Article: Wages Outstrip Turnover at Top Football Clubs

I was reading my regular Yorkshire Business News Bulletin at work this morning and came across this article, apologies if the same story has already been posted from a more high profile source:
http://www.thebusinessdesk.com/york...ampaign=Yorkshire_9th_Jun_2011_-_Daily_E-mail

In case the link doesn't work here it is in full (I don't know how to put it in one of those speech bubble things):


WAGE inflation of football players plying their trade in the Premier League outstripped clubs' turnover last season, according to figures from accountancy giant Deloitte.

Deloitte's latest Annual Survey of Football Finance reveal that although revenues rose 5% to £2.7bn player wage costs surged too.

In the Premier League - which accounts for the lion's share of revenues, a 2% rise to £2.03bn, was outstripped by wage inflation of 5%.

The total wage bill of the 20 Premier League clubs in 2009-2010 was £1.4bn, resulting in a record wages to revenue ratio of 68%. Worryingly Premier League clubs made record pre-tax losses of £445m.

Dan Jones, Manchester-based partner in Deloitte's Sports Business Group, said despite the recession Premier League football had shown "remarkable recession resistance."

Mr Jones said: "There are three reasons for this - pay TV revenues have really held up during the recession, clubs have been realistic and sensible in regard to ticket pricing, and commercial revenues have held-up too."

He expects this picture to continue too - a new TV deal came into force last year and will boost revenues for the 2010-11 season.

"We believe the English Premier League will be €1bn ahead of the other leagues as a result, he added."

Deloitte said the challenge for the leading clubs is to convert revenue growth into "sustainable profits that allow for investment in both infrastructure and talent".

The firm says cost control is the key issue facing the sport at all levels, and welcomes the advent of UEFA financial fair play rules, which will come into force in the next two years.


I'm astounded at the size of the pre-tax losses of the premier league, and astounded by the rise in players already vastly overinflated wages.

On the back of these figures, especially the pre-tax loss, my question is - does this make us, as Newcastle fans, feel more comfortable about the conservative approach Ashley seems to be making to transfers (i.e. lower prices, sell players if the profit is massive etc) and more importantly, about the club's wage cap? Do Ashley and Co have the right idea medium to long term?

 

My first article folks, I read this forum daily but this is my first article so be nice

 

At the moment the financial running of the club is the only good thing about Ashley's regime and he does deserve credit for that!

 

And a good one it is MrsF
Seen this on SSN this morning and it can only be a bad thing, sooner or later these clubs paying ridiculous wages will just collapse (except man city, unless the sheik leaves), it's one thing I would have to give MA credit for is bringing the wage cap in for the club.
It may hamper us from bringing some players in, but if that is all they are interested in they aren't worth it IMO

 

.............. sooner or later these clubs paying ridiculous wages will just collapse

My thoughts exactly.

 

Well done for your first post.

We know have a wage cap and I think that is the way to go, because of this we are actually getting player's who want to play for the club rather than the money.

 

Im an accountant.....I know but I am not boring so this article does interest me..so heres the thing.

All the top clubs are speculating to accumulate... and spending a lot of money to try and get into the champions league where the big money is.

The problem is most clubs will not get there and as a direct result will end up like us. We gambled prior to Cashley and look what happened and the same will happen to these other clubs. Apart from Man City and Chelsea.

The thing is the money is going out of the game to the players in wages and thus the lower league clubs are struggling.

The massive amount of money that is being spent cannot carry on and I believe it is a huge issue for the future.

Our boss is doing the RIGHT thing in sorting the finances out so that we can continue and I think most toon fans will agree we would take financial security over Administration any day. It is only a matter of time before a BIG club goes pop.

 

@Geordieginola - I agree and obviously ultimately we have had our fingers burnt playing high risk with finances and I wouldn't want to do that again.

Playing devil's advocate though - we are following a similar sort of model to Arsenal. Now I wouldn't begrudge the success that they have had over the past few years, but let's be honest - there hasn't been a trophy for quite a while now. So it is possible to use the model Ashley's adopting and still see a lot of success? Is it only a matter of time before Arsenal get a trophy or are they always going to fall short thanks to their business model?

 

Thanks

 

Good article MrsF

Another report on this subject sums it up pretty well. It would appear that a number of the clubs struggling towards the bottom of the premier league table have taken measures to reduce their wage bill and a number of the richest (Man U/Arsenal) have such big incomes that whilst their wage bills are higher than most they are as a percentage of turnover actually quite low and sustainable. The teams who are most at risk are the mid table teams who are trying to improve their position (speculating as Geordieginola suggests) and those who have spent crazily in recent years to buy success (Man City/Chelsea).

Newcastle are mentioned specifically but I am pretty sure that we are one of the few teams in the league who are making great strides towards a sustainable wage structure yet showing signs of advancing as a team. A happy medium which is pretty impressive to be honest and which I am very pleased with. When the FIFA regulations fully kick in I hope/expect that we will be in a good position to exploit the financial weakness of other teams.

As a note Man City spend 107% of their income on wages and therefore will have to find a way of bringing that down (or of increasing their income significantly).

Interesting times ahead me thinks!

 

One thing about the Arsenal model is that they have yet to realise their full earning potential. They have developed the old Highbury site as a very large residential development and have yet (as I understand it) not reached full income capacity from that. In addition they are diverting alot of their current income towards paying off the cost of building the Emirates as soon as possible and when this has been fully repayed will see a very large increase in income available to spend on wages and signings. Although I don't know exactly when they expect to clear this debt I think we are talking a matter of a few years. When that happens they will have a significant advantage over many of the clubs they are directly competing with and will be a very strong financial force in this league for the foreseeable future.

 

Didn't know Arsenal were also property developers! Shrewd.

Agree totally with your other points...and I guess the same would apply to NUFC when we have paid back a chunk of our loan from Ashley...

 

The thing with Arsenal is, they have the model they are working to but havn't been bringing many players in as well.
You need to get the balance of youth and experience in at the right price and work on the youth academy.
I don't remember Arsenal being very active in the last few transfer windows and I think that is why they've stuttered in the last few seasons.

 

Unfortunately I don't think we will benefit in the same way

Ashley's loans to us were to prop the club up financially by paying off other debts and to basically keep the club operating by making up the negative balance in our turnover (i.e. sustaining our annual financial losses). But the loans are interest free and any money we put into paying them off reduces the income we have to put towards wages and signings but won't actually save us any money or make us more profitable. It would only serve to make the club more attractive to outside buyers.

Arsenal though will by clearing the debt on the Emirates and maximising their income from the property development be increasing their income significantly.

Saying that I still think we are going to be in a better position than many but unfortunately nowhere near as good as the Gunners.

 

Here is a link to the Highbury site if you are interested in seeing just how shrewd they have been ... damn them!

http://www.highburysquare.com/

 

We wont ever be like the big 4 I am afraid under Ashley due to the financial prudence and the other so called top teams outside the top 4 trying to buy success. Arsenals model was of the back of successful seasons and trophies whereas ours is not. They are a Big team in europe still and I honestly think they have the best squad of young players to go forward.

The problem Arsenal have had is they are doing it the right way but it is not necessarily the way in which will win you trophies.

Manu have dominated the last 10 years off the back of the so called dream team (the youth team provided 8 top world class players) at no cost and thus they could build around this. This will never happen again!

 

Look at Middlesbrough.

You have my answer right there.

 

Yes - thanks!

 

Great 1st article.

I, for one, am relieved that Ashley has put a sensible wage structure in place. Under this structure we can still pay players more than they would earn in many foreign leagues and this is why our scouts have spent so much time in France.

The Arsenal model of buying promising young talent and developing them into Premiership standard players makes total sense but I would still like to see more investment in developing local and home grown talent.

 

Definitely with you on that. I think the greatest feeling (bar winning a trophy) is seeing a local lad wearing the black and white and playing well for the club. I'd rather see one of our own score in that shirt than some foreign mercenary we had to pay a fortune to sign and is that I suppose that made the Carroll betrayal hurt so much.

I'm also with you in appreciating the steps Ashley has taken with our finances and really hope that he can develop the rest of his brain so that he makes equally good decisions regarding the other elements of the club. That might be a bit too optimistic though!