EPL Braces for European (and World) Domination

• by Ross Fadner , Apr 29, 2015

Collectively, the 20 clubs that made up England’s Premier League during the 2013-14 season made an overall profit for the first time in 16 years, the Guardian reported on Wednesday. The league’s profit totaled 198 million pounds ($305.5 million) last season, up from a loss of 291 million pounds ($449 million) the season before.

Crucially, a set of financial fair play measures  was (barely) passed by the league’s clubs in February 2013, with the first effects being felt last season. According to the report, the most important of these was a restriction that would only allow clubs to spend 4 million pounds ($6.1 million) more on player salaries for the 2013/14 season despite the huge increases they each received from TV deals at home and abroad.

As a result, 15 of the league’s 20 teams made a profit last season, a huge improvement from 2012-13, when 12 of the 20 clubs posted a loss, with five losing 50 million pounds ($77.2 million) or more.

As it turns out, salary inflation was crippling the league’s smaller teams, so financial fair play looks to have been a smart move: per the report, players’ pay increased just 5.5 percent overall in 2013-14, while clubs’ overall income grew 22 percent. As a result, Premier League clubs spent 57.5 percent of their 3.3 billion-pound ($5.1 billion) income on salaries, a reduction of almost 10 percent from the 67 percent spent during 2012-13.

“In previous years, every time the money came in, before you could blink it had all gone in players’ wages,” said Stoke City owner Peter Coates, who voted for financial fair play implementation in 2013. “We couldn’t have that happen this time. It is a difficult balancing act and we will now be criticized for making too much money and not investing it, but I didn’t believe we could continue being the world’s richest league while all losing money.”

While $6.1 million was the agreed-upon cap for player salary increases from TV revenues last season, that rises to $12.3 million this season, then $18.5 million in 2015-16. However, this restriction does not preclude clubs from allocating salary increases sourced from their own growing commercial income, i.e. from sponsorships, etc. This obviously benefitted larger clubs capable of striking lucrative deals.

For example, Manchester United spent 34 million pounds ($52.5 million) more on salaries in 2013/14 than it did the season before, which was Sir Alex Ferguson’s last season in charge. This was OK, though, because, thanks to its myriad sponsorship deals, the club’s profit actually rose by 70 million pounds ($108 million), making the 215 million pounds ($331.8 million) it spent on salaries in 2013-14 a little less than half of its 433 million-pound ($668 million) profit. 

Great, so what does all this mean?

Simple: the Premier League is setting itself up for a future it completely dominates. As Forbes contributor Bobby McMahon reported earlier this year, by 2016-17, the Premier League’s 20 clubs will generate $2.7 billion from domestic rights alone, while the combined take for domestic and foreign rights of the top three leagues in France, Germany and Italy will be $3 billion.

Spain, you’ll notice, is missing, because at the moment, its teams are squabbling about how to move from a system whereby they negotiate individually for TV rights to one where they bargain collectively (to the detriment of superpowers Real Madrid and Barcelona). You’ll also notice that McMahon cited domestic rights alone. The Guardian report projects that the EPL’s new 2016-19 TV deals will total 8 billion pounds, or $12.3 billion.

In other words, Europe’s richest league will keep getting (much) richer, while the rest try desperately to catch up. Either that, or France, Germany, Spain and Italy will all have to become feeder teams for the EPL.