A Premier League for the digital age

Premier League logo - Brandnew - flooring

The Premier League has got a whole new look and the changes are much more than just a fresh coat of paint. The 2016-17 season debuts the league’s first new logo in a decade as well as a bold new visual identity to be used in all other branding. The changes are a massive revamp of the EPL brand and are clearly aimed at modernizing an iconic presence for the demands of a digital age.

Out with the old…

Premier League logo - Barclaycard The Premier League has only held two sponsors in its 24 year history, Carling and Barclays Bank, with the latter in place from 2001 – 04 as the Barclaycard Premiership and since then as the Barclays Premiership. After the 2005 redesign the Premier League branding remained unchanged through the spread of global EPL mania. Despite the growing popularity the limitations of the visual style could be clearly felt as new viewing formats and different digital media sprang up.

Premier League logo - Barclays The English Football Association announced that the league had begun work on the rebranding after ending its partnership with Barclays in the 2014-15 season with the league planning to forgo any name sponsorship indefinitely. Additionally the FA stated that it would no longer be offering title sponsorship as a branding opportunity, preferring to keep the competition only as “The Premier League” for the forseeable future. Bringing it in line with the other major leagues Bundesliga and Ligue 1 who also eschew title sponsors, La Liga remains the only competition with an official title sponsor, the Spanish bank BBVA.

In with the (digital) new…

Premier_League_LogoIn their new design DesignStudio retained the iconic crowned lion while discarding the outmoded badge elements to update the logo for the world of flat design. The rest of the visual style has also been upgraded with a duotone claw/stripe pattern being featured prominently in other marketing collateral.

The changes are more than just a visual refresh, they are the league’s solution for a sports market that is pioneering new digital experiences alongside its traditional broadcast formats. Whether mobile/tablet streaming, highlights embedded in digital content or just an enhanced TV experience the flexibility required of the brand has changed remarkably over just the past 5 years.

With color, size, and placement more easily modified the new style logo is more easily adjustable to different contexts regardless if that is on a 30ft screen in a digital theater or a mobile app with just inches of screen available. It’s a sure thing that we’ll be seeing more of the Premier League’s new look as the league continues spread around the world.

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A Premier League for the digital age

What does a post-Brexit Premier League look like?

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Credit: Getty Images

The British referendum stunned Europe and the world as the results revealed a majority opinion in favor of leaving the European Union. The vote carried with 52% in favor of departure while sharp divides in opinion were seen between age, economic and geographic demographics.

While the referendum is only a gauge of sentiment it is a strong signal that England’s departure from the European Union will happen in the near future as political parties find themselves obligated to follow through on public opinion. With Britain set to lose easy trade access and labor movement within the common market the economic implications for the country are large, so what effect will a Brexit have on the English Premier League?

The Brexit Blowback

Let’s break down the effects between economic and regulatory. As a result of the near term uncertainty around the exit specifics and projected drop in economic growth it would be expected to see:

  • devaluation in the British pound
  • drop in GBP denominated asset prices
  • slowdown in economic growth (potentially even a recession)
  • drop in average wages (decrease estimated between 1.1 – 3.1% by the LSE)

The market effects have already appeared with both the GBP/EUR and UK stock indices dropping by roughly 5% and 4% respectively on Friday. The broader economic effects stemming from investment uncertainty and strategic shifts in foreign investment will only appear in the next few years.

In terms of regulatory/legal changes the most immediate effects are:

  • loss of EU citizenship for British players
  • loss of automatically permitted movement of EU players
  • uncertain terms of access to the EU common market

Premier League

So what effect will these changes have on the Premier League? Let’s look at them grouped thematically:

1. Reduced transfer power and investor attractiveness

Devaluation of the GBP makes continental players (and likely all foreign players) more expensive in pound terms as European clubs will likely demand the same Euro transfer fees to satisfy their costs. Similarly, wage demands are likely to increase as players compensate for the reduced buying power of the British pound, both effects which could be apparent as early as this summer’s transfer window.

Additionally, Brexit impacts the overall attractiveness of British assets, mainly due to the drop in currency value but also because of the increased uncertainty about the long term health of the British economy. The effects of this are more intangible but would be seen in lower prices for clubs and a reduced willingness by foreign owners to invest in players and domestic infrastructure. While this is possible it seems less likely given the myriad reasons that investors buy Premier League clubs, from capital preservation and diversification to international prestige, as well as the league’s continuing status as one of the most popular in the world.

2. Weakness in local revenues

A British economic slowdown would likely be accompanied by a stagnation in average wages as businesses reduce workforces and competition weakens for existing labor. We can do a simple estimate of the impact to an average supporter by taking median, after-tax British income (£18,700) and applying the lowest estimated wage drop (1.1%) giving us a drop of £206 in discretionary income.

Less spendable income directly impacts Premier League clubs in three main revenue streams:

Matchday revenue (ticket sales and in-stadium purchases) is probably most under threat with Premier League ticket prices clocking in as some of the highest in Europe and as less disposable income forestalls season ticket renewals and ad-hoc game attendance.

Merchandising revenue (sale of products through direct and distribution partners) is similarly impacted by softness in consumer spending, our estimated drop of 206 easily covers a decision to not buy a new shirt or two.

Licensing revenue (partnerships leveraging club image and players) is less immediately affected but could be impacted as businesses reduce advertising spending in an uncertain consumer environment. The reduced licensing effect is likely to be felt more unevenly among the league as clubs which have more global appeal will still be able to leverage their cachet with global partners, whereas smaller clubs will rely on British/local market partners for a higher percentage of their revenue. Stoke City will not be able to balance lower local earnings by signing a lucrative Asian noodle partnership anytime soon.

3. Restricted movement of players

The potential loss of streamlined player movement within the European Union is the change with the least near term consequences but perhaps the greatest long run implications for player development and overall player quality in the Premier League. Britain’s EU exit would imply that all UK citizens would be subject to the same travel and work restrictions as citizens from any other ‘outside’ nation, potentially slowing or restricting the movement of players around the major European leagues. But there are a lot of forces at work here which make the implications much less clear, including player preferences, perceptions of the long term stability of the EU and overall club strategies.

Incoming players are foreign nationals brought in on loan or transfer. Much has been made about the list of 100 current senior players who wouldn’t be work eligible because of the stringent English FA rules applied to non-EU players. The list means little other than illustrating the type of talent English soccer could miss out on because of the exit, but it’s hard to believe that such regulations would be allowed to remain in force. Making it harder for clubs to import outstanding senior talent benefits neither players nor leagues and it would take an extraordinary amount of xenophobia to see that avenue closed off.

The bigger impact is likely to stem from the loss of access to the huge youth pool within the European Union since Britain will no longer be able to benefit from Article 19 of the FIFA Regulations, which permits the ‘transfers of minors between the age of 16 and 18 within the EU or EEA.’ Additionally, players may see England as less attractive if they are seeking easier access to a larger number of clubs or long term EU citizenship (the effects of these types of preferences are arguably mixed).

Outgoing players are foreign or domestic players loaned out or sold abroad. Britain notoriously exports little of its domestic talent with only the biggest names leaving for continental experience…and transfers of British megastars are unlikely to be stopped by legal terms. The most impacted areas are loans and sales of marginally-international level players as heightened permit requirements are likely to prevent things like Chelsea’s buy-loan strategy from operating as efficiently or with as much scale.

Brexit, Schmexit?

Overall, Brexit certainly has negative near and long term consequences for the Premier League but it’s difficult to say how significant those are compared with the phenomenal growth of the league’s popularity across the world. Do marginally increased transfer costs matter when domestic and international TV rights continue growing with every renewal and will easily surpass £2bn annually by 2018? Will players even think twice about EU access if they’re already playing on the defining international (commercial) stage of soccer?

Perhaps the only effect would be on the youth level as clubs face a decision on whether to invest more heavily in youth development in light of the lost access to elite European youth or continue buying ready made senior players from abroad. But even that decision is decision is likely to be determined more by the FA than Brexit rules given the emphasis on things like the homegrown player rules and demands of the national team.

It’s certainly up for debate whether Brexit actually will be anything more than a footnote in the meteoric rise of the Premier League as a global product.

 

What does a post-Brexit Premier League look like?

Aston Villa find new owner Xia Jiantong

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Randy Lerner has agreed the sale of Aston Villa Football Club to Chinese businessman “Tony” Xia Jiantong. The deal is reported to be worth £60 million and is pending approval by the Premier League.

The club stated that: “Aston Villa Football Club is pleased to announce that an agreement has been signed for the sale of 100 percent ownership by Randy Lerner to Recon Group, owned by Xia Jiantong. Randy Lerner has sought the right new owner for Aston Villa who would take great care of the club and restore its fortunes. He believes that Xia Jiantong is an excellent choice.”

The sale marks an end to the Lerner era, a decade of two distinct halves which saw the midlands club challenging for European places at the top and struggling at the bottom. The club recently succumbed to relegation in the most recent season and undoubtedly influenced the final selling price Lerner was able to command. It has been a painful journey for supporters and owner alike, with the former enduring years of lackluster play and the latter feeling the financial pain of a mismanaged property.

Lerner purchased Villa in 2006 for £62.2m and had invested close to £150m in the push for the Champions League, recently however the club recorded a £52m loss in 2012-13, a £3.9m loss in 2013-14 and a £27.3m loss in 2014-15. While it’s likely that Lerner recouped a portion of his investment through earned interest on debt extended to the club it doesn’t seem to be anywhere close to what was invested. This loss is especially likely given some of the debt-equity conversions he has Lerner completed recently (Swiss Ramble breaks this in incredible detail) which total approximately £175m over the past three years. Barring some yet undisclosed swap or agreement that equity is now sold off as part of the new deal. £175m in equity to £60m is a decent amount of pain.

Questions remain around the new Chinese owner “Tony” Xia Jiantong and his plans and ability to invest in the club. Recon Group appears to be a holding company with interests in diverse businesses like food additives and financial services. Xia has an equally diverse history spending several years at various educational institutions apparently including Harvard and Oxford ultimately studying design and landscape architecture.

Villa supporters will be hoping that Xia’s arrival marks a new, brighter future for the club.

Aston Villa find new owner Xia Jiantong

Aston Villa close to new owner, end of Lerner era

Aston Villa chairman Randy Lerner is close to selling the club for a price close to £150m. The Telegraph reports that the American has been in talks with three interested parties but that a sole “mystery bidder” has now been granted exclusivity to complete the due diligence process. The other interested groups were rumored to be of Chinese and American origin with one led by Paul Smith, former business director for Chelsea FC.

 

The Lerner REVOLUTION

The sale would mark the end of a nine year roller-coaster ride for the West Midlands club that saw the team swing from top four ambition to relegation desperation. Following his 2006 takeover Lerner made substantial improvements across the club: investing in players for the first and youth teams, modernizing academy infrastructure, and renovating match-day facilities. The club challenged for Champions League qualification in the following seasons until the wheels appeared to come off in the 2010/11 season, most notably punctuated by the acrimonious departure of Martin O’Neill early in the season. Results declined steadily as investment dropped off, with this season’s 17th place finish marking the lowest position of the club in almost 20 years, only to be surpassed the 18th place finish of the 1994/95 season.

From 2006 – 2011 Lerner invested nearly 200m into the club before limits on his own resources forced him to curtail spending. In the four years since, the net spend on players has dropped off considerably, with estimates at a much more modest £10m annually. The club’s biggest purchases in the post O’Neill period were Charles N’Zogbia and Christian Benteke, both brought in for £10m or less.

 

CHALLENGES OF THE MIDLANDS

The new investors have several key issues to address, in particular the need for immediate investment to stabilize league position and revamping the club’s approach to youth development. The Villans have been the fourth lowest spenders among clubs in the league for the past five seasons, having invested less than £29m on a net basis and only being underspent by Everton, Newcastle and Tottenham (Spurs also only included because of the tremendous outlier that was the Gareth Bale transfer).

EPL Net Spend 2010-2015
Net Spend of Premier League Survivors 2010-2015

Where there has been under-investment in the first team, there has been under-performance from the club’s academy system. Few of the crop brought in under Lerner have claimed regular spots in the senior team and it’s unclear whether those who have are of the quality needed to push Villa forward.

Most important is addressing Lerner’s lack of a long term growth strategy, arguably the biggest failure of his tenure, relying primarily on squad investment only to be out muscled by existing competitors and outflanked by the emergence of Manchester City. Is there room for Aston Villa in the Top Four? Is it feasible with Financial Fair Play in effect? Is mid-table stability the only realistic goal for the foreseeable future?

 

CAUTIOUS OPTIMISM

Despite recent troubles Aston Villa remain a club with a deep history, large supporter base and substantial resources to draw upon. The hangover of the past five years has been a crushing presence and lifting the burden of that history can only be a positive for the club.

Any new management that comes in will be able to work with a team that has shed its older, costly players and retained a core of talent surrounded by good prospects. The club is also still the presumptive king of the West Midlands, with control over the second most populous city in the UK to draw upon for local support and commercial opportunities. Meanwhile, the Villa name is still rated as one of the Top 25 brands of world soccer, the actual figure and ranking might need to be taken with a grain of salt but clearly there is something of value for ambitious owners to work with.

Bringing in an owner with a long time horizon and the ability to reinvigorate key areas of the club may finally realize the promise of Aston Villa in the modern era.

Aston Villa close to new owner, end of Lerner era

Premier League rights command record £5.136 billion

The Premier League announced the successful completion of its sale of UK broadcast rights for the seasons 2016/17 to 2018/19. Sky Sports and BT Sport will continue on as the broadcasters of choice with Sky winning five of the seven available match packages for a price of £4.18 billion and BT taking the remaining two packages with a winning bid of £960 million.

The £5.136 billion sale is an increase of 70% over the £3.018 billion paid for the current broadcast package covering the seasons 2013/14 to 2015/16. The number of matches for sale also increased with the league offering 168 matches per season (504 total) compared to 154 matches annually (462 total) for the previous agreement. Per match price increased at a slower (but still spectacular really…) 56% growing to £10.2 million per match from £6.5 million in the previous period.

EPL Rights 201617 - 201819

The growth of broadcast revenues in the Premier League has been astounding and represents the largest source of income for top division clubs. It will be interesting to see what effect the expectations of such significant revenue growth will have on transfer spending, ticket pricing and infrastructure investment.

Premier League rights command record £5.136 billion

Capitalizing for Financial Fair Play

I thought I would take this blog to answer one of the questions I receive most often. How is it possible for Premier League clubs to spend exorbitant amounts on new players and still remain compliant with the Financial Fair Play rules now in effect? Don’t the millions they spend violate the rules on maintaining breakeven incomes? There are a number of reasons the clubs expect to remain FFP compliant, but the most vital one is based on a core accounting principle.

Accounting 101

Source: Wikipedia

When a club incurs a cost it is treated one of two ways depending on the source. If the cost is related to a benefit that is only applicable to the current year (ex. buying medical tape for the squad) it is treated as an expense . If the cost is incurred for a benefit that is realized over multiple years (ex. improving the stadium) it is capitalized. A cost incurred for a benefit never realized is called a ‘Bebe‘. I kid because I love.

A capitalized cost is then divided over the usable lifetime of the asset. In the case of a player the usable lifetime is the length of his contract. For example, Chelsea have signed André Schürrle to a 5 year contract for £18m. The cash cost is likely to be £18m paid out immediately to Bayer Leverkusen, however the cost of the transfer for accounting/FFP purposes is £3.6m per year.

What about multiple players?

A fan of capitalization (Source: Manchester Evening News)

That puts big transfer price tags in the perspective of a FFP-conscious club. The annual cost does increase as you stack up more transfer in a single year but it makes it more plausible that a club that has spent millions over the past 5 years could actually be compliant. Let’s take a look at Manchester City (shockingly one of the clubs most often linked to this question in my mail).

Below is a schedule that lays out the amortized costs of ManCity’s transfer spending over the last 5 years.

ManCity Amortization Schedule

At the peak in 2012-13, the annual cost of the spending spree totals €94m. The actual number is less important than seeing how the headline grabbing sums are actually spread out for FFP matters.

Capitalizing for Financial Fair Play

Premier League Transfer Summary 1999-2012

UEFA is the busiest marketplace in the world for football players and the clubs of the English Premier League are the high rollers in the house. English clubs splash cash often and in large amounts. Here we will take a look at some of the data from the past twelve years of the league (1999-00 to 2011-12).

PLAYER MOVEMENT

Total Player Movements have increased almost 100% over the period, increasing from 567 in 1999 to 1,041 in 2012. This number includes players involved in loans as well as straight transfers. The growth in transfer activity implies that more players, from more clubs are all moving more frequently. The trend of more volatile squad composition is likely to be well spread too as there is a limit to how many transfers a single club can (or should) contribute per season.

Nothing too surprising in the Departure and Arrival figures, moving on… Continue reading “Premier League Transfer Summary 1999-2012”

Premier League Transfer Summary 1999-2012