Survey: rising wages threaten future of football

A survey of football finances claims rising player salaries are threatening the future of the sport across Europe.

Deloitte's annual study says total revenues among the 92 top English professional clubs grew by 100 million pounds (US$145 million) and exceeded 2.5 billion pounds ($3.62 billion) for the first time in 2008-09, but salaries increased even more.

The Premier League's 20 clubs contributed record revenues of 1.981 billion pounds ($2.87 billion), a figure that will have exceeded 2 billion pounds ($2.9 billion) in the 2009-10 season.

However, total salaries among the top 92 clubs in England has risen by 12 percent to 1.8 billion pounds ($2.6 billion), with 1.3 billion pounds ($1.9 billion) of that paid out in the Premier League.

"The growth in wages is more difficult to slow down given existing three-four year player contracts but must nonetheless be reined back to address clubs' declining profitability," Deloitte said.

As salary increases outstrip revenue growth, English football club operating profits have been under pressure. In the Premier League, clubs' total net debt also rose to 3.3 billion pounds ($4.8 billion) at the end of the 2008-09 season, with more than 1.9 billion pounds ($2.8 billion) of that carried by Arsenal, Chelsea, Liverpool and Manchester United. However, 40 percent of the total debt is classed as "soft loans" that do not accrue interest.

Premier League club revenues may have risen by 49 million pounds ($71 million), but salaries rose by 132 million pounds ($191 million), resulting in a record salaries-to-revenue ratio of 67 percent. The majority of the increase was driven by clubs outside the traditional big four - Chelsea, Manchester United, Arsenal and Liverpool - desperate to qualify for lucrative European competitions or avoid relegation.

Football's boon is not limited to England. Despite a global economic downturn, football markets across Europe also grew, totaling euro15.7 billion ($18.8 billion) in 2008-09, with the top five leagues - France, Germany, Italy, Spain and England - growing by 3 percent to euro7.9 billion ($9.4 billion).

But total salaries across Europe are also continuing to grow with Italy's Serie A leading the way with an increase of 12 percent, the Bundesliga and Premier League at 11 percent and La Liga and Ligue 1 up by 4 percent and 3 percent, respectively.

Last month, UEFA passed rules designed to curb European football clubs' excessive spending with penalties including banning teams from the Champions League taking effect from the 2014-15 season.

"Although regulation may not universally be welcomed, firm and consistent implementation of the new requirements can help improve the stability and financial health of European club football," Deloitte said.

While total salaries in England appear to play a major part in determining the finishing order of the top four and bottom three clubs, there is little correlation for the 13 other clubs.

According to the report, "this again highlights that money spent on wages is certainly no guarantee of success for the majority of Premier League clubs, and suggests many clubs are getting questionable value for investment in player wages."

Despite revenues in the Championship rising by 12 percent to 375 million pounds ($544 million) in 2008-09, the picture in English football's second tier is even bleaker with salaries taking up 90 percent of revenues.

Deloitte reports that broadcasting provides 49 percent of Premier League revenues - the biggest single source. However, a two percent increase in Premier League matchday revenues was offset by a one percent fall in commercial revenues.

Alan Switzer, director of the Deloitte Sports Business Group that produced the study, said clubs have to reverse the trend if they are to survive.

"We expect wages growth to outstrip revenue increases again in 2009-10," Switzer said. "This will further reduce operating profitability, a decline that cannot continue indefinitely.

"However, clubs have the opportunity, via the revenue uplift from the new broadcast deals from 2010-11, to get wage levels down to a more sustainable share of revenue. It's not the first such opportunity. It remains to be seen whether they grasp it."

New overseas broadcast deals will generate an additional 7 million pounds ($10 million) per season to each Premier League club starting next season.