with a weekly wage of £1,200.  Allowing for inflation this would now be the equivalent of £6,400 per week while reports suggest that Manchester United keeper, David De Gea,  is paid £200,000 per week which is still some way behind Paul Pogba at a cool £290,000.  When Frank McAvennie re-signed for the Hammers from Celtic in 1989 (to become our own first million pound player, I believe) he was paid £2,200 per week (equivalent to £5,500) while treatment room specialist Andy Carroll is currently the top earner at West Ham at somewhere around £80,000.

While the players are raking it in the most recent financial accounts show that the clubs themselves made a combined loss of £117 million (although it had been a profit of £113 million in the previous year).  West Ham were one of eight clubs to make a loss when they came in with a modest deficit of £5 million (following a £3 million profit the year before).  Of course, if we can ignore any annual losses the value of the two Dave’s investment has grown handsomely in the money rich Premier League.

Do higher transfer fees mean better players?

West Ham feature twice in the historic progression of British transfer fees.  In 1922, Syd Puddefoot was sold for a record £5,000 fee to Falkirk in Scotland and in 1970 the transfer of Martin Peters to Tottenham (at a valuation of £200,000) also set a British record.  Looks like we have always been a selling club!

West Ham did set a record for a transfer between British clubs when they paid £65,000 for Johnny Byrne in 1962 and then also set a world goalkeeper transfer record on signing Phil Parkes from QPR (in 1979) for a fee of £565,000 (equivalent to circa £3 million today).  Compare these to the recent signing by Manchester City of Ederson for £35 million and last season’s signing of Pogba by Manchester United to close on £90 million.  Closer to home Frankie McAvennie’s transfer in 1989 (£1.25 million) would be the equivalent to £3 million today whereas the current West Ham transfer record is for Andre Ayew at £20 million.

It is almost impossible to compare players across eras as the nature of the game has changed tremendously.  Then they played more games, were expected to turn out every week (often twice a week), were less protected from the crunching tackle and mostly played in their home countries.  Today the game is far faster and more athletic but, at least in the Premier League, is both a squad game and an international one.  High wages and transfer fees have brought many top players to England (other than those good enough to play for Real Madrid or Barcelona) but many of them spend their time sat on the bench.  During the same period the development of home-grown talent appears to have stalled although many factors may have contributed to this state of affairs.  The technical skills on show may have improved but possibly not the thrills and excitement.

Last summer transfer spending by Premier League teams topped £1.1 billion with £720 (or 62%) of that going to overseas clubs and largely leaving the English game, although with some transfers monies flowing the other way the net overseas spend come out at £630 million.  The remainder of the money is re-cycled between English clubs. less agent’s commission.

It doesn’t take an insight of Mystic Meg proportions to expect that records will once again be breached in the upcoming window.

Does money makes for a better the Match-day Experience?

Although match day revenues are far less important to top flight clubs these days (less than 20% of total income) attendances continue to hold up well and, with a number of new stadiums and redevelopments underway or completed, the post-WW2 record for average attendance could well soon be broken.  The existing record was set in 1950 with an average of 37,400 per game against a 2013/14 Premier League record of just under 37,000.  By contrast the top flight low was 18,856 per game in 1983/84.  For West Ham the move to the London Stadium allowed them to comfortably set a new average attendance record of 56,972 while our own all-time low was 16,001 in the 1992/93 bond scheme aftermath.

In terms of spectator numbers then the game is as popular as ever but it is difficult to determine any comparative measure for value.  I can remember paying two shillings (ten pence) to stand as a boy on the North Bank and I came across an old ticket stub from 1989 where the cost was £8.50, the highest price ticket band at the time.  Adjusted for inflation this would be equivalent to £21 in today’s terms while, in reality, a top band seat at the London Stadium will actually set you back £70 to £80.

It would be unfair to suggest that none of the new money has gone to improve stadium facilities and seats (marginally more comfortable), toilets (more of them and slightly less smelly) and catering (more options than just Bovril and Percy Dalton’s peanuts) have all been improved to a some degree.  Being able to turn up ten or fifteen minutes before kickoff is also preferable to the hour or so that was required to get the best position on the terraces.  The most notable improvement, however, is in the quality of playing surfaces and the provision of under-soil heating to ensure that games invariably go ahead as scheduled.  But even having said that it is still a matter of opinion as to whether two teams stroking the ball around on a putting green surface is more entertaining than a blood and guts battle on a 1970’s mud bath.  It is a question I’ll have to put to those purists when I finally meet them.

So what is the point of it all?

If we can subscribe to the Olympian view that “it is not the winning but the taking part” then we, and another dozen or so clubs, can put aside the unfortunate fact that there is almost zero chance of winning the competition that we have entered and get on with simply taking part.  Clubs can be satisfied that even the most abject of failures will leave them with a prize money pot of over £90 million.  Supporters can safely put aside any unrealistic hopes and concentrate on having a nice day out, maybe enjoy a pint or two, shout to relieve those little frustrations of life and take pleasure from the occasional unexpected victory over Tottenham.

In the twenty five years of the Premier League there have only been six winners but then  again, in the twenty five years before that, only eight different teams won the First Division; although there was much more variety among the contenders than we see today.  Surprisingly, given the seriousness with which it is sometimes treated, the FA Cup shows a greater consolidation with eight different winners in the Premier League era but fifteen in the same period beforehand.

In West Ham’s history (since election to the Football League) the club experienced forty five years without a trophy, won four cups in sixteen years and have since gone thirty seven more without success.   It is probably reasonable to conclude that any dreams of silverware are the triumph of hope over expectation and that entertainment is the only rational reason for attending or following most clubs.  The problem is that, at the first sign of impending relegation struggle, managers largely abandon any pretence at entertainment to enter survival lock-down mode.  From a financial point of view survival may be seen as success but whether it will always be enough to satisfy spectators in the long run is a separate question.  In some ways it would be like going to watch your favourite movie franchise with no interest in plot or action and only being concerned that the main characters survive the final act in order to make a sequel.

The Football Money League – Part 2

Digging deeper into those figures that show West Ham as 18th in world football money league.

Football MoneyOur earlier article summarised the league table of the top 20 football clubs in the world in respect of revenue generation. It showed West Ham in eighteenth place, and in seventh place of the eight Premier League teams. The English teams in the table were led by Manchester United, followed by Manchester City, Arsenal, Chelsea, Liverpool, Tottenham, West Ham, and Leicester. Emphasising the correlation between revenue generation and league positions, it is interesting to note that the top six English teams are the same in terms of both revenue and current league position, albeit in a different order. And their gap ahead of the rest is equally substantial in both revenue terms and points in the league.

Previously we showed the total revenue figures, followed by the percentages of that revenue produced as matchday income, TV income, and commercial income. The total revenue figures show the wide gulf between the other English clubs and ourselves, but if you analyse the actual figures in £M for each individual category, you can see just how far behind we are, and how it may be impossible to bridge the gap. When compared to previous years of the Deloitte table, the clubs at the top are getting exponentially richer, especially in terms of matchday revenue and commercial income in particular.

Looking at the matchday revenue figures, both Manchester United and Arsenal have figures of around four times of our own, Chelsea approaching three times, and we would need to double matchday income to be on a par with Liverpool and Manchester City, and raise it by 50% to match Tottenham. But that would be if their figures stood still, which they won’t. The move to the London Stadium was vital in revenue terms just to try to keep pace with the top clubs. It is unlikely to bring us any closer, especially in view of their own plans to increase capacities with larger stadiums.

Matchday Revenue (£M)

1

Manchester United

103.1

2

Arsenal

101.6

3

Real Madrid

97.4

4

Barcelona

88.1

5

Bayern Munich

75.3

6

Chelsea

70.3

7

PSG

70.1

8

Liverpool

57.4

9

Manchester City

51.0

10

Borussia Dortmund

46.7

11

Tottenham

39.7

12

Schalke 04

38.6

13

Juventus

33.2

14

Atletico Madrid

27.4

15

West Ham United

27.3

16

AS Roma

21.2

17

AC Milan

19.3

18

Internazionale

18.8

19

Leicester City

11.6

20

FC Zenith

7.4

In view of the way TV income is allocated, in percentage terms we are a lot closer to the other English clubs in the table, although our income is only half that of Manchester City, and considerably less than the others.

TV Revenue £M

1

Real Madrid

171.6

2

Manchester City

161.0

3

Barcelona

153.1

4

Juventus

145.4

5

Chelsea

143.9

6

Arsenal

143.7

7

Manchester United

139.1

8

Liverpool

126.8

9

AS Roma

115.9

10

Tottenham

110.9

11

Bayern Munich

110.7

12

Atletico Madrid

104.3

13

Leicester City

95.2

14

PSG

93.5

15

West Ham United

86.3

16

Internazionale

73.7

17

AC Milan

65.8

18

Borussia Dortmund

61.6

19

Schalke 04

55.4

20

FC Zenith

30.9

But it is the income generated commercially that is a real eye-opener. Tottenham’s figure is almost double of our own, Arsenal more than three times, Chelsea and Liverpool around four times, Manchester City six times, and Manchester United nine times! The figures show that, if the TV money were to dry up, or diminish to any great extent, the revenue differential between clubs would be even greater in percentage terms.

Commercial Revenue £M

1

Manchester United

273.1

2

Bayern Munich

256.8

3

PSG

226.0

4

Barcelona

222.6

5

Real Madrid

194.8

6

Manchester City

180.6

7

Chelsea

120.5

8

Liverpool

117.8

9

FC Zenith

108.8

10

Arsenal

105.1

11

Borussia Dortmund

104.0

12

Juventus

76.5

13

AC Milan

75.4

14

Schalke 04

73.9

15

Tottenham

58.6

16

Internazionale

41.5

17

Atletico Madrid

39.3

18

West Ham United

30.2

19

AS Roma

26.1

20

Leicester City

21.9

The Football Money League 2016

West Ham are the 18th highest revenue generating club in world football according to 20th edition of the Deloitte Football Money League.

MoneyThe world football money league for 2016 has recently been published by Deloitte.  The table shows that there are 8 Premier League teams in the Top 20 revenue earners with West Ham coming in at Number 18.

West Ham are still some way behind their closest Premier League rival, Tottenham Hotspur, with revenues that continue to rely heavily on TV money.  The move to the London Stadium is likely to increase Matchday income but early exits from cup competitions and a disappointing (so far) league campaign may offset this.  Commercial income still lags some way behind the majority of other clubs making it into the money league.

West Ham United make only their third appearance in the Money League in 18th, their highest ever position. 2015/16 was their last season at the Boleyn Ground stadium and a strong performance in the FA Cup helped their matchday revenue increase. Both broadcast and commercial revenue also grew as the club benefited from increased Premier League payments after finishing seventh (compared with 12th in 2014/15) and as Betway were announced as the club’s new shirt front sponsor.

– Deloitte Money League Report

 

 

 

Revenues

% Revenue From

 

 

(£m)

Matchday

TV

Commercial

1

Manchester United

515.3

20%

27%

53%

2

Barcelona

463.8

19%

33%

48%

3

Real Madrid

463.8

21%

37%

42%

4

Bayern Munich

442.7

17%

25%

58%

5

Manchester City

392.6

13%

41%

46%

6

PSG

389.6

18%

24%

58%

7

Arsenal

350.4

29%

41%

30%

8

Chelsea

334.6

21%

43%

36%

9

Liverpool

302.0

19%

42%

39%

10

Juventus

255.1

13%

57%

30%

11

Borussia Dortmund

212.3

22%

29%

49%

12

Tottenham

209.2

19%

53%

28%

13

Atletico Madrid

171.0

16%

61%

23%

14

Schalke 04

167.9

23%

33%

44%

15

AS Roma

163.2

13%

71%

16%

16

AC Milan

160.5

12%

41%

47%

17

FC Zenith

147.0

5%

21%

74%

18

West Ham United

143.8

19%

60%

21%

19

Internazionale

134.0

14%

55%

31%

20

Leicester City

128.7

9%

74%

17%