Broadcasting, owners and player sales at heart of Premier League finances

The authoritative Swiss Ramble reviews Premier League finances from his Zurich fastness.  

Loss before tax widened in 2020 from £155m to £992m, as the initial effect of the pandemic began to bite. It is true that the division was already loss-making in 2019, but it had reported profits in four of the preceding five years, amounting to £1.3 bn in this period.

Most clubs lose money.  This emphasises the importance of profit from player sales to profitability. This rose 25% from £434m to £542m in 2020, though this was much lower than the £836m peak in 2018. This will be an issue in 2021, as the transfer market has been less active during the pandemic.

Revenue had been on a steady upwards trend, more than doubling from £2.3 bn in 2011 to £5.2 bn in 2019, before falling £648m (13%) in 2020 to £4.5 bn. The effect of new 3-year broadcasting deals can be clearly seen, as they commenced in 2014 and 2017.

Broadcasting revenue has been driving growth, nearly tripling from £1.2 bln in 2011 to £3.0 bln in 2019, but dropped £718m (24%) to £2.3 bln in 2020, due to rebates to broadcasters and revenue deferred to 2020/21 accounts.

TV money from Europe has also grown, especially in the last five years, partly due to new broadcasting deals, but also because English clubs have been more successful. However, this fell £88m (21%) in 2020 from £428m to £340m, split Champions League £278m and Europa League £62m.

Financial results in 2020 were helped by commercial revenue increasing £163m (11%) from £1.4 ln to £1.6 bn, mainly due to new sponsorships. This revenue stream has nearly tripled from £550m in 2011. However, may well fall in 2021, as commercial partners had less exposure.

Over the last decade the revenue mix at clubs has significantly changed with match day reducing from 23% to 13%. Taking 2019 as a more normal season, broadcasting increased from 52% to 59%, while commercial also grew from 24% to 28%.

Despite the revenue decline in 2020, wages continued to rise, increasing from £3.1 bn to £3.2 bn. Wage bills have grown every year in the last decade, more than doubling from £1.6 bn in 2011.The ratio of wages and player amortisation over turnover broke through the 100% barrier in 2020, which means that clubs were already losing money before paying other expenses and interest (often to be compensated by player sales).

After many years when debt levels were relatively flat, this has surged in the last three years, rising from £2.0 bln in 2017 to £3.7 bln in 2020, the highest ever in England’s top flight. It increased by £554m in 2020 alone.

Much of the debt increase over last three years has come via loans from club owners. This “soft” debt has almost doubled since 2017, rising by £715m from £782m to £1.5 bln. Clubs with over £100m owner debt: Everton £350m,Brighton £304m, Leicester City £128m, Bournemouth £126m and Newcastle £107m.

However, the majority of the debt increase over the last three years is driven by external funding, which is up nearly a billion since 2017 from £1.2 bn to £2.2 bln. Largest external debt: Spurs £831m, Manchester United £526m, Arsenal £203m and Liverpool £197m.

The debt increase would have been even higher without owners either converting their loans to equity (£911m in last 10 years) or writing-off amounts owed to them (£90m), though most of that took place in the five years between 2011 and 2015 and hardly any recently.

Clubs have spent almost £2 bln on capital expenditure in the last four years, mainly on stadium and training ground developments, though this dropped from £598m in 2019 to £369m in 2020.

Premier League clubs pay hardly any corporation tax, only amounting to £143m in the last 10 years, though the Premier League would emphasise that they do contribute significant amounts to the Treasury via income tax paid by players and VAT collected by clubs.

Although debt has increased, net interest paid (cash outlay) has actually fallen to £66m, due to a combination of interest-free owner loans and falling interest rates. Highest interest in 2020 was Manchester United £19m, which was also the case in 2011, when they paid a staggering £166m.

Similarly, the only club that has consistently paid dividends to its owners is Manchester United, which accounts for £122m of the £153m payments in the last decade, averaging an annual £22m over the last five years.

Owners have provided £3.7 bn funding in the last 10 years, comprising £2.4 bn loans and £1.3 bn capital injections. The most generous owners in this period have been Manchester City £1.1 bn, Chelsea £570m, Aston Villa £459m, Everton £348m, Brighton £325m and Leicester City £312m.