Premier League: The Most Lucrative, but Also the Most unprofitability League?
The world's No. 1 football league has reported deficits for several consecutive seasons despite maintaining the highest revenue generation.
For the first time since the 2019/20 season, England lost its top spot in the UEFA coefficient rankings to Italy and Germany, dropping to third place at the end of the 2023/24 season. This is mainly due to the poor performance of the Premier League teams in the three UEFA club competitions this season. With the Champions League expanding from 32 to 36 teams next season, Serie A and the Bundesliga will each have an additional team participating, increasing both leagues' commercial value and influence. Therefore, will the Premier League lose its title as the "world's best league" commercially after losing its leading position in the competition?
Chapter 1: The Premier League is Still Europe's Leading Commercial League, Far Ahead of Second Place
Among the "Big Five" European Leagues in the 2021-22 season, the Premier League's total revenue was €6.442 billion, accounting for 37.4%, which is higher than the combined total of La Liga and the Bundesliga, which ranks second2️⃣ and third3️⃣. As for all European leagues, the Premier League accounts for 21.8%, making it the world's No.1 league commercially. According to reports from Football Benchmark, the Premier League's total revenue for the 2022/23 season rose to €7 billion, marking an increase of over 8% from the previous year, solidifying its position as the highest-earning football league in the world.
Moreover, in Deloitte's Football Money League report for 2024, among the top 20 clubs globally in revenue for the 2022/23 season, eight were from the Premier League, which is twice the number of clubs from Serie A, the league in second place. Expanding the scope to the top 30 revenue-generating clubs, 14 are from England, approximately equal to the combined total from the other four European "Big Five" leagues (15 clubs). Overall, Premier League clubs will likely maintain their leading position in revenue generation, at least in the near to mid-term.
Chapter 2: Despite High Revenue, the Premier League is Suffering Losses
However, an investigation by ACE Advisory into the financial status of the 20 Premier League clubs for the 2022/23 season revealed that the collective deficit of the Premier League clubs was €816 million, with only four clubs managing to turn a profit. In contrast, La Liga and the Bundesliga, both of which generate roughly half the revenue of the Premier League, managed to achieve overall profitability by the end of the season.
Moreover, the last recorded aggregate profit for the Premier League dates back to the 2017/18 season, amounting to €360 million. This indicates that the Premier League has been experiencing losses for at least five years, even before the COVID-19 era.😮
Chapter 3: Will the unhealthy expenditure structure be improved?
The primary cause of the huge deficit is the high staff costs. During the 2022/23 season, only Tottenham Hotspur F.C. among the 20 Premier League clubs had a wage-to-income ratio below 50% (46%). Most Premier League clubs are running at a loss; hence, the overall wage-to-revenue ratio is likely even higher. In comparison, Bundesliga clubs had an average employee expenditure ratio of 36.7% during the same season, and 12 of the 18 member clubs managed to turn a profit.
Notably, Leicester City was the only club that spent more on wages than its revenue for the season. Despite such significant investment, they failed to avoid relegation. Additionally, due to violating the Profitability and Sustainability Rules (PSR) for the 2022/23 season, the club will have to start the new season with negative points even though it just returned to the Premier League. Moreover, on 6th February 2023, four-time consecutive Premier League champion Manchester City faced 115 charges from the Premier League, primarily involving breaches of financial regulations from 2009 to 2018. These charges include failing to provide accurate financial information and cooperating with investigations. The potential sanctions could be severe sanctions, ranging from fines and points deductions to expulsion from the league.
Starting in 2024, the Premier League will likely transition towards a more sustainable financial approach. Its transfer market was much quieter in January 2024 than in previous winters. The 20 Premier League clubs spent a total of £100 million on transfers during this period, which is only one-seventh of the amount paid during the same period last year. At last week's Premier League Annual General Meeting, clubs agreed to trial a new financial system for the upcoming 2024/25 season. This trial, set to run on a non-binding basis, introduces the Squad Cost Rules (SCR), which limits spending, capping it at 85% of a club's football revenue and net profit or loss from player sales. Meanwhile, the existing Profitability and Sustainability Rules (PSR) will remain intact. This dual approach bolsters financial sustainability and maintains a competitive balance within the Premier League. The initiative reflects a proactive step towards a more financially responsible future for top-flight English football.
See you next week!
Created by Shawn, Wendy & Yiwei