Tottenham most valuable club in two-speed Premier

IT may be a surprise to some people, but Tottenham Hotspur have the highest valuation among Premier League clubs, according to the latest report from the University of Liverpool’s Sports Business Group.

Spurs have a valuation of £ 2.6 billion, some £ 400 million more than Manchester City and Manchester United, and about twice as much as London rivals Arsenal and Chelsea.

With the so-called “big six” all valued at more than £ 1 billion, the gap widens considerable outside that group, with Wolverhampton Wanderers the seventh highest with a value of £ 458 million. This obviously highlights, once more, the enormous gulf between the top clubs and the rest of the Premier League.

The report also demonstrates the changes taking place in football’s hierarchy: Tottenham have leapt beyond their North London neighbours Arsenal by some distance, thanks to prudent management, lower wages and a shining new stadium that offers considerable commercial potential. Conversely, Arsenal’s commercial income is now lagging the club’s peers and the Gunners are in danger of becoming isolated from the top six, witness their relative underperformance over the past two years.

Tottenham’s commitment to realistic costs has resulted in their wage-to-income ratio, which was just 39% in 2018-19 and the lowest in the Premier League. It is doubtful this will be maintained in the future – firstly, the team that won many plaudits, but sadly no prizes, may be on the brink of breaking-up and with the cost of a new stadium to pay for, the club will need a successful team to ensure revenues continue at the highest possible level. While cost discipline will be ever more important in the post-pandemic world, Spurs may be tempted to spend more on players and wages.

In 2018-19, Spurs made an underlying profit of £ 96 million, the highest in the Premier and a stark contrast to the losses of both Arsenal (loss of £ 28 million) and Chelsea (loss of £135 million).

Chelsea, like Arsenal, have seen their valuation drop. The club has a big disadvantage compared to the big six clubs in that their stadium (Capacity 40,853) is significantly smaller than Arsenal (60,260), Spurs (62,062), Manchester United (74,879), Manchester City (55,017) and Liverpool (54,074). The project to rebuild Stamford Bridge has been seemingly abandoned and this not only means matchday income growth is limited, but also fuels some of the uncertainty over the future of owner Roman Abramovich.

Chelsea’s player costs (wages and amortisation) amounted to 102% of income with their wage bill, at £ 286 million, the fourth highest in the Premier League and 64% of revenues.

Elsewhere in London, West Ham, who completed their third season at the London Stadium in 2018-19, have yet to realise the potential of their new home. The club is valued at just £ 248 million by the report, but CEO Karren Brady believes West Ham is worth around £ 800 million. That’s a big disparity, but the club’s financial performance has yet to take off after leaving the Boleyn Ground. Indeed, matchday income at the London Stadium was just £ 27 million in 2018-19, almost identical to the club’s last season at Upton Park, despite a 23,000 increase in attendances per game. This is largely because of low ticket prices at the former Olympic stadium.

Manchester has also seen a shift in the balance of power on and off the field. Manchester City are placed second in the report and United third. There is little between them, even though United’s revenues are almost £ 100 million higher than City’s (£ 627 versus £ 535 million). United’s big advantages down the years has been their ability to leverage their brand to drive commercial income, but in recent seasons, this appears to have flat-lined and the revenue gap between United and City is just £ 50 million.

United’s wage bill is some £ 16 million higher than City’s £ 316 million even though the latter’s wages have increased by £ 100 million since Pep Guardiola became manager.

While United and City are gradually moving closer to each other, in Liverpool the reds have accelerated away ahead of the blues. Everton’s valuation of £ 257 million is one sixth of Liverpool’s £ 1.6 million and just 10% of Tottenham’s £ 2.6 billion. Everton are hampered by their Goodison Park stadium which contributes just 8% of the club’s total revenues, but there could be better times ahead when their new stadium becomes reality.

The Premier League’s imbalances are underlined by the club valuations. As well as Everton versus Liverpool, 10 clubs have a valuation below £ 300 million, with the lowest Bournemouth on just £ 99 million.

The top six clubs account for 58% of total Premier League revenues, notably 73% of matchday revenues and 81% of commercial income. All Premier clubs benefit greatly from broadcasting income, but for the big clubs, the average contribution from TV amounts to less than 46%. For the smaller clubs, broadcasting revenues contribute a greater share, hence for 13 clubs the percentage is over 70%.

Generally, club valuations were down for 2018-19, notably Bournemouth (-37%), Everton (-30%), Southampton (-26%) and Huddersfield (-26%). On the other hand, Tottenham’s valuation was up by 40% and Watford’s rose by 66%. This was partly attributable to lower revenues as part of the current broadcasting cycle.

Where does the Premier League go from here? Has the peak point passed for modern football owing to the Coronavirus pandemic? Football finance expert Kieran Maguire of University of Liverpool predicts that club values will take a considerable hit. “There are fewer potential buyers in the market and greater uncertainty in terms of clubs’ ability to generate income…this is likely to be greater for smaller clubs who don’t have the marketing and reputational might of the well-known brands.”

Maguire adds that based on recent stock market activity around football share prices, the pandemic could affect valuations by as much as 35%. Like everything else connected with the crisis, nobody really knows what will happen to the game once it returns.

Source material: Premier League Club Valuations 2020, University of Liverpool, editor Kieran Maguire. April 2020.

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