Could this be the most competitive Premier League season ever?
Chelsea, Man Utd*, Liverpool and Arsenal** can all theoretically compete for the title, while Man City, with more strengthening of defense and midfield, could also compete.
It is possible to argue that all of the top 4 with the exception of Chelsea will open the new season with weaker squads than last season, though even Chelsea have a new manager who has never previously coached in the EPL. Man Utd lost Ronaldo. Liverpool look like they will lose Alonso. Arsenal have lost Adebayor and Toure.
To be honest, though I feel that Man Utd and Liverpool will open the season with weaker squads, I dont buy the argument that Arsenal are weaker. Fabregas was injured for half of last season. Denilson is one of the most underrated midfielders around and has one full year of experience to his name. Yes, the defense needs improvement, but hopefully, for the sake of EPL competition, this happens.
*I wrote off Man Utd last week. This was silly of me. Man Utd have the best defense in the league and Alex Ferguson in charge. They can compete.
There is a growing possibility that Newcastle Utd will not be sold this summer, according to the Guardian. This will leave owner Mike Ashley in charge of the Championship club at least until January and possibly next summer.
Several consortiums remain interested in purchasing Newcastle for a figure close to the £100m asking price, but the club's financial liabilities are severely slowing the purchasing process. "The process is moving extremely slowly, there is still genuine hope of a sale but it's not looking imminent," said the source. "Newcastle comes with a lot of baggage."
Potential buyers are likely to complete a transaction only on the condition of being able to sell players and reduce the club's wage bill. It is rare for football clubs to be sold outside of a transfer window, and with Newcastle's £65m wage bill totaling more than expected 2009/10 revenue, it makes little sense for buyers to purchase the club without the opportunity to offload assets and wages.
A £100m purchase of Newcastle is an extremely risky investment to any observer. Revenue, which totaled approximately £100m last season - next season when the club is in the Championship will be considerably lower than in previous years, while it will be near impossible to keep costs below £70m. The only conclusion one can reach is that Newcastle over the next season will add to its already giant £100m debt and that debt risks spiraling out of control if the club cannot reenter the premier league very quickly.
Newcastle's biggest chunk of income stemmed from broadcasting, totaling around £40m last season. In comparison to last season, Championship Newcastle are due to lose around £25m from broadcasting revenue alone. Newcastle are expected to make around £15m, including parachute payments, in broadcasting revenue next season. Any potential buyer for this reason alone will be gambling on an immediate return to the premier league for the northern club.
If a purchase is completed soon, the new owners will immediately try to offload some of the expensive talent in the squad. Newcastle's wage bill totals £65m per year, or over 100% of expected revenue. New owners will want to do their best to cut this by at least 40%. As the Guardian comments, sales of the sellable big earners at Newcastle - Obafemi Martins, Joey Barton, Fabricio Coloccini, Sebastien Bassong - are only likely to be completed if the club continues to pay a portion of their former players' wages. When Leeds United sold Robbie Fowler to Manchester City Elland Road kept on meeting a sizeable percentage of his salary and a source close to Newcastle admitted: "The fear is we could end up in a worse financial mess than Leeds did."
Many big earners at Newcastle will simply be stuck on the club's books until their contracts expire. None of Alan Smith, Geremi, Jonas Gutierrez, Xisco, Ignacio Gonzalez or Jose Enrique are sellable, probably even if Newcastle offer to continue to pay a sizeable chunk of their salaries.
The challenge facing Newcastle is not simply that its debt will increase in the short term. If the club cannot return to the top tier within 2 years, premier league parachute payments - £11m per year - will cease. In consequence, revenue will decline even further, which will mean even more players will need to be sold or losses expanded. The club may be desperate to get players off of its books and have to continue to pay portions of player wages or simply buy out player contracts, leading to a further increase of the club's debt.
More unfortunate, even if the club can manage within several years to make profits - an extremely unlikely scenario given club wages, the need to finance debt and Championship competition to enter the premier league -these will be negligible relative to potential premier league club profits. Championship revenue totals nowhere near premier league revenue. This means that the club will not be earning enough income to payback any significant portion of its debt.
Simply put, Newcastle Utd need a 2-year return to the premier league or to be bought out by owners willing to take the "Mike Ashley" risk of massive short-term losses for a longterm payoff. In the meantime, the depressed form of Ashley faces the prospect of continuing to own this club and taking an even bigger future loss on his investment in the club.
Sources
Guardian, Newcastle Utd Sale
Telegraph, Newcastle: Who Will Stay and Who Will Leave?
Newcastle Utd Finances
Several consortiums remain interested in purchasing Newcastle for a figure close to the £100m asking price, but the club's financial liabilities are severely slowing the purchasing process. "The process is moving extremely slowly, there is still genuine hope of a sale but it's not looking imminent," said the source. "Newcastle comes with a lot of baggage."Potential buyers are likely to complete a transaction only on the condition of being able to sell players and reduce the club's wage bill. It is rare for football clubs to be sold outside of a transfer window, and with Newcastle's £65m wage bill totaling more than expected 2009/10 revenue, it makes little sense for buyers to purchase the club without the opportunity to offload assets and wages.
A £100m purchase of Newcastle is an extremely risky investment to any observer. Revenue, which totaled approximately £100m last season - next season when the club is in the Championship will be considerably lower than in previous years, while it will be near impossible to keep costs below £70m. The only conclusion one can reach is that Newcastle over the next season will add to its already giant £100m debt and that debt risks spiraling out of control if the club cannot reenter the premier league very quickly.
Newcastle's biggest chunk of income stemmed from broadcasting, totaling around £40m last season. In comparison to last season, Championship Newcastle are due to lose around £25m from broadcasting revenue alone. Newcastle are expected to make around £15m, including parachute payments, in broadcasting revenue next season. Any potential buyer for this reason alone will be gambling on an immediate return to the premier league for the northern club.
If a purchase is completed soon, the new owners will immediately try to offload some of the expensive talent in the squad. Newcastle's wage bill totals £65m per year, or over 100% of expected revenue. New owners will want to do their best to cut this by at least 40%. As the Guardian comments, sales of the sellable big earners at Newcastle - Obafemi Martins, Joey Barton, Fabricio Coloccini, Sebastien Bassong - are only likely to be completed if the club continues to pay a portion of their former players' wages. When Leeds United sold Robbie Fowler to Manchester City Elland Road kept on meeting a sizeable percentage of his salary and a source close to Newcastle admitted: "The fear is we could end up in a worse financial mess than Leeds did."
Many big earners at Newcastle will simply be stuck on the club's books until their contracts expire. None of Alan Smith, Geremi, Jonas Gutierrez, Xisco, Ignacio Gonzalez or Jose Enrique are sellable, probably even if Newcastle offer to continue to pay a sizeable chunk of their salaries.
The challenge facing Newcastle is not simply that its debt will increase in the short term. If the club cannot return to the top tier within 2 years, premier league parachute payments - £11m per year - will cease. In consequence, revenue will decline even further, which will mean even more players will need to be sold or losses expanded. The club may be desperate to get players off of its books and have to continue to pay portions of player wages or simply buy out player contracts, leading to a further increase of the club's debt.
More unfortunate, even if the club can manage within several years to make profits - an extremely unlikely scenario given club wages, the need to finance debt and Championship competition to enter the premier league -these will be negligible relative to potential premier league club profits. Championship revenue totals nowhere near premier league revenue. This means that the club will not be earning enough income to payback any significant portion of its debt.
Simply put, Newcastle Utd need a 2-year return to the premier league or to be bought out by owners willing to take the "Mike Ashley" risk of massive short-term losses for a longterm payoff. In the meantime, the depressed form of Ashley faces the prospect of continuing to own this club and taking an even bigger future loss on his investment in the club.
Sources
Guardian, Newcastle Utd Sale
Telegraph, Newcastle: Who Will Stay and Who Will Leave?
Newcastle Utd Finances
Manchester City will claim the helm as the biggest spenders in world football, according to a new study of football transfer trends by Plain Soccer. Real Madrid and Man Utd ranked second and third in the report, which ranks clubs by expected spending power during the coming seasons.
This is the most comprehensive analysis of football's rich list in terms of financial spending power that is available on the internet. It combines reports from Deloitte and Forbes* with club financial reports and examinations of all club transfer expenditure and revenue from the past 12 months. In doing so, we are able to draw forecasts of the spending we can expect from the world's biggest clubs over the course of the next few seasons.
Football fans and analysts can expect four major changes in the European football transfer market during the coming seasons. First, Man City will establish themselves as the biggest spenders in world football. Second, the depreciation in the value of the sterling as well as anxiety about debt levels will diminish the spending power of Premier League clubs relative to their European rivals. Third, AC Milan and Juventus will once again arise as major competitors in the world football transfer market. Fourth, as the number of teams able to compete for the top players in the world increases, the market value of top players will rise.
Click on image for full data chart
Manchester City are clearly the biggest climbers in football spending power rankings relative to twelve months ago. City's new owners will establish the club as the undisputed biggest spending club in the world game. Sheikh Mansour, who took control of the Eastlands club last year, has an estimated net worth of £33b and has pledged to turn the club into one of the biggest in the world.
In the past 12 months, the club has spent approximately £175m on new players (approx. £300m including salaries). This amount far supercedes club income. City's revenue is approx. £82m per year, while the club has only earned approx. £15m from players sold. In short, City's net transfer expenditure during the past 12 months is +£160m, twice the last recorded annual revenue of the club. To put this in context, besides Real Madrid (who earned £210m more than City in the last recorded year), the club with the next largest net transfer expenditure during the previous 12 months is Juventus with a net of £40m, or £120m less than that of City. City are outspending the biggest football clubs in the world.
More pleasing for the club's fans, there is no indication whatsoever of an end to City's spending. The club's big spending will continue, far far surpassing that of any competitor in the world game. Sheikh Mansour is clearly determined to transform City into one of the biggest clubs in the world game.
Second, the depreciation in the value of the sterling as well as anxiety about debt levels will diminish the spending power of the Premier League clubs relative to their European rivals. Despite standing among the richest and highest earning clubs in the world, Arsenal, Chelsea, Liverpool and Man Utd all have debt levels surpassing 50% of club values. Following the credit crisis, these clubs face mounting pressure to improve profit margins and move income to debt repayment in order to decrease their debt levels.
No doubt, money previously assigned to transfers will now be assigned to debt repayment. Signs of this are already apparent by the relative silence of the EPL elite in the transfer market so far this summer. With the sale of Ronaldo and increasing revenue, Man Utd could move their debt below 50% of club value in 2010; ; Liverpool co-owner G. Gillett recently sold his stake in the NHL's Montreal Canadiens, partly to help fund Liverpool's approx. £415m debt; Chelsea have a goal to make profit in 2010 for the first time in seven years, thus preventing the expansion of their approx. £447m debt; while Arsenal are showing signs in recent times of being very worried about their massive debt. (edit: the magnitude of Arsenal's debt is difficult to measure. Forbes lists the debt at a massive £800m+, but this is by no means the only opinion. Bloomberg and the Telegraph list the club debt at £300m+, which would put Arsenal in a good financial situation moving into the future. Still, for the next few years, Arsenal are committed to financial restraint, so do not expect the club to compete with Man Utd or Chelsea for players.)
While the big EPL clubs repay their debt, the big continental clubs, all of which have much smaller debt levels, will close the financial gap on the premier league elite.
The credit crisis's heavy effect on Britain has also caused the value of the sterling to depreciate against the Euro. Consequently the transfer power of continental clubs relative to their premier league rivals has increased. This can already be realized in the concern expressed by Liverpool midfielder Xabi Alonso, "I think the weakness of the sterling is not helping the Premiership because for those competing and fighting against the European teams it is a big weak point." Alonso signed a five year contract with Liverpool in 2007 worth an estimated £65,000 per week. At the time there were €1.48 to the pound so he was on €96,200 per week but due to the weakness of the pound, as the Telegraph notes, that has fallen to €76,700 per week, or approx. €1,014,000 per year.
The gap between pre-recession take-home EPL salaries and post-recession take-home salaries has been exacerbated by new higher tax rates for the rich in the UK. The new UK highest tax rate of 50%, up from 40%, will have a major impact on the spending power of the EPL. When the new tax rate is initiated in the UK new year, Alonso's salary will drop to €69,000 per week, 21% less than he agreed to when he signed the contract.
EPL teams, in short, will now not only have to endure greater emphasis on debt repayment, but they will have to pay players significantly more money to counter the depreciating value of the sterling and higher UK tax rate. This will be the only option of the EPL in order to access the elite players in the world from continental rivals.
This does not mean that EPL clubs will cease to compete. We expect three of the top five biggest spenders in European football to come from the EPL. However, it means that 1) the big EPL clubs (excluding Man City) will focus more on profit making so that they can repay their debt, meaning they will be more cautious in their transfer policies and; 2) the relative spending power of continental clubs relative to their EPL rivals has increased.
Third, the major Italian clubs will once again arise as major competitors in the world football transfer market. Serie A teams have taken a backseat to EPL and Primera teams in recent seasons, but financial data indiciates the lull in the success of Serie A is coming to a quick end. We expect AC Milan and Juventus to compete in the transfer market with the likes of Man Utd, Chelsea and Barcelona during the coming seasons. These clubs have the dual blessing of minimal debt levels and huge revenues. Combine this blessing with the debt concerns of the EPL clubs and the scenario is clear: the strength of the big Serie A clubs will rise relative to their European rivals.
AC Milan especially, in a rebuilding phase at the moment, will arise probably next season as one of the biggest spenders in world football. Meanwhile, Juventus, recovering from a short lull, once again will arise as one of the big clubs in the world game.
Fourth, as the number of teams able to compete for the top players in the world increases, the market value of top players will rise. With the rise in the spending power of the Italian clubs and the entry of Man City into the elite league, there will be more competition in the transfer market for the world's top players. Go back just a couple of years and the English clubs clearly had an advantage in their spending power relative to the rest of the football market in buying big players in the world game. There are now 11 clubs - Real Madrid, Man City, Man Utd, Chelsea, Barcelona, Liverpool, AC Milan, Barcelona, Juventus, Inter, Bayern Munich - who can compete in the market for the best talent in the world game and spend big for that talent. The only outcome of this increased competition is for the market value of top talent to be pushed up.
Top 5 (can be seen in above chart):
Top 5 Clubs by Probable Spending Power
1. Man City
2. Real Madrid
3. Man Utd
4. Milan
5. Chelsea
Top 5 Clubs by Club Value
1. Man Utd £1.14b
2. Real Madrid £850m
3. Arsenal £837m
4. Bayern Munich £774m
5. Liverpool £704m
Top 5 Clubs by Owner Net Worth
1. Sheikh Mansour, Man City £33b
2. L. Mittal , QPR £12.5b
3. Adidas , B. Munich £8b
4. R. Abramovich , Chelsea £7b
5. S. Berlusconi , AC Milan £5.7b
Top 5 Clubs by Net Transfer Expenditure (Transfer expenditure-revenue; past 12 months)
1. Real Madrid, £185m
2. Man City , £160m
3. Juventus , £40m
4. Inter Milan , £35m
5. Lyon , £30m
Top 5 Clubs by Net Profit (past 12 months)
1. Man Utd , £80.4m
2. Real Madrid , £46m
3. Tottenham , £40m
4. B. Munich , £35m
5. Lyon , £30m
Top 5 Clubs by Debt-to-Value
1. B. Munich , 0%
2. AC Milan , 0%
3. Juventus , 5% (£21m)
4. Barcelona , 7% (£41m)
5. AS Roma , 9% (£24m)
The EPL will continue to stand as the wealthiest league in the world in the foreseeable future. Though the financial gap between the EPL and continental leagues will narrow.
*
Sources:
Deloitte.com, Deloitte Football Money League, 2009
Forbes.com, Football Team Valuations
Guardian.co.uk, Spurs Announce Record Profits
Bloomberg, Arsenal Isnt Strggling to Repay Debt
Telegraph, Arsenal Debt
This is the most comprehensive analysis of football's rich list in terms of financial spending power that is available on the internet. It combines reports from Deloitte and Forbes* with club financial reports and examinations of all club transfer expenditure and revenue from the past 12 months. In doing so, we are able to draw forecasts of the spending we can expect from the world's biggest clubs over the course of the next few seasons.
Football fans and analysts can expect four major changes in the European football transfer market during the coming seasons. First, Man City will establish themselves as the biggest spenders in world football. Second, the depreciation in the value of the sterling as well as anxiety about debt levels will diminish the spending power of Premier League clubs relative to their European rivals. Third, AC Milan and Juventus will once again arise as major competitors in the world football transfer market. Fourth, as the number of teams able to compete for the top players in the world increases, the market value of top players will rise.
Click on image for full data chart
Manchester City are clearly the biggest climbers in football spending power rankings relative to twelve months ago. City's new owners will establish the club as the undisputed biggest spending club in the world game. Sheikh Mansour, who took control of the Eastlands club last year, has an estimated net worth of £33b and has pledged to turn the club into one of the biggest in the world.
In the past 12 months, the club has spent approximately £175m on new players (approx. £300m including salaries). This amount far supercedes club income. City's revenue is approx. £82m per year, while the club has only earned approx. £15m from players sold. In short, City's net transfer expenditure during the past 12 months is +£160m, twice the last recorded annual revenue of the club. To put this in context, besides Real Madrid (who earned £210m more than City in the last recorded year), the club with the next largest net transfer expenditure during the previous 12 months is Juventus with a net of £40m, or £120m less than that of City. City are outspending the biggest football clubs in the world.
More pleasing for the club's fans, there is no indication whatsoever of an end to City's spending. The club's big spending will continue, far far surpassing that of any competitor in the world game. Sheikh Mansour is clearly determined to transform City into one of the biggest clubs in the world game.
Second, the depreciation in the value of the sterling as well as anxiety about debt levels will diminish the spending power of the Premier League clubs relative to their European rivals. Despite standing among the richest and highest earning clubs in the world, Arsenal, Chelsea, Liverpool and Man Utd all have debt levels surpassing 50% of club values. Following the credit crisis, these clubs face mounting pressure to improve profit margins and move income to debt repayment in order to decrease their debt levels.
No doubt, money previously assigned to transfers will now be assigned to debt repayment. Signs of this are already apparent by the relative silence of the EPL elite in the transfer market so far this summer. With the sale of Ronaldo and increasing revenue, Man Utd could move their debt below 50% of club value in 2010; ; Liverpool co-owner G. Gillett recently sold his stake in the NHL's Montreal Canadiens, partly to help fund Liverpool's approx. £415m debt; Chelsea have a goal to make profit in 2010 for the first time in seven years, thus preventing the expansion of their approx. £447m debt; while Arsenal are showing signs in recent times of being very worried about their massive debt. (edit: the magnitude of Arsenal's debt is difficult to measure. Forbes lists the debt at a massive £800m+, but this is by no means the only opinion. Bloomberg and the Telegraph list the club debt at £300m+, which would put Arsenal in a good financial situation moving into the future. Still, for the next few years, Arsenal are committed to financial restraint, so do not expect the club to compete with Man Utd or Chelsea for players.)
While the big EPL clubs repay their debt, the big continental clubs, all of which have much smaller debt levels, will close the financial gap on the premier league elite.
The credit crisis's heavy effect on Britain has also caused the value of the sterling to depreciate against the Euro. Consequently the transfer power of continental clubs relative to their premier league rivals has increased. This can already be realized in the concern expressed by Liverpool midfielder Xabi Alonso, "I think the weakness of the sterling is not helping the Premiership because for those competing and fighting against the European teams it is a big weak point." Alonso signed a five year contract with Liverpool in 2007 worth an estimated £65,000 per week. At the time there were €1.48 to the pound so he was on €96,200 per week but due to the weakness of the pound, as the Telegraph notes, that has fallen to €76,700 per week, or approx. €1,014,000 per year.
The gap between pre-recession take-home EPL salaries and post-recession take-home salaries has been exacerbated by new higher tax rates for the rich in the UK. The new UK highest tax rate of 50%, up from 40%, will have a major impact on the spending power of the EPL. When the new tax rate is initiated in the UK new year, Alonso's salary will drop to €69,000 per week, 21% less than he agreed to when he signed the contract.
EPL teams, in short, will now not only have to endure greater emphasis on debt repayment, but they will have to pay players significantly more money to counter the depreciating value of the sterling and higher UK tax rate. This will be the only option of the EPL in order to access the elite players in the world from continental rivals.
This does not mean that EPL clubs will cease to compete. We expect three of the top five biggest spenders in European football to come from the EPL. However, it means that 1) the big EPL clubs (excluding Man City) will focus more on profit making so that they can repay their debt, meaning they will be more cautious in their transfer policies and; 2) the relative spending power of continental clubs relative to their EPL rivals has increased.
Third, the major Italian clubs will once again arise as major competitors in the world football transfer market. Serie A teams have taken a backseat to EPL and Primera teams in recent seasons, but financial data indiciates the lull in the success of Serie A is coming to a quick end. We expect AC Milan and Juventus to compete in the transfer market with the likes of Man Utd, Chelsea and Barcelona during the coming seasons. These clubs have the dual blessing of minimal debt levels and huge revenues. Combine this blessing with the debt concerns of the EPL clubs and the scenario is clear: the strength of the big Serie A clubs will rise relative to their European rivals.
AC Milan especially, in a rebuilding phase at the moment, will arise probably next season as one of the biggest spenders in world football. Meanwhile, Juventus, recovering from a short lull, once again will arise as one of the big clubs in the world game.
Fourth, as the number of teams able to compete for the top players in the world increases, the market value of top players will rise. With the rise in the spending power of the Italian clubs and the entry of Man City into the elite league, there will be more competition in the transfer market for the world's top players. Go back just a couple of years and the English clubs clearly had an advantage in their spending power relative to the rest of the football market in buying big players in the world game. There are now 11 clubs - Real Madrid, Man City, Man Utd, Chelsea, Barcelona, Liverpool, AC Milan, Barcelona, Juventus, Inter, Bayern Munich - who can compete in the market for the best talent in the world game and spend big for that talent. The only outcome of this increased competition is for the market value of top talent to be pushed up.
Top 5 (can be seen in above chart):
Top 5 Clubs by Probable Spending Power
1. Man City
2. Real Madrid
3. Man Utd
4. Milan
5. Chelsea
Top 5 Clubs by Club Value
1. Man Utd £1.14b
2. Real Madrid £850m
3. Arsenal £837m
4. Bayern Munich £774m
5. Liverpool £704m
Top 5 Clubs by Owner Net Worth
1. Sheikh Mansour, Man City £33b
2. L. Mittal , QPR £12.5b
3. Adidas , B. Munich £8b
4. R. Abramovich , Chelsea £7b
5. S. Berlusconi , AC Milan £5.7b
Top 5 Clubs by Net Transfer Expenditure (Transfer expenditure-revenue; past 12 months)
1. Real Madrid, £185m
2. Man City , £160m
3. Juventus , £40m
4. Inter Milan , £35m
5. Lyon , £30m
Top 5 Clubs by Net Profit (past 12 months)
1. Man Utd , £80.4m
2. Real Madrid , £46m
3. Tottenham , £40m
4. B. Munich , £35m
5. Lyon , £30m
Top 5 Clubs by Debt-to-Value
1. B. Munich , 0%
2. AC Milan , 0%
3. Juventus , 5% (£21m)
4. Barcelona , 7% (£41m)
5. AS Roma , 9% (£24m)
The EPL will continue to stand as the wealthiest league in the world in the foreseeable future. Though the financial gap between the EPL and continental leagues will narrow.
*
Sources:
Deloitte.com, Deloitte Football Money League, 2009
Forbes.com, Football Team Valuations
Guardian.co.uk, Spurs Announce Record Profits
Bloomberg, Arsenal Isnt Strggling to Repay Debt
Telegraph, Arsenal Debt
