Anthony S Casey: Football Financing in 2016

The two Maestro’s of Manchester are Jose Mourinho and Pep Guardiola. But it’s likely we won’t see their battle royale until September when MU play MC.

Here’s what we expect for first day of the new season. It’s only 7 weeks away!

Let’s consider the money that’s involved in football.

Promotion and relegation in the English Premier League in 2016 is growing. The best English football had a four-year TV contract worth £44 million in 1988. The English Premier League will make £5.136 billion in national TV rights over the next three years nearly thirty years later. This doesn’t even include International rights!

The amount of money has made promotion to the English Premier League vital for teams in the second-tier English Championship. At the same time, it is more important than ever before those teams retain that top-flight status.

With the financial backing from TV, it’s extremely possible the English Premier League could see another Leicester City.

Three teams qualified for the English Premier League 2016-17 season via promotion: Burnley, Middlesbrough and Hull City. With the injection of money in the league, all three will have spending power like never before. Although the “big” clubs are moving to prevent that through player and managerial signings. The “fairer” split of TV money amongst Premier League teams – compared to those in other leagues in Europe – means the competition within the top-flight could be more even than ever, next term.

When Middlesbrough clinched promotion to the English Premier League in May, they pocketed £170m. A few weeks later, Hull City bagged £110m with their promotion playoff win over Sheffield Wednesday. Financial analyst firm Deloitte estimates that those numbers could rise to £290m if both sides retain their Premier League status next season. Pushing both clubs’ spending power far beyond what it was when they last appeared in the English Premier League. Those numbers for both sides can be a bit misleading, however. Both should see around £95m in 2016 from central distributions, increased commercial activities and gate receipts. The remainder of the money will be guaranteed Parachute Payments if they are relegated.

Burnley, who have yo-yoed between the Premier League and Championship in recent years, will see similar financial numbers. Burnley only last summer spent a transfer fee record £6m on striker Andre Gray. The money that bought Gray came from Parachute Payments used by Burnley after their 2015 relegation. This summer’s transfer window should see the claret and blue break that record.

While three clubs came up from the Championship, three now replace them from the Premier League. Newcastle United, Norwich City and Aston Villa will join the second division, but will do so with Parachute Payments in their back pockets. Despite the payments the clubs will receive, the biggest effect of relegation is missing out on the TV rights money. Championship teams collect a mere £3m compared to their Premier League rivals. Teams in the top-flight will make around £10m per game in 2016-17.

In addition to TV money, Aston Villa simply finished last in the wrong Premier League season. The Villains are guaranteed £66m for being bottom of the table. However, next season’s bottom dweller will see £100m go into their back accounts. It has truly never been a better time to be an English Premier League team thanks to next year’s TV deal going into effect.

Despite the relegated clubs being paid £65m in Parachute Payments, that figure is stretched out over four years. Norwich will get £25m next season, but that amount will be reduced in each subsequent year.

It is not just the players that are affected by relegation from the English Premier League. All three clubs are expected to cut jobs, and the wages for players and staff, if staff jobs are carried over. The price of being shut out of the Premier League is bigger than ever before, and it is set to continue growing.

 

Anthony S Casey on football investing. Read this original post on Linkedin and follow on Twitter.