TV rights setback won’t halt Premier League profitability
Premier League clubs are likely to sustain their recent profitability for the foreseeable future despite flat domestic broadcast revenues, say football finance experts.
Englands top division enjoyed another record-breaking year in 2016-17, with collective revenue up to £4.5bn and pre-tax profit rising to £500m – almost three times the previous record for the league – according to Deloitte.
The key driver of revenue growth – income from television rights – is in danger of slowing, however, after domestic sales failed to generate an increase in value for the 2019-2022 cycle.
Read more: 'Megged: Premier League faces TV rights own goal
But booming overseas TV contracts are expected to make up for the shortfall, meaning clubs can stay profitable as long as they continue to exercise a new-found restraint on wage spending.
“Despite the lack of growth in domestic broadcast deals announced to date, we still expect to see overall revenue growth in the coming seasons,” said Dan Jones of Deloittes Sports Business Group.
“If this is complemented with prudent cost control, we expect that pre-tax profits will be achieved for the foreseeable future.”
Wages-to-revenue
Key to this era of profitability – Premier League teams have now been in the black three years out of four since 2012-13 – has been arresting the so-called “prune juice effect”, which had previously seen any revenue increase instantly disappear in higher wage costs.
Only 23p of every extra pound of revenue last season went on wages, due largely to restrictions on spending at domestic and European level, bringing the leagues wages-to-revenue ratio – a trusted sustainability metric – down to 55 per cent, its lowest level for 19 years.
“While revenue is up considerably, the wages didnt follow suit,” Deloittes Tim Bridge told City A.M. “That shows that the regulations of the Premier League and Uefa are really having an impact and making clubs look specifically at how they balance the books and become more sustainable businesses in the long term.”
More spending on cards
English clubs financial strength has allowed them to spend a record-breaking £1.9bn on transfers this season and that trend is forecast to continue this summer.
“We may again see similar levels of spending in the coming season, with the Fifa World Cup providing the perfect shop window for talent, but expenditure remains well within the means of clubs,” Bridge added.
Collective revenue among the 20 teams increased by almost £1bn to a record £4.5bn, contributing to a doubling of operating profits to £1bn.
All clubs made an operating profit and all but two a pre-tax profit.
Jones added: “Although we anticipate wage costs will continue to rise in the coming seasons, we do not foresee increases to be at a level which can jeopardise the profitability of the Premier League as a whole.”
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