top menu

The economic cash cow of reaching the Promised Land of the Premier League  

Tonight’s playoff-final between Fulham and Brentford is an interesting stakeholder case in football with a huge amount of money at stake. On top of securing an attractive sporting position in the Premier League, the winner of the game will also exemplify the sports economic ‘the winner takes it all’ principle of scoring the ‘football lottery’s’ mega jackpot prize in terms of a fair part of the league’s gigantic broadcasting deal of more than £9bn. On the other hand, the losing club will have to face the shiny sporting and economic spotlight of the Premier League from distance in the dark shadow of the Championship; the winner takes it all aspect is evident in the fact that even the lowest ranked teams (when it comes to monetizing from broadcasting) score a high prize.

As illustrated below, Huddersfield banked approximately £96 mio. alone from the broadcasting deal and the central commercial revenues in the 2018/2019 season. If you add the parachute payments (there is a guarantee of minimum 2 years of parachute payments, i.e. if a club is relegated after just one season in the promised land[1]), a promoted club will land at least another £70 mio. over two years if benchmarking this year against the numbers from previous seasons. Along with this fruitful capitalization on sporting success, promotion to the Premier League provides commercial growth tied to sponsorships, gate receipts, merchandise sales and other means of capitalization on the brand equity of football, the Premier League and the product delivery from clubs in the league. Moreover, the two competitors in tonight’s game can draw on being based in London with all the city’s additional offers to football tourists and its important location when it comes to reaching the attention of corporate decision makers.

Photo: Distribution of broadcasting and central commercial revenues to clubs (source: Premier League).

A new reality for Brentford

Whereas Fulham has been a part of the Premier League in its modern edition and still benefit from the associated parachute payments and also understands the commercial advantages of playing with the ‘big boys’ in football’s global supermarket aka the Premier League, there is a totally new economic reality at stake for Brentford.

Brentford will take an important step up the economic ladder in the football economy if the club is successful tonight. From a sporting perspective, Brentford’s positive season has already elevated the value of the club’s central actors on the sporting side, i.e., players, coaches and other staff members. A promotion to the Premier League will add significant to this narrative and reality as sporting success adds vitality in the football economy and may mark a positive reinforcing cycle associated with Matthew Benham’s investments in Brentford and the related portfolio club FC Midtjylland in Denmark.

Synergetic effects for FC Midtjylland

What does it mean for a football player to play matches and make a difference in the Premier League compared to the Championship? In talent development in football, it proves a quality mark to go from one league and level to a higher league and level and still perform at a high standard. With this in mind, the transfer from the Championship or the Danish Super League or another development league at a lower level than the Premier League requires adjustment for a player, but the players who are capable of swimming effectively above the surface have a higher probability of succeeding from a sporting angle and hence will be able to elevate the value of their player brands and commercial appeal. Therefore, there is much meaning in cracking the code to what can be characterized as a ‘winning formula’ in player and club development because these two elements go hand in hand in the football economy where players are the central actors and valuable assets. However, assets MUST be appreciated so the winning formula’ in football reflects the importance of blending strategy and culture from the board room to the pitch.

In this regard, FC Midtjylland has taken quantum leaps over the past five years in Denmark with three championships and one FA Cup title (although this success has not been transformed into European competitiveness) and Brentford’s performance this season also rises beyond expectations and budget. So, there is definitely building stones to add to the development platform of both clubs if Brentford is promoted, financially and from a sporting perspective.

The meaning of a data-driven approach

The data revolution has shaped modern-day professional football with new means to boost sporting performances and commercialization. However, no data points are worth anything in football without being qualified in a contextual manner, e.g., adding quality to a club’s strategic journey and written in a simplistic way: enhancing the club’s win percentage, the transfer value of its players, and commercialization of the various legs of its business model. Benham’s investment and methodology has really influenced both clubs in these ways but most importantly, the clubs seem to have succeed in somehow battling the ‘production inefficiency’, which is so prevailing in talent development in football while doing this in a way that also accounts for the balance between strategic direction and cultural production and re-production.

The symbolic value in these two clubs being elevated so quickly at such a high stage mirrors an interesting formula regarding football investments, which proves my point regarding the importance of ‘asset appreciation’ and how this links with the weight of activating any form of capital in the football economy.

 Therefore, there is no doubt that both clubs and the bridge between them already attract attention from football investors worldwide eager to learn the secrets of how to unfold football potential and talent in the same manner. There is definitely much money at stake in such processes and therefore good returns to win if football clubs can re-engineer successful formulas and transform them into sporting and thereby financial success.

The distribution of broadcasting revenues compared to other football leagues

The Premier League is football heaven compared with the Championship but also in relation to other European leagues. The league’s distribution of broadcasting revenues is relatively solidary compared with for instance the Spanish La Liga. Where Manchester City as depicted in the above-mentioned illustration banked approximately £150 mio. from broadcasting and central commercial revenue in the 2018/2019 season, FC Barcelona generated approximately the same. However, when comparing Huddersfield to the Spanish La Liga club with the lowest broadcasting revenue there is a different scenario at stake, which emphasizes the economic strength of being promoted to the Premier League. Huddersfield generated approximately 2/3 of what Manchester City generated whereas the Spanish teams in the bottom of the economic broadcasting pyramid generated less than 1/3 of FC Barcelona’s revenue (the Spanish La Liga has been known for polarization and favorizing the big clubs such as Real Madrid and FC Barcelona). Consequently, this reflects the difference in economic power between Brentford (if promoted) and even mid-table teams in La Liga or the German Bundesliga due to the astronomic weight of broadcasting revenues in the Premier League.

At the same time, it is interesting to consider the growth of broadcasting revenues in the Premier League since the establishment of the league in 1992. KPMG notes that the total income from domestic and international broadcasting rights accounted for £254 mio. in the first broadcasting cycle from 1992-1997 whereas the current cycle (2019-2022) exceeds the £9 bn. mark.

In a book chapter written with Laurie and David Shaw exploring the relationship between fans and finance in the Premier League, we conclude that the business model of the Premier League has been turned upside down by broadcasting since 1992. In the early 1990s, an average of two-thirds of income arose from gate receipts”. We also highlight that “The decline in importance of matchday income is stark. Only Arsenal posted a match-day income that exceeded 20% of their turnover, followed by Manchester United and Tottenham Hotspur (19%), Liverpool (18%) and Chelsea (17%)” in the 2017/2018 season. When comparing this with teams outside the big clubs, we noted that “The ratio declines to less than 10% for Everton, down to a minimum of 4% for Huddersfield Town. On average, only 11% of the turnover at a Premier League club derives from match-day income, compared to nearly 66% in the 1991/92 season.”

[1] The installment of parachute payments helps clubs adjust and moderate the hit after being relegated from the Premier League. The reality in the Championship shows a more vulnerable business model from an economic standpoint as the total amount of players’ wages typically remain at a higher level after a relegation although relegated clubs face substantial drops in revenue. If the club is not relegated in the first season in the Premier League, there is another year of parachute payments.

, , , , , , , ,


No comments yet.

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Loading Facebook Comments ...