From Deloitte's Annual Review of Football Finance 2010-11:
Premier League clubs’ revenues increased by 12% to £2.3 billion, driven by further increases in broadcasting revenue (13%) and impressive growth in commercial revenues (18%)...
Total wages across the Premier League rose by £201m (14%), equivalent to over 80% of the £241m increase in revenue, to almost £1.6 billion. As a result, the league’s wages/revenue ratio reached an all time high of 70%, having been as low as 59% in 2004/05.
As I explained when they brought out their review for 2009-10, this stands to reason. Any increase in revenues above and beyond normal running costs will accrue to the least elastic factor of production, which in this case is "the best two hundred football players". It does not matter whether they are good, bad or mediocre, as long as they ever so slightly better than all the other football players they will be the best; and as long as clubs' total revenue keeps increasing, total wages will increase more or less £ for £ (or 80p in the £ in this particular year), thus soaking up an ever larger share of total revenues as time goes on.
But every year, Deloittes feign surprise at this, and announce with great foreboding that players' salaries have reached some sort of unsustainable upper limit which is endangering the viability of the Premier League. No they haven't and they never will - as long as clubs have a few hundred million left over for actual running costs, the clubs themselves (as distinct from the players) will keep soldiering on.
Thursday, 31 May 2012
Deloittes nearly join the dots
Subscribe to:
Post Comments (Atom)
15 comments:
Perhaps Deloitte's surprise is because they see the players as "workers" and cannot believe that the management haven't siphoned off all that extra cash before it got as far as the workers, as would happen in any normal financial institution.
B, it's the same thing with banks, actually. It's the top few "workers" (managers, traders, directors etc) completely ripping off the owners/shareholders. The PL players are analogous to bank directors.
And in neither case are the rank and file workers (groundsmen at football clubs or people working at bank tills) really affected as they are paid for work done at market rates and there is no rental element - the real battle is between different classes of rent seekers (players, bank directors, shareholders) who all want the monopoly profits/rent.
To use the old "them and us" terminology, I would have thought that, in a casino bank, the "workers" are the traders and the "management" are the directors and senior management, who take the lion's share of the bonuses. Sure, the owner/shareholders don't get a look in, and they don't in the PL either. I'm sure there must be cases in industry where the same thing happened - a shortage of skilled workers leading to their wages capturing all the superprofits of the business.
B, as far as I am aware, some of the "star" traders at banks earn vastly more than the official directors, but they're all in it together.
Suffice to say, the bulk of a bank's super-profits go to the [traders & directors] as "bonuses" (and how they split it up between themselves is unknown to me at the time of writing).
PS, included in PL salaries is of course salaries for the team manager and coach, who also earn a pretty penny.
MW, where do players' agents fit into this analogy?
Both the traders and the footballers are taking part in "zero-sum" industries where one worker's win is another worker's loss. Very different from most industries where every extra worker contributes a bit more to the production, even the below-average workers. Wonder if that has anything to do with the fact that workers in those industries get a larger share of the turnover than usual.
SBS, they're leeches on the back of leeches.
And then of course they all need tax advisors to set up accounts in Luxembourg and barristers to defend them in court and so on, so there are leeches on the back of leeches on the back of leeches and so on ad infinitum.
D, good point about zero-sum. I suppose the same could be said for film stars; there's only so much money which people spend on cinema tickets, and so the top few film stars are fighting over the same pot of money without actually increasing it.
I hadn't considered film stars but you're right. Looks like another data point.
D, or top barristers, the legal system is not even a zero-sum game, it is a massive big fat minus for the world at large and a huge great plus for a small group of self-selected insiders.
Until they bring in salary capping for clubs.
JH, do you think that a) that's a good idea and b) that it is enforceable? Apparently some of the American leagues do it (baseball, I think). Further, to whom will all the money go?
All this explains why, in my next life, I have decided to return as someone extremely decorative and useless...
Apparantly, film studios don't make much money. It's something like 10% profit. The reason they own them is to keep things like their other interests fed.
Let's say you're a company that owns a cable network. If you don't own some movie production, what happens if everyone else tells you that they won't supply you with movies? Your cable network is basically toast. It's like a form of MAD.
The people who make profitable movies are the likes of Roger Corman, knocking out cheap exploitation flicks like Dinoshark. They don't make huge money, but they don't cost much either. It's reckoned that Corman has never lost money making a movie.
Financially speaking, I have no idea why people invest in Scorsese's movies. They might be critically brilliant, but the box office returns are quite average. You make far more money making films like The 40 Year Old Virgin or Bridesmaids.
TS, what goes for football clubs goes for films. Fantastically rich people buy football clubs as a status thing and are quite happy to lose money (just to prove how fantastically rich they are); quite rich people invest in films just for the glamour, their returns are probably negative.
Post a Comment