Article by Ben Griffis
What effect does the Premier League have on newly-promoted clubs’ finances? This article shows the astronomical increases in revenue resulting from promotion to the Premier League compared to promotion to the Championship or League One. Further, we can see how relegation back to the Championship effects revenue using Huddersfield as the example case. Huddersfield Town are the perfect club to use, having spent multiple seasons in League One, the Championship, and the Premier League over the last 11 seasons.
First, let’s take a look at Huddersfield’s league positions over the past 11 seasons with financial information. Note that this does not include the most recent 2020/21 season, as their fiscal year hasn’t ended yet.
This illustrates why Huddersfield are such a good club to answer our question with. They have been promoted twice, spending 3 seasons in League One before 5 in the Championship, and finally earning promotion to the Premier League and remaining for 2 seasons. We also can look at the Premier League’s first parachute payment they distribute to relegated clubs for the 3 seasons after relegation.
Before looking at the financial information, I want to explain quickly where it is from and why I use the revenue streams I use. By law, all but a select few companies meeting certain exemptions are required to file their financial accounts (as well as other companiy information) at least annually. The Government then makes the data available to the public on their website.
As far as I am aware through my searches, no football clubs meet the exemptions, so all their information is available. You can search the club’s full name and, most of the time, they appear. Some clubs have slightly different official business names that take some digging to find. For reference, here is Huddersfield’s page.
For revenue (called “turnover” in the UK and in their documents), I only use items that are directly related to the football activities of the club. I exclude Huddersfield’s holding corporation revenue, extraordinary items, business development, communications, and other revenue. However, these make up a small portion of their total revenue anyway. When I calculate wages/revenue ratios, I use only the revenue shown in the chart for compatability reasons.
So, here is Hudderfield’s revenue breakdowns over the last 11 seasons.
I made this in Tableau, so if you want to see the exact revenue for each item each year, please follow this link.
Right away we see the massive impact the Premier League’s TV money has on Huddersfield’s finances. The Premier League is the most lucrative league in the world, and it certainly shows up here. TV & League revenue increase from about £5,000,000 in the Championship to almost £110,000,000. And Huddersfield placed 16th and 20th in their two seasons, so they got a lot less prize money than most other Premier League clubs and their ~£110M is on the low end of the Premier League money table.
Huddersfield’s Commercial revenue quadrupled from £2,000,000 to £8,000,000 after promotion to the Premier League, while their Retail sales doubled from £1,000,000 to £2,000,000.
We can also see increases when Huddersfield won promotion to the Championship from League One. While these look small because of the huge amount of Premier League money, they combine to almost double Huddersfield’s revenue in the Championship compared to League One.
Matchday revenue is fairly constant throughout, which makes sense since the club is constrained by their stadium’s size. If you are consistently having the same average attendance across each league, your matchday revenue will not change by much, if at all. We can see a small dip in Matchday revenue in the 2019/20 season becuase the final home games of the season were played behind closed doors due to COVID-19.
An interesting point about Huddersfield’s financials is that their wage/revenue ratio hovers around 1.2 (meaning wages are 120% of the revenue used in the chart) in LEague One and the Championship. This means that Huddersfield increased their wages accordingly when the reached the Championship. We don’t see this upon promotion to the Prmier League—Huddersfield’s wages increase by a lot overall, but at a much smaller rate than their revenue. This is a smart decision, as they couldn’t cement their place in the Premier League for the future.
However, Huddersfield sharply increased their wages in the seasons they earned promotion. Both seasons they took a gamble to hire better staff and players on higher wages, and it paid off. This was risky, as they would have had to offload those high-earning players if they didn’t win promotion to keep their wage/revenue ratio manageable.
Finally, when we look at the 2019/20 season when Huddersfield were back in the Championship, we can see that the previously increased Retail revenue decreases once again, as does Commercial revenue. These both decrease back to prior Championsip levels, showing us that, for Huddersfield at least, there is a predictable level of revenue for football activities based on current league. Huddersfield’s TV money in the 2019/20 Championship season is increased by the Premier League parachute payments paid out over 3 years to relegated sides.
A case study of Huddersfield’s financials allows us to see the massive effect that the Premier League has on a club’s finances. Revenue streams, even excluding the TV money, see a huge increase from Championship levels, but these are not sustained and revert back to Championship levels after relegation. Further, promotion to the Championship from League One has a remarkable impact as well, almost doubling the club’s revenues each season. Seeing these financials really drives home why so many clubs take on financial hardships for a season or two in an effort to earn promotion to the next division—the increased revenue will usually outweigh the additional wages needed to reach that next level.