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This article was first published in the February 2016 UK edition of Accounting and Business magazine.

At the end of last year, Liverpool FC announced the launch of its limited-edition, subtly branded, top-end garments and luxury leather accessories for its fan-base. Its chief commercial officer Billy Hogan believes its ‘Signature Collection’ might be unique within football: ‘I don’t know of any football clubs that have these higher-end product lines,’ he says.

This is just the latest development in the diversification of Premier League football clubs, which are finding innovative new ways to bolster revenues. Sky and BT Sport continue to pay billions of pounds for the right to broadcast Premier League, and Financial Fair Play (FFP) continues to influence and curb excessive club spend. But the new lines of commercial revenue are helping in part to offset rising wage and transfer fee costs. 

Although English Premier League clubs achieved record revenues and profits in 2013-14, as increased TV monies and FFP rules took effect, the 20 Premier League clubs currently spend approximately 70% of their overall income on wages. At that level it would mean that around £3.5bn of the total £5bn TV money the 20 clubs stand to receive over the three years from 2016-19 will end up in the pockets of players and their agents.

Infrastructure costs can be high, too. Liverpool, Spurs and Chelsea, for example, are spending hundreds of millions of pounds on stadium improvements or complete rebuilds.

But Dan Jones, head of Deloitte’s Sports Business Group, says that despite this, football is far from struggling. ‘With significant future revenue growth already secured through the recently agreed domestic broadcast rights deals from 2016-17 to 2018-19, as well as the success of cost-control regulations, the risks associated with investment in Premier League clubs seem to be diminishing.’

The gates are down

Broadcasting revenue currently accounts for 54% of the league’s total revenue – the highest proportion from any revenue stream in the history of the division. Conversely, the amount generated from match day (primarily ticket sales) has fallen to its lowest ever percentage. A total of 14 of the top 20 clubs saw the revenue they generate from match-day activities decline as a proportion of total revenue in 2013/14, compared with 2012/13.

This has been a steady and ongoing trend. Whereas the top 20 clubs in Deloitte’s Football Money League in 2004/05 generated around a third of their revenue from match day, this has now fallen to 20%. If this trend continues – as expected – it will raise significant questions about the nature of ticket pricing and marketing of the match-day experience within the business models of the world’s biggest clubs. 

While clubs continue to break new ground in attracting record-breaking deals with international commercial partners and broadcasters – for whom the live match crowd is a crucial part of the appeal – it may be that the growth of match day, the oldest revenue stream, is reaching a plateau. 

At the same time, the growing media exposure and visibility of football clubs means they have an increasing number and percentage of fans who never or rarely attend football matches at stadia. While these fans do not buy tickets for matches or merchandise from shops on match days, clubs do have massive opportunities to monetise by exploiting the level of engagement they have with their supporters, through social media and e-commerce.

Clubs are utilising the growth of internet and mobile usage to sell digital media content such as video-on demand and video games. Manchester United, through its international partnerships with telecoms operators, offers digital content to mobile devices, a revenue stream that is now generating over £10m a year.

Brand appeal

Football clubs are uniquely placed to be able to transfer the use of their brand outside of core activities given their large and loyal following and deeply entrenched brand qualities. As a result, a number of clubs have been attempting to leverage their brand appeal outside of sports-related areas to generate revenue from new markets – as the launch of Liverpool’s product range indicates.

According to a 2012 report by Value Partners Management Consulting, called Beating the offside trap: Driving forward the commercial performance of football clubs, a number of clubs are exploring even more radical ways to generate new revenues. These areas of growth are varied. Manchester United franchises its brand to a number of branded cafés across Asia, while the top four clubs in Turkey – Fenerbahçe, Beşiktaş, Galatasaray and Trabzonspor – have all launched mobile virtual network operators.

Meanwhile, Arsenal and Turin-based Juventus have taken advantage of their respective moves to new stadia in recent years to invest in the real estate business. This has enabled them to generate significant additional revenue from non-football activities. Arsenal continues to take advantage of its location in a desired area of London to capitalise on the booming housing market. The club earned £156.9m from its property development business in 2010 – the equivalent to 70% of turnover from its football operations.

Back in Turkey, Trabzonspor has pursued an even more radical opportunity by developing a hydroelectric power plant. The club has invested over £35m into the scheme and expects the new facility to generate £6.5m a year in additional revenue – significantly more than the club generates through ticket sales and shirts.

While these launches are innovative, they are just the beginning. As wages and transfer fees continue to climb, the desire of clubs to generate additional revenues will continue unabated in increasingly unconventional ways.

Alex Miller, journalist