Strategy & Operations » Leadership & Management » Football club FDs move towards more ‘traditional’ business models

Football club FDs move towards more 'traditional' business models

Advent of Financial Fair Play and new £5.1bn TV deal sees football clubs ramp up spending

ENGLISH PREMIER LEAGUE clubs are on the cusp of adopting more traditional business models as they benefit from new, lucrative media rights and the result of Financial Fair Play, a report by BDO has found.

BDO’s annual survey of football finance bosses found that the long-term, stabilising impact of FFP, alongside a new £5.1bn broadcasting rights deal, could cause clubs to adopt a more traditional business model with sustainable profitability, positive cash flows, investor returns, as well as enhanced value for money.

Premier League and Championship clubs are sacrificing short-term profits in order ramp up spending ahead of the new three-year rights deal with Sky and BT Sport. The contract, which begins from 2016/17, will add an average of around £30m in revenue per Premier League club and means that even the club finishing bottom will earn around £100m in TV revenues.

“As well as directly benefiting the English Premier League clubs, £1bn has been earmarked for distribution outside the top tier, contributing towards parachute and solidarity payments, and grass roots football,” said Ian Clayden, partner at BDO.

According to the report, 92% of English Premier League clubs expect to make a profit before player trading for their next accounting period, compared to 12% in the Championship. Only a third of clubs in Football Leagues 1 and 2 and half of the Scottish Premiership expect to make a profit.

As a result, the need for support from investors has increased in the last 12 months as 65% of clubs continue to be dependent on their principal shareholder – up from 60% last year. Interest from new potential investors has not wavered in the last 12 months with almost a quarter of clubs having received external interest/enquiries in the last year.

Of the clubs surveyed, 38% of all finance directors, including 62% of Premier League directors, believe that clubs in the Premier League should reduce match ticket pricing in light of the new level of TV arrangements. However, among Football Leagues 1 and 2, there is a concern that this may cause a migration of fans from the lower leagues to the higher leagues.

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