Premier League reaches new heights: Revenue set to top £5 billion
19 November 2019
According to Off The Pitch's Financial Forecast 2019, revenue will exceed £5 billion on aggregate for the 20 Premier League clubs of the 2018/19 season.
Commercial income the main driver as global Premier League popularity raises attractiveness for sponsors.
Massive growth of UEFA prize money further increases the gap between the "Big Six" and the rest of the Premier League clubs.
Premier League revenue is projected to top the £5 billion mark on aggregate in 2019 for the first time in history.
The Premier League Financial Forecast 2019 report, published by Off The Pitch, estimates that the total Premier League revenue will increase by £325 million to £5.1 billion.
Despite the relatively large increase of seven per cent, the growth is set to be lower than the average revenue growth rate (CAGR) of ten per cent that has been experienced since 2014. This is mainly due to the Premier League's 2016-2019 broadcasting cycle, which contributed to a massive revenue climb of 26 per cent from 2016 to 2017.
Commercial activity is the key
Looking at the revenue breakdown, it appears that commercial income, with its 12 per cent increase, will be the primary driver of the rising revenue, both in terms of volume and per cent. Broadcasting income follows with an increase of five per cent, while matchday income will experience the least growth at four per cent.
With the rising global popularity of the Premier League comes improved bargaining power against the sponsors, as the attractiveness of the league increases along with the potential exposure to a bigger audience.
This is well reflected by the development in value of main shirt sponsorships for newly promoted Premier League clubs. When promoted in 2016/17, Middlesbrough received £1 million - the lowest recorded sponsorship value in the league that year. In contrast, Sheffield United, with the lowest main sponsorship value of 2019/20, will receive £3.5 million.
The same pattern exists at the top of the league, where the "Big Six" clubs on average grew their main shirt sponsorship value by £6.7 million from 2017/18 to 2018/19, and by 44 per cent in total since 2016/17.
The introduction of shirtsleeve sponsorships, furthermore, contributes to the explanation of the rising commercial income.
All Premier League clubs, except Tottenham and Burnley, partnered up with a shirtsleeve sponsor for the 2018/19 season, which has proved to be another substantial source of income. Thus, the clubs have started to seize the potential arising from the increased global popularity of English top-tier football, and thereby to grow their commercial business.
Increased UEFA prize money to benefit "Big Six"
Looking at broadcasting income, the positive development of £148 million stems primarily from UEFA, whose distributions to the clubs participating in its tournaments have risen by 44 per cent and 31 per cent compared to 2018 for the Champions League and Europa League, respectively.
To demonstrate, Liverpool reached the final of the Champions League two years in a row, but will receive around £111 million in 2019, compared to £79 million in 2018. By winning the trophy in 2019, the club received an additional £4 million, but even without the latter supplement, the prize money received for reaching the same position in each of the two consecutive years is quite distinct.
UEFA started a new three-year competition cycle in 2019, in which it has successfully increased the value of the broadcasting and commercial rights.
This mainly benefits the "Big Six" as the only clubs participating in the tournaments on a relatively continuous basis, which further contributes to the already noticeable gap between the "Big Six" and the rest of the Premier League clubs in terms of revenue.
Domestically, the Premier League ended its previous broadcasting cycle with the 2018/19 season, meaning that the payments to the clubs have been relatively steady for the past three years. With the new broadcasting cycle from 2019-2022 starting this season, however, the Premier League clubs can probably expect to see their prize money increase once again next year, as the overseas broadcasting rights have allegedly risen by 35 per cent.
Matchday income with limited growth potential
In terms of matchday income, the fixed stadium capacity leaves limited growth potential for the clubs in the short term, with growth mainly achieved by increased prices for match and season tickets.
The clubs have been cautious in that regard, however, so as not to scare off the local supporters, who are integral to the vibrant atmosphere of the stadiums. This led to a large number of clubs keeping their ticket prices frozen, with Manchester United leading the way with their eighth consecutive year of frozen ticket prices.
In the long term, the other option is to increase capacity by expanding or even building whole new stadiums. Liverpool are an example of the former strategy, with their latest expansion of Anfield contributing to the 18 per cent increase in matchday income from 2016 to 2017.
Tottenham's newly opened stadium has almost double the capacity of White Hart Lane, and also offers the possibility of hosting NFL matches. Everton are another club trying to capture the increasing demand by building a new stadium, which reportedly aims to be in operation for the 2023/24 season.
The increase of sponsorships in the current season, however, suggest that commercial activities remain the key to growing revenue, along with potentially larger Premier League payments derived from the new three-year broadcasting deal starting this year.