Champion’s (financial) hangover: The most exciting (and expensive) end to a Premier League season to date

By winning the 2011/12 Premier League, Manchester City adds to the small group of 4 (now 5) teams to top the league since its creation in 1992. The top positions of the league have been dominated by few teams, with Manchester United wining 12 times out of 20 seasons. Finishing at the top of the league table appears to have a cumulative effect, making access to finance easier, increasing fan base, and ability to attract top talent. By a casual measure of revenue dispersion, the gap between revenue earned by the top and bottom clubs in the league is widening.

It is argued that spectator demand increases the more uncertain the match outcome. Therefore, the more equal the teams in the league are, the more exciting the contest is. As mentioned by media and pundits, the season finale was the most exciting in memory. City’s first league win (on just goal difference) puts on hold United’s 13^th win. Undoubtedly then, City’s performance has increased the appeal of the competition but at what cost?

Manchester City’s pre tax profit shows a £92.6 million and a £121.3 million loss for 2009 and 2010 respectively. Manchester United on the other hand achieved a £21.6 million profit and a £108.9 million loss over the same periods. The immediate benefit is relatively small, first place was granted with 15.14 million second place 14.38 million for the 2010/11 season.

With 2011 and 2012 figures yet to be added, the cost of City lifting the trophy is sizeable compared to the short term benefit. Leaving the suggestion that for those in charge at City, beating the neighbours was benefit enough!

FA Cup: An important win but the REAL WIN is yet to come

As winners of the FA Cup, Chelsea FC have grabbed one of the three places in next seasons UEFA Europa League. In previous seasons (2010/11) Manchester City and Liverpool have both received 6.4 million Euros (approx £5.18 million) for moderate success in the same Europa League.

As it currently stands in the Premier League, 6th place Chelsea are set to earn a merit bonus of around £11.4 million (based on 2010/11 figures). Not a lot less than the £12.4 million merit bonus arch rivals Tottenham Hotspur (Spurs) will receive for a finishing 4th.

Two places higher up the Premier League table, however, gives Spurs a slight advantage. Sitting in a UEFA Champions League qualifying position could be worth around 33 million Euros (approx £26.7 million) (as it was to Spurs in 2010/11).

There are also positive side effects (externalities) for clubs competing in the Champions League over the Europa League: The best playing talent want to play in the best competitions. If Chelsea cannot offer Champions League football to it's players, the club may struggle to attract key talent as they look to replace some of the older squad members (there are a few).

The match in Munich on the 19th May for the Champions League final becomes one of the most important matches in Chelsea's history. Poor domestic league performance puts the club out of Champions League football next season. Loose this match and arch rivals will start to pull away financially over the coming seasons. A win here will secure revenues and confidence (and likely to tip Chelsea as Premier League title contenders once again).

Premier League announces more matches to be broadcast

In recent research (2012) "Live broadcasting, gate revenue, and football club performance: some evidence" I made a case for the Premier League to allow more games to be broadcast live on television. See link for article and findings. The research received some media interest (and debate) that started with an article in The Daily Mail before others.

Today the Premier League announces a 40% uplift of games to be broadcast live for the coming auction, shown on the BBC amongst others. Instantly there is talk of increased competition from broadcasters to purchase these rights and more money for clubs. The resulting impact on fans (customers), the clubs and broadcasters will be observed. An intriguing story is starting to unfold...

Kick-Off

This blog is the creation of a friendly conversation that turned my thoughts on blogging upside down. The mid conversation question from a visiting academic "Do you blog?" halted my trail of thought.

For several days after I searched for strong reasons not to blog. I can't seem to find them, so whilst I continue to search here it is and credit to Yoram Bauman (The Stand-Up Economist).