Introduction
The 2022/23 summer transfer window was lively. The European clubs have been very active. However, the Premier League teams have been the busiest and have spent the most on transfers this window. The quality of signed players and the fee paid by certain Premier League clubs have baffled the spectators. That has been accentuated by Nottingham Forest's business this summer. A team at the bottom of the Championship (Second-tier English League) mid-way last season has just spent over $150m in transfer fees after promotion. The English teams have spent a lot despite the tight financial rules by UEFA and the Premier League. Hence, it raises questions about the revenue earned by the Premier League teams and whether the established regulations are strict enough.
We will perform an internal comparative analysis of the finances and transfer spending of the Premier League teams. After which, we will conduct an external comparative analysis with other European teams. By doing so, we can establish a few conclusions about the financial capacity of Premier League clubs relative to European teams.
Internal Comparative Analysis
Before looking at the financials of the teams, we must consider that football clubs are loss-making entities. The values mentioned above are for the financial year 2020/21, as 2021/22 numbers will only be released next year. Due to the pandemic, revenue has decreased year-on-year while expenses have remained the same. Thus, making it harder for clubs to main a net positive bottom line (profit).
There cannot be much emphasis placed on a club's P/L due to the economic effects of the global crisis. However, clubs that could maintain a profit during struggling financial times show strength in their costs relative to their revenue. The total assets amount shows the total amount of assets owned by an entity. These are the resources built, owned, and controlled. The total liabilities amount reveals the total money owed to various parties. Football clubs take on huge debt to finance different aspects of the business that is paid off from the returns generated by the investment.
The financials provided above helps us understand the different economic facets of a club. The primary value we will be focusing on will be the revenue generated. The difference in income generation sets apart the big teams from the small ones and the English clubs from the European.
The difference between the 'big six' clubs and the rest is quite evident. There is a disparity in revenue generation due to numerous factors. The bigger clubs get more matchday income as they can price their tickets higher and have higher capacity stadiums, a larger chunk of the broadcasting revenue, and better sponsorship deals.
Nevertheless, the 'non-big six' clubs have spent big in the summer transfer window. Not only have they splashed the cash but also have signed quality players. Such teams can compete with the big hitters. They can do so due to increased managerial talent in the 'lower' teams and the benefit of not playing mid-week European games.
The figures exhibited above are astronomical. Only 4 of the 20 teams have spent less than €50m. 17 of the 20 teams have a net transfer deficit balance. Out of these 17 teams, 9 clubs have a transfer deficit of more than €50m and 7 have a deficit of more than €100m. The spending spree seems reckless since last season was only the first campaign after the pandemic. Despite that, there must be valid reasons for this behavior.
External Analysis
English clubs are aware of the financial pit they can fall face-first into, yet, they have spent a fortune in 2022/23. The Premier League teams have shelled out almost as much as the other top four leagues combined. It has raised questions about the reasons behind their high spending capacity.
It was not just the ability to spend more than the others, it was their power to compete for high-quality players with high European pedigree clubs. The likes of Matheus Nunes, Jao Paulinha, and Damsgaard, were willing to join English clubs than possibly move to teams that played in Europe. It displays the financial and competitive pull of the English League.
To acknowledge the relative financial strength of the Premier League clubs to the European clubs, let us compare their income generation.
Not only is the Premier League earning more than the other leagues, the 2022 club revenue breakdown report by Statista indicates the financial muscle of the English clubs.
(source: Statista)
The most interesting numbers are not of the clubs at the top, but the ones at the bottom. Leeds United and Aston Villa generate 89% and 92% respectively, as much as the Serie A champions. West Ham United, Everton, and Leicester City have a higher income than AC Milan. It is incredible that Everton, close to relegation last season, generated more than the historic Milan club. This disparity has been a long-standing issue for the past years. It has annually compounded to the point where Leeds United and AC Milan fought for the same players' signature this summer.
Revenue of the 'Big Five' European Football Leagues
(source: Statista)
The imbalance in revenue is essentially due to the difference in broadcasting revenue. The English League can generate more revenue through broadcasting deals due to the large-scale acceptance of the English language, aggressive marketing by the Premier League, and strategic planning to increase its popularity.
In the article, 'Football Broadcasting Deals across the Top 5 European Leagues', Daniel Geey and Alex Harvey have mentioned the following. "The value of the EPL is clear: its £9.3bn + three-year broadcasting deal means that, on average, each EPL club receives £123m per season, in comparison to La Liga (£56m), Serie A (£52m), the Bundesliga (£52m) and Ligue 1 (£27m). On average, an EPL team makes more than twice as much broadcasting revenue than its equivalent in La Liga".
Conclusion
The European leagues are weary that this gap may broaden every year. It could be one of the reasons the big European clubs tried to form a breakaway Super League and may try again. There is no clarity on the action the leagues will take. However, they need to act fast as time has run out. If they let this affair continue, it could change the European football landscape.
Who knows? Maybe one day we will have M.K. Dons fighting for the same player as Juventus.
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