Get set for another football financial record

The football season is almost over – which means eye-popping financial deals are about to get under way. But is the flood of money set to dry up? Simon Wilson reports.


Will Manchester United or Arsenal get out the chequebook this summer?
(Image credit: This content is subject to copyright.)

The football season is almost over which means eye-popping financial deals in this big-money sport are about to get under way. But is the flood of money set to dry up? Simon Wilson reports.

What happened?

This Sunday, the Premier League the top flight of English football will finish the 2017-18 season. Manchester City, who have already won the championship, are still on course to break three major records: most goals, most wins and most points in a season. But football fans hoping to see even more records broken probably won't have to wait until next season. Just four days after Sunday's final match, the Premier League transfer window the period in which clubs can sign foreign players will open, followed over the next couple of weeks by the transfer windows of most of the other major European leagues. And if the trend of recent years is maintained, at some point this summer we're almost certain to see a transfer that beats the current record for the most expensive deal: the €222m (£194m) that Paris St Germain paid to buy Brazilian forward Neymar from Barcelona in 2017. That deal more than doubled the €105m that Manchester United paid Juventus for French midfielder Paul Pogba a year earlier. Now Neymar is already being touted to break his own record this summer with a €260m move to Barcelona's great rivals Real Madrid.

How did transfer deals get so big?

It may have been helped by the emergence of a small group of "super-agents" who represent many of the top stars: five of the top agents have a stable of players with a combined value of £2bn, says The Guardian. The influence and contacts these agents have assembled puts them in a very strong position to broker huge deals something that has benefited them financially as much as anybody else in the game. For example, super-agent Mino Raiola, who oversaw Pogba's move, reportedly received €49m for his part in brokering the deal €27m from Juventus and €19.4m from Manchester United, plus a further €2.6m from United for negotiating Pogba's salary. But obviously the huge increase in the amount of money sloshing around in football has been crucial: without the readies to pay for these deals, they couldn't happen. That money has come partly from the sale of TV rights which began to turn football into a big-money game in the 1990s and also from the arrival of deep-pocketed owners who now own most of the major clubs.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Is the price of those rights still going up?

There are some signs that the rights market may at least be taking a breather. After 25 years of astonishing growth, the price appears to have peaked certainly in terms of domestic rights. In 1991, the first big rights deal signed by the Premier League with Sky was worth £304m over five years, or about £61m a year. Meanwhile the current deal, signed in 2015 by English football's elite division with Sky and BT, covering the three years from 2016-19, is worth £5.14bn. That's £1.7bn a year 28 times as much as in 1991, and a 70% hike on the previous deal. However the 2018 domestic TV rights auction, concluded in February, failed to deliver any uplift. In fact, the price of the new three-year deal fell to £4.46bn (or £1.48bn a year).

Why has the price fallen?

Since the end of 2016 both Sky and BT have seen declines in subscriber numbers for their high-priced packages, according to analysts' estimates, with some customers choosing cheaper TV or streaming services such as Sky Now or Netflix. In addition, a cross-platform wholesaling agreement between BT and Sky last December, which involves showing each other's content from 2019, meant the competition was less intense. "There's clearly a ceiling that customers are willing to pay for watching Premier League games and subsequently what providers are willing to pay," Paolo Pescatore of research firm CCS told Reuters. It's a similar story in the other big European leagues.

Will the big clubs have to spend less?

Last season the Premier League clubs between them scored record revenues of £4.5bn, with operating profits doubling to a record £1bn. Overall revenues are likely to fall slightly over the next two years of the current deal cycle, reckons Chris Jones of Deloitte, before increasing again. However, he also expects the fall in value of domestic deals to be offset by international rights deals, especially in crucial growth markets in Asia. Nonetheless, there are signs the clubs are starting to spend a little less freely: the collective wage-to-revenue ratio fell last season to its lowest level, 55%, since 1997-98. That may reflect a "new breed" of foreign owners who are motivated more by return on investment than prestige and publicity, says Jones.

Will that affect the transfer market?

The English Premier League's position as Europe's richest and most profitable league (revenues from the UK and foreign TV rights total £8bn) means that English clubs are net acquirers of players. In 2016, 18 of the 20 clubs spent more on transfers than they made in sales, more than any other division in Europe. At the same time, 166 European clubs reported net transfer proceeds that made up more than 10% of revenues. For that reason, the British sports press is full of constant speculation about record-busting deals and talk of "tapping up", and the role played by "super-agents". The broader picture across Europe is that transfer fees are increasing (and agents are charging their clients a bit more), but that expenditure on talent remains within the means of most clubs, and that overall outlay on talent is falling. Analysts say part of the credit for this goes to Uefa, the governing body of European football, which introduced "financial fair play" rules in 2011 and 2013 aimed at ensuring clubs don't spend beyond their means.So there's nothing to say that we won't see another record transfer this year but it seems unlikely that fees can keep rising at this scorching pace indefinitely.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.