January 11, 2017
Farhad Moshiri talked at the General Meeting about a window of opportunity. I believe he’s talking about getting success on the pitch – that is the quickest route to growth in the business of Everton and funding the future stadium
I posted a couple of days ago that Manchester United will earn more than £2 billion more than Everton over the next 5 years if our relative positions are maintained – a truly staggering figure. Combined the 6 teams above us will earn between £6.5 bn and £8bn (depending upon assumptions used) more than ourselves if we were not to break the glass ceiling between us.
When you talk to almost any Blue these days and the topic will not only be about what’s happening on the pitch but also what’s happening off the pitch as we strive to catch up on the revenue stagnation of the recent past.
New sponsorship deals, the new stadium at Bramley Dock, new global partnerships better commercial arrangements with shirt manufacturers and distributors are all correctly seen as essential to the future development of our club.
However, I’d like to cast an eye on what’s happening on the pitch not only because I want us to be competitive and winning trophies, but also the impact that a successful team has on the club’s finances.
Clearly to improve on the pitch we need funds, we need capital and we need increased income to remain compliant as our wage bill rises. We also need capital for our stadium and other development projects – I’ll touch on this later.
The key to our development is regular qualification in European football particularly the Champions League – that increases revenues from both prize and broadcasting money but also sponsorship revenues.
The way to achieve that is to invest in our playing squad – it is afterall our results on the pitch which enables qualification in the Champions League and Europa League.
Qualification for European places significantly increases Premier League prize monies, the difference between 1st and 10th place in 2014 was £22 million, in 2017 it increases to near £35 million. However even that is dwarfed by the impact of regular European competition.
Why is it so important?
Performing in Europe brings three major revenue benefits to competing clubs, tv revenues, sponsorship revenues and prize money. Whilst the prize money is not insignificant, the two key elements are the TV revenues and the sponsorship opportunities the exposure brings.
Revenues (prize & TV) earned from European competition 2015/16
|Club||Competition/round reached||Total prize money|
|Manchester City||Champions League S/F||£73.0 million|
|Chelsea||Champions League R16||£60.0 million|
|Arsenal||Champions League R16||£46.4 million|
|Manchester United||Champions League Group||£33.1 million|
|Liverpool||Europa League Final||£32.9 million|
|Tottenham Hotspur||Europa League R16||£18.2 million|
Broadcasting revenues as with the Premier League are a huge part of the equation, and whilst growth in broadcasting revenues alone does not help with the issue of income rising in line with wages, clearly the additional income can be used for funding the stadium development and player acquisitions.
In 2015/16 broadcasting revenues distributed to European competitors increased by 38% from just over £1.1 billion previously to £1.542 billion, a long way behind the Premier League but significant nevertheless.
Earnings from the broadcasting revenues from European competitions for the last 5 years are as follows:
|Club||Aggregate European broadcasting revenues|
|Manchester City||£192 million|
|Manchester United||£137 million|
|Tottenham Hotspur||£36 million|
Playing in European competitions enormously increases the potential for commercial and sponsorship revenues, and importantly revenue growth here can be used to fund wage growth. Although we’ve received the welcome news of the USM sponsorship package plus in-named partner for shirt sponsorship, we are still uncompetitive compared to the regular European qualifiers:
Shirt Sponsorship deals
|Club||Annual revenues||End date of existing contract|
|Manchester United||£53 million||2021|
|Manchester City||£20 million||2021|
|Tottenham Hotspur||£16 million||2019|
Therefore the scale of the revenue opportunities from on the pitch success which will fund our development on and off the pitch are very apparent.
Without European competition the revenue growth opportunities are much less significant, even with a new stadium on the horizon.
Based on the deal with USM commercial revenues before entering our new stadium will at best provide another £13-18 million annually from sleeve sponsorship, newly negotiated shirt manufacturing and distribution deal and possible Goodison Park namings rights deal.
The stadium is going to cost between £350 million and £500 million – potentially it will be the most expensive stadium built in Britain other than Wembley, certainly the most expensive club stadium in Britain and possibly Europe. Whilst it will add to our revenue streams in future years it still has to be funded. As I stated earlier, the best way of funding it will be success on the pitch.
We need increases in income in the short term to fund the growth in wages required to become a success and that will be achieved by improved commercial deals.
However, the thrilling thing for Evertonians is that success on the pitch and European qualification is the quickest route to major increases in income to fund the stadium etc.
It’s reasonable therefore, (almost unthinkable in recent terms for Evertonians) to see continued investment in the playing squad, not only this window which has started wonderfully, but next summer as well.
With a competitive squad we can gain European qualification (and success in the future we would hope). It is a successful football team that becomes the enabler for the stadium and future developments.
Interesting and exciting times ahead, but crucially dependent upon success on the pitch, and that can only be achieved by continued investment in the playing squad.