PL wages decrease for first time

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A report has noted that wages for the top players in England has fallen for the first time in the Premier League history. But, with increasing television revenues, the trend likely won’t continue.

The survey, by Deloitte’s Annual Review of Football, mentioned the top clubs remain by far the biggest earners in world football, with the 20 generating more than GBP 1.3 billion in revenue.
 
“Over the past decade, we have seen Premiership wages rise by an average of 20 percent each year,” said Dan Jones, partner in the Sports Business Group at Deloitte. “The 3 percent reduction in the total wage costs for Premiership clubs, based on the latest available figures for the 2004-05 season, provides a stark contrast.
 
“Our latest analysis further supports the improving balance between revenue and costs, not just in England but also across Europe. The need to 'save clubs from themselves' with a salary cap now seems far less important than it did five years ago.”
 
Wage and salary costs fell by GBP 26 million in 2004-2005, bucking the trend over the past decade for Premier League salaries to increase by 20 percent year to year. The reduction was equivalent to each club cutting wages by GBP 1.3 million.
 
At Chelsea, wages fell by GBP 5.9 million. Arsenal’s dropped by GBP 3.9 million, Everton by GBP 2.3 million, and Liverpool, despite victory in the Champions League, fell GBP 1.4 million. Even Tottenham Hotspur, active in the transfer market that season, cut off GBP 1.4 million.
 
Premier League clubs believe that television revenue, which will be raised another GBP 500 million to GBP 1.7 billion during the next three-year cycle starting with 2007-08, will equal more money going to players.
 
“We can already see this effect, with new contracts for Thierry Henry, Frank Lampard and John Terry all in the GBP 130,000-a-week bracket,” said one chief executive for a top club. “Arsenal, moving into a new, 60,000-capacity stadium, obviously feel they can afford it - Manchester United’s capacity has also increased. There are new sponsorship deals, and players' agents will have noted that in addition to what Sky and Setanta will pay us we are also doing some great deals for other rights. Our main overseas deal is yet to be done.”
 
Paul Rawnsley, director in the Sports Business Group at Deloitte, expects the TV revenue to raise salaries and boost revenue for the league.
 
“The new TV deals are set to boost Premiership clubs' revenues to more than £1.7bn from 2007-08,” he said.
 
Jones said financial results for the past season will not show much of an increase on 2004-2005 figures, but, he said, "What I think will happen is that the ratio of wages to turnover will not increase."

In 2004-05 the drop in wages meant that wages as a proportion of turnover dipped below 60 per cent for the first time in six years.
 
Clubs always try not to spend more than 40 percent of income on salaries. Blackburn, during the title-winning 1994-1995 season, spent more than 100 percent of income on salaries, though this was offset by funding from chairman Jack Walker.
 
The report also emphasises the already well-known financial gulf between the Premier League and the Championship League. In 2004-2005, the average Premier League club had income of GBP 67 million, more than five times that of the average Championship club’s GBP 13 million.
 
The losses the Championship League suffered in the collapse of the deal with ITV Digital have been staunched as, in 2004-2005, wages rose by two percent, to slightly more than GBP 324 million.
 
Jones attributes this to the ambition of clubs such as Wigan and Reading, both recently promoted from the Championship.
 
“We have two clubs pushing for promotion, both funded by rich individuals. Given Wigan's success, you cannot knock that,” he said.
 
There has been a reduction, though, in the amount of Premier League money flowing to the Championship League through transfers. Only GBP 28 million trickled down in 2004-2005, the lowest in three years. Leeds accounted for much of this, selling players following relegation.
 
By contrast, GBP 500 million has left the English game in the last two years to overseas clubs and agents, mostly in Spain and France.
 
The report also highlighted the Premier League against other international rivals.
 
“While the German Bundesliga and Italian Serie A clubs had the biggest leaps in financial fortunes, with revenues up 17 percent and 16 percent respectively, English Premiership clubs remain well ahead,” said Alan Switzer, senior consultant in the Sports Business Group. “Premiership clubs benefit from a more even spread of revenue across different sources and different clubs and greater profitability than European rivals. Let's hope England's World Cup on-pitch performance can mirror its business and financial success.”
 
The big five European leagues generated 54 percent of the continent’s total GBP 7.8 billion football worth. The top tier leagues are in England (GBP 1.3 billion), Italy (GBP 900 million), Germany (GBP 800 million), Spain (GBP 700 million) and France (GBP 500 million).
 
Clubs in Germany (17 percent) and Italy (16 percent) had the highest percentage of revenue growth for the 2004-2005 season, compared with 1 percent in England.
 
English clubs are the most profitable in Europe, followed by Germany. For 2004-2005, a record 14 clubs reported pre-tax profits. The English Championship League, whose clubs generated GBP 306 million in revenues, is the sixth-ranked league in Europe.