The EPL voted through this initial sponsorship suspension 18 in favour & City abstaining. This is a pretty unanimous statement of intent by almost every EPL club at both ends of the spectrum.
Newcastle are claiming such a sponsorship suspension is anti-competitive. They used a very similar argument in the CAT re the takeover before that dispute was resolved. See their EPL cartel and dominance wording herehttps://lnkd.in/e_AxiUvw.
Again similar to NUFC’s previous EPL takeover dispute, EPL dispute proceedings were initiated. It is likely that if matters escalate, new ownership will take a leaf out of Mike Ashley’s playbook and start arbitration with 3 independent arbitrators appointed to resolve matters.
Interestingly City abstained because (perhaps) of their current ongoing EPL arbitration in part re their historic Etihad sponsorship deal & Football Leaks fallout. One area of discussion at the time was related party transactions & fair/market value.
By way of wider context, cost control/FFP reform is back on the cards at UEFA level specifically with talk of luxury taxes replacing break-even. This is the reported Bayern (stricter break-even) v PSG (looser luxury tax) conflict at the ECA right now.
EPL clubs are worried NU will ‘game’ the break-even regime through higher commercial revs giving NU greater leeway to spend. Expect more stringent regulations on related party deals brought in ASAP &/or wider structural discussion on whether EPL should follow UEFA luxury tax reforms.
Add to this context the fan led review into football governance and the distinct possibility of an independent regulator. This body may well be given oversight over such FFP/cost control/luxury tax compliance issues.
Whilst the EPL & EFL are currently regulating such matters like related party commercial deals & cost control more generally, the coming months may lead to the independent football regulator being handed such responsibilities.
As you can see, one micro decision is part of a broader number of macro issues for clubs, EPL, EFL, UEFA & government all from a political, legal, governance, regulatory and commercial perspective.
Over the last 18 months or so, I’ve been able to push content out across numerous platforms. I’ve really enjoyed creating various podcasts throughout this time. I set out the five seasons’ worth of podcast content which I hope you enjoy.
I’m really proud to be helping Riverside Youth Club create life-changing sports opportunities for some of the most deprived young people in London. The club is looking to raise around a further £200,000 by mid-January to restore and modernise its facilities.
The aim is to add a state-of-the-art 3G football pitch and games area, gym, indoor sports, working floodlights and lift to upper floors, community kitchen and learning zones.
To hopefully raise awareness (and funds), we are auctioning off a signed Dele Alli Spurs shirt with all proceeds going towards funding the works. Dele’s shirt will be the first of a number we will be auctioning to help fund life-changing sports opportunities for some of the most deprived young people in London.
Riverside will be a focal point for sports for the community on the Evelyn Estate in Lewisham, providing new sporting activities for people of all ages and abilities, such as walking football for the elderly, toddler football, basketball, rugby and a whole range of new league groups for young people. It will also provide a home to current community and recreational football and rugby teams with nowhere safe to play after dark or in wet weather. Having access to sport can be life changing for young people, not only helping them get fit and active, but also improving their self-esteem, mental health, and opening doors to new skills and qualifications, getting young people into jobs. This project combines sports with expert youth work support, advice support, activities and somewhere to have a hot meal, all in a safe place on their estate.
We hope you can help spread the work, bid in the auction and/or donate.
1. The Basics: The previous Governing Body Endorsement (GBE) requirements only related to non-EEA players wishing to play in the EPL and EFL. This was because of the EU free movement provisions that benefitted all European workers wishing to work in the UK. The new system is relevant to any player who is not a citizen of the UK and has not acquired permanent residence, been granted pre-settled status or settled status under the government’s EU Settlement scheme. For the nuanced detail of the FA men’s GBE regulations, I would recommend this Thomas Horton piece. The below sets out an overview and some particular contextual examples for the men’s regulations.
2. Route 1 –The Auto-Pass: A player will receive a GBE if his international appearances meet the auto-pass criteria. The national team criteria relate to his percentage of appearances and the team’s aggregate ranking. The latest list can be found here.
Based on the current rankings, the below are specific examples of players that will benefit from the auto-pass criteria and gain a GBE:
a. An Argentinian, Brazilian, French or Columbian national team player (currently in the top 10 FIFA aggregate rankings) who has made 30% or more international appearances during the relevant time period;
b. A Mexican, Chilean or Peruvian national team player (currently in 11-20 FIFA rankings) who has made 40% or more international appearances during the relevant time period;
c. A Japanese, American or Venezuelan national team player (currently in the 21-30 places in FIFA rankings) who has made 60% or more international appearances during the relevant time period.
3. Route 2 –Points Mean Prizes: If the auto-pass route is not available for a player either because he hasn’t made the minimum percentage appearance requirements or his national team is not within the requisite FIFA ranking positions, then the FA has put in place a points based system. If a player accumulates 15 points or above, they will be granted a GBE. Points are scored based on:
a. Domestic Minutes,
b. Continental Cup Competition Minutes,
c. Final League Position of Selling Club,
d. Continental Cup Competition Progression of the Selling Club; and
e. League Quality of Selling Club.
There are a number of avenues to reach the 15 point mark. The below examples demonstrate some of the more straight-forward potential pathways. I purposefully only used two criteria (domestic minutes ((a) above) and league quality ((e) above)) to show the potential pathway to a GBE. There are additional criteria ((b)-(d)), as set out above, that can also be deployed. This is in addition to points that are available to players that do not meet the auto-pass criteria. For example, a player that plays for Brazil that has played 25% of matches (although he will not receive an auto-pass) will receive 10 points (and will only require 5 more) to reach the 15 point target.
A player playing for a Band 1 club (EPL, Bundesliga, La Liga, Serie A and Ligue 1) will receive a GBE if he has:
· “appeared in the squad list for the Player’s Last Club for at least one match in its domestic league competition or a Continental Competition” (12 points); and
· played in 30% of the available domestic league minutes (6 points).
A player playing for a Band 2 club (Portuguese Primeira Liga, Eredivise, Belgian First Division, Turkish Super Lig and the English Championship) will receive a GBE if he has:
· “appeared in the squad list for the Player’s Last Club for at least one match in its domestic league competition or a Continental Competition”(10 points); and
· played in 40% of the available domestic league minutes will receive (5 points)
A player playing for a Band 3 club (Russian Premier League, Campeonato Brasileiro Série A, Primera División of Argentina, Liga MX and the Scottish Premiership) will receive a GBE if he has:
· “appeared in the squad list for the Player’s Last Club for at least one match in its domestic league competition or a Continental Competition”(8 points); and
· played in 80% of the available domestic league minutes (7 points).
As you can see, the lower the league banding, the higher the percentage appearance criteria in order to attain the necessary points. Importantly, a player from any country who has, say, played in the Belgian league and played in fewer than half of the club’s league domestic games, (and that’s not including the four other above criteria that could be applied to boost the player’s points total,) will be able to gain a GBE. Crucially, this gives a pathway for players regardless of their nationality to transition into the UK leagues by first playing in Band 1-3 leagues in Portugal, Holland, Belgium, Turkey, Russia, Mexico and Argentina. Whilst the old work permit criteria for non-EU players was significantly more focused on national team appearances, transfer fee and wage criteria, this points system is heavily weighted in favour of the strength of the player’s club and league.
4. Fine Margins: If a player only manages to receive 10-14 points based on the above criteria, there is an ‘exceptional circumstances’ appeal route called the Exceptions Panel, though that route will not be possible after the winter 20/21 transfer window.
5. The Youth Route: The above pathway also gives a route for under 21 year olds to gain a GBE if they have achieved 10-14 points and also attain 15+ points based on supplemental youth player criteria contained in the regulations. In addition, the FA were keen to stress that only three under 21 players can be signed by EPL clubs in the upcoming January window with an overall cap of six per season. Lastly, as has been well publicised, EPL and EFL clubs will now not be able to take advantage of the FIFA exception for transferring 16 and 17 year olds as I previously wrote about here.
It continues to be a time of great flux in the football industry. Broadcasting rights rebates, league seasons being curtailed, actual and potential administrations, EFL announcements on cost control measures and plenty of Projects (Restart, Big Picture and Beautiful Game). EFL Chairman Rick Parry has warned of an impending £200m EFL black-hole. Richard Masters had previously announced that EPL clubs are not immune to the new COVID world. Even Manchester United’s 19/20 accounts showed a pre-tax deterioration from a £27m profit to a £21m loss. Indeed the UCL 19/20 rebate to broadcasters was estimated to be north of half a billion Euros. There are likely to be significantly difficult times ahead for the whole football family.
As a result of such systemic turbulence, a variety of football regulators have made changes to their cost control regulations. The aim of this blog is to piece together the current state of play and an outline of what the new regulations will permit.
The UEFA Financial Fair Play (FFP) break-even rules ensure a club, more or less, has to balance its books. All clubs wanting to play in UEFA competition must submit the required licensing documentation to the relevant national football association (and for break-even purposes to UEFA). Acceptable deviation is the term used to describe break-even. Acceptable deviation allows clubs to pass the FFP break-even test without actually breaking even. The acceptable deviation provisions allow a club with some losses over a certain number of seasons to ‘break even’ and therefore pass the FFP regulations.
Three years’ worth of accounts need to be provided to UEFA to demonstrate if the club has complied with the rules. For example, a club playing in last year’s 2019-20 Champions League competition season would have been required to have provide 2018-19, 2017-18 and 2016-17 accounts to show they did not make more than a €30m loss over those three accounting years.
UEFA recently came up with rule changes to allow greater flexibility in how they will ensure FFP club compliance. It is set out in excellent detail by Swiss Ramble in this twitter thread. In summary, UEFA’s change of their regulations covers two monitoring periods:
· For the (current) 2020-21 season, the break-even assessment will be made based on two seasons (2017-18 and 2018-19) but not the COVID interrupted 2019-20 season.
· For the next 2021-22 season, the break-even assessment will be based on four seasons (2017-18, 2018-19 and then an average of the 2019-20 and 2020-21 seasons). It effectively means as UEFA explains: “the adverse impact of the pandemic is neutralised by averaging the combined deficit of 2020 and 2021 and by further allowing specific COVID-19 adjustments.”
These specific COVID adjustments (see more detail here) allow UEFA to take into account appropriate adjustments for the break-even calculation by making an adverse financial impact adjustment. In summary, UEFA will take into account the “loss of revenues between the average revenues relevant for the calculation of the break-even result recognised in the reporting periods ending in 2020 and 2021 and the corresponding anticipated average revenues foreseen for the same periods.”
The EPL regulations are not called FFP but rather the Profitability and Sustainability Regulations (PSR). There are two substantive cost control thresholds. At the lower level, EPL clubs can make a £15m loss over a three year rolling accounting period subject to certain conditions (e.g. an owner loan injection). At the higher end, 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 (set out below)).
If a club’s losses exceed £15m for the three year period, the club in the relevant season has to provide:
· future financial information to the EPL; and
· evidence of sufficient secure funding (which includes monies in escrow, personal guarantees or a letter of credit) of up to £90m.
In past years, if a club breached the cumulative £105m limit, the EPL board had the power to compel a club to adhere to a defined budget (Rule E.15.1) and/or refuse to register any new or existing player contract (Rule E.15.3). Interestingly, the latest EPL regulations (Rule E.53) sets out that no club in respect of the 19/20 season (presumably because of COVID) will be deemed to have breached the regulations and be sanctioned accordingly. There does not appear any similar provision for the current 2020/21 season.
Nonetheless, as was reported in October 2020, certain EPL clubs and EFL had been negotiating a much larger agreement (the basis of Project Big Picture) covering topic areas including FFP and cost controls. The reports suggested changing the PSRs and aligning all EPL and EFL break-even provisions with the above UEFA standard.
During the beginning of August 2020, EFL League 1 and 2 clubs voted for introduction of Squad Salary Caps (SSC). The caps were set for this current 2020-2021 season at £2.5m for League 1 and £1.5m for League 2. The regulations contain a significant amount of detail around what is included in any salary cap. This includes “Basic Wages; Taxes; Bonuses; Image rights; Agents’ fees and; Other fees and expenses paid directly or indirectly to all registered players” plus “[p]ayments directly linked to a Club’s progression in cup competitions or promotion are excluded from the Cap, [and] any income generated from players going out on loan”.
There are two additional SSC elements:
1. Committed Contracts: For contracts already in place, they will be ‘notionally’ capped at an agreed divisional average so that a club will not be sanctioned due to contracts entered into before the regulations were agreed upon. Similarly, for clubs relegated to L1 or L2, such contracts are again capped at the divisional average “prior to the Club’s relegation until those contracts expire”.
2. Cap Overrun: Clubs are given some leeway if their total squad salary payments “exceed the Cap by up to 5%, whereby dependent on the percentage level of the overrun, a financial penalty would be payable for every £1 in excess”. For any amount over the 5% excess, the EFL will refer the club to an independent commission for sanctioning. Interestingly, the EFL is employing technology to dynamically monitor the SSC on a real-time basis so presumably quicker referrals and commission decisions can be made.
Shortly after the announcement, the PFA attacked the EFL’s approach arguing that additional consideration and consultation should have been undertaken before finalising their SSC approach. Their document sets out the PFA’s concerns about a quasi-hard cap, its rationale and the principle that consultation when undertaken by UEFA, F1 and Premiership rugby for similar cost controls took a number of years to finalise, transition and implement. Watch this space.
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.