It’s almost five years since my last operation; the news the cancer had returned; a small nodule in a part of my lung. The haze of difficult conversations with my lovely husband, my beloved sons, the oncologist and the surgeon. The thought of further major surgery, more chemo and radiotherapy, my hair falling out again and the fear of what the future held. Was I going to die? I wasn’t ready to do that. It was happening again. That was 2015.
But this is not about then. It’s about now. Five years on. More positive, resilient, purposeful and so grateful.
It is sometimes the small things that keep things normal. For me, one of those routines was the BBC breakfast show. My lovely companions who helped brighten each day during my difficult cancer journey. To Louise, Naga, Carole, Sally, Charlie and Dan. Thank you. I am grateful for the support that you didn’t even know you gave. My gratitude goes full circle.
Throughout my treatment I kept on seeing thirteen. It was my late Mum’s lucky number. Her birthday date. It was as if she wanted me to know she was there. I was constantly showered by the number 13. I’d go to the theatre and sit on seat 13, driving in for treatment the number 13 bus would pass us on both sides of the road, twice, and the date I was operated on added up to 13 too. I could name hundreds of examples. I felt protected, cocooned and safe. Just this week I had another one of my routine scary scans and like clockwork the day before I got an email telling me I had reached my highest tennis world ranking (obviously and delightfully 13) and my latest scan date on 3.08.20 (equals 13) and so it continues and I love it.
To help my oncologist, the incredible Dr Jon Krell with his ground-breaking cancer research, we started a ((Thirteen.)) family cancer research fashion brand. As a sign of my gratitude to you all, I wanted to send you some merchandise from our online store www.13shop.co.uk. The box should be with you shortly.
All proceeds go towards a groundbreaking genetic risk-and-prevention research programme for breast and ovarian cancer, carried out at Imperial College London by my life saver Dr Jon Krell. You can read more here.
My message is especially for BBC Breakfast women Louise, Naga, Carole and Sally and everyone reading this. Please read about the programme, get tested and encourage other women to do the same. It determines a woman’s individual risk of developing breast and ovarian cancer and in so doing, will hopefully help prevent some getting this awful disease.
To the men reading this, tell your wives, mother, daughters, sisters, aunts and nieces. It’s free and could save you and/or your loved one’s life. I only wish I’d had this opportunity.
Knowledge is power, use it well. Thank you for reading this, please spread the word and enjoy wearing your ((Thirteen.)) merchandise.
I’ve been privileged to be on the board of the fantastic Football Aid charity for over 8 years. I’ve never been prouder of the charitable collaboration we are currently undertaking with Heads Together, the mental health programme set up by The Royal Foundation of The Duke and Duchess of Cambridge.
Football Aid are auctioning off tonnes of match-worn and/or signed shirts including lots of signed shirts from the two Heads Up FA Cup finalists Arsenal and Chelsea.
I have two favours to ask. Please bid to help fundraise for this great cause and please spread the word. It may be on Whatsapp, Twitter, Instagram, Facebook or TikTok. Help us amplify our message and maximise our fundraising potential.
For fans of Premier League teams (and you can click on the team link), we are delighted to have shirts from:
Over the Heads Up Weekends (8th–9th February 2020, and 15th–16th February 2020), football came together to kick off the biggest ever conversation around mental health.
Following the Heads Up Weekend matches, teams across the Premier League and the EFL have kindly donated their match worn shirts to the Heads Up campaign in order for them to be auctioned off to raise much-needed funds for the charity partners, Heads Together, Mind, and CALM.
The majority of the shirts have the unique ‘Heads Up’ logo on the front or the sleeve. These shirts were created for the Heads Up Weekends matches only, and are either match-worn or were issued to players for these matches. Most of the shirts are signed and will come with a copy of their letter or certificate of authenticity.
Ahead of The Heads Up FA Cup Final on 1st August, and following a football season unlike any other, Football Aid are privileged to be working with Heads Together to give fans a chance to bid for unique match worn shirts from the Heads Up Weekends. As well as bidding for a piece of history, you’ll be helping to continue the incredible work that is being done to improve and support our mental health across the country.
I hope you can find the shirt you have always dreamt of owning and framing and/or simply supporting these fantastic charities.
When David Beckham moved to Real Madrid, this seemed to herald the era of news stories about increases in shirt sales covering the transfer fee and wages for a new player. More than 1 million Real Madrid shirts were reportedly sold in the first year of Beckham’s four-year stay at the Bernabéu. The same narrative is regurgitated whenever a big name moves – Pogba to Manchester United, Ronaldo to Juve or Neymar to PSG.
The headline values that manufacturers attach to shirt deals for elite
clubs can be very large. It was reported that the latest Manchester United
deal with Adidas was worth £750m over a 10-year period. Adidas forecast
at the outset that they believed United shirt sales would reach £1.5 billion
over the length of the deal.
Indeed, Chelsea are said to have ended their current deal with Adidas
early (after paying a hefty termination fee of around £40m) in order to
secure a new deal with Nike, worth £60m per year. They did the same in
2005, agreeing an early end to their then agreement with Umbro by paying
£25m to sign with Adidas.
Shirt manufacturers will pay such astronomical figures only if they believe they are going to profit from the deal. People suggesting that Manchester United would make an additional £40m in shirt sales revenues after signing Zlatan or Pogba seem wide of the mark for the following reason. Kit manufacturers usually take 80–90% of all revenue from shirt sales. Clubs in return receive large, ‘up-front’ payments from their kit manufacturer. At best, the club can earn 20% of all net sales, though for many large deals, such royalty payments to a club only kick in only once a large number of sales have already been made – say, 2 million shirt sales.
It is reported that as Manchester United’s deal with Adidas is so large, it may be that it receives no additional royalties on shirt sales until a certain sales milestone is reached. Let’s say that after one million shirts are sold, the club receives a generous 20% of all shirt sales (again, for simplicity, £10 per £50 shirt). For the club to recoup Pogba’s transfer fee of £89m, it will need to sell one million shirts to start earning the royalty, and a further 8.9m shirts to recoup the entire fee. The club sold an impressive 1.85m shirts on average per season from 2014/15 to 2018/19 , yet still nowhere near the amount needed to claw back their £89m transfer investment.
This traditional structure based on ‘more’ up-front payments and ‘less’ profit-sharing is evolving. A case in point is Nike’s 2020 partnership with Liverpool. Before the 2020 Nike deal was signed, the shirt deal structure may have been as follows. Suppose Liverpool’s home shirt retails for £50, and that the club is making £10 from each shirt it sells. To recoup the transfer fee spent on Sadio Mané (around £30m – and that doesn’t include his wages and if profit sharing again only kicked in at one million shirts), Liverpool would need to sell four million shirts. Bear in mind that Liverpool averaged 1.13m shirts sold per season from 2014/15 to 2018/19, and you see that it is usually very difficult to recoup the money from large signings from shirt sales alone.
Interestingly, due to the New Balance v Liverpool High Court case (see my blog setting out the details here), the figures presented in Court by New Balance estimated that actually 2.9m Liverpool shirt units would be sold in 19/20 season (significantly more than the figures set out above). This was a 59% increase on sales from previous year. In. contrast to the above Adidas and New Balance examples, Nike’s offer was to pay Liverpool £30m per season plus 20% of net sales of all licensed products (meaning a share for the club from the first product sold rather than in the two above examples from the millionth product onwards). All licensed products included shirts, training merchandise and wider lifestyle products. It means that while Liverpool may be receiving a lower ‘guaranteed’ advance of £30m, the club shares in the substantial upside. Analysts have suggested that reasonable estimates for Nike’s 20/21 season and beyond could likely net Liverpool north of £65m+.
Whilst it is unlikely that many clubs recoup the transfer fees spent on particular players through shirt sales, it is clear that the traditional model is shifting in some cases away from large upfront guaranteed amounts and towards performance related (i.e. numbers of shirts sold) upside.
During a recent trip to Mumbai at the end of last
year, two of the authors met over breakfast to share their experiences in the
legal world. CB, a judge in the District Judiciary of West Bengal, India and
Daniel, a sports lawyer in London, were both brought together by their love of
sport and in particular football. In the months that followed, the authors
began collaborating on a variety of projects with joint articles on the
contrasting characteristics of Indian and European sports.
Their first piece draws its inspiration from the
‘crown jewels’ of the Indian and UK sports markets; the English Premier League
(EPL) and the Indian Premier League (IPL). In contrasting the approaches taken
from the various stakeholders, the authors share their views and experiences
and the different approaches taken by the relevant rights holders in organising
and monetising two such iconic sporting leagues.
The aim of this piece is to compare and contrast
the different approaches taken by the IPL and the EPL, with a particular focus
on how their competitions are set up, how broadcasting rights help fund the
central distributions to the teams, how the teams commercialise their own
rights, team valuations, cost control and player transfers.
IPL: Every year eight IPL franchise teams play in a
round-robin format where each side plays each other twice in home-away
fixtures. At the conclusion of the league stage, the top four teams qualify for
the playoffs, which takes the form of a knock out tournament. The entire IPL
season takes place within a two-month window between March to May.
EPL: The EPL is played in a league season format
between August and May each year, where each of the 20 teams plays each other
twice (also in home-away fixtures). At the end of the season, the team with the
highest number of points wins the title and the three teams with the fewest
points are relegated to the Championship.
The key difference between the league structures
is that relegation and promotion does not occur in the IPL franchise model. This
means that the same eight teams compete in the IPL year after year. This
contrasts with the EPL where three teams are relegated each season and three
new teams are promoted from the Championship to take their place. Another
significant difference is that in the IPL there is no qualification for
international competitions; whereas the top EPL teams can qualify for the
lucrative UEFA Champions League and Europa League competitions.
IPL: Both the IPL and the EPL provide monies to their
member clubs through revenue sharing central distributions, a significant
proportion of which come from lucrative broadcasting deals. According to ESPN, the IPL franchises receive a certain percentage
of the income from these central rights based on an agreement between the franchises
and the Board of Control for Cricket in India (BCCI). From the period 2008-12,
the teams received 80% of the income from the central distributions. This
reduced to 60% between 2013-17, and again to 50% from 2018. From the 2017
season this translated into central distributions for each team in the region
onwards it was
reported that as a result of the significantly more lucrative five-year Star
India/Vivo broadcasting deal, worth a reported $2.8bn, the total yearly central
distribution pool was around $273m (i.e. 50% of the total yearly amount of
$546m). From this amount, 90% of the $273m would be split equally between the 8
franchises and 10% would be distributed according to performance related indicators.
For example, in 2019 the IPL champions, the Mumbai Indians, received an
additional $2.6m; the runners up the Chennai Super Kings $1.6m; third place
Delhi Capitals $1.3m; and fourth place Sunrisers Hyderabad $1.1m.
EPL: Mirroring the IPL structure, the main source of
revenue for EPL clubs is through the sale of broadcasting rights. From the domestic
(i.e. UK) broadcasting revenues, 50% is split equally between the twenty
participating clubs; 25% is based on the number of television appearances –
called facility fees; and 25% is based on final league standings – called merit
payment. The EPL also recently introduced a new performance related element to
how non-UK broadcasting monies are distributed (previously the overseas rights
revenues were distributed evenly).
In the 2018/19 season, each of the 20 EPL clubs
received a minimum of £94m for participating in the EPL. For each club, there was
an equal share of at least £75m, and then £1.9m per place and a minimum of £12m
for television appearances. Even in the event of relegation, a club still receives
parachute payments totalling at least £80m over two or three years (depending on
how long the club played in the EPL). This lucrative revenue distribution is largely
down to domestic and international broadcasters paying huge sums for the rights
to show EPL games. UK broadcasters Sky and BT Sport, along with Amazon, reportedly
paid £4.55bn for the domestic rights over the current three-year cycle.
There are some interesting intricacies too.
Although Manchester City won the League in the 2018/19 season, earning £150.9m
in the process, their rivals Liverpool actually earned greater distribution
sums (£152.4m) because Liverpool were featured on UK television on three more
occasions (29 as opposed to 26 times).
Commercial Team Sponsorship
Direct sponsorship reportedly forms approximately
20-30% of an IPL team’s revenues. In 2019, Reliance Industries mobile brand Jio
was a common sponsor for all the eight teams and Kingfisher supported four teams
(Punjab, Mumbai, Hyderabad and Bangalore).By way of apparel sponsorship, no IPL team had agreements with global
apparel brands such as Nike, Adidas, Puma, New Balance or Under Armour.
Instead, Indian brands Zeven, Seven, Tyka and Lux provided the apparel for the
IPL teams. This Inside Sport report
suggests that the value of individual commercial team sponsorship deals was
significant, especially when considered against the weighted value of an annual
EPL 10 month season.
By way of contrast, the 2018/19 commercial revenue figures for a number of the top EPL clubs, as set out by the excellent Swiss Ramble here, are illuminating:
£m per season
In the 2019/20 season, the value of front of
shirt sponsorships of all EPL clubs equalled £349.1m,
marking a £23.5m increase from the 2018/19 season. Similarly, kit deals are of real commercial significance
for EPL clubs. Arsenal’s long term 6 year Adidas deal was reported to be worth
$365m, Chelsea’s 16 year deal with Nike totals $1.15bn, Manchester City’s Puma
deal is worth $860m and Adidas pays $920m for its ten year deal with Manchester
Player Signings and Salaries
A substantive difference between both competitions
is the way the teams recruit talent. The IPL teams use an auction system to
source highly sought-after cricketers from around the world. Whilst there is no
transfer fee paid, the clubs compete in the auction by bidding amounts to
entice players with ever larger salaries. Importantly, the IPL teams have a
salary cap of approximately $10.5m (INR
80 Crores) which limits the amount
of money the team can pay to its squad.
At the 2019
IPL auction, it was
reported that the IPL
franchises hired 60 players and spent a total of $14.1m (INR 106.8 Crores); an
average of $1.7m (INR 13.35 Crores) per player. Notably, some
clubs will already have expensive players retained for more than one season so
that will eat into the money available to bid for new players in any season’s
auction. It was reported that Kings
XI Punjab had the biggest remaining purse for the 2020 auction at INR 42.70 crores
It should be noted that IPL players often play in
a variety of different T20 franchise leagues each season (such as the
Australian Big Bash, for example) and many will therefore play for a variety of
different T20 teams in any one calendar year. In stark contrast, EPL players
will usually have longer term contracts (perhaps 4 or 5 years) and will therefore
only usually represent one club during a season (unless they are transferred or
loaned out in a particular transfer window).
In football, transfer fees are relatively common,
with transfer monies paid by a buying club to a selling club. Players can leave
without a transfer fee, but that only usually happens when their employment
contract has expired. The transfer fees paid by Manchester United for Paul Pogba
(£93m) and Romelu Lukaku (£75m) demonstrate the huge sums that EPL clubs are
willing to pay for elite talent. In contrast, because IPL players tend to be on
short-term contracts (to reflect the short-term nature of the IPL season), they
do not transfer between clubs during the term of their employment contracts and
therefore transfer fees are generally not payable.
When it comes to salaries, Virat Kohli leads the
race in terms of individual IPL earnings being paid $2,656,250 per season. With
the IPL running for a period of seven weeks, that roughly translates to a
weekly wage of $380,000. This is similar to the wages demanded by the biggest
stars in the EPL – Manchester United’s David De Gea, for example, is reported
to earn almost $400,000 per week.
In the fascinating Global Salaries Report 2019,
the figures painted an interesting comparative picture. The Mumbai Indians
average weekly salary was (an adjusted) $105,187, closely followed by Royal
Challengers Bangalore ($104,508) and Kings XI Punjab ($102,671). These weekly
average figures are comparable to the average weekly salaries at Chelsea
($114,760) and Arsenal ($115,150), but considerably lower than the huge sums
paid by Manchester City ($167,969) and Manchester United ($147,250).
Many elements come into play when valuing an EPL
football club or IPL franchise. The main revenues and assets of a team are
likely to be a combination of its players, central distributions, match-day
revenues, facilities (such as the
stadium and training ground) and its shirt, apparel and other commercial,
merchandising and advertising deals. There is no one-size-fits-all approach to
calculating the true value of a club, but traditional factors such as income,
profits, stadium attendances, player spending and debt all form part of the
In a 2019
study, it was reported that Manchester City was valued at £2.3bn; beating
city rivals Manchester United in second place (£2.08bn).
Liverpool (£1.615bn) and Chelsea (£1.615bn) made up the top five most
valuable EPL clubs. The total value
of the league’s clubs was almost £15bn.
In contrast, a brand valuation report from Duff
and Phelps valued the overall IPL ecosystem in 2019 at US$6.7bn, marking a
growth rate of 7% from 2018. According to the report, the Mumbai Indians are the
most valuable team ($107m), marking a 8.5% growth since last year. In contrast,
the Kolkata Knight Riders and Royal Challengers Bangalore each recorded an 8%
decrease in brand value to $79.5m (INR 630 crores) and $78.5m (INR 595 crores)
respectively. So, whilst commercial revenue and player wages are relatively
similar in the EPL and IPL, the IPL franchise teams clearly have some way to go
(in part because of the much shorter timeframe of matches) before they reach
the valuations of their EPL counterparts.
Across a variety of sports including football,
cricket, F1, basketball and rugby there are cost control mechanisms in place. Controlling
teams’ spending is an important function of any league and it is often necessary
in order to curb overspending and protect the long-term financial position of
the clubs. However, as we come on to below, there are a variety of different
ways in which leagues can seek to control spending.
As mentioned above, the IPL implements a fixed salary
cap. This means that, before each season’s auction, each team is given a
specific “purse” within which they have to complete a squad of 25 players. This
year the purse was Rs. 85 crores for each franchise and as and when teams buy
players the purse reduces accordingly. The IPL’s cost control measures seem to
now be paying dividends as last year was the first year in which it was
reported that every franchise reported a trading profit.
In comparison, the EPL imposes a slightly different financial control model (through the EPL Profitability and Sustainability Regulations) which essentially provides that clubs cannot spend beyond their means. The basics are that club’s cannot spend more than £105m over a three year period and even that requires owner finance guarantees. The consequence of this approach is that, provided clubs generate the necessary revenues, there is no fixed “cap” on what clubs can spend on transfer fees, wages and bonuses. Supporters of this approach point out that it encourages clubs to invest in sustainable and long-term revenue generating assets, whilst critics argue that it unfairly favours the bigger clubs which are able to generate greater revenues (and therefore spend more on transfer fees and wages).
COVID-19 has had a profound impact on the sporting sector. The 2020 edition of the IPL has been unable to begin. Likewise, the EPL 2019/20 season faces an uncertain conclusion. But, if the IPL resurfaces this year, demand for the tournament may shoot through the roof in India (though not likely in stadiums), leading to astronomical figures in TV viewership and matchday revenues.
The IPL has caught up with the frontrunners of the global sporting leagues in a relatively short period of time. Just look at the top players’ weekly salaries and broadcast right figures. Even in a post-COVID 19 world, these elite, prime-time live tournaments will continue to draw huge audiences fuelled by pay-TV.
[i] The authors decided on a weighting based on the fact that the IPL is played over an approximate two month window with the EPL over 10 months.
EFL Chairman Rick Parry has explained that without serious intervention, lower league clubs face a £200m funding blackhole come September 2020. When providing information to the Digital Culture, Media and Sport committee, Parry was clear that systemic change is needed to ensure EFL club finances are future proofed – whether through tighter cost controls, sustainability tests or more robust financial practices generally.
The reasons for the concerns around the financial sustainability of clubs have been well documented in recent weeks: significant lower league reliance on gate receipts and matchday revenue; high wage to revenue ratios; loss of other income streams including sponsorship and hospitality; and the fact that the restart of the league season will mean clubs will no longer be able to rely on the ‘furlough’ scheme as a means of off-setting the wage bills of players and other staff.
With the above in mind, below are three examples of how the EPL, if the current 2019/20 season can be restarted and concluded, could provide additional solidarity assistance in order to help protect lower league clubs and avert the potential crisis.
TV Monies for this Season and Next
In the event that the current EPL season does restart, games will in all likelihood be played behind closed doors for an extended period of time. It is not inconceivable that this could continue deep into next season (2020/21). With that in mind and because not every game is televised live in the UK (due in part to the 3pm blackout rule), the EPL has the opportunity to sell the remaining TV games to the incumbent broadcasters.
The current season (2019/20)
With 92 games still to play in the current EPL season, and 47 being shown live (Sky having the UK rights to 39 and BT to 8), there are 45 games that could presumably be offered to Sky, BT, Amazon or others. With the current ‘cost-per-game’ approximately £9m for Sky and £6m for BT, even at a heavy discount, part of those monies could be distributed to a central solidarity pot. If 45 additional games were to be screened at circa £2m per game (accounting for a deflated rights market), an additional £90m could – on the face of it – be made available for the EPL to distribute.
Next season (2020/21)
Similarly, with Sky, BT and Amazon having the rights to broadcast 180 EPL games in the UK next season, should all 2020/21 games be played behind closed doors, this would result in an additional 200 games available to broadcast. The prospect of 200 games at £2m a game potentially provides £400m worth of additional revenue for the league to distribute.
The above would be in addition to the potential additional broadcasting revenues that the EFL could commercialise through selling the allotted 3pm games that previously were prohibited from being shown (due to the blackout period) to its incumbent broadcasters.
Gary Neville had previously suggested on Sky Sports that the EPL should forward finance a proportion of future TV monies to assist the lower leagues. Even if that came by way of a loan from the EPL that the EFL could pay back out of its central funds, this would no doubt be of assistance to cushion the significant financial blow.
Once the transfer market re-opens (and on the basis that clubs have funds to spend), one requirement could be for EPL teams to commit to spending a minimum transfer amount of, say, £5m per season over say a two-season period. A large percentage of the transfer proceeds would go to the selling club with a small percentage distributed across the lower leagues according to a designed, weighted formula. Sell-on clauses could be built in too, so that a league solidarity pot potentially benefits from a subsequent transfer.
In contrast to the draft, which would no doubt be a complicated practical and regulatory proposal, a more straightforward mechanism would be to mandate that a % of any transfer fee paid by an EPL club is collected in a central league solidarity pool to be distributed across the football pyramid. This type of redistribution already occurs within the FIFA transfer system by way of solidarity payments and training compensation and in, for example, the EPL through a 4% transfer levy. A transfer tax of, say, 1% could be agreed for players being bought by EPL clubs that could be pooled accordingly and distributed.
The suggested funding streams outlined above would ideally be contingent on clubs showing evidence of financial discipline, including:
having in place sensible and robust business plans;
the provision of future financial club information and attainable budget forecasts; and
adherence to particular ratios in relation to debt and wage parameters.
There are no obvious or easy solutions to the unprecedented challenges facing the current game, in particular the potentially devastating financial impact on EFL and lower league clubs (as well as clubs in similar leagues across the UK, Ireland and across the globe) as a result of the ongoing disruption to competitions.
There will inevitably be practical, legal and commercial barriers to overcome when exploring the above three ‘ideas’ in more detail. That said, there is an opportunity to think creatively here – as a means of sourcing and raising additional funds which can be distributed across the football family.
I recently ran a week long YouTube course on my experiences in breaking into the sports industry and forging a career.
What we all see with a lot of people is the outcome, not the process and are seduced by the outcome rather than enjoying the process and the journey.
My key takeaway was that if you want to get into sport for the long term, don’t worry about getting a job in sport in the short term. The opportunity will arise if you invest the time productively. This can be done specifically by:
building relationships; and
supercharging your knowledge base.
If you do this consistently and with perseverance over a long period of time, you will have a much better chance of reaching your goals.
The five day course was broken down into particular themes.
“How Soon Is Now?”Day 1 focused on Practical Techniques to make contacts and build relationships.
Should the Newcastle takeover happen, it’s important to understand the spending restrictions in place at domestic Premier League (EPL) and UEFA level. It will be difficult for the club to spend astronomical amounts on transfer fees and wages because of the EPL Profitability and Sustainability Regulations and the UEFA Financial Fair Play Regulations (FFP).
The above rules were put in place to ensure that clubs become more self-sustainable by breaking-even in the medium to long term. UEFA, the EPL and the Football League all have different regulations setting out the acceptable losses that clubs are able to make. In the EPL, a club can make ‘acceptable losses’ of up to £105m over three years and €30m over three years for UEFA competitions.
Sanctions vary depending on the regulations but can involve potential points deductions in the EPL and spending, squad size restrictions and even expulsion from competition in UEFA competitions. PSG and Man City previously fell foul of the UEFA regulations and were restricted, among other things, in their transfer and wage spending for a number of seasons.
UEFA FFP relates only to Champions League and Europa League club participation, and not to domestic leagues. However, even if the club has not qualified for the Champions League or Europa League, if it wishes to play in future years, it will need to adhere to the spending regulations now because UEFA will effectively look back three years to ensure compliance.
The UEFA regulations do allow clubs in certain instances to spend over the €30m loss amounts through entering into a voluntary agreement (VA) with UEFA. This would allow Newcastle to potentially spend significant amounts on transfers and wages in the short term as long as a detailed business plan is in place to demonstrate to UEFA how the club will break-even over a longer period. A club owner who wishes to spend significant sums must guarantee such losses and commit funds as part of the VA. There will always be a risk that the VA business plan is not adhered to and monitoring by UEFA could still lead to disciplinary sanctions imposed on the club.
The club will also have to bear in mind the EPL Profitability and Sustainability regulations.
In summary, clubs can make a cumulative £35m loss per season over a three year rolling accounting period i.e. a total loss of £105m with certain conditions attached. If a club’s losses exceed £15m for the three year period, owners would have to provide evidence of ‘secure funding’ i.e. guaranteeing the remaining £90m so if the owners do not want to invest further monies, the remaining £90m can be used to cover the overspending.
For EPL purposes, Newcastle can spend more than they earn (up to the £105m mark over three years) so long as their owners are willing to provide secured funding. Practically however, as the club will want to participate in UEFA competition, they will be required to adhere to more stringent UEFA FFP rules (i.e. a maximum of a €30m loss over three years).
It will be imperative as a result for Newcastle to substantively grow its commercial revenues via high value partnerships with apparel manufacturers and brands. The greater the revenue generated, the greater the permitted expenditure on transfers and wages.
Milestone is a charity aimed at raising awareness of, and normalising the conversation around, mental health. Find out more here at www.TeamMilestone.co.uk
The UEFA Champions League Financial Distribution
By Alex Harvey and Daniel Geey
The brilliant Swiss Ramble has published an excellent, detailed analysis of the UEFA Champions League distribution model. We would strongly recommend reading the twitter thread in full, which you can find here. As we have done with previous Swiss Ramble threads, we thought it would be helpful to set out some of the key highlights from the analysis, along with some comments of our own.
UEFA as the distributor
As the governing body of
European Football, UEFA is responsible for exploiting the commercial rights in
the Champions League, the Europa League and the Super Cup. UEFA earns
significant sums through collectively selling broadcasting rights,
commercial rights and tickets/hospitality, and will then distribute those sums
back to the participating teams using a complex financial distribution model. It
is that distribution model which we will seek to unpick in this blog.
The Champions League “Pot”
UEFA’s gross commercial revenue
from the 2019/20 season is estimated to be around €3.25bn. Of that, €1.95bn
will be distributed to clubs participation in the Champions League, with the
remainder being used for administrative costs, solidarity payments and clubs
participating in other UEFA competitions such as the Europa League.
Under the current UEFA financial distribution model,
the €1.95bn is divided into four pillars:
25% Participation (€488m)
30% Performance (€585m)
30% Co-efficient Ranking (€585m)
15% TV Market Pool (€292m)
All of the 32 clubs which qualified for the 2019/20
Champions League group stage will each receive €15.25m (i.e. €488m/32). This
participation fee alone can represent a significant proportion of total revenue
for clubs playing outside of the top 5 European leagues.
During the group stage, €2.7m worth of performance bonuses
will be paid out for each match. Where a team wins, they receive the full €2.7m
(with the losing team receiving nothing). Where two teams draw, both teams
receive €900,000 each and the remaining €900,000 is pooled and redistributed
among all clubs playing in the group stage in amounts proportionate to their
number of wins.
After the group stage, clubs receive additional performance bonuses depending on how far they get in the competition: Round of 16, €9.5m: Quarter-finals, €10.5m: Semi-finals, €12m: Finalist, €15m: Winners, €19m.
Swiss Ramble calculates that, after this year’s group
stage, Bayern Munich have already earned €27.3m through performance bonuses
alone. This consists of: (i) €16.2m for winning all 6 group stage games; (ii) €1.6m
for their share of redistributed “draw” money; and (iii) €9.5m for reaching the
Co-Efficient Ranking (€585m)
30% of the Champions League pot is distributed to teams
based on their position in the UEFA co-efficient ranking, which takes into
account performances over a ten-year period.
The €585m is divided into ‘coefficient shares’, with
each share worth €1.108m. The lowest-ranked team in this year’s competition,
Slavia Prague, will receive €1.108m (representing 1 share) and the
highest-ranked team, Real Madrid, will receive €35.46m (representing 32
TV Market Pool (€292m)
15% of the Champions League pot is distributed in
accordance with the proportional value of each TV market represented by clubs
taking part in the Champions League. Half of the amount representing the value
of each market will be split among the clubs based on their performance in the
previous domestic season. The
other half will be paid in proportion to the number of matches played by each
club in the current Champions League competition.
Swiss Ramble calculates that, in relation to the first
half of the Market Pool only (ie. based on performances in the 18/19 domestic
season), Man City have the highest Market Pool revenue of all clubs with €14m,
followed closely by Liverpool with €10m; a reflection of the large sums that BT
Sport pay for the broadcasting rights in the UK.
Swiss Ramble: Key
Following the completion of this season’s group stage, Swiss
Ramble crunched the numbers and unearthed some fascinating findings:
Manchester City have the highest 2019/20 Champions
League revenue to date amongst the English clubs with €78m. Close behind are
Liverpool (€76m) and Chelsea (€73m), with Tottenham lagging behind on €58m.
Man City benefitted from significant performance
bonuses totalling €23.2m after a group-stage which included four wins and two
draws. As mentioned above, they have also earned a healthy €14m from the first
half of the TV Market Pool due to their Premier League triumph last season.
In contrast, Tottenham had the least successful record
of English clubs in the group stage (earning €19.3m), the lowest UEFA
coefficient based on the last 10 years (earning €19.9m) and the smallest TV
Market Pool after their 4th place finish in 2018/19 (earning €3.5m).
Highest Earners v
The highest earners after this year’s group stage are
Bayern Munich, who have already amassed a sizeable €82m. Slavia Prague are the
lowest earners with a more modest €18m. So how are those numbers broken down?
The first point to remember is that both teams receive €15.25m
as a participation fee simply for reaching the group stage. As stated above, Bayern
Munich have earned an impressive €27m through performance bonuses. They are
also third in the UEFA co-efficient behind only Real Madrid and Barcelona,
earning them a further €33m, and have received €6m from the first half of the
TV Market Pool.
Slavia Prague, by contrast, earned only €2m in
performance bonuses after a group stage campaign which saw them lose four games
and draw two. They are also the lowest-ranked team in the UEFA co-efficient,
earning them €1.1m. Note, however, that information on their TV Market Pool
earnings is not currently available.
The Atalanta Case Study
Atalanta are a fascinating case study. They have successfully qualified for the round of 16 after progressing through Group C ahead of Shakhtar Donetsk and Dinamo Zagreb. Despite this, their total revenue after the group stage is only €40m; half that of fellow Italian club Juventus (€80m), and less than five other clubs who actually failed to progress past the group stage (Benfica €51m, Ajax €46m, Shakhtar Donetsk €44m, Inter €41m and Zenit €41m).
The comparison with Inter is telling. Despite outperforming Inter in the performance bonuses (€16.3m v €6.8m) and the TV Market Pool (€5m v €2.5m), Atalanta have suffered due to their low UEFA co-efficient ranking (earning them only €3.3m) in comparison to Inter (€16.6m). It is clear that the distribution model, which includes a 30% pool based on the UEFA co-efficient ranking, advantages the traditionally larger clubs against up-and-coming teams such as Atalanta.
 UEFA’s 2017/18 Financial Report showed that 81% of its
revenue came from broadcasting rights
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