SportsFinanceInsights2024

FootballInvestmentSurvey

SportsFinanceInsights2024

FootballInvestmentSurvey

WelcometotheSportsFinanceInsights2024.Fortwo

Contents

decades,wehavecontributedtothefootballindustryby

publishingtheFootballFinanceDirectorsSurvey,layeringour

ownfinancialinsightsoverthedataandopinionsoffinancial

AwordfromIanClayden

3

Keymetricsandheadlines

4

Financialhealthofclubs

5

Whatareclubs’investmentpriorities?

9

Howareclubsaffordingthisincreasedlevelofspending?

15

Theowners’dilemma:fundinglossesandshiftingstrategies

17

HowdoesallthisfitinwithFinancialFairPlay?

20

Andwhataboutexpandedgovernancerequirements?

21

leadersfromclubsacrossthedomesticprofessionalfootball

leagues.Recognisingthatthewayweallconsumefinancial

informationandthoughtleadershiphaschanged,wewillnow

focusonshorter,morefrequent,andmoretopicalinsights

throughouttheyear.Withnofixedagenda,our(annualcampaign’willgiveusthefreedomtocommenton

liveandemergingissuesacrossfootballandthewiderProfessionalSportsSector.We

hopeyouenjoyourfirstSportsFinance

Insight,kickingoffwiththeFootballInvestmentSurvey.

2

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS2024

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20243

Theowners’dilemma:funding

lossesandshiftingstrategies

Howareclubsaffordingthis

increasedlevelofspending?

Andwhataboutexpanded

governancerequirements?

Howdoesallthisfitin

withFinancialFairPlay?

Whatareclubs’

investmentpriorities?

Keymetrics

andheadlines

Financial

healthofclubs

Awordfrom

IanClayden

AwordfromIanClayden,

Partner,HeadofProfessionalSports,BDO

Itisnosurprisethatrecentheadlinesaround

men’sfootballhavebeenaboutfinancialmatters!ManchesterUnitedannouncedrecordrevenues,

onlytobeswiftlyoutdonebyManchesterCity;

EvertonandNottinghamForestweredockedpointsforbreachesofthePremierLeague’sProfitability

&Sustainability(P&S)Rules,andallthewhile

theEnglishPremierLeague(EPL)brokeitsown

UKrecordbynegotiatinganewdomesticTVrightsdeal,withSkyandTNTSportspayingacombined￡6.7bnfor2025-28:anincreaseonthecurrent

￡4.9bn3-yeardeal.

Bywayofcontrast,inthewomen’sgamethe

recentfocushasbeenoncontrolandgovernance.ClubsintheWomen’sSuperLeagueandWomen’sChampionshiphavevotedtoformaclub-owned

competitionfromthe2024/25season,takingcontrolfromtheFA,andtheUKgovernmenthasendorsedtherecommendationsoftheindependentreviewintothedomesticwomen’sgameledbyKarenCarney.Amidstallofthis,wetakeourannualdeepdiveintotheopportunitiesandchallengesthatclubswithindifferentleaguesface,andtakealookathowtheiroperatingmodelsmightbeevolvingtofittheeverchangingfinancialandregulatorylandscape.

Inlightofrecord-breakingrevenues,wehavehadtheopportunitytoquestionwhenandifclubswilltransitionfromprincipallyloss-makingventurestoprofitmakingbusinesses.Infact,withsustainabilitybeingsuchanoverpoweringmantra,wequestionwhetheractualaccountingprofitsareevenrelevant.Wealsotakesometimetoshareourinsightson

whatnowappearstobethreedistinctoperatingmodelsthroughoutthefootballhierarchy:

Indoingso,forthefirsttime,wehavetakenacloserlookata“wages-to-points”leaguetablewhereweseeBrentford,BrightonandBournemouthtoppingthe2023table.Welookforwardtohavingthisasarollingdatasetforfuturereferenceasweobservehoweasy,orotherwise,itistotransitionbetweenmodelsfollowingpromotionorrelegation,andhowwellunderstoodthesemodelsarebythosemakinginvestmentdecisions.

Thequesttoremaincompetitivealsoplaysakeyroleindecisionsrelatedtoinfrastructureinvestment.Inordernottodivertfundsawayfromon-the-pitchactivities,infrastructurespendneedstocomefromneworexistinginvestors(shareholders)ratherthanfromoperatingcashflows.

Thiscreatesglobalinvestmentopportunitieswhereweareseeingincreasinglycreativeanddiverse

structuresputinplace.

Big6(ManchesterUnited,OtherEPLManchesterCity,Liverpool,

Chelsea,Arsenal,and

TottenhamHotspur)

FootballLeague

Championship(FLC)andbelow

Maximisespendingon

playersinsearchofthose

all-importantmarginalgainsatthehighestlevel.

Optimiseplayertradingto

outperformthecompetitioningettingthemostbangfortheirbuck(andmorerecentlyinmostcases,offsettradinglosses).

UtiliseallavailablelossesandplayertradingopportunitiesinagambletobreakthroughtotherichesoftheEPL.

Keepingwiththethemeofheadlinegrabbing,

notonlyhaveweconcludedthatthemid-tierclubsaresettingthestandardforreturnoninvestmentinplayerwages,butweresolutelyconcludethatEPLplayersarenot,Irepeat,NOT,over-paid.Atleastnotbasedonclubrevenuemetrics!Thesameis

notsaidofFLCplayers.So,asingleplayerbreakingthe￡1maweekwagethreshold,appearsnotonlyinevitable,butcommercial(forthefewclubsthatcanaffordit).

Playerspendcomesintwopartsofcourse:wages

andtransfers.AndwhilstwagesintheEPLare

proportionatetoclubrevenues,transferfeesarenowsetapart.ThetransfermarkethasbecomedistortedbythelevelsoftransferfeesbeingpaidbyEPLclubs.Whilstmuchofthisisaiszero-sum-gamewithin

theEPLitself,whereplayersareselectedfromlowerleaguesthiscreatesaverywelcomeredistributionofwealth,thecorrectionofwhichwouldactuallybedamagingtoEnglishFootballLeague(EFL)clubs.

Whenitcomestoownership,Inotedabovethat

clubsarenotrunforprofit,butthisdoesnotmeanthattheyarenotrunwithaviewtoachievinga

significantreturn.Institutionalinvestorsrepresentachallengetosuperrich,profile-buildingownershipinthisregard,astheyareallaboutachievinga

returnontheirinvestment.Theyhavealong-termplanandanexitstrategy.

Institutionalinvestors,particularlyfromtheUS,havetwochancestoachievetheirreturn,dependingonthenatureoftheirtargetclub:

1.Promotionupthefootballpyramid

(ideallytotheEPL)thenexit.The‘hold’forsubsequent‘commercialenhancement’strategyistoolongtermgiven:

i.thealreadyexpendedinvestmentperiodtoachievepromotion;and

ii.theneedtoleavesomethingonthetableforprospectivebuyers(theclassicprivateequity(PE)model).

WewouldnotexpectthePEinvestortofallforthetemptationsthatoftentraptheprofilebuildinginvestor.

2.Commercialenhancementofestablished

EPLclubsthenexit.Butthequestionhere

iswhotheinvestorsellstooncecommercial

optimisationisachieved.Investorsmayneedtoseekstrategicminorityinvestmentsorsellbacktothesuperrichprofilebuilder.

Muchofthefindingsofthisreportpointtothe

poweranddominanceofthe‘elite’clubs,theBig6.However,therearemorethanenoughreference

pointstomarketdynamicsthatdispelthemyth

thatthisdominanceisimpenetrable.Thereare

numerouschallengerclubslookingtostepupand,withanewbreedofpotentialbackersbehindthem,therewillbemoretofollow.

Mediarightsfeeshavegoneup,transferfeeswillgoup,wageswillgoup(subjecttospendingcaps),thelawofdiminishingreturnswillprevail,andtheEPLandtheFLCwillbecomemorecompetitive

withmoreclubsvyingforthetopspots.Maybe!

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20244

Theowners’dilemma:funding

lossesandshiftingstrategies

Howareclubsaffordingthis

increasedlevelofspending?

Andwhataboutexpanded

governancerequirements?

Howdoesallthisfitin

withFinancialFairPlay?

Whatareclubs’

investmentpriorities?

Keymetrics

andheadlines

Financial

healthofclubs

Awordfrom

IanClayden

Keymetricsandheadlines

59%

ofclubswesurveyedhavebeensubjecttoinformalorformalinvestment(M&A)inquiriesinthelastyear.

Howdoesplayerspendstrategydifferacrosstheleagues?

Whatarethekeyinvestmentprioritiesforclubs?1

Big6

Maximisespendingonplayers

withinallowablelossparameters

OtherEPL

Optimise(ratherthanmaximise)playertradingprincipallytobeascompetitiveaspossible

FLC,FL1

&FL2

Utiliseallowablelossesand

haveanetgainonplayertradingstrategytoinvestinastrongsquad

Thebalancingact

2

Playerspend

3

Commercial/otherrealestatedevelopment

betweentypeofinvestmentandcompetitiveness.

Investorfunding

Academy

development/expansion

Reservesandloans

Theowners’dilemma:funding

lossesandshiftingstrategies

Howareclubsaffordingthis

increasedlevelofspending?

Andwhataboutexpanded

governancerequirements?

Howdoesallthisfitin

withFinancialFairPlay?

Whatareclubs’

investmentpriorities?

Keymetrics

andheadlines

Financial

healthofclubs

Awordfrom

IanClayden

Financialhealthofclubs

Profitabilityversusfinancialhealth

Basedonourlatestsurvey,theoverall

financialhealthofclubshasimprovedslightly,withfewerrespondentshavingfinances“inneedofattention”,downto18%from30%inour

2022survey.However,almostone-fifthofclubssurveyedhavingfinancesinneedofattention

isstillhigherthanwewouldliketosee.

Thatsaid,lookingclosely,therearesome

surprisingresultswithineachleague.Itis

particularlyinterestingtoseeareductionin

“veryhealthy”EPLclubs(downfrom71%

to50%),giventherelativefinancialresources

availabletothem.However,thelargest,and

mostsurprising,year-on-yearchangehasbeenareductioninFLCclubsreportingtheirfinancesasbeing“inneedofattention”,reducingto11%from55%lastyear,despitethealarminglevelofFY23lossesandawidespreadexpectationthatlosseswillincreaseinFY24-seeopposite.

Howwouldyourateyourclub’scurrentfinancialposition?

Source:BDOSurveyResults

VeryhealthyCouldbebetterbutnotbadInneedofattention

InourlastFootballFinance2.0

2021

2022

2023

report,wenotedhowCOVID-19hadexacerbatedthedivergenceinfinancialhealthbetweenEPLclubfinancesandtherestofthefootballpyramid.Fastforward

14%

18%

18%

21%

22%

29%

32%

33%

33%

37%

50%

27%

43%

71%

43%

55%

50%

33%

42%

50%

tothisyear,andthereisstillanobviousgulfbetweentheEPLandthelowerleaguesbothintermsoffinancialstabilityandgrowthopportunities.FLCandFootballLeague1andFootballLeague2(FL1&FL2)clubswhoperceive

57%

56%

theirfinancesas“healthy”are

55%

50%

43%

36%

notnecessarilytradingprofitably,andthereisanincreasing

30%

29%

28%

27%

25%

18%

14%

11%

divergencebetweenthelargest(socalled“Big6”)EPLclubs

EPLFLCFL1&FL2AllClubsEPLFLCFL1&FL2AllClubsEPLFLCFL1&FL2AllClubs

andtherestoftheEPL.

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20245

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20246

Awordfrom

IanClayden

Keymetrics

andheadlines

Financial

healthofclubs

Whatareclubs’

investmentpriorities?

Howareclubsaffordingthis

increasedlevelofspending?

Theowners’dilemma:funding

lossesandshiftingstrategies

Howdoesallthisfitin

withFinancialFairPlay?

Andwhataboutexpanded

governancerequirements?

Financialhealthofclubs

EPL,FLCandFL1&FL2

Howdoyouexpectyourprofitability

Whenwecomparedclubs’viewsonfinancialhealthwith

Profitbeforetax:>￡50m

Profitbeforetax:￡10m-￡50m

Profitbeforetax:￡2m-￡10m

Profitbeforetax:￡0m-￡2m

Lossbeforetax:￡0m-￡2m

Lossbeforetax:￡2m-￡10m

5%

5%

5%

5%

14%

29%

25%

2022/23profitbeforetax

5%

10%

20%

Lossbeforetax:￡10m-￡50m

tochangein2023/24versus2022/23?

theirprofitabilityforFY22/23andtheirexpectationsforthe

currentyear,itisclearthatthedefinitionof“healthy”isopentoclubs’owninterpretations.IntheEPL,thenumberofprofitableclubsin2022/23asperfinancialstatements(profitbeforetax)was3(vs5in2021/22)despite50%ofsurveyresponsesfor

theEPLreportingtheyare“veryhealthy”.Wenotethattradinglossesdonotnecessarilyequatetopoorhealthintheeyes

ofFLCandFL1&FL2clubseither.89%ofsurveyedFLCclubs

describedthemselvesashavingfinancesthatareeither“could

bebetter,butnotbad”or“veryhealthy”,albeitthevastmajorityofFLCclubsincurredsignificantlossesin2022/23-65%of

clubsreportedalossbeforetaxofbetween￡10mand￡50min

45%

60%

14%

14%

MoreprofitableAroundthesameLessprofitable

Lossbeforetax:>￡50m

55%

65%

57%

EPLFLCFL1&FL2

expected*

*BasedonFL1&FL2clubexpectationspersurveyresponsesSource:Clubfinancialstatements-2022/23seasonand

BDOSurveyResults

20%

20%

33%

22%

72%

their2022/23annualreport.71%ofFL1&FL2clubssurveyed

expectedtoreportalossbeforetaxin2022/23,withincreased

lossesexpectednextyear,whilst57%ofFL1&FL2clubssurveyeddescribedthemselvesashavingfinancesthatareeither“couldbebetter,butnotbad”or“veryhealthy”.Clearly,forfootballclubs,financialhealthisassessedonmorethanjustbottom-lineresults.

Theloss-makingmodelseenacrossthefootballpyramidis

notanewtrend,andwhywoulditbegiventhefinancialrewardsassociatedwithEPLpromotion/retentionandaP&Sstructurethatallowslosses(withinpre-definedparameters)?Arguably,

beingprofitableiscompetitivelydisadvantageous.

Acrossthespectrum,clubslooktomaximisethequalityoftheirplayingsquadwhilstmanagingfinancialperformanceandcash

flowstostaywithinP&Slimits.Clubswhogivetheirfirstteam

managerthebestopportunities,whilesuccessfullybalancingtheiruseofshareholderfunding,debtfactoringandplayertrading,

withoutexposingtheclub’sfinancestounduerisk,mayberighttoconsiderthemselves”healthy”,despitetheiraccountinglosses.Thesetopicsareconsideredinmoredetaillater.

EPLFLCFL1&FL2

Source:BDOSurveyResults

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20247

ThedisparityinrevenueandprofitpotentialbetweentheEPLandlowerleaguesisbothinevitableandpartoffootball’snaturalequilibrium.However,thisdoesnotmeanthatthelevelofdisparitywillnotcontinuetobeapointofcontention.Infact,thereisan

increasingdivergencebetweenthesocalledBig6EPLclubs(comprisingManchesterUnited,Manchester

City,Liverpool,Chelsea,Arsenal,andTottenhamHotspur)andtherestoftheEPL.

Theanalysisoppositeshowsforthe2022/23

season(beingthelatestpubliclyavailablestatutoryaccounts)theminimum,maximumandaveragerevenueandprofitbeforetaxfortheBig6,rest

ofEPL,andFLC,includingonlyclubsthatwereintherespectiveleaguesthatyear.

Theminimum2022/23revenuefortheBig6

was￡467m,whichwasmorethan￡210mhigherthanthenexthighestclub.AverageBig6revenue(￡608m)wasamassive￡423mmorethanthe

averagefortherestoftheEPL(￡185m).

Thechartalsohighlightsthedifferenceinscale

andbreadthofBig6revenues,astheybenefitfromglobalfanengagementstrategies,additionalincomestreams,lucrativecommercialpartnershipsand

multi-club/academyinvestmentmodels,whichgivethemasignificantfinancialcompetitiveadvantage.

Theowners’dilemma:funding

lossesandshiftingstrategies

Howareclubsaffordingthis

increasedlevelofspending?

Andwhataboutexpanded

governancerequirements?

Howdoesallthisfitin

withFinancialFairPlay?

Whatareclubs’

investmentpriorities?

Keymetrics

andheadlines

Financial

healthofclubs

Awordfrom

IanClayden

Financialhealthofclubs

Revenueandprofitbeforetax(min,maxandaverage):Big6vsRestofEPLvsFLCSource:Clubfinancialstatements2022/23season

Theincreasinggulfbetween

theBig6andtherestoftheEPL

￡900m

￡800m

￡700m

￡600m

￡500m

￡400m

￡300m

￡200m

￡100m

-

(￡100m)

(￡200m)

Big6

RestofEPLFLC

Averagerevenuemixfor22/23season

￡700m

￡600m

Broadcasting

￡500m

￡400m

￡300m

CommercialMatchday

￡200mOther

￡100m

-

Big6RestofEPL

RevenueProfitRevenueProfitRevenueProfit

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20248

Awordfrom

IanClayden

Keymetrics

andheadlines

Financial

healthofclubs

Whatareclubs’

investmentpriorities?

Howareclubsaffordingthis

increasedlevelofspending?

Theowners’dilemma:funding

lossesandshiftingstrategies

Howdoesallthisfitin

withFinancialFairPlay?

Andwhataboutexpanded

governancerequirements?

Financialhealthofclubs

Mostofthetime,thistranslatesintoon-field

competitivenessduetothesumstheyareabletoconsistentlyandsustainablyinvestincoaching

staffandplayers(investmentprioritiesare

discussedinthefollowingsection).Thiscreatesavirtuouscircleasbetteron-fieldperformance

allowsforfurtherrevenuegrowth,suchashigherEPLmeritdistributions(basedonleagueposition)andChampionsLeaguequalification/income.

Anotherkeytakeawayfromtheabovechartis

thatwhilstthereisasignificantdivergencein

revenuesbetweenthedifferentgroupsofclubs,thereisamuchgreatersimilarityintheprofit

situation.Allclubsareseekingtomaxouttheir

allowablelossesinordertooptimisetheirsquads.

AveragerevenueintheFLCgenerallylags

morethan￡150mbehindnon-Big6EPLclubs.

Theobviousdifferenceliesincontracted

broadcasting(mediarights)distributions,

butthisiscompoundedbyFLCclubstypically

notbeingabletoattractthescaleandbreadthofcommercialrevenuesofeventhebottomhalfoftheirtier1counterparts.SimpleEPLratchetsinsponsorshipcontractsmakethisinevitable.

Clubsindifferentpositions,andwithdifferentrevenuegeneratingcapacity,areforcedto

operatedifferentbusinessmodels.Thesecanbebroadlysummarisedasfollows:

PlayerSpendStrategy

Big6Maximisespendingonplayers

withinallowablelossparameters.

Goal

TowinEPLand/orqualifyforEurope,toobtainUEFArevenuesandmaximisedomesticand

internationalcommercialrevenues.

Avoidrelegationorsteadilyimproveleaguepositionwithaviewtosustainability.

Tocompeteforpromotion/avoidrelegation.

OtherEPLOptimise(ratherthanmaximise)

playertradingprincipallytobeascompetitiveaspossible.

FLCUtiliseallowablelossesandhave

anetgainonplayertradingstrategytoinvestinastrongsquad.

Awordfrom

IanClayden

Keymetrics

andheadlines

Whatareclubs’

investmentpriorities?

Howareclubsaffordingthis

increasedlevelofspending?

Howdoesallthisfitin

withFinancialFairPlay?

Andwhataboutexpanded

governancerequirements?

Financial

healthofclubs

Theowners’dilemma:funding

lossesandshiftingstrategies

Whatareclubs’investmentpriorities?

Thecontinuingdivergenceofwealthrearsitsheadinthecontrastinginvestmentprioritiesthroughoutthedomesticfootballpyramid,withthedesiretoreachormaintaintherichesofEPLmembershiptheprimarydriver.

Thevaryinginvestmentprioritiesarenotjustdefinedbythefinancialhealthofaclub,butalsobyitsownershipmodel,i.e.theprioritiesoftheowners.Basedonthelatestsurveyresponses,itisclearthattheallureoftheEPL,andsuccesswithintheEPLandwithinEurope,hasmeantplayerspend(wagesandtransfers)isthetoppriorityforallEPLandmostFLCclubs,whoseeitasthekeydeterminantofEPLpromotionand/orretention.

Source:BDOSurveyResults

Investmentpriorities(top3)

Playerspend

Commercialandother

realestatedevelopment

Investmentintoothersports

(e.g.Americanfootball,basketball,eSports)StrategicallianceswithoverseasClubs

Investmentintoothercommercialventures

(e.g.hotels)

Stadiumexpansion

Academydevelopment/expansionInvestmentintowomen’sfootball

100%

100%

80%

78%

67%

60%

60%

56%

50%

50%

50%

50%

40%

40%40%

33%

33%33%

22%11%

FLC

20%

20%20%20%

0%0%

EPL

17%17%17%

0%

FL1&FL2

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS20249

FOOTBALLINVESTMENTSURVEY|SPORTSFINANCEINSIGHTS202410

AwordfromKeymetrics

FinancialWhatareclubs’HowareclubsaffordingthisTheowners’dilemma:funding

Howdoesallthisfitin

Andwhataboutexpanded

IanClaydenandheadlines

healthofclubsinvestmentpriorities?increasedlevelofspending?lossesandshiftingstrategies

withFinancialFairPlay?

governancerequirements?

Whatareclubs’

investment

priorities?

Playertransferspend

Inrecenttimeswehaveseenan

unprecedentedlevelofplayertransferspendbydomesticfootballclubs.Thisisdespite,

only29%ofEPLclubsand9%ofFLCclubs

expectingtheirtransferbudgetfor2022/23toincrease(asperourlatestsurvey),alongsideaconsensusviewthatliquidityinthetransfermarketwasatbestunchangedorworsening.

Themostrecentrespondents(whocompleted

IntheFLC,expenditureincreasedby40%from2021/22to2022/23,and102%from2022/23to2023/24.However,whilstFLCclubtransferexpenditurehasincreasedyear-on-year,theleagueasawhole,and

themajorityofclubswithin,havereceivedanetcashinflowfromplayertrading.Alotofthisisdrivenbyrecentlyrelegatedteamssellingexpensiveplayers.

EPLtransferwindowtotalspendSource:Transfermarkt

SeasonSummer*Winter*Total*

oursurveyaheadoftheSummer2023transferwindow)couldbeforgivenforunderestimating

theimpactofSaudiinvestmentinfootball(whichwediscusslater)and/orthelev