‘The shirt off your back’ – a piece for FAN on why the Premier League should have to share merchandising revenue

Below is a piece I wrote for The Football Action Network (FAN) on football’s finances. With the new TV deal announced, I wanted to challenge the notion that, while this money should be shared, other sources of income should be considered the sole property of clubs. It is the league, I argue, that enriches the top clubs, not the other way round…

It’s not just the TV money that needs redistributing. To bring some sanity back to the game, we need to look at all sources of club income, including sponsorship deals.

On a spectrum of unearned wealth, football’s latest TV deal sits somewhere between buying a winning lottery ticket and becoming a billionaire by IPOing a tech business that’s yet to turn a profit.

You’d be hard-pressed, I think, to maintain that the Premier League contributed nothing to its own elephantine wealth. Clearly the players are working hard, the clubs are more commercially minded and the league administrators know how to run a bidding process. Yet it would require someone with a shamelessness that exceeds even Richard Scudamore’s to maintain that all £5.1bn of the contract is morally the sole property of the Premier League.1

If nothing else, it’s unmistakably a deal signed in a rapidly growing international sports rights market – something for which the Premier League can take some but not all the credit. Most of all, though, it is a deal where a small group of business owners and highly paid staff are profiting by cutting out huge numbers of other employees, suppliers, customers and stakeholders who underpin their industry.

The Premier League does quietly admit its good fortune, though, in two significant ways. Firstly, it hands over 5% of its TV money to the rest of the game – the kind of voluntary tax contribution that the super-rich can just about stomach. Secondly, it splits 70% of TV money equally between teams, regardless of size, with only 30% being allocated according to finishing position and the frequency with which teams are televised.2 If this were truly earned income, would not the biggest clubs demand a cut more reflective of the popularity with viewers of their club, as they do in Spain? We could create a formula based around the Match of the Day running order.

They don’t, of course, because they know – even Richard Scudamore knows it – that some semblance of financial fairness is essential to stop the game becoming a La Liga-style farce.

The question, then, once it’s been grudgingly conceded that football income can be redistributed for the good of the game, is why do we need to stop with TV money? What about ticket and shirt sales? Or food and programme sales? Or shirt sponsorship and stadium naming rights?

Unlike TV money, your instinctive reaction is probably that this is ‘club money’ – money that came to them as direct from individuals and businesses, the sweat of their own brow. But is that really right?

A significant source of income inequality in the Premier League is income from stadium and shirt sponsorship. At the top end you have Chelsea’s freshly inked contract with Yokohama Rubber, delivering £40m extra a year to Roman’s boys while, in the lower reaches of the table, many teams struggle to attract more than £1m annually from their shirt deals. That’s an income disparity that, in just three seasons, creates a divide of more than £100m between top and bottom. It’s a similar picture with stadium naming rights.

The money is flowing in to a few top clubs and, in the absence of a salary cap, this is income that, under FFP, directly translates into an increased ability to pay star players. That alone might be a good enough reason to challenge how the money is distributed, except that it’s pretty easy to also argue that shirt deals depends on the league, with their sizes closely tracking league performance. Take Chelsea: it’s not simply the club’s history and heritage with which brands want to associate, but the prestige that attaches to being a top Premier League club. Without the stage that the Premier League provides, there would be no sponsorship. That income, then, like TV money, is a product of the Premier League’s collective activity and, as such, can be considered as ripe for redistribution as TV money. Doubly so in the cases of Chelsea and Manchester City, whose success has been bought at the expense of other teams without an unlimited overdraft.

And here’s the truth: much as they like to pretend otherwise, top clubs are not independent businesses. They depend on other Premier League clubs, just as the league itself depends on the rest of football and English society more generally. Indeed, even great entrepreneurial individualists like Richard Scudamore think it advantageous for the Premier League to band together to sell its media rights.

But, like the wealthy who’ve worked so hard to normalise high salaries, low business taxes and tax avoidance, the Premier League likes to keep evidence of cooperation out of the public eye, preferring to promote its notion of competition, with its implication that the outcomes are natural and unchallengeable. It’s this that football reformers need to challenge.

While there’s a growing movement to challenge in-built inequality in the economy – through, for example, bonus caps, mansion taxes and protests against corporate tax avoidance – not enough has happened in football. We talk of petitioning the Premier League for an increase in their contribution, capping the cost of away tickets or campaigning to get clubs to pay a living wage. This is admirable and, in the case of the living wage, showing promise. But it’s a request for benevolence and philanthropy, not an attempt to actually alter the status quo.

So here’s an outlandish proposal: all league merchandising deals should be negotiated centrally and all income divvied up equally between clubs. Crazy? Unworkable? Well, that’s what they do in the NFL. They also share TV and ticket money equally. (Teams don’t have shirt sponsors, but if they did, you can bet they’d share that money too.) In all, more than 60% of total NFL revenue is shared 32 ways regardless of club size or success.3 Well, nearly. Dallas is the sole team not to participate in merchandising sharing, preferring to negotiate alone. (It is part of the TV deal, though.) I mention Dallas not just for the sake of accuracy but to highlight how engrained the cooperative spirit is in American football. Here is a game – with a TV deal that dwarfs the Premier League’s – where, instead of cutting each other’s throats for a few extra dollars, teams voluntarily participate in revenue sharing.

And how much is that revenue sharing worth? Well, the current eight-year TV deal is worth more than £26bn – a little over £3.3bn a year and about twice the annual value of the new Premier League deal. Meanwhile, the licencing and sponsorship brought in £2.3bn annually in 2004 alone.4 (Apologies that I couldn’t get more recent figures, but I think it’s a safe assumption that this figure has increased dramatically in the ten years since.)

Not all revenue is collectivised: clubs can sell local sponsorship rights in a range of categories within a 75-mile radius of their stadium5 and they are allowed keep their stadium naming rights and income from executive boxes and premium seats. (This last provision was a cute move by the NFL to incentivise owners to build larger, more modern stadia).

The final measure of how central the league is – as opposed to any team – is that all club names and logos are owned by the league and then licensed to the clubs. It is meaningless, the thinking goes, to imagine that clubs can exist as some independent business, free from the league and the other teams against which they play. No club is an island, not even if the chairman owns one.

The NFL, then, is the most important league in the world for British football fans. Because even if you hate the game – and if you do, you’re mad – it is a standing rebuttal to the Premier League’s attempts to weasel out of proper reform.

It’s not our job to make the game fairer. We couldn’t ask clubs to share more revenue. We want to nurture the grassroots. We are trying to encourage better competition. We care about the financial health of all clubs. Any redistribution might threaten the Premier League’s pre-eminence.

All of these greed-driven falsehoods, which the league likes to present as immutable truths, can be amply disproved by pointing a finger across the pond and saying: there! They do it in the NFL, it makes the league fairer and they’re still rolling in money.

It is time, then, to be more radical in challenging the unspoken assumptions on which the current state of football rests. Far from earning its wealth, the Premier League has its hand in the pocket of everyone involved in football. All its sources of income, not just TV, need redistributing. And, above all, new and comprehensive legislation is needed. Asking nicely isn’t enough. We need to demand sweeping change: a new constitutional arrangement and set of administrators that acknowledge that the Premier League, and the handful of teams atop it, are nothing without the rest of football and that they must share their largely unearned wealth with everyone that helps to make football Britain’s most loved sport.

 

Martin Calladine

If you enjoyed this, please buy my book “The Ugly Game: How Football Lost Its Magic And What It Could Learn From The NFL”. That way I’ll have the money to write more things you might like. Oh, and please spread the word, too. Thanks a lot.

 

1 An under-reported aspect of the TV deal is that broadcasters plan to make a profit, the £5.1bn being fronted by Sky and BT until they can extract it, and more, from their customers and advertisers. The new TV deal, then, can be seen as little more than a giant tax increase on football fans.
2 At its founding, the Premier League agreed to share TV money on the following principles:
  • All international income (about 40 per cent of the total TV money) would be shared equally between the 20 teams.
  • Fifty per cent of the UK TV revenue would be split equally between the 20 clubs.
  • The remaining 50 per cent would be split in half and paid out according to final league position and the frequency with which that club is televised
3 http://www.sportingnews.com/nfl/story/2014-09-05/nfl-revenue-sharing-television-contracts-2014-season-business-model-nba-nhl-mlb-comparison-salary-cap
4 ‘Merchandising NFL brands and intellectual property rights’, Stephen McKelvey and Ryan Spalding in ‘The Economics of the National Football League’ ed. Kevin Quinn, Springer Science and Business Media 2012 5 Ibid.
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One thought on “‘The shirt off your back’ – a piece for FAN on why the Premier League should have to share merchandising revenue

  1. Pingback: The Fifpro report on ending transfer fees – a review | The Ugly Game

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