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Home truths Annual Review of Football Finance 2020 Sports Business Group June 2020 A Annual Review of Football Finance 2020 | Section title goes here

The 2018/19 season saw English and European football reach record levels of revenue generation. This snapshot of the peak before the impact of the COVID-19 pandemic also includes some warning signs for the challenges to come.

B Annual Review of Football Finance 2020 | Contents

Contents

Foreword 02 Edited by Dan Jones Delivering results worldwide 05 Sub-editor The leading team in the business of sport 06 Michael Barnard

Europe’s premier leagues 08 Authors Theo Ajadi, Tom Ambler, Zal Udwadia and Chris Wood Fans for the memories 14 Sports Business Group clubs 16 Telephone: +44 (0)161 455 8787 PO Box 500, 2 Hardman Street, Manchester, M60 2AT, UK The women’s game 22 E-mail: [email protected] www.deloitte.co.uk/sportsbusinessgroup Football League clubs 24 June 2020 Player transfers 28 Climate for change? 29 Common Goal – past, present and future 30 Please visit our website at Stadia 31 www.deloitte.co.uk/arff to download a copy of the full report and to purchase the Databook. 5G in football – a winning strategy 34 Our 40 page Databook includes over 8,000 data items on the various topics covered in this report, prepared on the basis of our specialist and long-established methodologies. It is available to purchase for £1,000 from www.deloitte.co.uk/arff

01 Annual Review of Football Finance 2020 | Foreword

Home truths

Welcome to the Annual Review of Football Finance 2020, the The commercial powerhouses of FC Barcelona I want it all and Real Madrid, which delivered a Spanish one- Record revenues were accompanied by publication that remains the most comprehensive analysis of two in the latest edition of the Deloitte Football increased disparity between the biggest and the the financial trends in, and prospects for, the football industry. Money League, drove ’s revenues rest within the Premier League, with the average ahead of those of it’s German counterpart, the revenue of the ‘big six’ clubs now at £500m, over . three times that of the remaining clubs. The 29th edition of this report is written at a Don’t stop me now time like no other, set against the backdrop 2018/19 saw further revenue increases to The anticipated uplift of c.20% in value of La Wage cost growth outpaced revenue growth of the ongoing COVID-19 pandemic which is record levels across each of the ‘big five’ Liga’s domestic and international broadcast for the second season in a row, increasing 11% impacting all industries at every level. The world leagues, further growing the overall size of the rights agreements from 2019/20 had looked to over £3 billion for the first time, resulting in a of elite football is no exception. European football market. Due to COVID-19, the set to ensure they remain the Premier League’s wages to revenue ratio of 61%. next edition of this report will show a decrease nearest challenger, in revenue generation terms, Whilst this report focuses on the finances in the scale of the market. as the English top-tier also entered a new rights In previous editions we have reported increased of European football in the 2018/19 season, cycle. wage spending in the final year of a broadcast completed ahead of the COVID-19 outbreak, Across revenue growth was driven cycle, ahead of commencement of the Premier we have sought to consider the impact on the by clubs in the ‘big five’ leagues receiving the Instead, by virtue of its earlier return to play League’s next bumper deal. This time, clubs 2019/20 season and those which follow. majority of a c.€700m increase in distributions and, uniquely amongst the ‘big five’, planned were aware that no large increases would follow from UEFA club competitions, delivered through completion of matches by the end of June, the as they have in each of the two previous cycles, It is a reflection of the importance of elite a raft of new broadcast arrangements for the Bundesliga will likely report higher revenues despite the increased value of international European club football in many people’s lives cycle 2018/19 to 2020/21. than La Liga in 2019/20. La Liga is expected rights being set to deliver an incremental uplift that for them the postponement of matches was to return to being Europe’s second highest to Premier League revenues. one of the first clear signals of the seriousness Liverpool lifted the UEFA Champions League for revenue-generating league in 2020/21. and ubiquitous impact of the pandemic on the sixth time, as a new distribution mechanism Clubs’ spending on playing talent, through society. That importance to people, coupled favoured the biggest clubs, rewarding historical Despite recording double-digit revenue growth, wages and transfer fees, was already set to with ongoing progress towards the return of performance and adding to polarisation across Italian and French top-tier clubs recorded reduce profitability in 2019/20, as it had in football, gives us confidence that the industry and within the European game. operating losses. ’s revenue growth from 2018/19. The COVID-19 pandemic will have had will thrive again in the future, despite the a new broadcast cycle was outpaced as wage a destructive impact on profitability in 2019/20, seismic short-term shock in the spring of 2020. 2018/19 saw Premier League clubs’ revenue spending increased at the fastest rate of any as revenues fell dramatically and costs did not in total over £5 billion for the first time, as the of the ‘big five’. ’s record operating loss, the final quarter of the season. revenue gap to La Liga and the Bundesliga was ahead of a now expunged season in 2019/20, extended again, following a slight narrowing in gave particular cause for concern. The negative swing of almost £600m in 2018/19 the previous season. compared to 2017/18 saw previous hopes for sustained pre-tax profitability shattered, with 02 Annual Review of Football Finance 2020 | Foreword

clubs recording an aggregate loss of £165m, Broadcast and commercial revenue streams The trend, identified Hammer to fall as player transfer profits fell and amortisation delivered 86% of ‘big five’ league revenues, in numerous At the start of the charges grew as Premier League clubs invested and with the remaining 14% from matchday previous editions 2019/20 season, Bury to strengthen squads. not available for the foreseeable future, clubs of this report, FC became the first and leagues must do everything they can to continued as the Football This result was not the responsibility of a small find ways to strengthen these relationships, spending behaviour of to go out of business minority. Almost half of the Premier League’s and deliver value to their partners through EFL Championship clubs since Maidstone United’s clubs recorded losses, delivering only the alternative content and activation. remained unsustainable liquidation in 1992. A number second aggregate pre-tax loss in the past six without owner funding, with the of other clubs struggled through, seasons. The previous example, in 2015/16 The strength of these relationships will be tested pursuit of promotion to the World’s richest supported from month to month by owner (£115m), came ahead of a known near 50% under the current strain. There are substantial league continuing. For the fourth time in seven contributions. More rigorous and robustly increase in domestic broadcast rights values for implications for the European football seasons, a record-breaking wages to revenue enforced regulation than the EFL’s existing the following year. Not so on this occasion. landscape over the coming seasons, including ratio (107%) demonstrated the collective lack rules is required to force clubs to act more potentially significant and lasting impacts on the of control. In no other industry would such a responsibly and save them from themselves to It is clear that even before the onset of the financial strength of clubs and leagues. metric be viable, and whilst football benefits ensure this does not become commonplace. COVID-19 pandemic there was some evidence from the desire of many to fund those losses, of weakening cost control and profitability the impact of the pandemic on club owners’ Whilst COVID-19 has presented so many among Premier League clubs. The sudden hit to I want to break free broader finances and business interests brings challenges to the global population and the revenues will have compounded this and tipped A step below Europe’s elite, the finances of the question of long-term sustainability into football industry alike over the past three many clubs into, or deeper into, a loss making the (‘EFL’) have been sharper focus than ever. months, it will inevitably provide opportunities position overnight. thrust into the spotlight in recent weeks as the for change. And change is needed desperately, COVID-19 outbreak has accentuated the losses, Across the rest of the EFL, League 1 and League both collectively, and in many cases individually, Returning to action is clearly critical to limiting and cash flow difficulties, of Football League 2 clubs together reported record revenues for the good of the now 71 football league clubs. the financial impact of the pandemic and clubs which have manifested themselves over a of £282m, driven by a change in club mix, as leagues have now responded in different ways number of years. Sunderland played in the third tier for the first The commencement of a new broadcast rights at different paces. The Bundesliga has returned time in over 30 years. Sunderland’s higher arrangement for 2019/20 has delivered a to crowdless action, the Premier League, La Liga 2018/19 saw record revenues of £785m in the revenues aided a decreased wages to revenue c.35% increase in value on the previous deal, and are all on the path to a resumption Championship, as three established Premier ratio in League 1 (80%), whilst League 2 wage but nothing has suggested that this additional in mid-June, whilst the Ligue 1 season was League clubs relegated in 2017/18 returned to spending stabilised at 78% of revenues. revenue isn’t already wholly spent, and then quickly expunged. the second-tier. These clubs also brought large, some, on playing talent. As such, this increase though reduced from Premier League level, cost will have, unfortunately, done little to support bases with them. EFL clubs which have lost their matchday income over the past three months. 03 Annual Review of Football Finance 2020 | Foreword

Deferrals and temporary wage cuts may be responsibility for clubs. We may well see shifts been harmed by the ravages of the pandemic. applied to ease the short-term cash implications, in fan behaviour that impact the future of the Polarisation will be even more evident – for the but in the long run more meaningful changes game in unpredictable ways. biggest clubs and competitions others will step are likely, and required. A squad salary cap at forward and fill the breach, for many though Championship level, if collectively driven and More so than ever, this period of crisis shows times will be tough. enforced, could significantly reduce losses the huge positive impact that professional rapidly with a financial benefit far in excess of football can have on wider society with the For fans, while for some the path back to the any damage to the on-pitch competitiveness or activity of organisations like Common Goal, stadium may be slow and uncertain initially, quality in the division. the use of club stadia to enhance healthcare the thirst to reconnect with friends, family and capacity, anti-racism activities and Premier the rituals of the crowd on match day will pull League players’ contribution to NHS Charities them back in their tens of thousands again as a A kind of magic being clear examples. Stakeholders who work in welcome measure of normality. The recent lockdown has highlighted the the football industry know more than ever the custodians of institutions that are older than importance of live sport to so many, particularly incredible power and influence the sport holds The clubs will as ever be the magnets for this any of us, and that hopefully will outlive all of us. that unbeatable experience of matchday. Whilst in society. activity, setting the stage upon which the Their response will determine whether this crisis the revenue derived from match-going fans players will again have the chance to show is viewed in the future as the end of a golden had become an ever smaller proportion of the their skills, and those talents will rightly reap age, or the beginning of a new, better, era. total revenue of top-flight clubs, the period of The show must go on the biggest share of the financial rewards the behind closed doors football that lies ahead In many ways everything has changed in the public’s interest generates. I would like to thank my colleagues, Henry Wong looks set to reinforce the importance of fans, world of football finance since we started and all those from across the football community without their presence in the stadium to create planning this year’s Annual Review of Football who have helped us compile this year’s report. the atmosphere for both players and broadcast Finance, but fundamentally much has also Play the game By the time of our next edition we will hopefully audiences to enjoy. stayed the same. The game of football will recover and thrive be looking forward to the delayed Euro 2020 and remain a great universal passion for the tournament and reflecting on the financial This period also provides a new challenge for The absence of football from our screens, and world. Critical to how the finances of football impact of a football season like no other. Until clubs in their relationships with fans – who its tentative return, has reinforced the public’s emerge from this extraordinary short-term then, stay safe and well and enjoy this edition. cannot currently build their connection through love for it and hence broadcasters’ appetite shock will be the actions of the game’s business the age-old matchday channels. for, and in some cases, dependence upon, it. leaders. Football has the potential to return Dan Jones, Partner This in turn will continue to attract sponsor not only intact, but stronger and more resilient www.deloitte.co.uk/sportsbusinessgroup The importance of being able to meaningfully and corporate interest, although the ability if the right lessons are learned and measures connect with fans digitally has never been of many companies to fund the game to the are taken, perhaps collectively. The current greater and presents an opportunity and degree they previously did – or at all – may have cohort of administrators and investors are the

04 Annual Review of Football Finance 2020 | Sports Business Group

Delivering results worldwide

Deloitte has a unique focus on the sports sector, led from Strategy development Business planning Assistance with the Business plan preparation the UK and operating across the world. Our experience, development of brand, regarding the Rugby League long-standing relationships and understanding of the business and go-to-market World Cup tournament’s strategies for the league. broadcast and commercial industry mean we bring valuable expertise to any project rights. from day one. Consulting services Market analysis and Assistance to FIA and benchmarking For more than a quarter of a century, across For further details on how Deloitte can add Formula 1 to support the Independent study on the over 40 countries, we have worked with more value to your project and your business, development of the FIA economics of cricket, providing organisations in sport than any other advisers. visit our website www.deloitte.co.uk/ F1 Financial Regulations the first comprehensive Our specialist Sports Business Group at Deloitte sportsbusinessgroup and contact us on: and supporting regulatory analysis of the sport’s finances provides services including: framework. in a global context. Telephone: +44 (0)161 455 8787 •• Business planning Email: [email protected] •• Revenue enhancement and cost control •• Market analysis and benchmarking •• Strategic review •• Economic impact studies •• Venue feasibility and development •• Sports regulation advice •• Due diligence •• Corporate finance advisory •• Business improvement and restructuring •• Forensic and dispute services •• Digital strategy and transformation

Deloitte are also audit and tax advisers to many sports businesses.

05 Annual Review of Football Finance 2020 | Sports Business Group

The leading team in the business of sport

Improve your strategy and governance

Working together with our clients, We help deliver effective Deloitte’s unique experience, governance, strategies, insights, robust evidence-based operations, competitions and advice, and credibility in sport impact analysis for sports Business Economic impact Strategy Governance and Restructuring Business Economic impact Strategy Governance and Restructuring helpsplanning build a strong casestudies and revieworganisations and toorganisational build their of competitions planning studies review and organisational of competitions consensus for change amongst developmenintegrity, credibility,t desig quality,n youthand calendar development design and calendar key stakeholders and enables player development, popularity our clients to positively influence and value. and react to their wider political, economic and social environment.

Optimise your revenues

Deloitte bring experience, We give our clients a competitive information, insights and leading advantage by delivering solutions practices to help our clients to to help engage their fans, grow analyse and grow their revenues attendances, promote their and profitability. brand, build value from new Commercial Market analysis Ticketing and Benchmarking Media rights Commercial Market analysis Ticketing and Benchmarking Media rights markets and accelerate growth. development and development hospitality and best practice analysis development and development hospitality and best practice analysis strategies strategies

06

Advice on the Financial and Business and Targeting, Major event Advice on the Financial and Business and Targeting, Major event development of commercial venue market acquiring and feasibility, bid development of commercial venue market acquiring and feasibility, bid stadia and other due diligence feasibility studies disposing of a support and stadia and other due diligence feasibility studies disposing of a support and facilities sports business advisory services facilities sports business advisory services

Risk Audit and Club licensing Investigatory and Sports tax Risk Audit and Club licensing Investigatory and Sports tax management compliance and cost control dispute services advisory management compliance and cost control dispute services advisory regulations regulations

Digital strategy Data Business agility Mobile and Content and Digital strategy Data Business agility Mobile and Content and and planning transformation and ways of e-commerce campaign and planning transformation and ways of e-commerce campaign working implementation strategy working implementation strategy Business Economic impact Strategy Governance and Restructuring planning studies review and organisational of competitions development design and calendar

Commercial Market analysis Ticketing and Benchmarking Media rights development and development hospitality and best practice analysis strategies

Advice on the Financial and Business and Targeting, Major event development of commercial venue market acquiring and feasibility, bid stadia and other due diligence feasibility studies disposing of a support and facilities sports business advisory services

Business Economic impact Strategy Governance and Restructuring planning studies review and organisational of competitions development design and calendar Business Economic impact Strategy Governance and Restructuring planning studies review and organisational of competitions development design and calendar Risk Audit and Club licensing Investigatory and Sports tax management compliance and cost control dispute services advisory regulations

Annual Review of Football Finance 2020 | Sports Business Group

Unlocking digital revenue

Commercial Market analysis Ticketing and Benchmarking Media rights Deloitte help our clients move Deloitte focus on putting smaller, development and development hospitality and best practice analysis strategies beyond ad-hoc, siloed, digital more tightly scoped offerings initiativesCommercial to create Market a coherent analysis Ticketinginto the and market Benchmarking quickly and Media rights development and development hospitality and best practice analysis end-to-end transformation that successfully,strategies to incrementally Digital strategy Data Business agility Mobile and Content and combines emerging technology achieve a re-imagined business and planning transformation and ways of e-commerce campaign and human-experience led ambition. working implementation strategy design.

Make informed investment decisions

Deloitte has an extensive track- We utilise our experience, industry record of delivering tailored value- knowledge and global networks Advice on theadding Financialservices andto a wideBusiness range ofand to provideTargeting, independent Major and event development of commercial venue market acquiring and feasibility, bid stadia and otherinvestors, due owners diligence andfeasibility financiers studies trusteddisposing advice of a to helpsupport our clients and facilitiesin respect of various sports assets understandsports business the commercialadvisory service s Advice on the Financial and Business and Targeting, Major event around the world such as clubs realities of their proposed development of commercial venue market acquiring and feasibility, bid stadia and other due diligence feasibility studies disposing of a support and and sports marketing companies. investments, and plan successfully facilities sports business advisory services for the future.

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Deloitte brings to clients an Our clients benefit from our unrivalled depth of understanding expert review, advice and reports of sports’ regulatory requirements, to manage their risks, comply with how the business of sport works in statutory requirements, resolve Risk Audit and Club licensing Investigatory and Sports tax practice, and the wider economic, disputes, and implement effective management compliance and cost control dispute services advisory accounting and legal environment sport regulations. regulations in whichRisk a sport operates.Audit and Club licensing Investigatory and Sports tax management compliance and cost control dispute services advisory regulations

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Digital strategy Data Business agility Mobile and Content and and planning transformation and ways of e-commerce campaign working implementation strategy Digital strategy Data Business agility Mobile and Content and and planning transformation and ways of e-commerce campaign working implementation strategy Annual Review of Football Finance 2020 | Europe’s premier leagues

Europe’s premier leagues

In 2018/19, the commencement of the new three-year Chart 1: European football market size – 2017/18 and 2018/19 (€ billion) broadcast cycle for UEFA club competitions drove growth in ‘Big five’ 2.7 4.2 9% European club football, although the challenge of revenue 15% Non ‘big five’ top leagues 0.7 2.9 0.7 2% 2% ‘Big five’ countries’ other leagues 10% polarisation remains. 2.6 FIFA, UEFA and National 9% €28.4bn €28.9bn Associations 2017/18 15.6 2018/19 European football market Revenue increases, whilst benefitting all 55% 5.6 17.0 Non ‘big five’ other leagues 20% 59% European football market revenue for the in absolute terms, have not resolved the 5.3 2018/19 season totalled €28.9 billion. longstanding challenge of polarisation as 19% Source: Leagues; UEFA; FIFA; This equates to 2% growth since 2017/18. relative gaps widen. Clubs from the ‘big five’ Deloitte analysis. leagues benefited from 70% of the additional Excluding the biennial impact of UEFA UEFA prize money distributions, amounting and FIFA’s international tournaments, the to €483m, driving their share of the European excel, but the overall strength of the relationship reported. UEFA’s ability to ensure its member European football market has grown every year football market to 59%. between revenue and on-pitch success in the associations’ clubs remain aligned will be critical throughout the 21st century to date. European same direction is hard to resist. to the future direction and health of European football remains incredibly popular, with the In an effort to help redress the balance, UEFA football. value of broadcast rights soaring in recent years has responded with a new club competition Recent developments have further intensified and fans’ interest higher than ever. Clearly, starting in 2021/22, the UEFA Europa the challenges facing football’s governing Alongside this, the continuing evolution, and challenging times now lie ahead for European Conference League. bodies. Currently, the European competition associated perception, of UEFA’s financial football and in future editions we may well be format beyond 2023/24 is yet to be agreed regulations will play a key part. Whilst it is likely reporting a revenue decline. Nonetheless, in The self-fulfilling nature of polarisation has been and the possibility of a European Super UEFA will face increased scrutiny, the principles the long-term the fundamentals of the public, well recorded, as the most successful teams on League to disrupt the status quo is regularly of ensuring sporting integrity should remain, and hence corporate, appetite for elite football the pitch reap financial rewards in increased with all stakeholders having a responsibility to remain strong and will help the industry revenue and invest in playing talent to further act accordingly. overcome these challenges. strengthen on-pitch performance. This has been Clubs from the ‘big five’ seen again in the 2019/20 season as, for the first leagues benefited from In the immediate term, UEFA has commenced 2018/19 growth was driven by the time since the introduction of the round of 16 in its sales process for the 2021/22-2023/24 rights commencement of the new three-year 2003/04, all 16 of the clubs reaching the knock- 70% of the additional UEFA cycle. Early indications suggest impressive broadcast cycle for UEFA club competitions. out stages of the UEFA Champions League play prize money distributions, value uplifts in some key markets, although it Substantial uplifts to media rights values meant their domestic football in a ‘big five’ league. The is acknowledged that sustaining this across all almost €700m of additional prize money was correlation and causation is imperfect, as ‘big’ amounting to €483m. territories is likely to be challenging. distributed to clubs through UEFA competitions. clubs can underperform and ‘smaller’ clubs can 08 Annual Review of Football Finance 2020 | Europe’s premier leagues

Spain’s La Liga saw strong growth during Chart8,000 2: ‘Big five’ European league clubs’ revenue – 2018/19 (€m) 2018/19 and pushed ahead of the German Weathering the storm 5,851 Bundesliga to regain its position as the Matchday 6,000 1,616 European football has been a huge success world’s second-highest revenue generating 28% Broadcasting story in its ability to generate revenue football league. Sponsorship/Commercial 4,000 3,459 3,375 3,345 growth, led by broadcast but supported by 59% 496 Other commercial 1,023 15% 2,495 30% 846 1,902 385 commercial and matchday revenues. 25% 751 415 20% 1,831 30% 22% The impact of COVID-19 with all major ‘Big five’ European leagues’ revenues 2,000 54% 1,483 1,460 776 521 44% 520 284 201 Note: Commercial revenue is not 59% 901 leagues severely disrupted, or ended La Liga clubs reported revenue growth of over 13% 16% 16% 11% 11% 47% disaggregated into ‘sponsorship’ prematurely, and the postponement of €300m (10%) in the 2018/19 season, the second 0 Spain Italy and ‘other commercial’ for clubs in Euro 2020, will mean 2019/20 will see a highest absolute growth amongst the ‘big five’ England, Spain and Italy. Average revenue per club (€m) marked reduction in revenues. leagues. Broadcast revenues continued to be Source: Leagues; Deloitte analysis. the primary driver as the league benefited from 293 169 186 125 95 While all will be impacted, those clubs uplifts to media rights and the clubs competing Matchday from smaller countries, typically with a in European competitions profited from Average match attendance greater dependence on matchday increased UEFA distributions. 38,484 26,585 42,738 24,106 22,833 Broadcasting revenues risk being hit the hardest. The expected quiet summer player Top flight Spanish clubs grew commercial Stadium utilisation (%) Sponsorship/Commercial transfer window may also limit vital revenues by 7%. Within this, the extent of additional funds as bigger traditional polarisation within top-level football leagues is 97 75 88 61 74 Other commercial buying clubs have their own financial evident as FC Barcelona alone accounted for challenges. A likely mixed picture on the 88% of the increase. The club benefitted from timing and nature of the return of fans to changes to its licensing and merchandising that In Serie A and Ligue 1, strong revenue Juventus accounting for around half of Serie stadia, economic weakness faced by saw a reduced reliance on third parties as more growth was noted, with 11% and 12% uplifts A’s commercial growth. In Ligue 1, Paris Saint- broadcasters and commercial partners of its revenue generating functions operated respectively. As we see across the football Germain continues to dominate French football, and even ongoing restrictions on in-house. industry, broadcast rights income continues generating almost half of the league’s non- European travel suggest it could be a to be a critical factor in driving overall revenue broadcast revenue. This is one of the clearest bumpy recovery. Having regained the status of the second-richest growth. In Italy, the start of a new three-year examples of polarisation across Europe’s football league in 2017/18, the Bundesliga’s international media rights deal resulted ‘big five’ leagues. In addition to appropriate government change in club mix for 2018/19, from promotion in broadcast revenues increasing by 11%. support, necessary and justified to protect and relegation reduced matchday and French clubs generated an additional €110m The Premier League continues to generate a sport which means so much to so many, commercial revenues, allowing La Liga to retake from broadcast income as club performance the highest revenues across the ‘big five’ (€5.9 it will be important all stakeholders play second place in revenue terms through its improved in UEFA competitions. billion). The 20 clubs’ combined revenue grew their part in this recovery. Solidarity superior growth. by 7%, driven by commercial revenue growth of across all stakeholders as well as strong In Italy and France, growth was actually 9% and clubs competing in UEFA competitions leadership and action individually will be Bundesliga clubs still achieved impressive achieved across all revenue streams. Similar to benefiting from increased distributions. needed to ensure none of the rich revenue growth of €177m (6%) for the the situation in Spain, the primary drivers for diversity European football has built over 2018/19 season, due to the uplift in broadcast matchday and commercial revenue growth were English clubs achieved the highest absolute decades of history is lost. revenues (19%) as the league benefitted from individual clubs’ financial performance, most growth (€411m) amongst the ‘big five’ leagues, a contractual annual domestic rights revenue notably in Italy with Internazionale accounting despite the 2018/19 season having been the increase. for c.70% of matchday revenue growth and final year of their current broadcast cycle. 09 Annual Review of Football Finance 2020 | Europe’s premier leagues

The 2019/20 and 2020/21 financial years Spain Italy Chart 3: ‘Big five’ European league clubs’ will be directly impacted by COVID-19, Commencing in 2019/20, new domestic Under the leadership of a new President, Serie revenue – 2016/17 to 2020/21 (€ billion) with lost, and deferred, revenue from broadcast rights agreements are set to deliver A has highlighted key priorities of increasing the the 2019/20 season creating a ‘V-shaped’ an uplift of c.15% in centralised revenue for La international appeal of the Italian league and 7.0 6.2 recovery for many ‘big five’ leagues as fans’ Liga clubs. Alongside a five-year international potentially transforming it into an organisation 5.9 continuing desire to consume top level rights agreement, this may see the league’s with broadcasting capabilities, as it seeks to 6.0 5.4 5.3 football helps to drive recovery and future clubs achieve combined broadcast revenues in regain lost ground from competitors. 4.9 long term revenue growth. excess of c.€2 billion in the coming years. 5.0 Domestic and international broadcast rights Following the move to a centralised rights agreements expire at the end of the 2020/21 England sales model in 2015/16, a clear objective of the season. Serie A is currently assessing its 4.0 3.7 3.4 3.3 2019/20 marks the first year of a new three-year league was to reduce the financial disparity options, which may include accessing private 3.2 3.2 2.9 3.3 broadcast cycle in England that was estimated between clubs. For 2018/19, La Liga has publicly equity investment and / or the creation of 3.0 3.0 3.1 2.7 2.8 2.5 to deliver a c.8% increase to broadcast heralded its ability to reduce the ratio of its own platform in partnership with a third 2.2 2.1 2.1 2.3 revenues. The growth is entirely driven by an central broadcast revenues between the top party, likely a non-traditional broadcaster that 2.0 increase in international rights values. A relative and bottom earning clubs from almost 8:1 in may also commit to underwriting revenue 1.9 1.6 1.7 1.7 lack of competitive intensity in the domestic 2014/15 to 3.5:1. This reduced disparity should commitments to clubs. The decisions taken by broadcast market compared to previous cycles further help the attractiveness and value of the Serie A clubs and the successful execution of 1.0 causing these values to fall slightly. This should Spanish league. the chosen strategy will be key to the league’s Projected be viewed in the context of having achieved ability to narrow the gap to Germany and Spain 0 16/17 17/18 18/19 19/20 20/21 over 150% growth across the previous two Germany in revenue terms. cycles, however, maintaining close to those A key factor in the structure of the current England Spain France England Spain France levels should be viewed favourably. domestic media rights agreement in Germany France Germany Italy Germany Italy is the step changes between seasons that Before the cancellation of the 2019/20 season, Of particular interest was the entrance of provides Bundesliga clubs with incremental reducing polarisation within the league and Source: Leagues; Deloitte analysis. Amazon into the market and its acquisition of increases to broadcast income between achieving future (likely international) revenue two full game-weeks through each season from 2017/18 and 2020/21. growth continued to be key priorities for Ligue As normality returns, the French Football 2019/20. Whilst its broadcast product differed 1. Domestically, the broadcast rights for the League’s (LFP) focus will switch to international minimally from traditional broadcasters, the The Bundesliga faces a challenging broadcast 2020/21-2023/24 seasons are sold, with French exposure. The LFP is considering renegotiating introduction of concurrent broadcasting and rights market for its tender for the next cycle top-tier clubs collectively agreeing that the with the current international rights holder staggered kick-off times generated a high level starting in 2021/22, and will be hoping to create additional revenues are to be distributed under following pressure from clubs which believe of interest. Amazon has reported significant competition between potential media partners a new equal-share model. This distribution these rights are undervalued. The most growth in its Prime subscription packages over that have suffered financially in recent months. model is forecast to generate an additional successful nine clubs are bullish on the long- the period when Premier League matches In order to promote competitive tension and c.€20m for each club, which will at least help term growth of international rights, and a were broadcast and we await with interest to entice new entrants to the market, the to mitigate the impact of the cessation of the pre-condition of agreeing to the equal split of whether this will signal a more substantial move Bundesliga has implemented a “no exclusive 2019/20 season and consequent shortfall in additional domestic rights value was that future to acquire rights by Amazon, or other similar owner rule”, requiring rights to be shared with broadcast revenue for that year. additional international broadcast revenues organisations in the future. internet and media providers if the first four be shared between just those nine clubs. Only packages of rights are acquired by one partner. the results of future rights sale processes will demonstrate which faction got the better deal.

10 Annual Review of Football Finance 2020 | Europe’s premier leagues

Wage costs across the ‘big five’ leagues Germany Chart 4: ‘Big five’ European league clubs’ revenue and wage costs – 2017/18 and 2018/19 (€m) increased by almost €1 billion as their Bundesliga clubs increased their wage combined wages to revenue ratio expenditure by 7%. Despite top-tier German 8,000 increased to 63%. clubs benefitting from revenue growth during 5,851 the second year of a four-year domestic 6,000 5,440 broadcast cycle, the wages to revenue ratio

England actually rose slightly to 54%. Whilst this is the 3,375 3,345 4,000 3,073 3,168 3,579 Top-tier English clubs increased their wage spend highest level since the 2009/10 season it is 2,495 3,217 2,239 by 11% to €3.6 billion in 2018/19 season. As is worth noting that no other ‘big five’ league has 1,692 1,902 2,000 2,031 2,093 typical in the final year of the Premier League’s recorded as low a level as this in the past 1,674 1,798 1,757 1,487 1,262 1,389 broadcast rights cycle, wage growth outpaced 20 years. revenue growth, resulting in an increase in the 0 17/18 18/19 17/18 18/19 17/18 18/19 17/18 18/19 17/18 18/19 RevenueWage costs wages to revenue ratio from 59% to 61%. An interesting trend across German football England Spain Germany Italy France Wages/revenue ratioAverage club wages recently has been the approach of acquiring the Wages/revenue ratio (%) In previous cycles, Premier League clubs were best young playing talent from other leagues spending in the comforting knowledge of around the world. This has included both 59 61 66 62 53 54 66 70 75 73 contracted increased central distributions to players that have made a rapid impression in Average club wages (€m) come for the next three seasons. The fact this non ‘big five’ leagues and those denied first was not the case in 2018/19 raises concerns team playing opportunities in other ‘big five’ 161 179 102 105 93 100 74 88 63 69 about the impact on overall levels of profitability leagues. Whilst in the short-term these players for 2019/20 and beyond, even without any other may not demand the same level of wages as a Revenue Wage costs Source: Leagues; Deloitte analysis. disruption. more established ‘ name’, it is likely that if Bundesliga clubs wish to retain them through Spain the peak of their careers, we will see inflationary Italy France After three consecutive seasons of double-digit pressure on the wages to revenue ratio over Serie A clubs increased their wage expenditure After a period of intense transfer activity helped wage growth, the increase in La Liga clubs’ time. The Bundesliga will look to counter that at the fastest rate of the ‘big five’ leagues in drive Ligue 1 clubs’ wage costs up by 10%, wage expenditure was a much more modest by the development and longer-term retention 2018/19, and returned to a wages to revenue Paris Saint-Germain, Monaco, Olympique 3% for the 2018/19 season. This was driven by of the playing talent, assisting in achieving ratio of 70%, the UEFA guideline for a club’s Lyonnais and Olympique de Marseille were a reduction in wage spend at Real Madrid (a the strategic objective of developing the financial health. again the top four biggest wage spenders, decrease of €36.5m), due in part to the transfer competition’s international image and hence accounting for over half of the league’s total of Cristiano Ronaldo to Juventus. Removing revenues. With Italian clubs seeking to improve their playing wage costs between them. Real Madrid’s wage cost decrease reveals an talent through the transfer market, significant underlying increase across the other 19 La Liga additions were made to playing squads and 11 of As Ligue 1 clubs benefitted from strong revenue clubs of 6%. the 20 Serie A clubs reported a wages to revenue growth, the wages to revenue ratio reduced to ratio in excess of 70%, compared to seven in 73%, however this remains the highest wages The wages to revenue ratio decreased to 62% the previous season. As the league’s clubs to revenue ratio across the ‘big five’ leagues. in 2018/19, from a 15 year high in the previous continued to acquire playing talent to compete The broadcast rights uplifts secured from season (66%). 2019/20 marks the start of a new at both domestic and European levels we the 2020/21 season may enable the wages to broadcast cycle, bringing Spanish clubs further expect to see a further increase in the league’s revenue ratio to be reduced further in future revenue growth and scope to further reduce wage spending and wages to revenue ratio in seasons. the ratio in the coming years. the next edition of this report. 11 Annual Review of Football Finance 2020 | Europe’s premier leagues

The ‘big five’ leagues generated aggregated Spain Chart 5: ‘Big five’ European league clubs’ profitability – 2009/10 to 2018/19 (€m) operating profits of €1.4 billion for the Spanish top-flight clubs achieved aggregated 1,250 UEFA FFP Start of FFP Start of break- Enhanced 1,208 2018/19 season, an increase of 7% on the operating profit of €445m for the 2018/19 regulations break-even even compliance version of FFP prior year. season and, for the first time in the league’s first approved requirement monitoring regulations

history, no La Liga club reported an operating 1,000 979 loss. This is a remarkable position for Spain’s top 934 England 739 721 England flight clubs, especially given the financial picture 750 After a number of years in which we have of just a few years ago. Whilst the centralised 681 reported a trend of Premier League clubs sale of broadcast rights has undoubtedly 455 445 Spain 500 397 moving towards consistent operating profits, been a key factor, credit should also be given 347 373 316 343 284 394 Germany 2018/19 saw a decline in overall operating profit to the league’s regulatory environment, 264 250 190 to €934m as wages and other operating costs which monitors clubs’ spending and imposes 250 138 171 96 260 226 104 grew faster than revenue. restrictions if appropriate. 81 59 103 30 (3) (35) (40) (102) (97) (67) 0 (140) (36) Italy With centralised revenue unlikely to deliver Revenue uplifts are secured for the next (53) (43) (110) (98) growth in operating profits over the rights cycle domestic media rights cycle, and the league has (149) (160) (143) (133) that commenced in 2019/20, the emphasis publicly stated a desire to reduce the central -250 (298) (306) France more than ever is on individual clubs to distributions ratio between the top and bottom consider ways in which they can develop their earning clubs. Twinned with a tight regulatory -500 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 own revenue and efficiently deliver operating environment, it is likely that sustained profits. With Premier League clubs appearing in profitability can be achieved across La Liga in recent years to have become more sustainable the long-term. Note: The operating result is the net of revenues less France businesses, there is a risk that 2018/19 marks wage costs and other operating costs. The operating Ligue 1 clubs reported a record aggregate result excludes player trading and certain exceptional a turning point back towards clubs making Germany operating loss of €306m for the 2018/19 items. Aggregate operating results for Spanish clubs operating losses even without external market Likewise in Germany, the implementation of the were not available prior to 2013/14. season, their 12th successive year of generating shocks such as those faced in 2020. DFL’s licensing standards has created a strong combined losses. regulatory environment and facilitated financial Source: Leagues; Deloitte analysis. responsibility amongst Bundesliga clubs. In More positively, the new domestic broadcast Spanish top-flight clubs 2018/19, clubs benefited from broadcast revenue cycle in 2020/21 is expected to generate achieved aggregated growth and controlled overall expenditure. Increased investor interest in Italian football revenue uplifts of c.€400m. This, if combined Consequently, clubs achieved a league record coupled with a more robust regulatory and with improved cost control rather than further operating profit of €445m for high operating profit of almost €400m. governance approach could provide the wage increases, could provide an opportunity the 2018/19 season and, for opportunity for a return to profitability, but it for Ligue 1 clubs to operate profitably and Italy is undoubtedly a challenging time for Italian increase the investor appeal of top-tier French the first time in the league’s After two successive seasons of operating football. Those responsible for the Italian game clubs. history, no La Liga club profits, Serie A clubs generated a combined will need to consider carefully how best to operating loss of €36m for the 2018/19 season. proceed for a successful future. reported an operating loss. Despite revenue growth, the increase in wage spending has led to a collective loss-making position.

12 Annual Review of Football Finance 2020 | Europe’s premier leagues

1,000 Whilst 2018/19 saw growth across many Chart 6: Selected other European league clubs’ revenue – 2018/19 (€m) The 2018/19 season saw revenues increase by of Europe’s non ‘big-five’ leagues, the 752 748 800 impacts of COVID-19, particularly on those 20% across the Dutch clubs. This was 138 45 Matchday Sponsorship/Commercial 230 leagues with a higher reliance on matchday driven primarily by Ajax’s progression to the 594 Broadcasting Other commercial Matchday revenue, will present a major challenge. Champions League semi-finals which earned 600 436 226 the club €79m from UEFA distributions. 440 Broadcasting 384 38 Sponsorship/Commercial 400 106 344 191 Other commercial 115 256 232 240 The (RPL) maintained The Primera Liga saw further revenue 49 198 140 73 200 101 68 146 145 124 its position as the sixth-richest football league, polarisation amongst its clubs, as the league 126 73 51 35 19 63 51 65 52 104 69 116 49 39 39 despite a revenue decline, in Euro terms, of achieved overall revenue growth of 2% to 89 64 89 37 16 51 19 43 36 20 €61m (8%). €440m. The top three clubs, S.L. Benfica, 0 Russia NetherlandsPortugalBelgiumSAustria cotland FC Porto and Sporting CP, drove growth through Average revenue per club (€m) In order to deliver growth for future seasons, increased matchday revenues and distributions 47 42 33 24 22 21 20 14 998 the RPL entered into an agreement with from UEFA club competitions. YouTube to distribute international rights Wages/revenue ratio (%) during 2019/20 via a paid-for membership. 70 79 57 75 49 63 65 64 58 71 74

Furthermore, the league is seeking to increase Jupiler Pro League clubs achieved revenue Number of clubs the intensity of competition and entertainment growth of 16% to €344m. A key driver of growth 16 18 18 18 16 12 12 14 16 16 16 value by voting in favour of an expansion of the was broadcast revenue (up 32%) as Belgian league to 18 teams. clubs benefited from an improved collective performance in UEFA club competitions Note: This chart includes a sample of countries top-tier leagues analysed in this report. Central Turkey compared to 2017/18. From 2020/21 broadcast ranking below fifth in terms of average top division distributions from the SPFL will be boosted by club revenues for the most recent available financial The Turkish Süper Lig reported limited revenue revenue growth is expected, as a new five- a new, long-term, domestic broadcast rights information. Figures in respect of Norway, Poland, growth of 2% in Euro terms over the period. year domestic and international rights deal is Portugal, Russia and Turkey relate to FY2018. Figures in agreement commencing in 2020/21, which is Difficult economic conditions and turbulence in anticipated to deliver an increase of over 25% respect of Denmark and Sweden relate to the year to anticipated to deliver a c.20% increase on the the Turkish Lira exchange rate both presented on the existing agreement. December 2019. The wages to revenue ratio in respect existing arrangement. of Belgium is based on player payroll only. growth challenges. Source: Leagues; Club accounts; UEFA; Deloitte analysis. Denmark, Poland, Norway and Sweden Nonetheless, the twin impacts of a new The 2018/19 season marked significant growth In 2018/19 no club from Denmark, Poland, broadcast cycle and matchday revenue for the Austrian Bundesliga, as the league Norway or Sweden qualified for the Champions improvements helped maintain Turkey’s strong expanded the number of competing teams to League group stage, and the advent of the UEFA financial ranking amongst European leagues. 12 and revenues grew by 45% to €256m. Europa Conference League therefore offers Turkish clubs’ stadium redevelopment projects The commencement of the new broadcast The clubs’ revenues these clubs an additional opportunity to benefit and the Turkish Football Federation’s use of cycle, starting in 2018/19 further drove growth. increased by 3% to £212m (€240m) in 2018/19. financially from a share of UEFA distributions. initiatives, such as UEFA Grow, to increase Longer term growth has seemingly been The presence of both Old Firm clubs in the These leagues also continue to look to other the country’s participation in football and secured as the existing broadcast rights holder UEFA Europa League helped to deliver overall sources of revenue to achieve growth. For encourage families to attend Süper Lig matches has negotiated an option to extend its current matchday and commercial growth. Matchday example, the has agreed a have also helped strengthen performance. agreement for a reported c.20% increase in revenues, boosted by a fourth successive season new three-season broadcast rights deal from annual revenues, from the 2022/23 season. of attendances growth, comprised 48% of total 2021/22 to 2023/24 and the Polish revenue – the highest amongst the European launched its own OTT platform in 2019/20. 13 Annual Review of Football Finance 2020 | Sports Business Group

Fans for the memories 50% Fans – as the ultimate consumer of its product – will always watch live football via streaming (i.e. be a primary consideration for decision-makers in the web based solutions), football industry. The three revenue types by which the with the same proportion watching via industry’s income is categorised are all ultimately driven by attendance at matches. fan consumption. It is fans who subscribe to or 90% of fans surveyed still watch streaming providers to watch the sport and provide broadcast live football via traditional Key finding: revenue, fans that organisations partnering with football clubs linear broadcasts Traditional linear (via satellite or cable broadcast therefore and leagues wish to increase their profile with thus providing broadcasters). remains hugely important commercial revenue, and fans directly providing matchday for live sport, backed by considerable demand revenue through their attendance. amongst fans.

The consumption demands of the fan in a post- To get a glimpse into the current viewpoint of COVID-19 world will therefore be of paramount the football fan we conducted a global survey importance and interest to the industry as it in early May 2020 of fans in over 30 countries. consolidates, recovers and ultimately grows The responses provided notable insights both in the face of the pandemic. An adaptation on how fans prefer to consume football and When fans were asked to rank their of existing business models is likely in the several topical issues in the game which will methods of consumption by order of short-term at least as the industry adjusts to undoubtedly continue to be discussed in the preference the results were particularly competing in a behind-closed-doors scenario, coming year. telling. Attendance at matches received Key finding: where the consumption preferences of fans the highest number of first preference There is still an insatiable watching from home become even more critical. selections with 40%. The most selected appetite for live sport, second and third preferences were live and despite significant television and live streaming broadcasts, advances in broadcast with highlights via television and and technology, from the streaming the most common fourth and perspective of the fan, fifth preferences respectively. nothing beats being there.

14 Annual Review of Football Finance 2020 | Sports Business Group

The preferred channels used to access information about clubs, leagues and players vary. Despite the proliferation of social media over the past Key finding: decade respondents still 56% Greater use of streaming used websites for clubs and Key finding: of respondees view the for highlights than for leagues more than any Fans appear to be current competition live football shows other channel. The most broadly supportive of formats at continental The consumption methods for that different content common source for players the continental and and domestic level as highlights are again still led by is viewed via different was their Instagram feed. domestic competition fit for purpose. 30% traditional linear broadcasts media by the same formats currently in were neutral on the with 72% of respondents consumers. operation. issue with only 14% using this method, although a expressing negative significantly higher proportion sentiment. (60%) consume via streaming High profile official domestic compared to live football. matches taking place in other territories have become When asked about ‘Super League’ style more prevalent, recent competitions the fans surveyed were mainly examples being the disapproving of such formats which would Of those fans that Italian Supercoppa and potentially match the largest, but not necessarily streamed (either live or Spanish Supercopa in the current best on-pitch, clubs against each highlights) the device Saudi Arabia. The fans other on a regular season basis. 57% of fans most commonly used surveyed expressed posted negative sentiment with less than a was the phone, with negative sentiment quarter (24%) supportive. 42% of fans that stream for this, with 57% 63% also disapproved of using that method disapproving and only Key finding: the notion that these Key finding: compared to around 17% expressing Whilst such offers from host competitions should The current domestic 25% for laptop and approval. cities and countries may be be ‘closed shop’ and continental calendars, television. attractive to leagues and (i.e. no promotion/ coupled with the drama, federations, especially in a post- relegation) to fluidity and jeopardy that Key finding: COVID-19 scenario where cashflow guarantee that the As mobile technology challenges are commonplace, largest teams play provides appear to be and video quality careful consideration should be each other much valued. continues to evolve with given to the core consumers – each season. the advancement of 5G the fans – when making these the trend of phone as the decisions. primary streaming device looks set to continue.

15 Annual Review of Football Finance 2020 | Premier League clubs

Premier League clubs Into the valley

The huge disruption to the 2019/20 season The completion of the 2019/20 season in the caused by COVID-19, with a quarter of the summer of 2020 could, surprisingly, prompt season delayed until at least June and July a rebound to a new revenue record for the and played behind closed doors, will trigger 2020/21 financial year, as it will effectively the first ever drop in Premier League cover one and a quarter seasons. There are As predicted in last year’s Chart 7: Premier League clubs’ revenues revenues. The fall is made up of two a number of inherent uncertainties in trying 2016/17-2020/21 (£m) elements – 1) revenue delayed until the to estimate the revenue levels for 2020/21 edition, Premier League following financial year when the final – the speed and scale of return of fans to 6,000 Projected clubs’ total revenue exceeded 5,400 games are played (football accounting years stadiums, the easing of travel restrictions to 5,157 1,350 typically end in May or June) and much more facilitate UEFA competitions, the strength of £5 billion for the first time in 4,819 1,425 25% 5,000 4,556 28% seriously, 2) revenue permanently lost due broadcast and commercial partnerships 1,305 4,300 2018/19, an increase of 7% 1,168 27% to the impact of the pandemic. and most fundamentally the prevalence of 26% 1,550 COVID-19 will all shape the outcome. compared to the previous 4,000 36% 3,700 3,049 69% While much uncertainty remains, assuming 2,844 59% 2,768 59% a completed 2019/20 season, we estimate It is highly likely that the first truly “new season. 61% 3,000 revenue may fall to c.£4.3 billion (17% normal” set of financial results will not be 2,200 Revenue increased across all three streams with 51% reduction from 2018/19), with over £500m seen until the 2021/22 season, reflected in the majority of growth in broadcast revenue. 2,000 now recognised in 2020/21 but almost the 2023 edition of the Annual Review of Increased distributions from participation £500m lost to the sport. Football Finance. in UEFA club competitions were received by 1,000 clubs as a new cycle of broadcast agreements 620 670 683 550 350 14% 13% commenced and changes to the distribution 13% 13% 6% performance in UEFA competitions; and strong between them. Both clubs continue to seek model adopted by UEFA for its Champions 0 16/17 17/18 18/19 19/20 20/21 performances by Premier League clubs in ways to utilise their stadiums on non-match League and Europa League competitions became Average revenue per club (£m) UEFA competitions. Approximately 80% of the days, with 2019/20 seeing concerts at Anfield effective. Commercial revenue grew faster than 228 241 258 215 270 increase in broadcast revenue was generated by for the first time since 2008 and Tottenham broadcast revenue (9% compared to 7%), due to the four Premier League clubs that participated Hotspur Stadium hosting its first NFL fixtures. the commencement of multiple new commercial Matchday Broadcasting Commercial in the 2018/19 Champions League, with deals, particularly at the largest clubs. the winners Liverpool generating £264m in As expected, matchday revenue continues to be Source: Deloitte analysis. broadcast revenue across all competitions, a the smallest component of total revenue and its 19% increase on the previous season. share of total revenue decreased marginally to Premier League clubs’ revenue generated revenue growth of more than 10%. 13%. Nonetheless, most of the Premier League Clubs’ total revenue increased by £338m The increase in broadcast revenue (£205m) Commercial revenue increases (£120m, 9%) clubs which also participated in the 2017/18 (7%) in 2018/19 taking average revenue per accounted for 61% of the total revenue increase. accounted for most of the remaining total season reported increases in matchday revenue Premier League club to £258m, an increase The rise was predominantly driven by the revenue increase, with all bar four of the as the total edged up to a new record level of £17m compared to 2017/18. Total revenue combination of the increased value of UEFA consistent Premier League clubs reporting for the League. Stadium utilisation was 97%, increases to new club record levels were seen broadcast rights; a new UEFA distribution increases. The two Champions League finalists, further highlighting the limited scope for growth at the majority of Premier League clubs. Aside mechanism, which introduced a coefficient Liverpool and Tottenham Hotspur generated in matchday revenue without ticket price or from newly promoted clubs, four other clubs ranking element based on a club’s historical over half of the total commercial growth capacity increases. 16 Annual Review of Football Finance 2020 | Premier League clubs

The gap between the average revenue An emerging theme in the sector in respect of Chart 8: Premier League and Championship clubs’ average revenues – 2018/19 (£m) generated by a ‘big six’ club and the the highest revenue generating clubs, and which 600 remaining clubs has continued to widen. is also observed in the Premier League, is the 539 Commercial Broadcasting PL central In 2018/19 the average revenue generated emergence of “mini-leagues” which represent the 207 Broadcasting other Matchday Commercial by a ‘big six’ club was £500m, an increase grouping of clubs in terms of revenue generation. 500 Broadcasting UEFA of £39m (9%) from 2017/18, whilst average 422 Broadcasting other revenue for the remaining clubs increased The revenue gap between the ‘big six’ and the 148 400 £7m (5%) to £154m. rest is the largest it has ever been. Arsenal, Broadcasting UEFA the sixth highest revenue generating club 19 88 (£393m), earned more than double the revenue 300 16 38 Broadcasting PL central Premier League clubs’ revenue levels of West Ham United (£193m) in seventh, a 143 139 Once again, all Premier League clubs ranked revenue gap of £200m. The introduction of 200 161 Matchday in the top 50 revenue generating clubs in the historical performance coefficients into UEFA’s 24 128 11 13 world with Manchester United the highest distribution model will further benefit those 111 12 100 95 57 23 ranked English club in third, with FC Barcelona clubs with previous success in the competition, 82 81 6 9 8 3 15 8 7 5 and Real Madrid continuing their recent many of whom have already built strong 8 34 dominance of the top two positions in the fanbases and global brands. It is becoming 0 UCL clubs UEL clubs Premier League Premier League Championship Championship (other) (relegated) with parachute without parachute Deloitte Football Money League. increasingly apparent that for clubs outside of

Note: UCL clubs comprised Liverpool, Manchester City, Manchester United and Tottenham Hotspur. UEL clubs Binge watching on catch up comprised Arsenal and Chelsea only as Burnley was Hard choices eliminated in the play-off round of qualification. The disruption to the 2019/20 season has to the maximum audience in a unique The deep public love for sport – whether Source: Premier League; UEFA; Deloitte analysis. reportedly resulted in agreed (c.£330m) moment of peacetime national crisis. watching or participating – has been rebates to the domestic and international clearly demonstrated during the crisis broadcasters, in recognition of the impact to The 2019/20 season is the first of the the ‘big six’ to reduce the revenue gap they need and sport will play a valuable role in the broadcasters’ revenues from the extended three-year broadcast cycle. In normal times to consistently challenge on the field and finish nation’s recovery, indeed way beyond its absence of live matches, subsequent domestic negotiations for the next cycle inside the top six league positions. Breaking direct economic contribution. disruption to planned schedules and the (starting 2022/23) would be expected to through and establishing themselves in this loss of subscribers (revenue therefrom). progress in early 2021. Any ongoing virtuous circle is neither easy (as many have In the long-term, commercial partners will Illustrating the public’s thirst for a return to uncertainty over COVID-19 would make tried and failed) nor cheap, as the most recent still want to be associated with the live football, and the broadcasters’ appetite such discussions more complex and point successes in doing so have shown. passion of sport, but for many corporates for live content, all 92 of delayed games of to a tough market. Nonetheless, there was tough spending decisions will be required the 2019/20 season will be shown live. New already emerging new competitors for The clubs relegated from the Premier League and short-term discretionary expenditure innovative extended schedules have been Premier League rights, and Amazon’s in 2018/19 were three of the four lowest such as sponsorship and corporate agreed with matches staggered across ‘experiment’ is reported to have been a revenue generating clubs. Fulham, Cardiff City hospitality will come under scrutiny. familiar and new kick-off slots and spread success. The popularity of the streaming and Huddersfield Town generated an average Some partner industries to sport may between Sky, BT Sport, Amazon and the BBC services has increased through the crisis revenue of £128m whilst the 11 clubs that were retreat, certainly in the medium term, but – the first time the BBC has broadcast live and it is very possible they could become not relegated and did not take part in the Group others have the opportunity to become Premier League matches, bringing matches more prominent in the future cycle. Stages of UEFA competitions achieved average more prominent supporters. revenue of £161m. 17 Annual Review of Football Finance 2020 | Premier League clubs

Premier League clubs’ wage costs Chart 9: Premier League clubs’ revenues surpassed £3 billion for the first time ever and wage costs – 2017/18 and 2018/19 (£m) A brave new world in 2018/19, an increase of 11% from 2017/18 to £3.2 billion. Over the last two completed 6,000 The COVID-19 crisis has starkly same structures may not directly work in seasons the combined increase in wage 5,157 demonstrated the risk that clubs face due to the Premier League, some more direct 4,819 costs has outstripped revenue growth of 5,000 their high operational gearing. Revenues linkage of wages costs to revenue would Premier League clubs. are volatile and at risk fromRevenu one yeare to the seem an obvious route for clubs to explore next, whereas costs (with players’ wages the in order to better share risk and reward 4,000 dominant cost) are largely fixed,Wage cooftensts for with players, and in turn create a more Premier League clubs’ wage costs years at a time due to the nature of players’ sustainable and robust business model. 3,000 3,155 Wages/revenue ratio The wages to revenue ratio increased again 2,849 contracts and competition to secure and from 59% to 61% in 2018/19 as Premier League retain their services. While a pandemic Premier League clubs also benefit from Average wage costs clubs spent an additional £306m on wages 2,000 affecting all 20 clubs almost overnight could visibility on future revenues as broadcast compared to 2017/18 with only Arsenal and not have been foreseen, thepe relegationr club risk contracts are known one or two years in Watford reporting decreases. The ‘big six’ clubs, and impact crystallises for three clubs each advance. Historically, given the typical 1,000 excluding Arsenal, all significantly increased year and the threat of aSo plateauurce: Deloit or declinete analysis . substantial increases in broadcast their wage spend, ranging from 18% to 28%. in other revenues is much discussed. revenues, this has fuelled wage inflation. Similar to the disparity in revenues, the average 0 2017/18 2018/19 A more prudent approach will now be wage cost for a ‘big six’ club was £284m, an Wages/revenue ratio (%) In other sports, teams are better protected required, given – as a minimum – increase of 17%, compared to an average of against this through formal revenue sharing uncertainty over future revenue increases £110m for the remaining consistent Premier 59 61 and collective bargaining agreements coupled with the need to repair eroded League clubs. Despite its significant increase in between players and teams. Whilst the balance sheets. Average club wages (£m) wage costs, Tottenham Hotspur had the lowest wages to revenue ratio in the league (39%) for 142 158 the third season running. Revenue Source: Deloitte analysis. Outside the ‘big six’ there were also some Wage costs Outside the ‘big six’ there significant increases, as the promoted clubs were also some significant increased wage costs in a bid to avoid immediate relegation, with mixed success, and other clubs £2.3 billion increases in wage costs, as sought to maintain Premier League status or Contributed by English the promoted clubs increased challenge the ‘big six’ at the top of the table. Two professional football promoted clubs increased their wage costs by wage costs in a bid to avoid to Government in 70% and 82% respectively – the first, Fulham taxes in 2018/19. immediate relegation. was relegated, the second, Wolverhampton

Wanderers qualified for European competition. The remaining 11 clubs increased their wage bills by an average 9% (£8m).

18 Annual Review of Football Finance 2020 | Premier League clubs

Eight Premier League clubs reported Chart 10: Premier League clubs’ revenues and wage costs – 2018/19 (£m) wages to revenue ratios of 70% or more, the indicative warning threshold used 700 627 by UEFA as part of its Financial Fair Play Regulations. AFC Bournemouth, Everton 600 538 and Leicester City reported wages to 533 revenue ratios of 85%, 85% and 83% 500 459 452 respectively, this is the first time there has been more than one club with a wages to 393 revenue ratio of over 80% since 2015/16. 400

352 Averag e 315 300 310 314 258 Everto n West Ham United Newcastle United

Correlation between wage costs and Leicester Cit y Wolverhampton Wanderer s Crystal Palace Southampto n Watfor d Brighton & Hove Albion Burnle y Fulham AFC Bournemout h Cardiff Cit y Huddersfield Town

Tottenham Hotspu r 235 193 188 league position 179 176 200 172 154 150 147 The Spearman’s rank correlation coefficient, 179 143 139 137 131 158 160 125 122 which measures the relationship between 150 136 119 100 115 102 111 league position and total wage cost rank, 97 92 84 87 93 54 64 Manchester Cit y increased from 0.75 in 2017/18 to 0.82 in Manchester United Liverpool Chelse a Arsenal

2018/19, indicating a relatively strong correlation 0 between final league position and total wage Wages/revenue ratio (%) cost in the 2018/19 season. Across the league, 56 59 58 39 70 60 61 70 85 83 55 53 78 77 57 71 62 67 85 43 53 14 clubs finished within two places either side of their wage costs rank with eight clubs finishing Revenue Wage costs Source: Deloitte analysis. within one place.

At the top of the table there continues to be a will avoid relegation it certainly gives clubs a At the top of the table there strong relationship between league position greater chance, all other things being equal. and total wage costs. The top six wage spenders continues to be a strong all finished in the top six league positions in Across the rest of the division (7th to 17th) relationship between league the 2018/19 season, however only Arsenal and there is significantly less correlation between Chelsea’s finishing positions (third and fifth) league position and total wage cost. The position and total wage perfectly correlated with their their wage cost Spearman’s rank correlation coefficient drops costs, while the mid-table ranks. to 0.25 for this section of the league indicating that the mid-table remains a highly competitive is a highly competitive and Cardiff City and Huddersfield Town, the two and unpredictable environment as has been unpredictable environment. lowest wage spending clubs in the league were highlighted again by the 2019/20 season to date. both relegated along with Fulham, which also ranked in the bottom third for wage spending. This indicates that while spending significant amounts on wages cannot guarantee the club

19 Annual Review of Football Finance 2020 | Premier League clubs

In 2018/19, the collective operating profit Chart 11: Premier League clubs’ profitability of Premier League clubs reduced to – 2014/15-2018/19 (£m) Testing times £824m, a decrease of 5% and a decline for the second consecutive season. 1,250 Operating profit/(loss) It is clear that COVID-19 will have a very It is very possible that Premier League clubs 1,038 19 Five clubs reported an operating loss 15 material impact on the profits of Premier will report a collective operating loss for compared to just one in 2017/18. Whilst 1,000 43 League clubs, but it is not the sole cause of the first time when we report results for 20 41 cumulative operating profits of clubs 17 declining profitability. the 2019/20 financial year in the summer 867 are at their third highest level ever and 52 824 of 2021. The expected much quieter 750 27 hence remained strong, aggregate pre-tax Even before the COVID-19 pandemic there summer 2020 transfer window, certainly 549 528 losses of £165m were reported in 2018/19, were some worrying signs in the for most clubs, means much reduced 427 which is a dramatic £592m reduction 500 509 profitability of English clubs. In the 2018/19 opportunities for generating significant 14 18 17 from profitability in 2017/18 and the 13 season it was already known that the new profits on disposal of players. This has 6 26 worst reported losses since 2012/13. Nine 250 25 Premier League rights deals for 2019/20 previously been facilitated by a perpetually 112 21 clubs recorded pre-tax losses, the largest 11 onwards would not deliver large revenue rising market and aided by the sale of home number since 2012/13 when 13 clubs were increases as the previous two had. Wage grown players with no recognised balance 0 (8) loss making. growth and transfer spending had eroded sheet value. (115) (165) hundreds of millions of pounds of -250 12 Profit/(loss) before tax profitability since the 2016/17 season as Therefore it is very likely that 2019/20 will Premier League clubs’ operating profit (6) clubs carried record book values of players see a record pre-tax loss (currently a £406m

The combined operating profit (which excludes -500 14/15 15/16 16/17 17/18 18/19 on their balance sheets going into the loss from 2009/10), and potentially well in profit on player trading, amortisation of player 2019/20 season. The clubs were therefore excess of this. While clearly unwanted, a transfer fees and finance costs) of Premier Clubs reporting operating profit/pre-tax profit already due to see profitability fall again in crisis provides the opportunity to League clubs has reduced for the second Average club operating result/pre-tax result the 2019/20 season, an effect that will be reconsider established but sub-optimal successive year, as the pace of wage cost magnified by the loss of revenue from the business practices. Clubs should adopt an Note: The operating result is the net of revenue less increases outstripped the rate of revenue wage7.0 costs and other operating costs. The operating season being paused. open minded approach to reform. growth and other operating costs grew. result excludes player trading and certain exceptional 5.9 5.9 items, which are included in the pre-tax result, along The pattern of successive operating profit 6.0 with other costs such5.4 as financing costs. 5.3 reductions in the second and third years of the 5.1 2016/17 to 2018/19 broadcast rights cycle is a Source: Deloitte analysis. The three newly promoted clubs, Cardiff City, Five clubs generating consistent trend with the 2013/14 to 2015/16 5.0 Fulham and Wolves, received a total of £332m rights cycle. Despite this, reported cumulative in central distributions from the Premier League operating losses is the operating profit of £824m is still the third 4.0 3.6 in 2018/19, helping boost their combined 3.4 highest number of clubs to highest in Premier League history. year operating profit3.2 increases. Outside the ‘big operating profits to £98m, having generated 2.9 3.3 2.8 3.0 six’ operating losses were made by an additional operating losses of £113m in 2017/18. This do so since 2012/13. 3.0 3.0 2.7 2.8 2.5 2.8 Chelsea was the only ‘big six’ club to report an four clubs. Five clubs2.2 generating operating transformation of clubs’ profitability highlights operating loss (£2m), with the other five clubs losses is2.0 the highest number of clubs1.9 to do2.1 so the financial opportunity on offer to clubs generating a combined operating profit of since2.0 2012/13 with all five1.9 increasing their wage promoted to the Premier League and underpins 1.6 1.7 £566m, approximately 70% of Premier League costs by more than revenue increased,1.5 indeed the level of operating losses owners appear clubs’ total operating profits. Despite this, of the in1.0 three cases increasing wage costs despite a willing to incur in their efforts to do so. six only Liverpool and Arsenal recorded year-on- decline in total revenue.

0 16/17 17/18 18/19 19/20 20/21 20 Annual Review of Football Finance 2020 | Premier League clubs

Premier League clubs’ pre-tax losses The cumulative net debt held by Premier Chart 12: Premier League clubs’ net debt – 2019 (£m) Having achieved pre-tax profits of £427m League clubs surpassed £3 billion in in 2017/18, Premier League clubs reported 2018/19 for the first time since 2008/09, 500 404 significant aggregate pre-tax losses of £165m in reaching a total of £3.5 billion, up from 308 2018/19. This was the highest losses total since £2.9 billion in 2017/18. Whilst this is the 250 2012/13 and only the second cumulative pre- highest level of cumulative net debt 37 14 (8) (12) 28 9 10 (44) tax loss in the past six seasons, representing ever recorded by Premier League clubs, 0 (1) (79) (106) (100) Net cash/bank a negative swing of almost £600m compared it represents just over two thirds of (131) (66) (20) borrowings to 2017/18. The predominant driver has been combined revenues. Ten years previously (271) (16) Other loans the combination of a significant reduction in the then record £3.3 billion represented -250

(397) Watfor d (473)

profit from the sale of players and increased 167% of that season’s revenues. The rise Liverpool (534) (512) Soft loans amortisation of player registrations. has predominantly been driven by an -500 (126) Leicester Cit y

increase in soft loans from club owners. AFC Bournemout h Net debt Chelsea generated the largest pre-tax loss due Total Total -750 2019 2018 to marginal revenue growth (1%), a reduction in Newcastle United Wolverhampton Wanderer s 212 367 profits achieved on sale of players (from £113m Premier League clubs’ net debt Brighton & Hove Albion Other clubs -1,000 to £60m) and the largest increases among Soft loans – a club’s borrowings on interest-free Manchester United Premier League clubs in both wage costs (£69m) terms typically from their owners – increased Tottenham Hotspu r (1,187) (1,159) and amortisation of player registrations (£44m). by 16% (£338m) in 2018/19. The increase is -1,250 Chelse a Tottenham Hotspur reported the highest pre- considerably smaller than was seen in 2017/18 (2,495) (2,157) (1,384) tax profit for the second successive season, (£679m) which was the result of promoted clubs albeit this reduced from £139m (2017/18) to contributing a combined soft loans balance (1,347) (534) (384) (279) (204) (157) (103) (97) (90) (80) (195) (3,470) (2,949) £87m (2018/19). of over £700m. Chelsea’s soft loan balance

increased by £228m in 2018/19 and the club 0 (25) 2 (3)(23) (4)(2) (7)(5) (4) (35) (106) (74) In 2018/19, nine clubs reported pre-tax losses, continue to hold the largest owner borrowings the highest number since 2012/13. Outside of balance in the league (£1.4 billion). Other notable the ‘big six’ the average pre-tax loss was £13m, increases were reported by Bournemouth and improved cash balance, increasing by £127m Net cash/bank borrowings Net debt which included a range from pre-tax losses Brighton, which increased their soft loans by to over £1 billion across the league. This was Other loans Net finance costs of £112m (Everton) to pre-tax profits of £41m £80m between them during 2018/19. largely driven by increases in the cash balances Soft loans (Newcastle United). Notably, two of the three of the two Manchester clubs, with Manchester Note: Newcastle United net debt calculated using relegated clubs (Cardiff City and Huddersfield Bank borrowings, which increased by £282m City and Manchester United reporting increases Newcastle United Limited 2018/19 financial statements Town) reported pre-tax profits indicating careful compared to 2017/18, was the other main of £102m and £66m respectively. This meant and St James Holdings Limited 2017/18 financial cost control. In normal times this approach driver of increased net debt. The increase across the 20 Premier League clubs they had statements. should, alongside parachute payments, provide was underpinned by a significant increase at combined net cash in the bank of £212m. Source: Deloitte analysis. a club with a more stable financial base as they Tottenham, with bank loans increasing from attempt to adjust to life in the Championship. £461m to £658m as the club completed work Other loans remained at much the same level as on its new stadium. Significantly increased bank in 2017/18, showing a 3% (£28m) increase. Net borrowing was also seen at Huddersfield Town finance costs rose by £32m to £106m in 2018/19, and Leicester City, increases of £31m and £55m however these remain comfortably covered by respectively. These increases were offset by an the clubs’ aggregate operating profits.

21 Annual Review of Football Finance 2020 | Sports Business Group

The women’s game

Women’s football made further substantial progress in the of all four UK home nations and the Republic Outlook for 2019/20 and beyond of Ireland in April 2019. Whilst FIFA’s major Given the exposure of women’s football during 2018/19 season and, notwithstanding the current COVID-19 partners of the tournament are predetermined, the World Cup, many domestic leagues were induced hiatus, the outlook remains positive with strong (FIFA’s six Global Partners have rights to all planning how to capitalise on the “buzz” created FIFA competitions) the tournament is able around the game and its players. One such existing and potential growth opportunities for stakeholders. to negotiate its own national sponsors. The initiative, implemented by the FA WSL, was the six national sponsors generated a reported introduction of women’s football weekends with 2018/19 – review headlines Regarding commercial interest in the women’s US$11.8m of rights fees and with reports that women’s games played at larger men’s stadia. game, in England the FA announced Barclays as FIFA may unbundle the rights to the Men’s and During these weekends, attendances for the Club football the first ever title sponsor of the FA Women’s Women’s World Cup (WWC) from 2022 onwards, English domestic game reached new heights. The 2018/19 season witnessed numerous record Super League (FA WSL) in a reported £10m the 2023 World Cup could see a significant uplift The first Manchester derby saw a WSL record one-off attendances in the women’s domestic three-year deal. In Spain, Spanish energy in value for the women’s competition. crowd of 31,213 at the Etihad Stadium, only to game, including: in Spain (Atlético Madrid v company Iberdrola announced an extension to be surpassed a few months later by the 38,262 Barcelona, 60,739, March 2019), in Italy (Juventus its title sponsorship of the top-flight league in a The 2019 World Cup more than delivered on who turned out at Tottenham Hotspur’s new v Fiorentina, 39,027, March 2019), and in France deal reportedly worth €1m per year. the pre-event promise to act as a supercharger stadium for the first top-tier North London (Lyon v Paris Saint-Germain, 25,907, April 2019). for interest in the women’s game. Match derby. The confirmation of the power of local Although these leagues now boast impressive International football attendances were sizeable, at an average derbies to drive interest was an important proof record attendances, the picture is remarkably UEFA announced two major women’s football of 21,756. These figures were by no means of concept for the women’s game. different for average match attendances. The sponsors: unprecedented (the average attendance majority of major women’s domestic leagues 1) VISA became the first ever sponsor of recorded at the previous edition in There has also been a surge in commercial achieve average attendances of c.1,000 with the UEFA women’s football with a seven- was 26,029) but the tournament shattered interest following the World Cup. For example, two exceptions being: year partnership through to 2025, TV records. The average global live match the BBC reportedly paid €10-12m for the rights 1) The American NWSL – which has achieved reportedly worth €2.5m per season; audience of 17m was more than double to the Women’s Euro in 2021 (now 2022) being an average attendance of c.6,000 in the and the 8m in Canada in 2015, with a total hosted in England, up from €1m that Channel 4 three seasons to 2018/19; and 2) In March 2019 Nike was announced viewership across the tournament of reportedly paid for the 2017 edition. Canal Plus 2) The Australian W-League – with attendances as the official match ball supplier. more than 1 billion. Digital engagement was and TF1 followed this trend in France with a joint of c.1,800. another key success for the World Cup, €13m deal for the French rights to the same Given the upcoming World with players such as Alex Morgan, competition. Whilst progress may have been 2018/19 was also the season that Manchester Cup in France there was Megan Rapinoe and Lieke Mertens temporarily paused in the wake of COVID-19, United entered the professional women’s game also significant commercial becoming recognised star this pause may create opportunities for growth and, despite playing in the second tier of English interest in the national team names, among football fans and as the game’s key decision makers are given football, achieved an average attendance of game. As a prominent example, beyond, and not just in their own time to reflect and consider its future direction. over 2,000. Boots signed as a main sponsor countries. 22 Annual Review of Football Finance 2020 | Sports Business Group

2022 Record 45,000+ FIFA publish Boots sign as a Mastercard VISA’s sponsorship Over 1 billion 14.3m watch the Canal Plus and FIFPro UEFA Women’s fans attend the first ever main sponsor of become first major activation watch the World Cup Final in TF1 secure rights overview Euro 2021 SSE Women’s strategy for all four UK home official partner of expenditure was World Cup the US, 22% more to Women’s Euro of women’s APR 2019 OCT 2018 OCT 2019 APR 2020 APR (England) MAY 2018 FA Cup Final at women’s nations and the MAY 2019 Arsenal Women’s the same for the than watched the in France for football Wembley football football club WWC as the Men’s men’s final in 2018 €13m report JUN/JUL 2019 JUN/JUL

2018 2019 2020

2021 2023 Manchester FA WSL Women’s club 39,000 sell- Nike sign as a Barclays sign Mediapro secures 31,213 attend BBC pays First top-tier North Tokyo 2020 FIFA WWC – United announce becomes match World out crowd main sponsor a multi-million rights to broadcast the first €10m for London derby at Olympic the first 32 intention to fully Record attendance at Juventus of UEFA pound deal to Primera División women’s rights to Tottenham Hotspur SEP 2018 SEP 2019 Games team WWC NOV 2019 MAR 2018 MAR create a women’s professional 2019 MAR – 60,739 at Atlético v Fiorentina women’s become title in Spain for a Manchester Women’s stadium breaks (Japan) (Location TBC) team Madrid Femenino – a record football in a sponsor of the reported €3m per derby Euro in WSL attendance vs FC Barcelona for women’s seven-year FA WSL season (2019/20 to breaking the the UK record with a Governance and Attendances Femení football in Italy deal 2021/22) WSL record crowd of 38,262 investment in the and TV women’s game audiences

Three such opportunities are: built on past encounters in women’s football or tag and a steeper potential growth trajectory a nascent professional sport such as women’s •• Rivalries; through building on pre-existing local rivalries. compared to many other sports properties, football, without the logistical behemoth of an •• Ownership; and For example, Manchester United entering a could be an attractive proposition. For the overloaded calendar deeply-rooted in tradition, •• Game changing thinking. women’s team and the subsequent attendance leagues and the clubs themselves, while there this may be possible. Indeed, such bold ideas record from the first Manchester derby shows remains a need to be sure of the benefits of can be a key catalyst for growth. Rivalries the value a rivalry can have on fan engagement. any long-term partnership, and the intentions Many of the greatest and most valuable stories of the partner, the immediate investment in sport are built upon rivalries. Whether it is Ownership would provide a significant opportunity to Grasp the opportunity Pakistan v India (cricket), LA Lakers v Boston Fuelled in part by the challenging current further professionalise and grow their fanbase, Given the success of its most recent major Celtics (basketball), Real Madrid v Barcelona financial environment for sports organisations, subsequently attracting increased commercial competitions (e.g. 2019 FIFA WWC), the current (football) or America v Europe (Ryder Cup golf). investors are increasingly interested in interest and thus accelerating a virtuous circle and predicted global interest in the sport and These matches draw the biggest crowds, the sports leagues and clubs, offering immediate of growth. the outlook of three major events in the next highest audiences and the greatest commercial investment in return for an equity stake and three years (Olympic Games in 2021 – Japan, value because they mean more to all concerned. influence and involvement in a potentially Game changing thinking UEFA Women’s Euro 2022 – England and FIFA Rivalries create a sense of identity and belonging rewarding long-term business opportunity. Despite the significant surge in interest in WWC 2023 – location TBC), the potential for – recognised by Maslow’s hierarchy of needs as With the majority of domestic women’s leagues women’s football, particularly following on from women’s football has never been stronger. the third level of human need, only surpassed owned and operated by their respective National the 2019 World Cup, the industry is still in its Rights holders and investors that can grasp this by physiological needs (water, food etc.) and Association (a key difference with their male infancy. This presents an opportunity for key opportunity and invest in the key catalysts for safety needs (employment, health etc.). Rivalries counterparts which are predominantly owned stakeholders to contemplate revolutionary change will be well placed to generate and reap in sport not only deeply embed fan loyalty but by the clubs themselves), the current situation ideas that other longer established sports lack the rewards from the next phase of growth. also create “appointment to view” moments may be an opportunity for rights holders to the agility to implement. For example, could the that even casual fans do not want to miss. In consider attracting third party investment. global club game be structured in a different The Sports Business Group at Deloitte the context of women’s football, the creation This could take a variety of forms, such as: joint way to its men’s counterpart in terms of the advises sports leagues and clubs on and strengthening of rivalries should be an ventures, long-term strategic partnerships, interaction of national, continental and global developing their strategic future direction, important consideration for rights holders and direct purchases or partial equity investments. competitions? While such a concept might be and regularly assists investors considering clubs. This can be through creating new rivalries Women’s football, with both a lower entry price dismissed immediately in the men’s game, for acquiring a sports asset. 23 Annual Review of Football Finance 2020 | Football League clubs

commercial revenue to make a meaningful Football League clubs contribution to bridging the financial gap. Good or evil – Parachute Leeds United was the most successful payments Championship club at generating matchday (£18m) and commercial (£21m) revenue, which Parachute payments are being accounted for a combined c.80% of their total increasingly scrutinised for the financially revenue, enabling it to generate higher total polarising effect they have within the revenue than some clubs in receipt of parachute Championship as they attempt to bridge 2018/19 saw a sixth successive season of revenue growth in payments. Leeds United was the only club to do the vast revenue gap between the top two so, though Norwich City also came close. divisions in English football. The average the Championship. Clubs generated record revenues of £785m, revenue of the three newly relegated a 5% rise on 2017/18. The increase was largely driven by the Commercial revenue also accounted for a higher clubs was £70m compared to an average percentage of Championship club’s total revenue of £48m for the other four clubs in receipt return to the Championship of three long standing Premier in 2018/19 at 25%, up from 23% in the prior of parachute payments and £23m for the League sides in Swansea City, Stoke City and West Bromwich year, driven by the three newly relegated clubs other 17 clubs, representing a sizeable Albion which had stayed in the top flight for a combined averaging £10m of commercial revenue each. financial advantage. 25 seasons before their relegations. In 2018/19, all three clubs relegated from Chart 13: Football League clubs’ revenues – the Premier League in the prior season Revenue is expected to fall for the 2019/20 Parachute payments were the single largest 2017/18 and 2018/19 (£m) failed to secure promotion. The challenges season given the disruption to the football contributing item to total Championship of adjusting to life in the Championship 800 calendar caused by COVID-19. On a positive clubs’ revenue, accounting for 30%. Seven 785 meant that while the parachute helped note, a new domestic broadcast rights deal Championship clubs were in receipt of 749 break their financial fall, it failed to began in the 2019/20 season, providing a 35% parachute payments, ranging from £16m to 700 facilitate the required bounce to catapult increase in value on the current deal, which £44m and totalling £237m, a decline on last year them back into the Premier League. will provide a boost to Championship revenues due to the back-to-back relegations suffered by 600 during this deal cycle. Sunderland, which now competes in League 1. Aston Villa was the only one of the three sides The 18 consistent Championship clubs from the promoted to the Premier League which received 200 191 2017/18 season saw their combined revenue Football League clubs’ revenue parachute payments in 2018/19, confirming 146 fall by £27m, largely due to parachute payments Broadcast revenue (including parachute that whilst parachute payments can be a key either ending (Cardiff City and Norwich 100 91 91 payments) continues to dominate the revenue differentiator in assisting on-pitch success City) or tapering (Aston Villa, Hull City, and profile of Championship clubs, accounting for they bring no guarantees. While success was Middlesbrough) and the gap not being filled by 0 2017/18 2018/19 over 54% of total revenue. Commercial revenue apparent for Aston Villa, only one of the other other revenue streams. (25%) and matchday revenue (21%) combined six clubs reached the playoffs. Average revenue per club (£m) made up just under half of total revenue in 31 6 4 33 8 4 Sunderland’s first season in the third tier of 2018/19. West Bromwich Albion recorded the The average revenue of a club in receipt of English football since 1987 drove the increase highest revenue in the Championship, reporting parachute payments was £57m compared to Championship League 1 League 2 in revenues generated by League 1 clubs from revenue of £71m, with over 62% coming from £23m for those not in receipt. For those not £146m to £191m, a record high for the division. parachute payments. in receipt of parachute payments, it is very Source: Deloitte analysis. Meanwhile, League 2 revenue remained stable challenging to generate the matchday and at £91m. 24 Annual Review of Football Finance 2020 | Football League clubs

Record revenue was coupled with record Chart 14: Football League clubs’ revenues lower than this reported figure, making this the increased correlation, the correlation wage costs of £837m in the 2018/19 season, and wage costs – 2017/18 and 2018/19 (£m) achievement even more remarkable. Sheffield between wage spending and finishing position a 5% increase on the 2017/18 season. United showed that promotion is achievable on remains weaker than in the Premier League. 1,000 The wages to revenue ratio rose to a new 837 a mid-table budget, albeit still one that required record of 107%. This reconfirms the huge 796 substantial owner funding of losses. 2018/19 saw League 1 wages rise 12% to 785 financial risks that Championship clubs are 750 749 Revenue£153m however the wages to revenue ratio willing to take in order to chase promotion There was a much stronger than usual positive fell from 94% to 80%, with the introduction of to the Premier League for as long as they correlation between wages and final leagueWa ge costSunderlands to League 1 having a significant 500 are able to. Overall, wage levels in League position in the Championship in 2018/19. impact on the financial landscape of English 1 and League 2 were marginally more The Spearman’s rank coefficient for the Wages/refootball’svenue rati thirdo tier. League 2 wages remained 191 sustainable, although most clubs remain 250 146 Championship was 0.70, a significant rise from stable at £71m in 2018/19, as did the wages to 153 91 91 137 Average wage costs loss making and reliant on a combination 71 71 0.47 in 207/18. The rankings showed that revenue ratio at 78%. Whilst the significant wage of owner funding and windfall transfer 0 17/18 18/19 17/18 18/19 17/18 18/19 generally the highest spenders finished at pether club growth in League 1 and falling wages to revenue receipts. ChampionshipLeague 1League 2 top and the lowest at the bottom, with very few ratio may largely be driven by Sunderland’s

Wages/revenue ratio (%) clubs finishing in the ‘wrong half’ of the table presence, the stabilising wage spending in relative to their spending. Nonetheless, despite League 2 is more promising. Football League clubs’ wage costs 106 107 94 80 78 78 Aston Villa had the highest wage cost in the Average wages per club (€m) Championship in 2018/19 with £95m, more Put a cap on it 33 35 6 6 3 3 than 12 times that of Rotherham United (which recorded the lowest wage spend, at The scale of the financial risk taken in the been in place for the 2018/19 season, the £7.8m). Whilst in some senses, the difference Revenue Source: Deloitte analysis. Championship through wage spending and wage decrease would have reduced on the pitch at these extremes was clear, with Wage costs the consequential recurring losses of most operating losses by £308m and reduced Aston Villa finishing 17 places higher in the Championship clubs has been evident for the number of clubs losing over £10m at Championship, the four clubs that finished many years. A combination of owner funding that level to just two, whilst almost entirely above Aston Villa each spent around half as Promoted sides Sheffield United (190%) and and in some cases, occasional windfalls wiping out the combined pre-tax loss much as them on wages. The average wage Aston Villa (181%) were close to wages to from promotion to the Premier League or recorded by Championship clubs. spend per club was £35m in the Championship, revenue ratios of 200%, which may have been player transfer receipts has been the an increase from £33m in 2017/18. partly driven by promotion bonuses. method of financial survival for many clubs. Interestingly, whilst this measure would The COVID-19 crisis and the impact it has have changed the wage ranking of Only four of the consistent Championship clubs Birmingham City, with a wages to revenue ratio had on clubs and on some of their owners’ Championship clubs for the 2018/19 from 2017/18, reported a decrease in their wage of1,000 136%, wasChampionshi sanctionedpL by the eagueFootball 1L League eaguefinancial 2 resources is forcing deeper season, the wage ranking of clubs under spend in 2018/19 as the majority of clubs began for breaching796 Profitability835 and Sustainability scrutiny into the current financial such a cap is more closely correlated with the season with a business plan built upon rules. 785 environment these clubs operate in. their pre-cap wage ranking then their 750 749 the objective of reaching the Premier League, pre-cap wage ranking was with their league despite only three teams being able to do so. Sheffield United was the success story of the Salary capping is reported to be under position. This indicates that the financial 2018/19500 season, gaining promotion on the active consideration. As an observation, if a benefit gained by all collectively from the Around half of the clubs reported a wage spend eighth largest reported wage bill. Furthermore, straightforward salary cap at 70% of wage cap would seem to outweigh any 191 greater than total revenue in 2018/19 with as Sheffield250 United’s wage bill146 likely included revenue at each club (the benchmark level sporting performance loss for a few. 91 91 Reading spending over twice as much on wages promotion bonuses, the underlying137 wage153 generally seen as the sustainable level) had as the club received in revenue. bill and ranking would likely have been even 71 71 0 17/18 18/19 17/18 18/19 17/18 18/19 25 Wages/revenue ratio (%)

106 106 94 80 78 78

Average revenue per club (€m)

31 33 6 8 4 4 Annual Review of Football Finance 2020 | Football League clubs

With wage cost growth continuing to Chart 15: Championship clubs’ losses – 2014/15 to 2018/19 (£m) outstrip revenue growth, Championship Regulating the clubs clubs recorded record operating losses for 100 2014/15 2015/16 2016/17 2017/18 2018/19 the fourth successive season, worsening by 2 As part of a wider agreement between

6% to £382m. Championship clubs narrowly 0 (3) the Football League and the Premier avoided setting a new record for combined 6 5 League, from the 2016/17 season the pre-tax losses which remained over £300m. (60) Championship clubs became subject to -100 (8) (9) the Profitability and Sustainability (P&S) (196) (208) 5 Rules, replacing the Championship’s Football League clubs’ losses -200 4 Financial Fair Play Rules which were (225) (13) Only two Championship clubs (Hull City and (253) (13) (309) assisting clubs in restraining losses. 1 Rotherham United) reported both operating -300 (289) Profit/(loss) before tax Unfortunately, losses have risen 1 (320) and pre-tax profits. Brentford, Bristol City and (9) 5 significantly since the adoption of the P&S (11) (361) Operating profit/(loss) Middlesbrough recorded pre-tax profits despite (382) rules and the financial health of -400 (12) 3 operating losses after averaging £34m profit on 3 Championship clubs has deteriorated. player trading, as some Championship clubs still (15) (16) manage to use transfer receipts to offset losses. -500 In 2019, Birmingham City became the first Over half of Championship clubs reported club to be deducted points for its failure operating losses of over £10m with the average As a result of significant player sales that Clubs generating operating profit/pre-tax profit to comply with the P&S Rules, given operating loss being £16m across the league as resulted in a profit on player trading of £30m, Average club operating loss/pre-tax loss excessive spending over the three a whole. Brentford recorded the highest pre-tax profit in financial years covering the 2015/16 to the division of £24m. Notes: The operating result is the net of revenues less 2017/18 seasons. Subsequently, other Championship play off final winners Aston wage costs and other operating costs. The operating Championship clubs have been subject to result excludes player trading and certain exceptional Villa recorded both the highest operating loss 2018/19 has seen League 1 pre-tax losses fall charges for non-compliance and the items, which are included in the pre-tax result, along (£60m) and highest pre-tax loss (£69m) in the from £81m in 2017/18 to £22m. This reduction with other costs such as financing costs. reported cumulative losses of Championship, demonstrating once again how was driven by a change in club mix, with Championship clubs indicates others are much is at stake in the biggest game in world Blackburn Rovers and Wigan Athletic exiting The 2014/15 pre-tax loss included one-off credits of struggling to comply. £26m at Cardiff City and £11m at Reading. The 2015/16 football, in financial terms. The three clubs League 1 upon promotion the previous year, pre-tax loss included one-off credits of £170m at Bolton promoted to the Premier League in 2018/19 which had combined pre-tax losses of £34m Wanderers, £18m at Nottingham Forest, £12m at Derby With football currently on pause due to accounted for 32% of the Championship clubs’ in 2017/18, and an increase in profit on player County, and £10m at Cardiff City. the impact of COVID-19, and losses set to total operating losses and 42% of pre-tax losses, trading. League 2 pre-tax losses increased to spike due to the financial impact of this The 2016/17 pre-tax loss included a one-off credit of highlighting the financial risks that clubs are £20m from £10m in 2017/18. £40m at Nottingham Forest. disruption, now is the opportune time to willing to take in the pursuit of promotion to the create more effective cost control Premier League. The financial collapse of Bury FC and its The 2017/18 pre-tax loss included one-off credits of regulations for the future and an overall consequential loss of membership of the £40m at Derby County, £38m at Sheffield Wednesday, regulatory framework to facilitate, £8m at Sunderland, and £5m at Nottingham Forest. Championship clubs generated a profit on Football League in August 2019 will be deplored monitor and enforce a more financially player trading of £271m. This was largely offset by all who value the role that clubs play in their The 2018/19 pre-tax loss included one-off credits sustainable environment for Football by amortisation of player contracts of c.£250m, local communities. As noted in the subsequent of £30m at Reading, £17m at Birmingham, £14m at League clubs. meaning a net c.£20m contribution to profits independent review commissioned by the Brentford and £5m at Aston Villa. was created by player trading. Football League, the case should act as “a real Source: Deloitte analysis. wake-up call for football authorities generally.” 26 Annual Review of Football Finance 2020 | Football League clubs

At summer 2019, Championship clubs’ Chart 16: Championship clubs’ net debt – 2019 (£m) aggregate net debt was 14% higher than at All stand together 50 summer 2018, totalling £1.1 billion, largely 40 driven by the presence of Blackburn Rovers It is evident that COVID-19 represents the 2 6 3 1 2 4 2 (14) and Stoke City in the Championship, which greatest threat to the survival of many 0 (23) reported combined net debt of £248m. English Football League clubs since the (50) (46) (43) The majority of Championship clubs’ demise of ITV Digital in 2002. (36) (57) -50 (74) (19) reported net debt was in the form of y interest-free soft loans from shareholders The opportunity does exist for clubs to (105) (102) -100 (115) (123) Brentfor d

reflecting their continued heavy reliance address existing major structural h Net cash/bank (125) on their owners for funding and solvency. weaknesses as part of the recovery from Bristol Cit y borrowings

COVID-19. However, in order for clubs to -150 Preston North En d Nottingham Forest Birmingham Cit Queens Park Rangers Readin g

have the ability to develop these more Stoke Cit y Other loans

Football League clubs’ net debt sustainable future business models, Middlesbroug -200 Eight Championship clubs reported net debt all stakeholders will need to play their Soft loans in excess of £50m. Four reported net debt in part in funding and reducing what will be excess of £100m. very significant operating losses in -250 Blackburn Rover s Total Total Net debt 2019 2018 2019/20 and the start of 2020/21. A raft of

Four clubs (Aston Villa, Rotherham United, actions will be necessary including -300 (4) 12 Swansea City and West Bromwich Albion) all ongoing government support, the reported net funds at the year-end rather than coordination between and support of Other clubs -350 (270) (125) (226) net debt. The absence of soft loans was not football bodies to an extent not seen due to a lack of owner funding in Aston Villa’s before, existing owners’ contribution and (1,013) (791) case, with an equity injection of £106m provided players and club staff likely to have to -400 during 2018/19. share the pain through wage deferrals (139) and reductions (with the Professional (121) (109) (105) (71) (69) (58) (55) (42) (41) (332) (1,142) (1,005) Substantial bank lending continues to be Footballers’ Association taking a an uncommon form of financing in the leading role). (0) (0) 0 (1)(0) (1)(1) 1(1) 0 (12) (15) (22) Championship. Overall, only £4m is owed to (243) (213) (126) (64) (51) (47) (46) (40) (21) banks in total across Championship clubs at the New owners will almost certainly be summer of 2019, ranging from a cash balance required for some clubs and new At summer 2019 Net cash/bank borrowings Net debt of over £20m at Aston Villa and Swansea City to investment should be welcomed. It is Other loans Net finance costs borrowing of £50m at Bristol City. critical that any such owners are Championship clubs’ Soft loans committed to the long term future of the aggregate net debt Source: Deloitte analysis. respective clubs and protect the rich heritage of such valuable community was 14% higher than at assets. summer 2018, totalling £1.1 billion.

27 Annual Review of Football Finance 2020 | Player transfers

Premier League clubs’ transfer activity Football League clubs’ transfer activity Player transfers In recent years, central distributions from Football League clubs saw their combined the Premier League have granted clubs the gross transfer expenditure fall by 8% to £276m opportunity to acquire talent at premiums from the 2017/18 season figure of £300m. that can only be matched by a relatively small Middlesbrough, which spent £66m in 2017/18 number of clubs internationally. but only £11m in the 2018/19 season, was the largest contributor to the overall reduction. Recognition by Premier League clubs that The 2018/19 season saw a reduction in transfer spend by significant increases in central distributions In the Championship, the seven clubs in receipt were not going to be received for the 2019/20 to of Premier League parachute payments on English clubs, having reached a record high in 2017/18. 2021/22 broadcast rights cycle had a noticeable average spent twice as much as those without, Premier League clubs’ transfer spend fell to £1.9 billion, impact on their approach in the transfer market. with clubs receiving said payments spending an average of £18m in 2017/18 compared with £9m marking a 21% reduction compared to the previous season Of the 17 clubs in the Premier League in both by clubs which did not. (£2.4 billion), whilst Football League clubs also reduced the 2017/18 and 2018/19 seasons, the average transfer expenditure per club decreased expenditure, by 8% to £276m. by £35m, with the three promoted clubs committing a year-on-year average increase of Restricted movement Chart 17: Premier League and Football League clubs’ player transfer payments £66m as they invested in talent in an attempt – 2018/19 (£m) to secure their position in the top-tier of English The 2019/20 transfer payments analysis football. we publish next year will reflect the Note: Arrows represent the flow of transfer payments, with players activity in the summer of 2019 and £1,237m moving in the opposite direction. 12 of the 17 consistent Premier League January 2020. That is likely to be a high £1,237m (£1,354m) The estimated fees in respect of the clubs spentPremier less League compared clubs to the 2017/18 watermark for the foreseeable future as a transfer of player registrations refer Premier League clubs season, withWithin Chelsea PL club thes highest spenders very different summer transfer window is to amounts committed in 2018/19, Within PL clubs £185m £407m rather than actual cashflows. The (£281m). Liverpool was the only ‘big£407m six’ club expected in 2020 due to the financial £185m Non-English (£657m) Non-English sources for the amounts in the to increase their spending year-on-year(£444m) with impact of the COVID-19 pandemic. We clubs clubs chart relate to periods that are not Premier League total total spendPremier reaching League £223m. total Manchester City anticipate a much quieter, and more necessarily coterminous. £1,858m and Manchester£1,796m United reduced spend by polarised, transfer window this summer more than £200m(£2,352m and) £100m respectively, in money terms. A few large clubs funded Source: Premier League; Football £175m £68m £51m £175m £68m £51m League; Football Association; demonstrating the relative restraint(£130m) of the (£45m) by( £92m)wealthy owners may remain well Deloitte analysis. league’s largest clubs. Player agents further equipped to secure their top targets, but £261m £64m £261m £64m increased income from English clubs despiteFootball many clubs will be unable or unwilling to (£211m) (£44m) the reduction in overall transfer fee spend,League with clubs invest and many that sell may be similarly Within FL clubs Football League clubs amounts paid to agents increasing from £258m not in a position to reinvest. There may Within FL clubs £104m to £318m. still be a lot of player movement as clubs Agents £104m Agents (£117m) £57m seek to adjust their cost base to £57m (£47m) Football League total Football League total compensate for lost revenue, but fees £276m £276m (£300m) overall are likely to be greatly subdued relative to previous years.

28 Annual Review of Football Finance 2020 | Sports Business Group

Climate for change?

Environmental sustainability Encouraging signs The challenge facing sport – including Under pressure A long list of sports organisations have signed football – is to move from undertaking ad- Stakeholder pressure leads to action. Whilst has, over recent years, up to a UN-led framework – Sports for Climate hoc environmental initiatives to embedding there are examples of clubs taking the initiative become front-page news. Action – seeking to move the sports sector to a environmental sustainability into strategy. (with Forest Green Rovers possibly being the low carbon economy. Signatories should commit most celebrated example), arguably the onus Whilst COVID-19 has shifted to a set of five principles and incorporate is on FIFA, UEFA and national associations to football’s current priorities, them into strategies, policies and procedures, Responsive action not reaction take the lead in setting out guidelines – and integrating them into their sports communities, The latest edition of Deloitte’s European CFO potentially regulations – to embed climate post-COVID-19 there may be for a wider dissemination of the message. Survey asked 1,200 CFOs about their company’s strategies throughout football. an even greater emphasis on measures on climate change. The results reveal The aim is for the global sports community a mixed picture which, unsurprisingly based The thorniest challenge may always be global addressing climate change to address its own impact (e.g. via measuring, upon our experience, reflects the situation in fan travel. Landmark events such as the FIFA to shape a greener recovery reducing, and reporting greenhouse gas football; World Cup, UEFA European Championship and emissions) and in so doing to “use sports as a •• there is increasing pressure from a range of Champions League offer compelling festivals of after the pandemic. unifying tool to drive climate awareness and action stakeholders to act; but football (much missed this year) but millions of among global citizens”. Football organisations •• companies’ climate responses focus on short- fans travelling to attend has a big environmental Football’s activities have an impact upon climate that have signed up include FIFA, UEFA, the term cost-saving effects; cost. Everyone wants international football to change through multiple areas such as travel, English FA, and Spain’s La Liga. •• a thorough understanding of climate-related return, but over the coming years the game will energy and water use, catering, plastics, waste business risks is rare; have to make significant efforts to address what management and construction. Equally, climate- There are plenty of positive examples of •• few companies have a mechanism in place it can, where it can. Recovery, post-COVID-19, related episodes such as flooding and extreme initiatives across the sporting world. F1 and to develop and implement comprehensive may provide a unique opportunity for the game weather conditions have negative impacts on SailGP have pledged to be carbon neutral climate strategies; and to build back better and to reconsider and both professional and amateur football (as when by 2030 and 2025 respectively, and London •• targets for carbon emission reductions are integrate environmental considerations. storm Ciara caused multiple postponements in Marathon Events has implemented measures usually not aligned with the Paris Agreement. UK sports fixtures in February 2020). to reduce environmental impact and deliver At Deloitte we help our clients on their more sustainable mass participation events. There is therefore much work to do; sentiment sustainability journey. Our economists, As the world’s most popular sport, football In football, Germany’s Bundesliga clubs are is shifting and football (like other industries, climate scientists and energy experts can help has huge potential to influence fans to address perhaps leading the way, with numerous but perhaps even more so given its profile) will sports organisations to uncover the financial climate change, if football takes a conspicuous examples of action being taken. Examples need to respond further. Can clubs, leagues and costs of climate change, demonstrate a lead in adapting its activities to have a positive include an optional €1 on ticket prices towards governing bodies truly embrace and embed commitment to a green future, create and environmental impact. But is football putting a climate change fund, tickets doubling up environmental sustainability into their activities? implement a decarbonisation strategy and enough emphasis on addressing its carbon as public transport passes and solar panel embed reporting and monitoring practices to footprint, and sustainability? installations on stadium rooftops. ensure long-term success. 29 Annual Review of Football Finance 2020 | Sports Business Group

Common Goal – past, present and future

Since its launch in 2017, Common Goal has already achieved As of today, Common Goal has c.150 professional players and managers as high-profile coverage and backing from an increasing number members (and hence contributing at least 1% of players across the globe. The initiative has audacious and of their earnings) and Danish Superliga club FC Nordsjaelland became the first club to join. transformational goals for the next decade. The club has the 1% as an opt-out clause (i.e. these pillars remain strong. The pandemic the default is to opt-in to support Common has fostered a spirit of global solidarity, Common Goal – founded by Juan Mata and Griesbeck then founded streetfootballworld Goal) across all contracts (staff, athletes and with a greater realisation that we are all Jürgen Griesbeck – sees football as a unique in 2002 to help connect similar grassroots businesses) and they also provide 1% of stadium interconnected and share the impact of each accelerator for community activity and initiatives that were active globally, to amplify revenues. To date, Common Goal members other’s actions and all have a role to play. initiatives. their impact. streetfootballworld has since collectively have contributed over £1.5m. Common Goal aims to sustain and further build grown to encompass over 135 football-based upon this sentiment and make it an integral The idea is simple – to put 1% of revenues organisations, in c.90 territories across the part of the ‘new normal’ to accelerate progress from the commercial income of football into a world, that engage with over two million young Future towards a better and more sustainable future collective impact fund that advances the UN’s people. Common Goal was the next step to link Pooling donations should create economies of for all (guided by the Global Goals 2030). Sustainable Development Goals (the Global the professional game with these organisations, scale, decreasing costs and increasing focus Goals 2030). The premise is that by establishing and beyond. and impact, as the movement grows, with the Football is in a unique position to actively drive a systemic link between football as a business aim of achieving a critical mass so that the 1% and accelerate progress, as the biggest shared and football as a tool for social development, contribution from the football industry becomes passion point, combining cultural influence on a the game can play its role in tackling key global Present the norm, at the latest by 2030. Globally, 1% of global scale with everyday relevance in the life of challenges, such as advancing gender equality, The Common Goal concept is to link the a football industry worth many billions could people. Time will tell if and how Common Goal driving employment and growth, and promoting professional football industry with non- potentially unlock hundreds of millions per year. will grow and develop but arguably its aims will greater peace and social justice. governmental organisations (NGOs) that are be even more relevant in a post-COVID-19 world. using football as a tool to transform their Though driven initially by professional players, communities. This is a powerful partnership. the aim is to also engage football’s huge global Deloitte is led by a purpose: to make an Past The football industry has the resources from fan base. Individuals pledging 1% of their time impact that matters. This purpose defines The origin of Common Goal lies in a Colombian monetising the game and huge profile with fans – 90 minutes per week – could result in a huge who we are. It also resonates powerfully youth football project, Fútbol por la Paz (Football and the general population. NGOs complement global workforce to help sustainably develop with the aims of Common Goal. Deloitte for Peace) set up by Jürgen Griesbeck to combat this with expertise in delivering meaningful people and the planet. and Common Goal are therefore working violence in Medellin, with the backdrop being the impact, direct access to disadvantaged local together to explore ideas and initiatives, tragic and shocking murder of Andrés Escobar communities and trusted relationships with Common Goal’s approach is based on three within football, that support the shared aims days after his own goal at the 1994 World Cup. those communities. ‘pillars’: team play, solidarity and individual of both organisations. responsibility. During and post-COVID-19, 30 Annual Review of Football Finance 2020 | Stadia

Stadia

At the time of writing the 2019/20 football season remains Analysis in this section reflects attendances up With the largest stadium in the league and to the suspension or cancellation of 2019/20 utilisation of 99%, Manchester United matches paused in the majority of European countries with any football seasons. In comparing 2019/20 continue to generate the highest attendance restart to involve matches being held behind closed doors. averages to previous seasons, it is noted that with an average of almost 74,000 despite mixed any comparison with previous completed on-pitch results. This contrasts to It is a real possibility that the 2020/21 season will also see at seasons is therefore on a best available, not AFC Bournemouth which averages 11,112 in the least part of the season played in empty stadiums. wholly like for like, basis. league’s smallest stadium that has a capacity of just 11,329.

Chart 18: Premier League and Football League clubs’ average matchday attendances – Premier League clubs’ attendances The average stadium utilisation across the 2015/16 to 2019/20 (000s) The 2019/20 Premier League season was league was 98% in 2019/20 before the season suspended with 288 of the scheduled 380 was suspended demonstrating that most clubs 50 Premier League matches completed (76%). At the time of have limited capacity to increase attendances.

38.5 38.5 39.5 3% Championship suspension, average attendance had Notable exceptions include Newcastle United 40 36.5 35.8 League 1 increased 3% to 39,490 per match for the which suffered an 8% fall in attendances League 2 season to date from 38,484 for the whole of the in 2019/20, a likely result of mixed on-pitch % change on 2018/19 2018/19 season. performance and uncertainty regarding the 30 future ownership of the club. In addition, (8%) 20.2 20.5 20.2 18.6 The increase in attendances was driven by a Southampton, Burnley and Watford all had 17.6 Note: 2019/20 averages are up to 20 the point of suspension. change in composition of the league and the stadiums which were less than 94% full. impact of Tottenham Hotspur’s new stadium. 8.7 8.8 1% 8.0 7.8 Source: Premier League; Football 10 7.2 The three newly promoted sides (Aston Villa, League; Deloitte analysis. Sheffield United and Norwich City) averaged 5.0 4.9 4.5 4.5 4.8 7% At the time of suspension, 32,908 per match, an increase of 24% on the 0 15/16 16/17 17/18 18/19 19/20 three clubs they replaced which averaged average attendances were up Stadium utilisation (%) 26,482. Aston Villa in particular averaged 3% in the Premier League. 96 96 96 97 98 more than 41,500 fans per match (with 98% utilisation), the eighth highest average 65 72 73 74 72 attendance in the Premier League. Tottenham now has the second highest attendances in the 47 50 51 57 56 league at more than 61,000. 51 47 42 40 48

31 Annual Review of Football Finance 2020 | Stadia

Chart 19: ‘Big five’ European leagues average matchday attendances COVID-19 impact on matchday revenue – 2018/19 and 2019/20 (000s)

Matchday revenue is the smallest revenue in 2018/19. Whilst public reporting 50 42.7 contributor to total revenue of the three requirements for League 1 and League 2 40.3 38.5 39.5 primary revenue sources in the ‘big five’ clubs mean that they are not compelled to 40 European Leagues. In 2018/19, matchday break down their revenue sources it is clear revenue contributed only 13% of total that matchday revenue makes up an even 28.8 30 26.6 26.4 24.1 revenue in the Premier League, compared greater proportion of total revenue for 22.8 22.6 to 59% for broadcast and 28% for League 1 and League 2 clubs. commercial. It is a similar situation across 20 the ‘big five’ European Leagues where Under a worst-case scenario where a full matchday contributes between 11% season is played in front of empty stadiums, 10 (Ligue 1 and Serie A) and 16% (Bundesliga the ‘big five’ European Leagues are facing an and La Liga) of total revenue. 11-16% reduction in total revenue from 0 18/19 19/20 18/19 19/20 18/19 19/20 18/19 19/20 18/19 19/20 earning no matchday revenue. Clubs lower Bundesliga Premier League La Liga Serie A Ligue 1 As one moves further down the football down the football are facing an pyramid and away from lucrative broadcast even greater proportional decrease in total Note: 2018/19 averages are for the full season; 2019/20 Source: Leagues; Deloitte analysis. deals and the interest of major corporate revenue. A further unknown variable is averages are up to the point of suspension. sponsors, the importance of matchday what longer term impact COVID-19 may revenue increases. In the Football League have on sport attendances in terms of both Championship, even including the distorting permitted capacity (supply) and propensity the Championship. The disappointing on-pitch League 1 and League 2 clubs’ attendances impact of parachute payments, matchday to attend (demand) and therefore the ability performance of a number of former Premier The League 1 and League 2 seasons were revenue still accounted for 21% of total of clubs to generate matchday revenue. League clubs has also had a substantial impact. suspended when 72% and 80% of matches Middlesbrough (attendances down 14%), had been played respectively. At the time of Birmingham City (down 10%), Stoke City (down suspension, League 1 average attendances 9%) and Wigan Athletic (down 9%) have all were up slightly to 8,744 per match, compared Disappointing on-pitch Championship clubs’ attendances recorded substantial declines in attendances to 8,690 for the full 2018/19 season. In League The 2019/20 Championship season was as they spent the majority of the season to 2, average attendance increased 7% from performance of a number of suspended with 444 of the scheduled 552 date at significant risk of relegation. Swansea 4,526 per match for the full 2018/19 season to former Premier League clubs matches completed (80%). Average attendance City has fared better on the pitch, but is seeing 4,854 for the 2019/20 season to date. League had decreased from 20,193 per match for the its second consecutive season of double-digit 1 stadium utilisation decreased slightly to 56%, contributed to a reduction in full 2018/19 season to 18,624 for the 2019/20 percentage declines in attendances following however League 2 stadium utilisation was up Championship attendances. season to date, while capacity utilisation had relegation from the Premier League in 2017/18. significantly to 48%. also slipped slightly from 74% to 72%.

The aforementioned promotion to the Premier League of three clubs that generated above league average attendances was a contributor to the decline in attendances for

32 Annual Review of Football Finance 2020 | Stadia

European attendances Excluding Tottenham Hotspur, Premier League Chart 20: Premier League and Football The Bundesliga continues to achieve the highest Fan interaction capital spending increased by £52m to £167m League clubs’ expenditure on stadia and attendances of the ‘big five’ European Leagues, becomes digital with Liverpool (£25m), Leicester City (£18m) and other facilities – 2017/18 and 2018/19 (£m) with an average attendance of 40,264 at the Chelsea (£15m) all spending in excess of £15m point of season suspension. This is however, a The impact of empty stadiums will extend on various capital projects. 750 decline of 6% from the 2018/19 season average beyond just a reduction in revenue. Whilst 709 of 42,738, primarily due to the clubs that were direct interaction with fans at the stadium Championship clubs spent £54m in 2018/19, up 700 692 5 Premier League 2 14 promoted for 2019/20 averaging significantly is impossible the primary channel for fan £4m from the previous season. Approximately 11 Championship 54 lower attendances than those they replaced. interaction becomes digital. This is not a 60% of this spend was attributed to Aston 50 650 League 1 Based upon this data, for the 2019/20 season new concept. The biggest clubs, Villa (£17m) and Reading (£16m). Aston Villa’s League 2 to date the Premier League had closed the particularly, but not exclusively, in the ‘big expenditure was primarily related to a complete 629 636 average attendance gap to less than one five’ European leagues, consider their fan reconstruction of its academy, while Reading 600 thousand fans per match. Borussia Dortmund base to be international and recognise opened the new Bearwood Park training facility. Source: Deloitte analysis. continued to attract average attendances of there is untapped revenue potential from 550 nearly 81,000 fans during the 2019/20 season, engaging with fans beyond just those in League 1 clubs spent a combined £14m, up the highest of any of the clubs in the ‘big five’ the stadium. from £11m the previous year and League 2 150 European Leagues. clubs spent £5m, up from £2m. Notable capital To date, the efficacy of club existing digital spend came from AFC Wimbledon (£4m) and La Liga average attendances grew more than strategies is mixed, with few clubs having Accrington Stanley (£3m) in League 1 and 100 8% to 28,755 in 2019/20 to date, but there is truly embraced the breadth and depth of Port Vale (£1m) in League 2. Work on AFC significant variability in average attendances ‘digital transformation’ required to Wimbledon’s new stadium at Plough Lane is 50 across the league. FC Barcelona and Real maximise results. The overnight, but ongoing while the club seeks additional funding Madrid led the way averaging 72,472 and enduring, impact of COVID-19 has forced to complete the development. 0 2017/18 2018/19 66,736 respectively, but half of the league’s clubs to accelerate change in how they clubs averaged less than 20,000 fans per match. interact with their fans on digital channels. While COVID-19 has had a direct and Meanwhile, Serie A average attendances were immediate impact on clubs’ matchday revenue Premier League League 1 26,352 per match, an increase of more than through suspension of the season and likely Championship League 2 9% on 2018/19. Ligue 1 attendances decreased Capital expenditure recommencement without crowds, there may slightly to an average of 22,554 with Olympique Capital expenditure across the top 92 clubs in also be longer-term impacts. Premier League Source: Deloitte analysis. de Marseille, Paris Saint-Germain and English professional football exceeded £700m clubs including Everton, Watford, Crystal Palace, Olympique Lyonnais averaging approximately for the first time in the 2018/19 season. Leicester City, Chelsea and Bournemouth 50,000 fans per match. have all confirmed or have rumoured plans The Bundesliga continues The total investment during the season by for stadium developments. Any extended Premier League clubs narrowly set a new record period where matches are to be played in to achieve the highest at £636m in 2018/19, an increase of just £7m empty stadiums or with reduced capacities attendances of the ‘big five’ from the previous season. Tottenham Hotspur to accommodate social distancing, naturally again accounted for the vast majority of this reduces the incentive for clubs to invest in their European Leagues, with an expenditure with spend of £469m on its new stadiums in the near future. average attendance of 40,264. stadium, which officially opened on 3 April 2019.

33 Annual Review of Football Finance 2020 | Sports Business Group

5G in football – a winning strategy

5G might not currently be top of mind for football clubs as that could be added to enhance the TV viewer Alternatively, a private 5G network could be set experience, and the value of televised coverage. up at a stadium, with spectrum rights granted they respond to the unique and evolving challenge that is In the 2018 Winter Olympics, 5G was used to for a fixed period to the football club, giving it COVID-19. However, teams should consider that 5G may well relay images from 4K cameras integrated into control over which entities had access to that the front of bobsleighs. network. This means that a football club could be integral to the future of elite sport, impacting results on have the rights to a specific tranche of spectrum the pitch, operational performance, fan experience and, The very high speeds that 5G can offer should (the radio waves which data is carried over) for also ease the migration to 8K coverage of its own stadium. hence, financial results. matches. 8K video is four times the file size of 4K, which itself is four times greater than HD. Successful new technologies enable evolution 5G enables TV cameras to be connected Branded 8K TV sets are already available for 5G can enhance player performance as well as revolution. 5G is often positioned as wirelessly, providing all the freedom that offers, under £2,500. The price points will continue 5G can be used for more than broadcasting revolutionary, enabling, for example, viewing in but with the speed performance and reliability to decline over the course of the decade, and matches; it is likely to be increasingly important virtual reality or the use of augmented reality of a wired connection. Major stadia already have sports will be one the most compelling forms of for training situations, where video capture applications. However, the most significant fixed locations, equipped with fibre connections content filling those screens. is now commonly used. Additional viewing benefits from 5G are likely to be evolutionary: for TV cameras, but 5G enables camera crews angles provide new perspectives that can feed upgrades to a wide range of processes, not just to roam around without worrying about the One aspect of 5G which was not available into new training approaches. 5G can enable those taking place on match day, but, also, every length of a cable. Broadcasters around the in prior generations of mobile technology cameras to relay images to monitors on the other day of the year. world, including BT Sport and have is network slicing, which other side of the field. Manchester City already used 5G for broadcasts. enables the partitioning of has been using drones to provide aerial segments of the network views of play as a real-time input into So what is 5G, and why does it matter to A 5G connection could enable cameras to relay for specific applications, with training sessions. They can also capture football clubs? footage from the team bus (before and after custom service level agreements. the entire pitch, or follow the movement 5G offers multiple increments to the the match), to provide more behind-the-scenes For live TV, reliability is of a specific player. Drones can send performance levels of 4G, which has been access, to relay content from the team hotel paramount, and a mobile images over Wi-Fi, but 5G available in the UK since 2012. when preparing for matches, or to provide operator could offer connections should be more additional viewing angles. a specific contract for a reliable and offer better range. One of the upgrades is transmission speed: guaranteed uplink, with an up to 20 gigabits per second per cell, when all Cameras have been proliferating in the agreed level of reliability. The upgrades are deployed. These speeds are far coverage of all elite sports for many years – be ability to guarantee quality over a faster than what a consumer would need, but this multiple in-car cameras in Formula 1 or wireless connection could remove are within the parameters of what a television cameras embedded within cricket stumps – the need for a satellite truck for some broadcast crew may require. there is effectively no limit on the video feeds broadcasts. 34 Annual Review of Football Finance 2020 | Sports Business Group

During a game, pitchside cameras can also be A popular benefit is likely to Sensors were used to detect animals, and a The game of elite football spans multiple placed to monitor individual player movement be the ability to send more combination of scents and pre-recorded voice facets – from results on the pitch to financial without players having to wear GPS trackers, and sounds were used to repel them. performance, including revenue generation. which can be cumbersome, and which collect a photos and video while Underlying each outcome are multiple limited set of movement related data. Cameras watching the game. Other operational aspects could also benefit processes, many of which could be improved on the main pitch can also enable additional from 5G, including what may feel like quite through the application of 5G technologies. data to be collected, such as orientation mundane tasks such as processing credit card Football clubs should study how the highest of players during the course of a play, or Lawn mowing machines could be controlled payments. Vendors of food or merchandise performing organisations across all industries throughout a session. remotely. The grass at a training ground could around the stadium, equipped with hand-held are applying 5G and determine whether these be cut to the same length as the pitch for the 4G connected credit card machines, may not deployments would also make sense in their 5G could also be used to collect data in next away match. This would enable players to be able to connect when a stadium is environment. 5G is a brand new technology real time from multiple sensors on a player, get used to the movement of the ball on that busy, due to the aggregate demand and its benefits are still being revealed, often measuring an array of vital signs. This data could pitch. A mower equipped with a camera could on what is a shared network. But 5G serendipitously. In the continuing quest be used to help inform when a player should relay video of the pitch via a 5G connection to can enable a slice of bandwidth to be for the edge in an intensely competitive be taken off, or rested to prevent injury. Usage help assess the quality of the turf; Ajax currently dedicated to the singular process of environment, 5G can be a game changer of 5G in hospitals to relay ultrasound scans uses sensors in mowers to monitor the state of card payment authorisation within and football clubs should be alert to its for remote analysis may also be applicable in the pitch. seconds. 5G trials have already developing potential. understanding injuries to players, whilst still at proven this to be an important the side of the pitch. Sprinklers could also be controlled with greater commercial application of the new Deloitte believes in the power precision, with each nozzle connected. The standard. of technology to iterate the volume of water sprayed at half time could be every day – as well as the 5G can enhance stadium experience varied, on a per nozzle basis, according to the 5G can also enhance the match day. Deloitte’s teams 5G also enables far more connections in a given home team’s strategy for the second half. experience for fans. A popular in enterprise connectivity, area: up to a million connections per square benefit is likely to be the network deployments, kilometre, versus a maximum of 100,000 for Preventative maintenance of sprinklers and ability to send more photos machine learning and 4G. This capability could be used to enhance undersoil heating machinery could also be and video while watching the regulation are all working multiple operational and strategic aspects improved by connecting key components to a game. However, more esoteric on 5G projects around of a football club. Every seat in a stadium 5G network so as to provide early warning of applications, such as augmented the world, helping could be connected, enabling purchasing of elements needing repair or replacement. reality overlays may not be that apply this technology refreshments from each seat as well as other useful when fans are focused to deliver improved capabilities. However, it’s not just static objects At a more prosaic level, grounds could use 5G on the players on the pitch in outcomes in a wide range of that could benefit. to help with pest control, as happened at Uaiji, front of them. industries, from logistics to ports, one of the sites of the Winter Olympics in 2018. from hospitals to sports teams. 35 Annual Review of Football Finance 2020 | Sports Business Group

Basis of preparation

Sources of information We have not performed any The financial results of some clubs correspond to those projected and amortisation of player registrations Bank borrowings is debt advanced The financial results and financial verification work or audited any of have changed, or may in the future no reliance should be placed on such and other intangible assets, profit/ by lenders in the form of term loans, position of English football clubs for the financial information contained change, due to the change in basis of projections. loss on player disposals, certain overdrafts or hybrid products, net 2018/19, and comparisons between in the financial statements or other accounting practice. In some cases disclosed exceptional items, and of any positive cash balance. Other them, has been based on figures sources in respect of each club for these changes may be significant. finance income/costs. loans includes securitisation and extracted from the latest available the purpose of this publication. Key terms player finance monies, bonds and company or group statutory financial The number of clubs in the top Revenue includes matchday, Pre-tax profit/loss is the operating convertible loan stock, intercompany statements in respect of each club – division of each country can vary broadcast, sponsorship and result plus/minus amortisation loans and loans from related parties which were either sent to us by the Comparability over time. In respect of the ‘big five’ commercial revenues. Revenue of player registrations and other that are not otherwise soft loans. club or obtained from Companies Clubs are not wholly consistent with leagues for 2018/19, each division excludes player transfer fees, VAT intangible assets, profit/loss on Soft loans includes amounts from House. In general, if available to us, each other in the way they record had 20 clubs except for Germany and other sales related taxes. player disposals, certain disclosed related parties with no interest the figures are extracted from the and classify financial transactions. (18 clubs). exceptional items, and finance charged. annual financial statements of the In some cases we have made Matchday revenue is largely derived income/costs. legal entity registered in the United adjustments to a club’s figures The figures for some comparative from gate receipts (including Kingdom which is at, or closest to, to enable, in our view, a more years have been re-stated compared general admission and premium Under UK GAAP and IFRS, the costs Exchange rates the ‘top’ of the ownership structure meaningful comparison of the to previous editions of this report tickets). Broadcast revenue includes to a club of acquiring a player’s For the purpose of the international in respect of each club. The vast football business on a club by club due to changes in estimates distributions received from registration from another club analysis and comparisons we have majority of English clubs have an basis and over time. For example, arising from additional information participation in domestic league should be capitalised on the balance converted the figures for 2018/19 annual financial reporting period where information was available to available to us and/or due to the and cups and from European club sheet within intangible fixed assets into euros using the average ending in May, June or July. us, significant non-football activities actual restatement by clubs of their competitions. Unless sponsorship and subsequently amortised to zero exchange rate for the year ending or capital transactions have been annual financial statements. revenue is separately disclosed, residual value over the period of the 30 June 2019 (£1 = €1.13); for years The financial results and financial excluded from revenue. commercial revenue includes respective player’s contract with the prior to 2018/19 comparative figures position of clubs in various non- sponsorship, merchandising and club. The potential market value of as extracted from previous editions English leagues, and comparisons Some differences between clubs, or Financial projections other commercial operations. Where ‘home-grown’ players is excluded of this report; and the figures for between them, has been based on over time, may arise due to different Our projected results are based on identifiable from a club’s disclosures, from intangible fixed assets as there years since 2018/19 converted into figures extracted from the company commercial arrangements and how a combination of upcoming figures distributions received in respect of is no acquisition cost. Amortisation euros using the average exchange or group financial statements the transactions are recorded in the known to us (for example, central central commercial revenues are of player registrations is as disclosed rate for the 10 months ending in respect of each club, or from financial statements (for example, distributions to clubs) and other, in included in commercial revenue, in a club’s accounts, increased by 30 April 2020 (£1 = €1.14). information provided to us by in respect of merchandising and our view, reasonable assumptions. or otherwise included in broadcast any provisions for impairment of the national associations/leagues. hospitality arrangements), due revenue. value of player’s registrations. to different financial reporting In relation to estimates and If financial statements were not perimeters in respect of a club, and/ projections actual results are likely Wage costs includes wages, Net debt/funds is as disclosed in available to us for all clubs in a or due to different ways in which to be different from those projected salaries, signing-on fees, bonuses, financial statements (where shown) division, then aggregate divisional accounting practice is applied such because events and circumstances termination payments, social or is an aggregation of certain totals have been estimated for all that the same type of transaction frequently do not occur as expected, security contributions and other figures from the balance sheet. The clubs for comparison purposes (from might be recorded in different ways. and those differences may be employee benefit expenses. Unless net debt/funds figure in the financial year to year or between divisions). material. In particular, there are otherwise stated, wage costs are the statements has been adjusted in Each club’s financial information uncertainties as a consequence of total for all employees (including, some cases to aid comparability, This publication contains a variety has been prepared on the basis of COVID-19 including the impacts players, technical and administrative such as the inclusion of related party of information derived from publicly national accounting practices or on football competitions, clubs’ employees). debt. Net debt/funds includes net available or other direct sources, International Financial Reporting operations and the global economy. cash/ bank borrowings, other loans, other than financial statements. Standards (“IFRS”). Deloitte can give no assurance as to Operating profit/loss is the net and soft loans. whether, or how closely, the actual of revenue less wage costs and results ultimately achieved will other operating costs, excluding

36 Annual Review of Football Finance 2020 | Section title goes here

37 Annual Review of Football Finance 2020 | Section title goes here

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