New Everton stadium arriving at right time to face looming problem all clubs are trying to deal with
For Everton, a fresh beginning is on the horizon. By the end of this year, the club could be under new ownership as The Friedkin Group (TFG) edges closer to gaining regulatory approval to seal the deal.
The Toffees have lurched from one financial crisis to another in recent years as the heavy spending in the early years of the Farhad Moshiri reign was not backed up by revenues rising at a fast enough rate, while on-pitch struggles and the very pressing need to find the funds to complete the build of the new stadium at Bramley-Moore Dock making it challenging for the club.
Twice last year Everton were landed with points deductions, amounting to eight after appeal. The club had been found to be in breach of the Premier League’s profit and sustainability regulations (PSR) on two separate occasions for breaches occurring in 2021/22, and 2022/23.
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After the failed takeover attempt by the now-collapsed 777 Partners, TFG came back to the table and look set to take over at a club where there are some blue skies peeking out amid what had been gloomy grey clouds.
It cannot be overstated just how important it will be to Everton to move away from Goodison Park to their new 52,888-seater home. As sentimental as Goodison is, and as important its place is in English football history, the need for the club as a business to operate successfully in years to come is predicated on its ability to make the most of the most valuable tangible asset they have, which is the new stadium on the banks of the River Mersey.
The requirement to raise commercial revenues and matchday revenues is now more important than it has ever been before.
The Premier League as a whole has a huge dependency on the revenues that it brings in from broadcasters. The current domestic rights, just entering a new cycle, were agreed at a £6.5bn price over four years, for 270 games per season. The international rights, which are in the process of tenders for the next cycle, were most recently at £5bn for three years.
That money gets pooled and distributed across the clubs via central funding, with 50% split equally, 25% based on the number of television appearances with a stipulated minimum amount (facility fees), and 25% based on where that club finishes in the league (merit payment).
The broadcast revenues are what have supercharged the Premier League’s growth as a global brand and ensured that even the teams in the lower reaches can stand to make more money from TV money than some teams battling for Champions League places in other major European leagues. The transfer fees, the wages, and the agents' fees have all risen as a result of the Premier League’s access to plentiful cash, and that has seen the transfer market boom.
But some clubs have started to try and curb their reliance on the big cheques arriving from the Premier League TV pot, although it isn’t an easy thing to wean a club off.
Of Everton’s total revenue, 67% of it comes from the money that broadcast rights bring in. It delivered, in 2022/23, a sum of £116m against £172.2m turnover. The so-called ‘big six’ sit around 40%, while clubs such as Nottingham Forest sit around 80%, and Bournemouth stand at about 87%.
All of those figures are hardly surprising given the biggest clubs bring in the largest revenue, and they have the ability to generate more from other avenues such as commercial activity.
But why should all this matter? After all, broadcast revenues have seemingly been rising at a phenomenal rate and there is nothing to suggest that the good times will stop, right? Well, actually, not quite.
The current £6.7bn domestic deal might seem like a huge £1.7bn rise on the previous cycle on the face of it, but in reality, it is over four years instead of three and involved the Premier League giving away more in terms of inventory, an extra 70 games per season, up from 200 to 270. That actually means there has been a diminution of the value of each individual game shown.
While that might not seem like a huge problem, and the commitment for a longer period of time might seem like it suggests confidence in the market, there is only so far broadcasters will be able to keep pushing to pay for the product.
For so long the idea of a direct-to-consumer offering has been mooted, something akin to ‘Premflix’, where the Premier League produces the content and has ownership of the intellectual property and all that comes with it. That is valuable, but it would also be hugely expensive to set up. It would involve clubs suffering lean years in terms of broadcast rights income, and for some, it might create potentially catastrophic consequences. Not many team owners, right now, would be seeking to have the broadcast rights slashed while the Premier League sets up shop.
Other factors are at play and people want a return on their investment, so stacked have been the chips in favour of broadcast revenues that many clubs couldn’t cope with a significant reduction.
The signs are already starting to show at potential choppy waters ahead, which is why many clubs are now trying to reduce that percentage of broadcast revenue against turnover.
Sky, who hold the biggest and most valuable set of Premier League rights and have done so since the competition’s creation in 1992, posted losses of £750m. Now, that isn’t down to the football having lost them all that money, but the constant need to keep paying more against the backdrop of more and more people moving away from the traditional satellite package and on to online streaming, as well as the rise of piracy through IPTV, means that the prospects for growth to support further, heavier investment don’t look promising.
For the most recent cycle of rights for English football’s top tier, Sky paid more than £5bn to acquire four out of five available packages of Premier League games, which will see it broadcast a record number of matches – at least 215 a season – from next year.
The live sporting event, particularly football, has been seen for a long time as the best way to drive subscriptions, and that is what sees the value so high. The likes of Amazon have already dipped their toe in the water, while Netflix may try in the future. But all face challenges to grow revenues, and nobody will be able to swallow a never-ending steep incline of broadcast rights rises, something will have to give.
Raising more from commercial income and matchday revenue, which will arrive as a direct result of the new stadium being built and the myriad opportunities it presents that Everton have never been able to tap into before, will be a key part of the plan for TFG, it is one of the reasons that the Toffees have remained an attractive investment proposition despite heavy debt burdens and a chaotic recent financial past.
They are also likely to have to explore new ways that the relationship with the global fanbase can be monetised to a greater extent by harnessing new technologies.
For now, the money keeps on flowing in from broadcast rights, especially for those clubs who can count on the lucrative sums that arrive from Champions League football. But for all Premier League clubs, Everton included, keeping the percentage of broadcast revenue to turnover on a downward trend will be absolutely vital to protect against the potential issues that are starting to gather on the horizon.
Everton and TFG may find that the new stadium which had seemed like such a millstone around the club’s neck during times of financial strife in recent years, will be what helps them to reduce the reliance on broadcast and build a more solid platform for future success than they would have otherwise been able to do.