Amazon and Facebook are about to pour more money into the Premier League

The Premier League has so much money it literally doesn’t know how to spend it. It knows how to waste the money, but it doesn’t seem to know how to spend the money. And with Facebook and Amazon and probably Twitter and every other media company out there vying for a piece of the action I have a feeling that it’s only going to get worse over the next decade.

Manchester United announced fiscal results today and during the conference call with investors Ed Woodward suggested that media interest in the Premier League will only grow.  Speaking about Facebook and Amazon, Woodward said. “Absolutely, I think they will enter the mix; anecdotally, there was incredibly strong interest in the last cycle. We are hearing that around the Premier League table and we are also hearing that from a European perspective in terms of interest in the Champions League and Europa rights. I do think we are going to see an increasing engagement from these and we would welcome the interest.”

If true, it means that Premier League clubs will have an even further influx of cash to an already cash rich league. But the problem isn’t that they have money, it’s that these clubs don’t seem to know how to spend it. Take this summer’s transfer business as an example. Nearly every team overpaid for players and some of them paid outrageous fees for average or even below average players.

Chelsea – Danny Drinkwater £35m, value £8m
Man City – Benjamin Mendy £51m, value £11m
Liverpool – Alex Oxlade-Chamberlain, £35m, value £19m (last year of his contract)
Everton – Gylfi Sigurdsson – £45m, value £23m
Bournemouth – Nathan Ake – £20m, value £7m
Crystal Palace – Mamadou Sakho – £26m, value £14m
(Source: Transfermarkt.co.uk)

This isn’t meant as a “back in my day” tale because it was literally just last year that Paul Pogba cost £95m and this year we have turned around and more than doubled that record with the transfer of Neymar to PSG for £195m. Obviously, the Neymar transfer is outside the bounds of normal football business but the inflated prices that Premier League teams are paying for mediocre players this summer are now normal football business.

Manchester United announced today that they have increased their income by £66m for fiscal year 2016/17 (last year!) and that their pre-tax profits for the year, this was the year that they bought Paul Pogba and didn’t play in the Champions League, was £57m. It’s difficult to wrap my head around how a team could spend £100m on a player, miss out on Champions League football, and still post nearly £60m in profits.

Yes, I understand that they are amortizing Pogba’s transfer fees and contract which makes his transfer a “mere” £35m per year on the books (£20m transfer and £15m wages). But as an Arsenal supporter that type of expenditure is unheard of. Wenger just broke the Arsenal transfer record on Lacazette and even at the highest reported figures, Lacazette is costing £20m per year amortized.

The Lacazette Arsenal deal, though, shows how much money is available to clubs in the Premier League. Arsenal are a notoriously stingy club when it comes to transfers. Mesut Özil, Arsenal’s previous transfer record, amortized at somewhere around £15m per season. Alexis Sanchez cost a bit less than Özil but tips in at a slightly higher £17m per year amortized. So, even Arsenal – who are tighter than a tick – are growing their expenditures, though at a more reasonable rate.

And as the Premier League splashes cash all over the world to buy up the talent they need, the result is that even teams in Italy and Spain have to pay more for players. And players cost more regardless of the position that they play.

Nathan Ake is a decent center back but he cost Bournemouth more than Chicharito cost West Ham. This was a doubly stupid move on their part – not only did they overpay for a center back, but they gave that money to a fellow Premier League team – giving Chelsea the money to waste on Danny Drinkwater, which in turn gave the money to Leicester who bought wisely in the market and got CF Iheanacho for £25m. In essence, Bournemouth bought Leicester the very player which could help Leicester relegate Bournemouth. They better hope Nathan Ake turns out to be a world class center back.

Even if your team needs center backs, you don’t break a record for them because it’s not center backs which are going to ensure your survival in the Premier League, it’s forwards and attacking players, as Bournemouth are going to find out this season.

But all of this foolish spending is just a symptom of the larger problem in the Premier League: too much money and not enough experience knowing how to spend it. This is only going to accelerate as the money pot grows.

There is a danger in holding on to money during an inflationary market. In theory, Nathan Ake might cost £40m next year. So, if you have the chance to buy a top player then you almost have to spend the money because your money is going to be worthless (literally worth less) next year. But even in an inflationary market you can’t just spend for spend’s sake and you even need to be better at spending on the players who are going to improve the team. It’s a Catch-22: you gotta spend the money because if you don’t it will cost you more next year but if you waste the money you’re going down.

And finally, as for the idea of “kicking greed out of football” I’m sorry to inform you that greed is here to stay. In this kind of market, one of huge growth for growth’s sake, it’s unlikely that owners, players, managers, or agents are suddenly going to take the less greedy route. One way which they could – especially if they aren’t going to spend money on players – is to lower ticket prices. There are some signs of some clubs, like Arsenal, doing that for away fans but a widespread effort to lower prices all across the market seems unlikely.

Qq

33 comments

  1. As big as Amazon is – it’s streaming service still falls quite a bit behind Netflix and with other players like Hulu, SlingTV etc. that space is quite congested even at these early innings. Winning the rights to stream EPL games will be a game changer for Amazon. I don’t have Amazon Prime yet but that will obviously change if I have to tune into Amazon Prime to catch these games. I am most probably among millions of Amazon users all over the world who doesn’t have Prime yet but follows the EPL and will end up becoming an Amazon Prime member. This literally turns into billions of dollars in annual revenue for Amazon (Prime is $100/year) and given their incredible cash flow from everything they are already involved in, I can see them easily outbidding any rivals for the streaming rights to the EPL. Jeff Bezos gets what he wants.

    I have given up on Wenger spending any meaningful cash to strengthen the squad but with the squad overhaul that will most certainly be needed in the next two years, we will need all the help we can get. I can only hope the next manager will use the cash wisely.

  2. Your actual article basically mentions nothing about the title…? I mean, I Googled it, but I would’ve liked to just get the information that I was promised in the title.

  3. Seller’s market , Tim.
    With that much money floating around football and a relative shortage of real quality players , it was always predictable we would get here.

    As for the greed in football, it’s everywhere you look so why not in football.

    Cheaper tickets ? Highly unlikely .
    Why would Arsenal lower ST prices when people line up to get them.

    Kroenke and other American billionaire owners would rather donate millions to Trump for a promise of huge windfall via tax cuts.
    Money ,incidentally , Trump gets to keep if he chooses to do so( wonder what certain Pires’ goatee would have to say about that btw)
    Distract the gullible public with the donation of his presidential salary to worthy causes, while at the same time pocketing hundreds times the amount from other sources, and all perfectly legal apparently.

    With all this greed abound , it’s even more admirable certain players are willing to take a huge pay cut , go out of their comfort zone and take a gamble in order to better themselves.

    And when that happens , it’s surprising to see people hoping for their failure .
    Weird.

  4. Hi, mate
    I am just going to re-make a point you made a few years ago that resonated with me. We need to look and see what is really happening with player prices. Remember when you said that inflated player prices favoured super-rich clubs/clubs with infinite resources, because only they could afford players; which indeed it did. But more and more clubs have money now, especially in the PL, with the TV deals and even other clubs by selling stars for huge prices. So we ask why did PSG spend £192m on Neymar… Yes they wanted a marque, elite, super-talented player; but by spending that much they have moved the goal posts again with regard to player prices. They have recreated a market where only they can afford the elite players; as £192 is the going rate. We saw the knock-on effects of the Neymar price on other elite talents e.g . Mbappe, Coutinho, Dembelee. We essentially had a situation where Barcelona could not afford Coutinho and could barely afford Dembele and only PSG could afford Mbappe. Post- Neymar, there is no way Barcelona could afford a “Suarez” today . PSG have recreated a market where they have first choice on any elite talent as only they can afford them, essentially a situation akin to when there were only one or two infinitely rich clubs. The reset the goal posts. The effects percolates down to all players.

  5. @Tom
    Van Chamberlain will never have my sympathy, no matter how you spin it.

    @Tim
    I’m not convinced the future is quite so bright for the Prem. No doubt you been to r/soccerstreams. I’m sure you’ve heard about ESPN’s woes. Unbundling is beginning to pick up. Twitch and the rise of spectator e-sports commands significant attention in the youth demographic. I agree Amazon/Facebook represents an opportunity, but I’m not sure it will provide the 4x revenue growth that Danny Drinkwater for 35MM implies.

    1. Dr DUH
      Where’s the spin?
      He took a pay cut to the tune of millions of pounds.
      Picked a more challenging option to move to a new club under a new manager with probably as much ,or perhaps even more pressure to succeed from fans than at Arsenal.

      Perhaps I’m missing somethings here, do enlighten me.

    2. “Van Chamberlain.”

      We shouldn’t take Ox’s decision to leave as a betrayal. In fact, it was kind of ballsy to leave his comfort zone. He had a very nice life in London, was playing every week when fit, was one of the live wires of the dressing room and much loved by the players and media staff, had the obligatory pop star girlfriend and a pick of much better nightlife in London — and could have earned a lot more money by staying at Arsenal.

      The shallow beeyatch of a football tribalist in me is enjoying him riding the pine, enjoying the sight of the klutz looking like he’s now learning the game when he does play, and the expressions of buyer’s remorse from Liverpool fans. The pragmatist in me realises that he’s just the new guy at the office trying to figure out how the printer works. And figure it out he will. He was good business for Liverpool in this market…

      … and good business for us. We got £40m for an eminently replaceable squad player who was going to walk free in 10 months.

      The Ox didn’t betray Arsenal. I hope the fans give him a warm reception when he comes back to the Emirates, but I know that they won’t.

      1. Great comment, Claude.
        I posted something similar but far less eloquent , but apparently it got stuck in moderation.

    3. Van Chamberlain missed 82 games and 513 days.
      Wenger stood by him despite all of his injuries and difficulties. Found a way to get him minutes, tried him in different spots to see what would unleash his potential, while minimizing his deficiencies. The chief of which was his tendency to switch off on defense. The minute he starts to gain some traction he leaves for greener pastures and then delivers a little swipe at Wenger, perhaps unintentional, but easily foreseeable.

      He’s looking out for number one. Which is fine. But it’s the opposite of loyalty. If I’m a customer, I pay my money and expect a quality product. If I’m a supporter then I am loyal to the club and expect loyalty from the club and the players.

      1. Agree with much of that, particularly the observation of Wenger standing by him and finding ways to get him minutes.

      2. ” The minute he starts to gain some traction he leaves for greener pastures ”

        Huh?
        Less money, shit town, and bigger pressure to come good because of a fairly steep price tag and Liverpool’s lengthy title dry spell Klopp said would end within the next three years. Something Wenger would never promise in order to keep the expectations low.

        Ox could’ve stayed put , collected his £180k per week instead the £120k for the next four or five years and no one would bat an eye if he didn’t progress one iota because most said he was overrated and overindulged by Wenger.

        Someone has got to explain to one of us the concept of greener pastures.

  6. I’m past caring about the financial side of football. I used to feel scandalized when player X cost Y euros or pounds; remember Ashley Young’s transfer? Andriy Schevchenko? Andy effing Carroll? It was crazy, it’s getting crazier every year and it’s making me feel nothing but empty inside when I think of football. With all due respect to Swiss Ramble, et al., I just want to watch good football. I don’t want to be a part time accountant just to follow football so I can assign fair value and feel appropriately smug or scandalized by what a player cost. Ain’t nobody got time for that. I sure don’t.

      1. I assume that comment was tongue in cheek! Quite the opposite, in fact, though snobby purists like me don’t like the direction the growth is headed.

  7. This is human nature, not economics. Greed has been part and parcel of professional sport for a long time and it will continue to be.

    But there is a pure and natural dimension to sport that can always be appreciated despite the circus in any given period.

    Bergkamp’s spinorama goal, Giroud’s scorpion kick goal, Fabianski saving penalties in the cup final.

    Those are the moments that matter even more when sharks are circling the waters.

    1. You’re not wrong – I feel like I’m watching football in spite of the investment rather than because of it.

      It’s always been those moments you watch for, I guess, but it seems like the surrounding circus is becoming increasingly distracting; the way pundits scramble for a narrative without paying heed to the stories that are already there is always a little worrying.

  8. Talking of money, just read that Stan Kroenke was among NFL owner/billionaires who gave millions to Trump.

    Think about that for a moment. Donald Trump is pocketing Kroenke money. Kroenke is pocketing more of the money generated from Arsenal than we’d like him to, because it’s money that he doesn’t invest in a central midfielder.

    1. I thought the money being taken out was negligible. LIke $3M a year and it supported StatDNA. I don’t have a problem with that per se.

      Unlike the Glazers, Kroenke didn’t load Arsenal up with debt to buy the team. So he isn’t really asset stripping.

      “The offer will not be funded by way of any debt finance (banks loans, payment in kind loans or other debt or quasi-debt interest bearing obligations) for which the payment of interest on, repayment of or security for any liability (contingent or otherwise) will depend on the business of Arsenal.”
      http://www.bbc.com/sport/football/13040475

      That said, I’m not sure what he is using to secure the NFL stadium loan. To the extent that he may be using Arsenal shares, he has an interest in not encumbering our balance sheet with expensive player acquisitions.

      1. Exactly right. I’m not an accountant but even I know that Arsenal are a non-profit which means the owners do not take out dividends. So Kroenke grows richer by virtue of owning Arsenal and the increasing market value of the club that gives him increasing net worth. He can sell his shares and profit that way, (but he hasn’t because Arsenal are publicly traded and movement of shares always generates news) but he cannot take Arsenal’s net income and give it to Trump or anyone else for that matter. Even that 3 million pound consulting fee I thought was stopped because of the uproar from the supporters.

        1. I have always thought this is as well. Arsenal is an net asset vehicle which can be a tremendous boost to Kroenke when trying to obtaining financing for capital projects/stadium building, acquiring the next team or buying another huge ranch or maybe the entire state of Texas.

          Do you think he’ll “take a knee” when they play the Stars n Stripes at the next Rams game?

        2. “Donald Trump is pocketing Kroenke money. Kroenke is pocketing more of the money generated from Arsenal than we’d like him to, because it’s money that he doesn’t invest in a central midfielder.”

          I did not say that Trump is pocketing Arsenal money. As a former journo, I choose my words carefully.

          For someone who lauds the values of the club we both love, you’re way missing the salient point here (today, kneel-day of all days)… which is The Donald, Arsenal Football Club values, and what it those two things say about Kroenke’s ownership of AFC.

          Given our roots, Stan doesn’t represent our values. You can be blase about Stan, but this is huge for some of us.

          And no, Arsenal are not a non-profit. None of the top flight clubs is a non-profit. They’re all businesses.

          1. Kroenke donated $1m to Trumps inaugural fund which took in over $106m in total donations – roughly double the amount of Obama’s inaugural fund.

            Unlike the financial contributions to elect, inaugural donations don’t come under scrutiny of regulators and Trump can virtually pocket whatever money is remaining after paying the bill for his inauguration concert, which btw was billed out at $25 m .

            Obama’s inaugural concert featured a line up of A – list performers and still only cost about $5 m.
            Trump’s, on the other hand ,featured no high profile artist yet cost five times more?
            Putting out such number can only serve as a trial baloon to see what kind of reaction this information will be met with , which might determine what Trump decides to do with the remaining $81m that was promised to be donated to various charities.

            There’s no law saying Trump can’t keep any of that money for himself,
            and going by his record of charitable donations he may very well keep it.

            There will be no government audit of the Trump inaugural fund’s distribution of money.

            Thank goodness we dodged the bullet of the crooked , greedy Hilary though.

  9. Also, not on topic but did anyone see Morata’s hat trick yesterday? He’s some player. The way he left Shawcross for dead for one of the goals brought a little tear to my eye. Something good happening to Chelsea is still preferable to something bad happening to Stoke and Shawcross in particular, I guess. Also, it makes me even more proud that he was hardly in the game against us two weeks ago.

    1. yeah, talking about a giroud upgrade, morata was the most legitimate option available this summer, in my mind (and to a lesser extent, lukaku). morata is a proper center forward with tremendous upside. both claudeivan and i were talking him up since last summer. instead, arsenal signed lacazette for roughly the same money. go figure. morata’s already proven he’s a better center forward than lacazette and at a younger age.

      lacazette is a decent player and may even be a better soccer player than giroud but he’s not a better center forward than giroud, let alone morata. if everton were to come in with the rumored £40 million offer for giroud and arsenal were still starting lacazette ahead of giroud at center forward, don’t be surprised to see him leave. likewise, i promise not to be surprised to see people refer to him as “van giroud”, as disgraceful as that would be.

      1. True. And Shard liked him as well, a rare moment of accord between us. 🙂

        If you’d asked me to choose between the two, I’d have picked Morata over Laca every day. But hey, he’s a Chelsea player, and Laca is what/who we have. At least, like Eduardo, he knows where the goal is. But Morata is a proper CF, built for this league. He can finesse, he can bruise and bully, and he can provide a good turn of speed.

  10. How can you control the rising bile in your throat when watching those teams both at the same time? You’re a doctor – you must have some trick involving antacid or alcohol or both.

  11. How can you possibly watch those two teams (both on the pitch at the same) without bike rising to your throat??

    I put it down to some medical secret that you have experimented with as doctor. Possibly involving a combination of antacid, alcohol and holding your nose.

  12. It’s an Arsenal blog but I gotta ask:

    If you’re an American what would you do?

    Stand up or sit down or do something else as the national anthem plays?

    Almost half the population elected this mess. Living with it is a challenge as any smart and informed grade schooler might have predicted.

  13. A remarkable sporting moment occurred in the NFL today.

    Politics has no place in sport? It always has. Ask Ali, ask Jesse Owens, ask Tommie Smith.

    Donald Trump feeds on racial politics and bigotry, and a significant swathe of America wasn’t having it today.

    I hope you write about it, Tim.

  14. Funny how the white NFL owners, coaches and players suddenly found religion and stood up against the racist Trump, but only after his overt racism has hit too close to home and threatened to effect their bottom line.

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