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Football riches spread across Europe

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The 26th Deloitte annual review of football finance reports that driven by continued growth in broadcast rights values in European football’s biggest leagues, and the impact of UEFA Euro 2016, total European football market revenues reached almost €25 billion in 2015/16, a 13% increase on 2014/15.

The ‘big five’ European leagues grew collective revenues by €1.4 billion (12%) in 2015/16, 59% of which was due to increased broadcast revenues, and 31% due to increased sponsorship and other commercial revenues.

In recent years, step-change increases in broadcast revenues have been almost the sole preserve of English Premier League clubs. However, in 2015/16 new broadcast arrangements in Germany, Italy and Spain, coupled with a significant increase in UEFA broadcast distributions under the new three year rights cycle, led to combined broadcast revenue growth among the clubs in the top divisions of those three countries of €535m.

A successful UEFA Euro 2016 in France resulted in a substantial increase in UEFA revenues.  FIFA adopted new revenue recognition policies to more accurately reflect its four-year World Cup cycle, resulting in the restatement of prior year revenue and a marginal reduction in revenue  in 2015/16.The 2015/16 season was notable for just how widespread growth was across the entire European football landscape, with revenue increases across the non-‘big five’ European leagues, and even clubs in the lower tiers of Europe’s ‘big five’ football markets grew revenues by €271m (11%).

Deloitte calculated that much of the new money was spent on the field, with wage costs of clubs in the top five leagues increasing 10 per cent to €8.2bn year on year.  'These clubs are not run as businesses where making money is the number one priority,' soccer economics guru Stefan Szymanski told the Financial Times.  'The number one priority is winning.'

The English Premier League remains the most lucrative in Europe, with its clubs generating €4.9bn in revenue in 2015/16, up from €4.4bn the previous season. But its clubs recorded a combined pre-tax loss of £110m over the 2015/16 season once player transfers were taken into account, with spending on talent outpacing revenue growth.

Sides in Italy and France also recorded combined operating losses over the 2015/16 season.  

Falling viewers for UK games, which we have discussed in recent posts,  is adding to pressure on club owners and media groups.    Many clubs would be vulnerable to larger losses if broadcast revenues shrank. Last month, Sky said its broadcasts of Premier League football had suffered a 14 per cent drop in viewing, the largest fall in seven years.

Nonetheless, Dan Jones, head of Deloitte’s sports business group, said he was 'bullish' about the future TV interest for football. He also predicted that teams would be able to adapt to lower broadcasting revenues if necessary, because leagues sign their screening deals at least a year in advance.

“'If there were ever to be a downturn in the broadcast market, clubs would have a reasonable amount of notice to manage and deal with that,' he told the Pink 'Un.

The Premier League’s financial dominance is expected to increase in the coming years, as Deloitte’s figures do not include the impact of the new £5.1bn three-year domestic broadcasting deal with Sky and BT, which only kicked in last year.

International interest in European football is helping other countries secure major increases from television companies. Teams in Germany’s Bundesliga had combined revenues of €2.7bn in 2015/16, representing a 13 per cent increase to the previous year, thanks to a series of new overseas rights deals.

Spain’s La Liga generated the largest jump in revenues, with clubs enjoying a 19 per cent rise to €2.4bn. The increase came after Telefónica paid €600m for the domestic rights to screen matches of all Spanish league teams, while Mediapro renewed its international broadcasting deal with 38 clubs in Spain in a €400m deal for the 2016/17 season.