12th September 2013 by The Harried House Hunter
This morning the BBC has produced an update on the price of football in 2013 and by this they mean the cost of attending a match. On this basis they declare this.
It found average ticket prices across English football’s top four divisions have fallen by up to 2.4%.
Initially this sounds rather cheery does it not as we review the possibility of falling ticket prices and indeed disinflation making attending a match more affordable. However for fans of the Premiership the picture is by no means so happy.
The average cost of the cheapest season ticket at Premier League clubs has risen by more than 4%, with prices ranging from £299 to £985.
In this instance praise goes to Manchester City (cheapest) and opprobrium to Arsenal (dearest). No wonder Arsenal fans were expecting more spending in the transfer window you might think! Indeed the most expensive season tickets are to be found in a North London enclave at Arsenal (£1950) and Spurs (£1895) a long way ahead of even Chelsea (£1250) where I assume they have ignored the one purchased by a certain Mr. R Abramovich. Not the working-(wo)man’s game anymore is it?
Some of the economic themes of this blog are already at play here. One of the earliest in fact is the simple concept of price as football clubs offer a wide variety of prices these days just like utility suppliers,mobile phone companies et al. For example a friend who is a West Ham fan was telling me earlier about a membership deal where he and his son can get cheaper tickets for 6 games a season. So we find another example of an area where simply discovering the price is much more complex than the economic textbooks seem to think. Comparisons and measures of inflation are harder than you might think. Speaking of West Ham, who would have thought that their theme song would turn out to be a critique of UK economic policy (mortgage lending up 29% year on year as I type this)?
Also we have an inequality theme as West Bromwich with its maximum season ticket price of £449 may win cheers from its fans but in terms of budget is way behind North and South-West London. If we continue with that theme and look down the divisions this theme does not echo as loudly as I thought it might, but the major source of inequality is yet to come.
Food and drink
If we continue in a naming and shaming mode there is also this in the report.
The Eagles sell the most expensive pie in England’s top four divisions, charging £4, while Manchester United sell the dearest cup of tea in the country at £2.50.
We do not get told if the tea is drinkable or even resembles it!? Or for that matter if the pies give you indigestion or worse? Nor why Manchester United deserves bold type when the nickname of Crystal Palace does not.
A Fuller Picture requires broadcasting and commercial revenues
If we are looking at a football club in the English Premiership there are substantial broadcasting revenues and often significant commercial ones too. I took a look at the latest accounts for Arsenal (May 2012) to get a handle on this, because they are relatively transparent. Here are the major revenue elements that relate to football.
Gate and match day revenue £95.21 million
Broadcasting £84.7 million
Retail and licensing £18.3 million
So the traditional sources of revenue (tickets, programmes, food and drink) are being outstripped over time. Indeed the latest unaudited accounts for the subsequent six months show broadcasting exceeding match-day revenues something that – as I will discuss in a moment – looks a clear trend.
Of these the hot topic is the wages of the players which the media regularly reports as something in the stratosphere. There is a nod to this in references to increased wage costs and then this.
The changes in playing personnel have also contributed to an increased wage bill. However, the full wage impact of the revised contracts awarded to a number of key young players – including Walcott, Wilshere, Ramsey, Gibbs, Jenkinson and Oxlade-Chamberlain – will not come through until the second half of the year and subsequent periods.
As you can see from the numbers below, they were not to be found in this particular set of accounts, which also way predate the impact (and perhaps consequences…) of the terms offered to and accepted by Mesut Ozil.
The Group’s employment costs are the principal driver for the increase in football operating costs to £101.1 million (2011 – £98.4 million).
This is an increasingly major influence on revenues for the major clubs. Arsenal expect some quite substantial growth.
In the second half of the year Commercial revenues will increase significantly as we will start to account for the extended partnership contract with Emirates; revenues from the £150 million contract extension (over five years..)
This has boomed and boomed. After the impact of British Sky Broadcasting offering what were then considered substantial sums to the Premiership as a way of kicking-off its own business model came the success of the league in foreign climes. According to the datablog of the Guardian that first contract back in 1991 was for £191 million. Seems like chicken-feed now does it not?
Sporting Intelligence crunched the numbers on the latest deal which also involves British Telecom as a new entrant.
Jaws dropped, mine included, when the Premier League held a press conference last Wednesday at the Landmark Hotel in London to announce they had sold their UK live TV rights for 2013-16 to Sky and BT – for £3.018bn.
This represented a staggering increase of a bit more than £1.2bn over the cash paid by Sky and ESPN for the three years, 2010-13.
As an economist, my immediate thought is how much of that rise of about two-thirds is economic growth and how much is inflation? Let me throw that question out to the comments section…..
Also there has been enormous growth in interest in the English Premier League in the United States and parts of Asia. If you want to know where just check where the big teams go on tour in the summer! Here again is the estimate of the impact of this from Sporting Intelligence.
I would expect total Premier League media revenues to rise from around £3.5bn in 2010-13 to way above £5bn and perhaps as much as £6bn for 2013-16.
I don’t know about you but the theme song of West Ham United comes to mind again.
I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.
Harsh? Well I spotted this opinion piece on Yahoo Singapore.
Just this week, SingTel announced that its prices for EPL viewers would increase to S$60…….. This is up from the current price of $34, an increase of close to 75%.
We might be on track to be the world’s richest country but that doesn’t mean we should be exploited! Wayne Rooney definitely owes us a couple of visits here in Singapore!
I always thought it was absence and not distance that makes the heart grow fonder, or perhaps be careful what you wish for is more appropriate!
A force for equality?
Whilst there are plainly illustrations of inequality throughout this article and indeed hints of the 0.01% versus the 99.99% within it there is a surprising amount of equality. When Manchester City won in 2011/12 they received £60.6 million from television rights whereas bottom club Wolvehampton Wanderers received £39.1 million.
The European Central Bank
How exactly has it boosted the Premiership? By a rather odd route to say the least. It is beyond the scope of today’s blog post to look at the finances of Real Madrid apart from to point out that Real has provided around £80 million twice via the transfers of Cristiano Ronaldo from Manchester United and now Gareth Bale from Tottenham Hotspur. It borrowed the money for Cristiano from the nice friendly (ahem.. insolvent) Bankia which deposits the loans as collateral at the ECB for freshly minted liquidity, and there are suspicions that some of the money for Gareth Bale came from the same route.
So in the not entirely unlikely possibility that Bankia collapses the ECB would have a none to shabby left-side to its football team…..
So if we look at the economics we see the following, problems with price discovery, growth, inflation, inequality and a likely bubble and that is just for starters! However I am hooked (is it a type of addiction?) and will be watching, what about you?
One of the comments below has helped coalesce my thoughts on the impact of all the monetary stimulus going on. It has long been a thought of mine that the sort of debt model that is applied by the Glazers who own Manchester United in effect was bailed out by the various monetary stimuli such as QE. From the link quoted.
The reduction in the amount and cost of United’s debts is an unequivocal good thing.
For Manchester United fans of course it is but for savers who are on the other side of this trend? I would suspect that savers who support Manchester City will be fuming at this point!
Please do not misunderstand me as there are other factors such as ones I have described above and ones added to by JW’s comment but were they given time to breath by another bailout albeit an implicit one? Along that road we see a risky business model succeeding because of intervention, what could go wrong?