The lucrative Premiership's international stars make for marketing opportunities the world over, and the EPL is even gaining fast on the NFL
Every weekend from now until next May, teams from the English Premier League (EPL) will battle it out in arguably the world's most competitive soccer championship. Across Britain, fans will flood into local pubs to down a few pints while hoping to catch a moment of brilliance from their favorite superstars, such as Cristiano Ronaldo of Manchester United or Didier Drogba of Chelsea FC.
What's surprising, though, is that this scene—minus, perhaps, the authentic British pub—is replicated week in and week out all over the world, from Texas to Thailand. The global appeal of England's "Premiership," coupled with lucrative global broadcasting agreements, has made the EPL an economic juggernaut. Already outstripping other European soccer leagues in revenues and viewership, the Premiership is now gaining on America's National Football League (NFL) and National Basketball Association (NBA) by capitalizing on soccer's place as the world's favorite sport.
Since its inaugural season back in 1992, the EPL has grown from a minnow into a whale. According to Deloitte Consulting, the Premiership's total revenue this season from TV rights, ticket sales, and merchandising should top $3.6 billion—up tenfold since its first season 16 years ago. That far exceeds its nearest rival, the German Bundesliga, which is expected to pull in just over $2 billion this year.
"The Premiership really has gone from strength to strength," says Pete Hackleton, London-based senior manager at Deloitte's Sports Business Group. "Increasing broadcasting revenue has been the major reason for the league's success."
One advantage the Premiership enjoys over other European soccer leagues is that it negotiates broadcasting agreements collectively. (Elsewhere, TV deals are usually agreed on a club-by-club basis.) That has given the EPL greater clout in dealing with the likes of News Corp. (NWS) units Fox Sports and British Sky Broadcasting (BSkyB) (BSY). The Premiership recently struck a three-year, $2.6 billion deal with BSkyB, as well as a separate $730 million agreement with Irish broadcaster Setanta. Other deals around the world account for a quarter of the league's roughly $1.8 billion in annual broadcasting revenues. All told, EPL games are available to 600 million homes in 202 countries.
While the EPL still doesn't match the NFL's annual $3.7 billion haul from broadcasting rights alone, soccer's global appeal likely gives the Premiership more room for growth. Currently, the EPL's overseas TV rights equate to a mere 16¢ per viewer, compared with $2.60 in Britain. That affords plenty of opportunity to increase broadcast revenues—especially in Asia. The traditional early afternoon start for English games falls during prime time viewing hours in many soccer-mad Asian nations.
"The time works out great for Asia, which is by far the largest potential market compared with Africa and the Americas," says Deloitte's Hackleton.
The potential for lucrative TV deals also has attracted foreign investors who have shelled out millions for some of the EPL's highest-profile clubs. The best known is Russian billionaire and tabloid favorite Roman Abramovich, who bought London's Chelsea FC in 2003. But Americans also are getting into the act: Tampa Bay Buccaneers owner Malcolm Glazer now owns Manchester United, while the multisport-franchise-owning pair of George Gillett and Tom Hicks own Liverpool FC.
Indeed, almost half of the Premiership clubs now are foreign-owned, but some deals have courted controversy. Last summer, millionaire Thaksin Shinawatra, the former Prime Minister of Thailand, bought the club Manchester City for an undisclosed amount. But when the Thai Supreme Court recently issued a warrant for his arrest on corruption charges, Shinawatra's continued EPL ownership was cast into doubt.
The influx of foreign owners has coincided with a rise in the number of international stars plying their trade in the Premiership. Greater broadcasting and commercial revenues have translated into larger EPL salaries (BusinessWeek.com, 8/21/08), which attract foreign players that previously might have signed for Italian or Spanish clubs. More than half of the Premiership's roughly 350 players now come from outside Britain, compared with less than one-fifth during its inaugural season.
According to Rune Gustafson, chief executive officer for the British unit of consultancy Interbrand, the EPL's global makeup helps reinforce worldwide interest in the league. Crowds in the small African country of Togo, for example, now gather around TVs to watch countryman Emmanuel Adebayor score goals for the London club Arsenal FC. Similarly, the success of South Korean Ji Sung Park at Manchester United has boosted the club's following in that lucrative market. "The Premiership brand has grown internationally because [foreign] players bring added attraction to overseas markets," Gustafson says.
While foreign stars have raised the EPL's profile, players' soaring salaries also have put a strain on many clubs' finances. Since 1992, wages have risen an average of 13% per year, compared with 11% annual growth in overall Premiership revenue. Salaries now constitute almost two-thirds of clubs' total budgets. That has reduced average operating margins for EPL teams to just 6%—one-third the 18% returns notched in the rival Bundesliga. And in the 2006-2007 season, only eight clubs posted operating profits, down from 16 the previous year.
"Owners see their clubs delivering only minimal regular returns," says Dan Jones, a partner in Deloitte's Sport Business Group. The bigger payoff—typically in double digits—comes when owners sell their teams, he says.
Those economics might not sound appealing to some potential owners, but there's no doubt the Premiership's global success has given English clubs the edge over Continental rivals. Three out of the four semifinalists in the last two UEFA Champions League tournaments (a contest among all of Europe's best teams) have been English. (However, England was shut out of the UEFA Euro 2008 championship (BusinessWeek.com, 6/20/08) this year, which pits national teams against one another.) Last season, two EPL clubs reached the Champions League final for the first time.
Along with sporting success, the Premiership's economic dominance also appears here to stay. All 20 teams now rank in the top 50 of the world's wealthiest clubs, while four—including No. 1 Manchester United—make the top 10. This economic strength is only set to grow as the EPL expands its reach into more foreign markets, making English soccer a hot commodity for sports-hungry fans the world over.
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