Clubs cautioned over TV windfalls
Club bosses should adapt to a "culture shock" and make sure they do not blow their huge new TV windfall on players' wages, a new report has warned.
The Deloitte Annual Review of Football Finance 2013 says half the clubs in the Premier League are still making losses despite record overall revenues.
But the extra TV cash plus new spending controls could have significant beneficial effects for top-flight and Championship clubs if it is managed properly, says the report.
From August, clubs in the Premier League will receive an extra £25million on average each year from the new TV contracts, and for most clubs that could wipe out their losses. Relegated clubs will also receive up to £60million in parachute payments.
The Deloitte report predicts player wage costs will rise considerably with the new TV money coming in - but says that clubs could keep that rise to respectable levels and allow more money to be spent on stadia, youth development and reducing losses.
"Achieving a more sustainable balance between their costs and revenues and thereby generating more profits provides opportunities or, some might say, a culture shock for clubs," says the report. "Increased profitability will allow greater longer-term investment in stadia and training infrastructure, youth development and community programmes.
"It also provides funds for the acquisition of talent, as clubs in the top flight can use the self-generated funds to transfer in and retain top playing talent to strive to improve the quality of football on show."
Premier League clubs' revenue reached a record £2.36billion in 2011/12, but most of that went on wages - up 4% - to remain 70 per cent of total turnover. In the Championship, the picture is even more alarming with only five of the 24 clubs finishing in the black and overall 90 per cent of all revenue going on wages.
Alan Switzer, director in the sports business group at Deloitte, said: "It's fair to say some Championship clubs are rolling the dice and gambling on getting into the Premier League. The financial regulations the Football League has brought in seek to address that, and if the losses are above the allowed limit then the club will have an embargo on transfers."
The top five clubs by revenue in 2011/12 were Manchester United (£320million), Chelsea (£261million), Arsenal (£235million), Manchester City (£231million), and Liverpool (£189million). Manchester City also made the greatest annual loss, £97.9million, down significantly from the £197.5million of the previous 12 months.