How to Make a Premier League Team Profitable

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Shockwaves rippled through the footballing world this week after it was confirmed Newcastle Football Club has been bought out in a £300m deal, ending owner Mike Ashley’s 14-year tenure.

The takeover leaves Newcastle in the hands of the Saudi Arabia Public Investment Fund (PIF), which now owns 80% of the club. The other 20% is split evenly between Amanda Staveley and the Reuben brothers.

After years of frustration and disappointment, Newcastle fans are now full of hope for the future as their new owners are the wealthiest in the sport, worth an eye-watering £700bn. To put that into context, Manchester City previously had the wealthiest owners in the Premier League, who are worth £23bn.

That is not to say Newcastle is now worth £700bn, but they will now have a war chest which dwarfs all others, giving them the financial means to bring in big players.

This news might tempt you to check a major football betting site like 888Sport to see what Newcastle’s chances are of winning the Premier League this season, but their odds remain largely unchanged. City are still hot favourites to lift the trophy at odds of roughly 10/11.

So, besides a takeover from a wealthy consortium, how do Premier League clubs make their money? Their biggest revenue stream comes from television broadcast rights for the league.

The English top-flight is the most popular league in the world, in any sport; the viewing figures back this up. As such, the cost of domestic broadcast rights are astronomically high; they’re now in the billions.

Sky Sports and BT Sport are the two main contenders for this content, though Amazon Prime and the BBC also contribute.

Exactly half – 50% – of this revenue is split evenly between the 20 Premier League clubs. A further 25% is then distributed according to how many times a team is broadcast live (these are known as facility fees) and the final 25% is based on where a team places in the league (merit fees).

So, a team that is shown live on TV more often will receive a larger chunk of the facility fees, and likewise, a club that finishes high up in the league table will be rewarded with higher merit fees revenue.

This, in theory, should create more of a meritocracy and allow clubs to earn more money based on their performances. However, in reality, big clubs like Liverpool, Chelsea and Manchester United will always get more airtime and, thus, more money.

International broadcast rights revenue is split evenly between the 20 clubs, however, those that make it into the Champions League will get even more funds from TV rights. This is because of separate deals for this competition, and the amount they get largely depends on how far they go in the Champions League.

The TV rights battle only properly boomed over the past decade or so, leading to the staggering figures that are forked over by broadcasters nowadays, which only seem to keep growing.

A more traditional form of revenue for clubs are ticket sales. Clubs will charge each and every person that attends a game for their seat in the stadium, and these prices will vary depending on their position in the venue and the context of the game itself. A London derby between Chelsea and Tottenham will cost more to attend than a game against Aston Villa at Stamford Bridge.

Clubs will also make money from season ticket holders, who will pay a lump sum to have tickets in the same seats for every home game for their team.

On top of this, most Premier League clubs also offer exclusive hospitality and business packages to those willing to splash out on game day. These are particularly attractive to companies that want to impress clients or reward their colleagues. These packages cost a lot more than regular tickets and can be decent earners for Premier League clubs.

In a similar vein, major clubs provide tours of their stadiums outside of match days, charging people to look around and inside the venue to get a closer feel.

Aside from ticket sales, clubs will also be charging for food and drink inside the stadium, and these can generate huge sums of money when totalled up.

Then, of course, there is merchandise. Clubs will have their own shops and stalls on site that sell things like shirts and scarves, but they also have websites where fans can purchase these items as well.

Last, but certainly not least, are the shirt sponsor deals that Premier Clubs can command. Brands like Chevrolet and Yokohama pay tens of millions of pounds to have their logo featured prominently on the shirts of players, providing these teams with yet more income.

However, it isn’t all plain sailing, even for the world’s biggest football teams. Just look at FC Barcelona, who are facing the worst financial crisis in their long history. Their debt is over the £1bn mark, and they have a lot of work to do before they’re out of it.

A large part of their problems stem from player salaries which, according to club president Joan Laporta, represents 103% of their total income. Obviously, such a business model is not sustainable, particularly as they will have many other costs elsewhere.

Obviously, managing the finances of a major football club is no easy task and while it’s not possible to get a detailed look at exactly what has gone wrong at Barcelona, it’s clear that inflated salaries have been a huge issue.

Premier League clubs earn revenue from numerous streams, some of which aren’t wholly under their control but will still have a significant impact on their bottom line. Salaries will be their main outgoing so, as long as they can keep these in check, profits should come.

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