Football mad: Are we paying more for less?

Football is becoming more expensive, less exciting, and the prospect of the England team replicating the kind of brave attacking play demonstrated by Spain, Germany and Italy at this summer’s European Championship is vanishingly remote.

These were the key conclusions of a recent study by the High Pay Centre on the impact of runaway players wages on the national game. The report lays out in stark terms just how badly the influx of money into football since the establishment of the Premier League in 1992 has been spent.

As Figure 1 shows, increasingly lucrative TV deals, plus prize money from the Premier League and Champions League and, crucially, the fact that the top flight clubs’ income is no longer shared with the lower divisions, means that revenues have rocketed. However, the proportion of turnover spent on players wages has grown even faster, from 48% in 1997 to 70% today.

Figure 1 Permiership turnover and wages, 1997-2011

In absolute terms, Premier League players’ wages have grown by 1508% since 1992 (in comparison with a national average of 186%).  As such, despite the growing number of alternative income streams available to clubs – including sponsorship agreements and global merchandise sales, in addition to TV deals and prize money – ticket prices have also soared, in some cases by over 1000%. It cost just £4 to watch Liverpool in 1989, about £7 in today’s money. Last season, the cheapest ticket came in at £45. For Arsenal, a £5 ticket in 1989 would have cost £51 in 2011/12.

Table 1 Changes in price of cheapest tickets between 1989 and 2011 at clubs who have stayed in the top flight through that period

Such is the extent of the growth in wage costs, that even these enormous increases have not been enough to keep English football on a sustainable financial footing. Every year UEFA conducts an annual survey of the finances of over 700 top flight clubs across the continent. Though English teams only account for 2% of those surveyed, in 2010 they were responsible for an astonishing 56% of the surveyed clubs total debt.

This effect is even more pronounced in the lower divisions, where the pressure to keep up with the top flight clubs is acute, but the revenue streams to meet rapidly increasing player wages are less accessible. Half the professional clubs in England have been insolvent at some point in the past twenty years. In the last five years, only one team, Norwich City, has achieved promotion to the Premier League without either being in receipt of parachute payments for recently relegated Premier League clubs, or spending over 100% of their turnover on wages alone, effectively jeopardising their very existence in pursuit of promotion.

Table 2 Premiership or bust

This is somewhat ironic, because in the lower leagues, the football is at least somewhat exciting and unpredictable. Few would have guessed that Norwich or Southampton, for example, would go from the third tier of English football to the top division in consecutive seasons.  When they get there, however, the chances of causing an upset rapidly diminish.

In the last three seasons, clubs finishing in the bottom three of the Premier League have beaten those finishing in the top three on just three occasions out of fifty four. If last season’s Bolton Wanderers team had played their Manchester United counterparts ten times, the odds are that they wouldn’t have won once.

Table 3 Record of top three club against bottom three club in the Premier League, 2009-12

Of course, one could argue that this is great news if you’re a Manchester United supporter, and these days most people are, if they’re not a fan of another major club such as Arsenal, Liverpool or Chelsea.

But firstly, even supporters of the teams who are winning every week will surely get bored eventually, when their victories are so commonplace as to become meaningless. Few English football fans looking objectively at the dominance of Real Madrid and Barcelona in Spain, for example, or Celtic and Rangers in Scotland (up until Rangers’ financial implosion, brought on, of course, by spiralling wages costs) would judge it to be a health state of affairs.

Secondly, regardless of their club affiliation, most English football supporters are fans of the England national team. And there is a direct link between the growing share of football’s income eaten up by players’ pay, and the poor technical quality of English footballers in comparison with players from the countries who consistently outperform us at World Cups and European Championships.

There is just one UEFA-qualified coach for every 812 registered footballers in England, compared with ratio of 480:1 in Italy, 170:1 in Spain and 150:1 in Germany.

Figure 2 Qualified coaches in UEFA countries

Nobody who watched Italy and Germany outclass England at the two most recent international tournament, or Spain’s eventual triumph in both competitions, could fail to conclude that better access to proper coaching and technical instruction was a factor in their success.

Surely investment in an improved coaching infrastructure would be a more sensible way to use the vast amount of money in English football, rather than funnelling it straight out of the game in the form of player wages.  In football, as in many areas of business, there are a number of lessons we could learn from Germany, where League rules ensure that clubs maintain stable finances, as well as guaranteeing that clubs are supporter owned, and that even in the amateur divisions, coaches must be in possession of a valid coaching license. As a result, player wages are lower, but so are ticket prices. Stadiums are full, clubs are solvent and the national team have reached more tournament semi-finals in the last six years than the England team has in its entire history.

It is difficult to see who exactly would lose out from the adoption of a similar model here, beyond a handful of millionaire players.

Editors’ note: Download “Football Mad: Are We Paying More for Less?” from the High Pay Centre here.