Rising wage bills curb Premier League profits despite record revenues
Participation of five English clubs in the Champions League for the first time last season helped boost revenues
Total revenues were up six percent from £4.6 billion in 2016/17 but operating profits were just £0.9 billion due to a 15 percent increase in wages to £2.9 billion. PHOTO: AFP
LONDON:
England's 20 Premier League clubs amassed record combined revenues of £4.8 billion ($6.2 billion) for the 2017/18 season, but saw profitability hit by rising wage bills, according to a report by football finance experts Deloitte.
Total revenues were up six percent from £4.6 billion in 2016/17 but operating profits were just £0.9 billion due to a 15 percent increase in wages to £2.9 billion.
Tottenham posted a world-record £113 million net profit earlier this month thanks to increased matchday revenue from playing at temporary home Wembley last season, reaching the Champions League last-16 and improved commercial income.
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Liverpool had briefly held the world record for their £106 million profit based on reaching last season's Champions League final and the £142 million sale of Philippe Coutinho to Barcelona.
The participation of five English clubs in the Champions League for the first time last season helped boost revenues.
However, the number of clubs posting a pre-tax loss rose as Arsenal, Liverpool and Tottenham combined for more than 75 percent of total profits.
That is partly because player wages rose well in excess of revenue growth.
"Almost half of Premier League clubs recorded a wages/revenue ratio of 70 percent or greater, with overall wage spend increasing 15 percent to £2.9 billion," said the report.
"This had a direct impact on clubs' collective operating profitability, falling to £0.9 billion, albeit still the second highest in Premier League history."
The rise in wages came on the back of record transfer windows for spending by Premier League clubs in the summer of 2017 and January 2018.
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Yet, with the rapid growth in TV rights deals slowing for the 2019-2022 cycle, Deloitte expect that spending on transfers and wages may decline in coming seasons.
"With the total value of Premier League broadcast rights expected to only marginally increase in the 2019/20-2021/22 broadcast rights cycle, increases in wage and transfer expenditure may be expected to slow in the medium term, as already signalled by the reduced estimated £1.4 billion gross transfer spend in the current season," said Tim Bridge, director in the Sports Business Group at Deloitte.
"With the emphasis now on clubs to generate revenue growth from sources other than central broadcast distributions, it may be that we see the levels of pre-tax profit diminish over the next few years."
England's 20 Premier League clubs amassed record combined revenues of £4.8 billion ($6.2 billion) for the 2017/18 season, but saw profitability hit by rising wage bills, according to a report by football finance experts Deloitte.
Total revenues were up six percent from £4.6 billion in 2016/17 but operating profits were just £0.9 billion due to a 15 percent increase in wages to £2.9 billion.
Tottenham posted a world-record £113 million net profit earlier this month thanks to increased matchday revenue from playing at temporary home Wembley last season, reaching the Champions League last-16 and improved commercial income.
Five things we learned from the Premier League
Liverpool had briefly held the world record for their £106 million profit based on reaching last season's Champions League final and the £142 million sale of Philippe Coutinho to Barcelona.
The participation of five English clubs in the Champions League for the first time last season helped boost revenues.
However, the number of clubs posting a pre-tax loss rose as Arsenal, Liverpool and Tottenham combined for more than 75 percent of total profits.
That is partly because player wages rose well in excess of revenue growth.
"Almost half of Premier League clubs recorded a wages/revenue ratio of 70 percent or greater, with overall wage spend increasing 15 percent to £2.9 billion," said the report.
"This had a direct impact on clubs' collective operating profitability, falling to £0.9 billion, albeit still the second highest in Premier League history."
The rise in wages came on the back of record transfer windows for spending by Premier League clubs in the summer of 2017 and January 2018.
Premier League give Champions League duo extra day to prepare
Yet, with the rapid growth in TV rights deals slowing for the 2019-2022 cycle, Deloitte expect that spending on transfers and wages may decline in coming seasons.
"With the total value of Premier League broadcast rights expected to only marginally increase in the 2019/20-2021/22 broadcast rights cycle, increases in wage and transfer expenditure may be expected to slow in the medium term, as already signalled by the reduced estimated £1.4 billion gross transfer spend in the current season," said Tim Bridge, director in the Sports Business Group at Deloitte.
"With the emphasis now on clubs to generate revenue growth from sources other than central broadcast distributions, it may be that we see the levels of pre-tax profit diminish over the next few years."