The English Premier League (EPL), the world’s top football competition, kicked off its 2023/2024 season two Fridays ago, with the defending champions Manchester City defeating Burnley 3-0. It signalled the start of another nine months of global fanaticism and extensive media coverage for the 20 members of the exclusive EPL club.
Largely a British business at its inception in 1992, the EPL has evolved into the world’s most popular domestic football competition, and it generates significantly more revenue than any of the other top European leagues. As a result, the clubs have become very hot commercial property in their own right and have caught the eyes of several international speculators with extremely deep pockets. To date, American investors fully or partly own ten EPL clubs, including five of the elite ‘Big Six’, Arsenal, Chelsea, Liverpool, Manchester City and Manchester United. Saudi Arabia’s overflowing petrol dollars have controlling interests in Newcastle United and Sheffield United, whilst Abu Dhabi’s oil wealth purchased an 81 percent stake in Manchester City Football Club (MCFC). Other international investors from China, Egypt, Greece, Iran, Pakistan, and Switzerland, have also joined the billionaire bandwagon in pursuit of massive revenues, glory and trophies.
The main source of the league’s revenue is the extremely lucrative television contract, which according to the EPL’s website, is split three ways: 50 percent is distributed equally between the clubs, 25 percent is awarded on a merit basis which is determined by the final league positions, and 25 percent is dispensed as a facilities fee for televised matches. Estimated revenue sharing of the 2.6 billion pounds television deal for the 2021/22 EPL Champions Manchester City was: 79 million pounds, 53.1 million pounds, 26.3 million pounds, and an equal share of the EPL combined commercial income of 5.6 million pounds, for a total of 164 million pounds. Runners-up Liverpool received 162.3 million pounds, third placed Chelsea collected 155 million pounds, and twentieth (last) placed Norwich were presented with 98.6 million pounds. These numbers are a far cry from the 35 million pounds split by the then 22 clubs of the inaugural EPL season when winners Manchester United received 2.4 million pounds, and last placed Nottingham Forest’s efforts netted 1.1 million pounds.
These huge annual revenue cash flows have led to the wealthy clubs, especially the ‘Big Six’ splurging enormous sums on the transfer market in pursuit of the world’s best players and then rewarding them with astronomical salaries. While the average EPL salary is approximately 60,000 pounds per week, leading players such as MUFC’s Norwegian star Erling Haaland earns 865,000 pounds per week, whilst his Belgian teammate, Kevin De Bruyne, and Liverpool’s Egyptian goal scorer Mohamed Salah are compensated 385,000 pounds for their weekly services. England strikers, MUFC’s Marcus Rashford and Chelsea’s Raheem Sterling cost their clubs, 375,000 pounds, and 350,000 pounds, respectively, on a weekly basis.
The EPL’s television contract, colossal as it is, and the clubs’ other revenue sources cannot support these mammoth – unrealistic in real terms – salaries, and hence, the clubs have resorted to borrowing staggering sums of money. In April, Alliance Fund chief executive Iain Crawford painted a bleak picture of the financial state of the EPL, “Survival within the Premier League has become an increasingly costly endeavour for teams in the top flight and as if the cost of remaining competitive wasn’t high enough already, many are still struggling to overcome the severe financial pothole that saw matchday revenues all but vanish throughout the pandemic.” Crawford added this dilemma has led to an over reliance on borrowing from the banks as the balance between net cash and bank financing began slipping into the red in 2020, as the cost of servicing these loans has increased. Crawford’s analysis is endorsed by the financial services firm LCP, which stated that two-thirds of clubs are loss making, with those awash in a sea of red ink having accumulated 1.2 billion pounds in losses during the 2021/22 season. Teams also owe 2.6 billion pounds to their multi-billion-dollar private equity firms, state sponsored firms and mega-rich individual owners.
While the EPL has financial regulations in place to control spending by the clubs, it is not always clear what the actual financial resources have been at their disposal. Manchester City, which won the Premier League, the FA Cup and the European Cup last season have spent billions of pounds over the last decade. Their glorious on-the-field success – five Premier League titles in the last six seasons – was put under the microscope when the EPL appointed an independent commission in February to review breaches of its financial regulations. The club has been charged with more than 100 breaches spanning from the 2009/10 to 2017/18. Among the charges are that the club failed to provide ‘in utmost good faith accurate financial information that gives a true and fair view of the club’s financial position’ as related to revenue, including sponsorship. The club has mounted legal challenges and the entire process could take several years, at the end of which City could face possible sanctions of fines, points deductions, stripping of their titles, and even expulsion from the league.
Newly promoted Luton Town Football Club’s return to the top tier of English football after 30 seasons in the wilderness can only be described as a fairy tale. Ten seasons ago, the Hatters, (their affectionate nickname due to the town’s historical association with the hat-making industry) were in the sixth division. Today the Luton players are rubbing shoulders with the likes of Manchester City and Liverpool, as the club is set to receive a potential windfall of 168 million pounds this season.
Luton’s return to the upper echelons has forced the club to modify its dilapidated stadium at Kenilworth Road to meet the demands of the EPL standards. The “Kenny”, home to the club since 1905, had to be upgraded with new floodlights, a news conference room and positions for the 50 data-analysis and television cameras, among other stringent EPL criteria to the tune of an estimated 12 million pounds. Luton, one of only four EPL clubs still wholly English owned, have no plans to get caught up in the swirl of the razzle-dazzle world of the EPL, like some former newly promoted predecessors did to their demise, as they tried to keep up with the extravagant super rich owners.
In an interview with the New York Times, Luton’s chief executive Gary Sweet stated, “We are consummate long-term planners … planning for the club five or ten years ahead, actually, rather than five or ten minutes, which a lot of people do. That’s the golden rule of what our success will be: having a sensible, long-term, financial, strategic plan.”
Luton plans to allocate 25 percent of its EPL golden nest egg towards a new stadium, and avoid the wanton spending – at times irrational – on players as the elite clubs are prone to do. The club has brought in new players for this season but have not hung their hat where they can’t reach it. Luton’s management appreciates that the EPL has become a playground for billionaires competing with each other like kids in a sand box, and the have-nots must be aware of their limitations in this dangerous financial game. Former EPL teams, Reading (2012/13) and Wigan Athletic (2005/13), which were regulated to League One (Division Three equivalent) last season, were served with winding-up petitions in June over unpaid tax bills.
Luton’s stay in the EPL might not be as long as their previous stay in the old top flight Division One, when they spent a decade – 1982 to 1982 – but at least they figure to be in better financial shape having laid “the foundations for the future” according to Sweet.
Hats off to Luton Town for opting for fiscal conservatism and infrastructure investment over the pursuit of instant glorification with the potential risk of long-term financial ruin.
