It is, to use the technical term, early doors in the English Premier League club financial reporting season. Publication this month of Everton’s figures brings to all of three the number of clubs who have so far reported. Yet 2013-14 is already shaping up to be a landmark year for profitability in the English top tier.
Yes, none of the prior year’s big loss-makers have yet reported. And no, I am not for one moment predicting a total absence of red ink. But it does look like we will see a sizeable improvement from the aggregate loss of well over £300 million run up by the 20 clubs, seven of which managed a pre-tax profit, in 2012-13.
Look at it this way: the trio who have so far reported – Arsenal, Everton and Manchester United – have generated pre-tax profits of £73.4 million between them. A year earlier, the same calculation would have yielded a modest loss.
So, with 17 clubs still to report, we are seeing a positive year-on-year swing of about £74 million. And we already know that Tottenham’s figures should reflect the world record transfer fee paid by Real Madrid for Gareth Bale in September 2013. And that Newcastle’s should take account of the reported £20 million deal that took midfielder Yohan Cabaye to Paris Saint-Germain last January.
What has prompted this apparent improvement in English top-tier club finances? And who should we hold most responsible?
Is it UEFA President Michel Platini, architect of the much mulled-over Financial Fair Play (FFP) initiative? Or Richard Scudamore, long-serving chief executive of the Premier League? Or is it an obscure member of the current British Government, whom few members of the public would recognise and who sits on the board of a Scottish Premier League club, Glasgow Celtic?
Yes, as you probably guessed, my vote would be cast firmly in favour of the third candidate – Lord Livingston of Parkhead, British Minister of State for Trade and Investment.
This is not to say that the other two have not contributed to the improvement: Platini’s FFP is making it much more difficult for clubs to produce big losses year after year and has perhaps played a part in inducing a period of relative wage restraint; Scudamore has been a competent pilot of the league’s business affairs over many years.
The key factor, though, behind the improved profits outlook is a big jump in broadcasting revenue – and this is where Lord Livingston enters the picture.
As plain old Ian Livingston, he was chief executive of BT, the traditional telephone company that embarked on an exciting diversification by agreeing in June 2012 to pay £246 million a year for the live domestic broadcasting rights to 38 Premier League games a year for three seasons starting with 2013-14.
The move helped to generate an eye-popping near 70% advance in the overall value of these rights to more than £1 billion a season.
We are seeing how beneficial this is proving for clubs in the financial results that have now started to trickle out, with the three who have already reported generating year-on-year increases in broadcasting revenue of between 34% and 59%.
Just as crucially, whereas in former years wages have tended to rise at a similar lick to revenues, on this occasion the three clubs whose figures are out have managed so far to keep the lid on, with wage costs over the same period up by between 8% and 19%.
This perhaps reflects the fact that with Premier League wage costs not too far off double the next highest-paying of the Big Five West European leagues, and with clubs throughout Europe under pressure to reduce their debts, the leverage of agents is much reduced for all but the biggest and most promising talents.
The net result, I would say, is that the 2013-14 Premier League clubs have a sporting chance of reporting aggregate losses of below £200 million for the first time since 2004-05. This would constitute substantial progress in the struggle for financial stability.
The broadcasting boost might conceivably be enough to get just about every club into operating profit before player trading and perhaps a majority into pre-tax profit.
Will it last? History suggests not, and so frankly does the record summer transfer spending of £835 million shelled out by Premier League clubs, headed by Manchester United, in the 2014 window. There is no guarantee that high levels of transfer activity will accelerate wage growth, but it would be no surprise (to say the least) if it did.
For now though, the finances of top-tier English football clubs look to be improving. And – fire up the presses – a Government Minister can claim some of the plaudits.
David Owen worked for 20 years for the Financial Times in the United States, Canada, France and the UK. He ended his FT career as sports editor after the 2006 World Cup and is now freelancing, including covering the 2008 Beijing Olympics, the 2010 World Cup and London 2012. Owen’s Twitter feed can be accessed at www.twitter.com/dodo938.