Breakdown of the Premier League Prize Money: Key Points

Breakdown of the Premier League Prize Money: Key Points

The Premier League drew to a close on Sunday, confirming Chelsea as the title winners and Sunderland, Middlesbrough and Hull City as the relegated teams. The league table does not lie over an eight month long season and we can safely say that each team in the league deserves the position they ended at. Chelsea were the league leaders for more than six months in the campaign and Sunderland were awful from the start. Liverpool reaped the benefit of a brilliant first half, while Manchester United paid the price of an overtly defensive attitude. All said and done, no club can have complaints about where they ended up.

That is just as well, because their final position in the table has a direct impact on their earnings from the Premier League in its most lucrative season thus far. Everyone knew since the Premier League signed that massive £8 billion deal with Sky, BT and overseas broadcasters in 2015, that this was going to be the first of the three seasons that will bring a massive windfall to the Premier League clubs. On an average, the clubs’ earnings from Premier League jumped up 52% in 2016-17 over 2015-16, which was the last year for the previous broadcasting rights contracts.

This year, the Premier League distributed about £1.7 billion from domestic TV rights and about £1 billion from overseas TV rights. The overseas amount is equally distributed among all the 20 clubs, amounting to an income of £47 million for each club from the overseas money. The distribution of the domestic amount is slightly different however. 50% of it i.e. close to £900 million is distributed equally, giving another income of about £38 million for each club. From these equal shares, each club got a revenue of £84.4 million this season. This itself is higher than many club’s total prize money from the last season.

Now the other 50% of the domestic earnings is distributed by dividing it into merit payments – based on league positions and facility fee – based on the number of matches shown live. Starting from Sunderland in 20th position, who will receive £1.9 million of merit payment, each higher position yields £1.9 million more, i.e. Boro will earn £3.8 million, Hull £5.7 million and so on till Chelsea, who will get £38 million for their title win. The biggest winner in terms of merit payments on the final game week were Swansea, whose win over West Brom resulted in them getting £3.8 million more in merit payments.

Facility fee calculations are based on the number of matches shown live in UK for each team. Each team gets about £13 million as fixed payment for 10 matches (even if their matches are shown fewer times on TV). Those clubs that had more than 10 matches shown live, they get £0.94 million per incremental match.

The total of these payments is very lucrative for all the clubs this season. So much so, that even Sunderland missed out earning £100 million by a whisker. To put that in perspective, Arsenal who were the top earners last season earned £101 million back then.

This obviously is only the clubs’ revenue from Premier League’s broadcasting rights i.e. it is the Premier League prize money. All the clubs also earn match-day and other commercial revenue based on merchandise and sponsorship deals. Those numbers are not included here.

Let us take a look at the Prize Money table:

Source: www.sportingintelligence.com

History is Valuable

One point that struck me from this table and it has struck me every year for last 3-4 years is that Liverpool invariably gets more Facility payments than Chelsea or Tottenham. This is because more Liverpool matches are shown live than Chelsea or Spurs. This time I also read a crib about it on Chelsea fan blog as 29 Liverpool matches were shown live but Chelsea were shown live one less time, despite ending up as champions and also having a recent history of title successes. Tottenham were shown live only 25 times, four less than the Reds. Perhaps the only explanation is that the TV channels feel that the historical glory periods of Liverpool and Manchester United that have gone by, have created enough viewers for them to warrant more live games, even if their current performances do not match up to those glory days.

Cash Rich Clubs

This new TV deal has ensured that Premier League clubs are among the highest earners in the football world. When Deloitte UK comes up with the next Football Money League report in January 2018, they will have many more Premier League clubs flooding their top 20, not just the eight that they included in the 2017 report. Even the relegated clubs are earning close to £100 million this season, meaning that they have a better chance of climbing back up into the Premier League in 2018-19.

Already, in expectation of this windfall, Premier League clubs flooded the transfer market with cash last summer splashing £1.18 billion in transfer and agent fees last summer. We can expect that they will continue with at least that level of spending this summer as well.

Wage Gap Between Manchester United and the League

Now this is not strictly related to the Premier League prize money. But I wished to see that if this was the clubs’ only revenue stream, then would the Premier League clubs be able to sustain their wage structures. I collected the average annual wage data from Sporting Intelligence’s Global Sports Salaries Survey 2016.

I found that the two Manchester clubs are the highest payers in the  Prem, with average annual pay of £5.77 million for Manchester United and £5.42 million for City. All other clubs are lower than these numbers. Now if we assume a squad of 25 players, what we find is that Manchester United’s earnings from Premier League prize money are just short of their wage bill, and Manchester City’s earnings are barely (£13 million) higher than their wage bill. All other clubs’ earnings are much higher than their estimated wage bills. The next worst is Chelsea who have earnings of £40 million more than their wage bill only from the Premier League prize money

While both the Manchester Clubs are raking in a lot of revenue from matchday and commercial streams, and there is no cause for alarm but the above exercise does indicate the levels to which these clubs’ wage bills are inflated. No doubt, this results from their transfer policy of acquiring expensive superstars.

But right now, neither the Manchester clubs, nor any of the other Premier League clubs need to worry because the most lucrative season of the most lucrative football league in the world just ended and all of them are rolling in cash.