The 170 million pound game

LONDON, ENGLAND - MAY 28:  Hull City players celebrate after Sky Bet Championship Play Off Final match between Hull City and Sheffield Wednesday at Wembley Stadium on May 28, 2016 in London, England.  (Photo by Alex Livesey/Getty Images)
LONDON, ENGLAND – 28 MAY: Hull City players celebrate after Sky Bet Championship Play Off Final match between Hull City and Sheffield Wednesday at Wembley Stadium on 28 May 2016 in London, England. (Photo by Alex Livesey/Getty Images)

It was a huge night for European football. Two of Europe’s finest teams, both of them based in Madrid, faced each other in a thrilling game to decide whose name would be engraved on a coveted trophy with big ears next to the number 2016. The game at the monumental Giuseppe Meazza, in Milan’s affluent San Siro neighbourhood, was yet another reminder of the Spanish dominance in European football, as proven by nine consecutive major trophies ending up in the arms of the La Liga sides. Sixty years after the first European Cup final the winner was the same – Real managed to win La Undecima.

Right about the time Los Merengues and Los Colchoneros were doing their pre-match warm up in northern Italy, fans in another of football’s cathedrals on the other side of the continent were witnessing the other big game of the night. Comparing the Champions League final to a game contested by the teams that ended in positions four and six in England’s second tier may seem a bit odd, but in today’s football world, when money matters more than ever, that was actually the most significant game of the day.

Over the course of ninety minutes the decision had to be made: would Hull City be back to the Premier League a year after their relegation, or do we witness the return of a sleeping giant, Sheffield Wednesday, sixteen years after their demise.

Or, to put it bluntly: which of the two sides gets the 170 million pounds of the money guaranteed for competing in the Premier League next season?

Ever since the Premier League was established in early 1990s there has never been such a defining moment as this summer. After successfully negotiating a new three-year TV deal, which saw the income rise by nearly two-thirds, the world’s most lucrative competition is indeed in a league of its own.

From this August until June 2018 each team playing in the Premier League is guaranteed at least 99 million pounds (125 million euro) per season, and that’s just the TV money. On top of that there will be match day and commercial revenues, enabling each club in the league to earn at least 160 million euros per season.

To put it in a perspective, 160.9 million euros was enough to include West Ham United into the Top 20 in this year’s Deloitte Money League. Envisioned in 1997 and conducted by one of the world’s most prominent accountancy firms annually since 2000, the Deloitte Money League is a globally recognised ranking of football clubs by revenue generated from football operations.

In the latest edition, accounting for 2014/15 season, nine English clubs are in the world’s Top 20, fourteen are in the Top 30, and all of the Premier League members are among the 40 top earners.  This trend is expected to repeat itself next January, when the new edition is published, meaning that a 12-thousand stadium capacity and a mere eight live TV games in their debut season (as compared to Arsenal’s 27) won’t stop AFC Bournemouth from breaking the 100 million pounds barrier.

Deloitte’s next report will take into account the last season of the expiring TV deal. Once the new, improved one is included, in January 2018, the full scale of the Premier League’s financial dominance will be obvious.

But that is not all. Even if a club gets relegated, they would get 70 million pounds over four seasons in the form of a parachute payment, to help them survive the financial hit of no longer being among the rich elite. Since it was introduced more than a decade ago, the parachute payment system has proved hugely successful in helping relegated clubs avoid insolvency.

Before that and the introduction of FFP-like constraints in the Football League, for many clubs relegation from the top tier was quickly followed by bankruptcy, due to the combination of high wage bills and insufficient income. Since 1998 twelve former Premier League clubs, including current champions Leicester City, have gone into administration after being relegated. A total of 55 clubs have gone bankrupt since the Premier League was formed in 1992, but not a single one in the past three years.

This strategy has been so successful that the other leagues have decided to replicate it, albeit with certain adjustments. Hellas Verona’s fall from Serie A will be significantly softened by a 20 million euro payment in each of the next two seasons. Carpi and Frosinone, on the other hand, can count on only 10 million each, as they were relegated after a single season in the top flight.

Other successful strategies created by the Premier League are slowly being adopted across the continent as well. None of them was as important in creating the Premier League as it is today as the decision to split the TV revenue more fairly across the league.

It is amazing to see such a success story in the English top flight at a time when big clubs across Europe have suffered on a scale not seen since the nineties. That is a testament to the vision of the league creators two and a half decades ago, and of the importance of marketing the league as a whole, not just as the sum of its parts.

While the likes of Real Madrid, Barcelona, Juventus and the two Milan giants have conducted their media rights negotiations separately in order to maitain their huge financial advantage over the other teams in their respective leagues (the difference between the top and the bottom clubs in those league is as large as 20 to 1), their English peers have agreed to share the wealth with the smaller clubs.

LONDON, ENGLAND - MAY 30: AFC Wimbledon's Adebayo Akinfenwa celebrates after scoring the teams second goal from the penalty spot during the Sky Bet League 2 Play Off Final between Plymouth Argyle and AFC Wimbledon at Wembley Stadium on May 30, 2016 in London, England. (Photo by Charlie Crowhurst/Getty Images)
LONDON, ENGLAND – 30 MAY: AFC Wimbledon’s Adebayo Akinfenwa celebrates after scoring the teams second goal from the penalty spot during the Sky Bet League 2 Play Off Final between Plymouth Argyle and AFC Wimbledon at Wembley Stadium on 30 May 2016 in London, England. (Photo by Charlie Crowhurst/Getty Images)

Take for example the league’s most successful club. The sheer size of Old Trafford, the club’s continuous success home and abroad, its marketability and appeal to a worldwide audience has allowed Manchester United to earn vast amounts of money year after year, but their TV income has never been more than twice the sum given to the bottom club in the league and the details of the money-sharing arrangement make sure that the gap is constantly narrowing.

Key to this is the fact that, while the income from domestic television is split according to the clubs’ final position and the number of times their games were shown live to the English audience, the money from international broadcast rights is shared equally among the 20 clubs.

As the difference between domestic and international rights grows ever smaller (domestic rights accounted for around 90 percent of the TV money at the turn of the century, but from last August onwards that would drop to 60 percent), the gap in club revenues shrinks accordingly.

That does not mean that the English league is completely egalitarian. United still earns upwards of 500 million euros per year, 3.25 times more than West Ham and around five times more than AFC Bournemouth, but it gives each team the basis for growth and makes astonishingly thrilling seasons like this past one possible.

After years of opposing the idea of sharing their wealth and in turn allowing the rest of their respective leagues to start bridging the difference, the big clubs in Spain and Italy have finally agreed to make some concessions, a last minute move to save their domestic competitions.

This past season only Serie A clubs lost a large amount of money – another 365 million euro, further enlarging their already enormous debt. The problem is obvious when some of the league’s big guns keep searching for wealthy new owners, desperately and unsuccessfully. Even though the Spanish top teams have ruled Europe for years, the state of the rest of La Liga is just as precarious.

Don’t let one amazing season in the Premier League fool you. Money matters big time. The Champions League was won by Europe’s richest team; the richest teams have won the league in France and Italy, and the richest pairs have finished first-second in Spain and Germany.

MADRID, SPAIN - MAY 29:  Real Madrid CF players celebrate with their fans at Cibeles Square after winning the Uefa Champions League Final match against Club Atletico de Madrid on May 29, 2016 in Madrid, Spain.  (Photo by Pablo Blazquez Dominguez/Getty Images)
MADRID, SPAIN – 29 MAY: Real Madrid CF players celebrate with their fans at Cibeles Square after winning the Uefa Champions League Final match against Club Atletico de Madrid on 29 May 2016 in Madrid, Spain. (Photo by Pablo Blazquez Dominguez/Getty Images)

The success of the Premier League has caused problems for UEFA as well. It comes as no surprise that the continent’s big guns are not happy with the way the top competition is organised. As shown by the ever falling number of viewers, the Champion’s League group phase has become plainly boring, and the number of top level games over the course of the season is too small.

That is why a new format will be discussed at the end of the year, and it seems that the overhaul will be the biggest since the competition was belatedly restarted in 1992 (the plans for a competition restart were set for a year prior to that, but as the failure of the champions of England, Germany and France to qualify for the group stage meant that sponsors were hard to find so UEFA decided to postpone the change for a season).

The Champions League prize money during the (hugely improved) current TV contract, which runs from 2015 to 2018, is around 1.3 billion euro per season, around 40 percent of what Premier League clubs get, and it is shared by 42 clubs (32 in the competition proper, and the ten play-off losers).

 The winner, Real Madrid, earned around 94 million, while Atletico’s share was 82 million euros. Even under the current contract Aston Villa falls right in between them, while the bottom side in the next year’s Premier League will get 30 million euros more than Europe’s champions.

That brings us back to the guys from the beginning of the story. Hull City deservedly beat Sheff Wed with the help of a stunner by Mohamed Diame worthy of a Champions League final. Next year, starting on 1 July, The Tigers, who are set for an ownership change and whose debut appearance in the top flight came as late as eight years ago, will probably have 50 percent higher revenue than Sevilla, who have won the Europa League three times in a row.

Further down the English pyramid a completely different sort of a club has made shockwaves. AFC Wimbledon, formed in 2002 by fans protesting the move of their original club (FC Wimbledon) from southwest London to Milton Keynes (where they would take the name MK Dons), won the League Two play-off final and progressed to League One. The team has seen six promotions in thirteen years, all the time that was needed to catch up with their despised club Milton Keynes. That makes for some story next season, huh?

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