Premier League clubs posted record profits last season thanks to strong broadcast revenues and Financial Fair Play rules keeping wage inflation under control, Deloitte has announced.
According to analysis of the clubs’ accounts for the 2016-17 season by Deloitte’s Sports Business Group, the Premier League made a collective pre-tax profit of £500 million, two-and-a-half times the previous record of £200m from 2013-14.
The clubs also generated a record operating profit — total revenues minus wages and other business costs, apart from transfer fees — of £1 billion, double the figure for the previous season.
Wages did rise across the league by nine percent to a new record of £2.5bn but overall revenue rose 25 percent.
This means clubs spent only 23 percent of every additional £1 earned on wages — a degree of restraint that enabled all 20 clubs to make operating profits and 18 of 20 to record pre-tax profits.
Overall, the earnings-to-wages ratio, a key indicator of a company’s financial viability, fell from 63 percent to 55 percent, the lowest for nearly 20 years.
In a statement, Dan Jones, the head of Deloitte’s Sports Business Group, said the increase in revenue was a result of last season being the first of the current three-year domestic deal with BT and Sky, which is worth more than £5.1bn.
Jones said the increase in wages was “nowhere near the level of revenue growth” and this “reflects both the extent of [the Premier League’s] financial advantage over other leagues and the impact of domestic and European cost control measures”.
Deloitte also noted that the clubs have made collective pre-tax profits in three of the last four years — a trend it believes will continue despite the difficulties the league has had in selling the next set of domestic broadcast rights this year.
BT and Sky have so far bought 160 of the 200 games a season on offer from 2019-20 but that has brought in less than £4.5bn and the Premier League had to postpone plans to sell the remaining two packages of 20 games each as the bids were too low.
The league is expected to restart the auction process again after the season and it is still hoped that interest from the likes of Amazon could get the total domestic package for 2019-22 up to the current figure. But even if that is not achieved, the league’s growing international broadcast revenues should more than fill the deficit.
“Despite the lack of growth in domestic broadcast deals announced to date, we still expect to see overall revenue growth in the coming seasons, and if this is complemented with prudent cost control, we expect that pre-tax profits will be achieved for the foreseeable future,” said Jones.
As stated, the figures above do not include transfer costs, which for accounting purposes are spread over the length of a player’s contract, and the price of talent continues to rise. Deloitte, however, believes Premier League clubs can afford it.
Sports Business Group senior consultant Tim Bridge said: “We have already seen some clubs utilising their significant revenue increases, with a record £1.9bn spent on transfers in the 2017-18 season.
“We may again see similar levels of spending in the coming season, with the World Cup providing the perfect shop window for talent, but expenditure remains well within the means of clubs.”