Payday: The Barclays Premier League and Prize Payouts

As the Barclay’s Premier League transfer window winds down, it’s difficult to not get caught up in the mass of rumors, reports and articles purporting to be ‘in-the-know’ concerning big money moves and contract negotiations. The January window is usually less glamorous and intriguing than the summer period, yet die-hard fans still find themselves scouring the internet and twitter for any whiff of news concerning their team. For the fan, it’s like Christmas all over again. Only this time, the disappointment of getting socks and underwear translates into your club spending on a player who underachieves, is injury prone or is just plain terrible. No more underwear; Premier League fans want an expensive watches, iPhones, Playstations and laptops. That is, they want their clubs to spend big and bring in those big names who can lift their team to glory.

Big money signings, a traditional hallmark of the summer transfer period, are much rarer in January, but they do happen.

Recently, Juan Mata’s move from Chelsea to Manchester United has caught the attention of everyone. The Spanish midfielder’s £37 million ($61 million) move, a price demonstrating the inflated values of players in January, also highlights the lengths (and costs) teams will go to in order to challenge for the top spots. For another stimulating look at Mata's transfer on The Richest, click here.

Mata’s price-tag is directly linked to his quality as a creative attacking player. It is also linked to the fact that Manchester United have struggled with their form this season and are desperate to add quality to their side. In this case, quality and need combined in a move which saw Mata’s transfer value jump more than 50% when compared to Chelsea’s initial purchase in 2011. This begs the question; Is it worth it? Why do EPL clubs dish out tens of millions of dollars ever year? The players will tell you that the thrill of winning and lifting a trophy is an ultimate goal. For the clubs, however, the monetary payouts far exceed the thrill of lifting some silverware. Trophies may attract players, but only money can buy them. League, Cup and European competitions all provide a chance for glory for players, and a massive payday for the clubs.

In the case of the EPL, a title also translates into millions of dollars in prize money and television revenue. Manchester United, winners of the 2012/13 season, pocketed approximately £61 million ($100 million) for their accomplishment. This in itself explains why and how a club like United can spend $61 million on a player in the transfer window. Just how much a club can earn from winning the league is set to increase dramatically for the 2013/2014 season. This pay hike can be attributed to recent bids for the rights to televise league games. Sky Broadcasting and the BT Group, two giants in the British telecommunications industry, have obtained the broadcast rights for the EPL for a staggering £1 billion ($1.65 billion). This potentially means that future league winners are now in a position to pocket as much as £100 million ($165 million) when they lift the trophy at the end of the season.

With such a prize at stake it is understandable why clubs break the bank to land players who can win them games. A single £20-40 million transfer in August or January can appear insane at first, yet result in a multi-million dollar payoff. This was made abundantly clear last season when Manchester United’s title run was inspired by the £24 million ($39.5 million) purchase of Arsenal’s Robin van Persie. Given he had only one year left on his contract with Arsenal, the outlay by United for the Dutch striker turned more than one head. Waiting until the end of the 2012/13 season would have potentially seen van Persie available on a free transfer. Sir Alex Ferguson, the now retired manager of United, opted to move fast with the checkbook and nobody questions the move now. Van Persie’s quality and 26 goals not only helped United to the League title but also ensured them a place in the lucrative UEFA Champions League. In the EPL, the old adage appears spot-on – you need to spend money to make money.

In the Premier League, only the top four clubs qualify for the UEFA Champions League. The elite competition sees the best clubs from Europe’s top leagues pitted against one another. For the players, it is a chance to play with the best, against the best. For the clubs, winning takes on a different dimension as tens of millions of dollars in prize and television money are at stake. Just qualifying for the preliminary group stage of the competition ensures a prize payout of €8.6 million ($11.7 million). With each win in the group stage, a club rakes in a further $1.4 million. In conjunction with television money, winning the UEFA Champions League can net over €60 million ($82 million) for a club and provide automatic qualification in the next year’s competition. Payouts for participants will increase over the years to come, especially given the BT Group’s successful bid of £900 million ($1.48 billion) to secure television broadcast rights. As success in the EPL ensures a chance to play in the Champions League, it further explains why clubs spend so much on player transfers in the summer and January.

The League title and Champions League are the ultimate prizes for many clubs and players. We should not, however, discount the smaller domestic cup competitions. Players often cite the emotion and thrill of challenging for the Budweiser FA or Capitol One League Cups. While the prize payouts are substantially less than other competitions, domestic cup campaigns can help clubs fill their coffers with several millions of dollars and provide automatic qualification for the Europa League – the UEFA competition one step down from the Champions League. The FA Cup is often viewed as the top domestic cup competition and is second only to the Premier League in domestic prestige and television coverage. That said, the money a club can potentially earn is a fraction of the money available to league winners.

A club which wins the FA cup can collect approximately £3.4 million ($5.6 million) in prize money and around £700,000 ($1.1 million) in television money. The Capitol One League Cup is considered to be a lesser competition than the FA Cup. This is evident in the prize payout which, in comparison with other competitions, is a meager £100,000 ($165,000). The drop in money and television coverage for these competitions helps to explain why top tier clubs are often reluctant to play their best players in cup competitions. The Capitol One Cup especially sees the top clubs fielding significant numbers of youth players and substitutes in an effort to rest starting players for the more important competitions.

More than the prize money involved, both the FA Cup and League Cup provide automatic qualification for the Europa League. This league is not as prestigious as the Champions League, nor does it pay out as much in prize money. This is evident with the 2012/13 Europe League winners Chelsea collecting €10.7 million ($14.6 million) in prize and television money. Yet, it is a competition which can be just as challenging as the Champions League. While the largest and most successful Premier League teams see the Europa League as a second-rate competition, smaller clubs do not. Wigan Athletic and Swansea, winners of the 2012/13 FA and League cups respectively, qualified for the 2013/14 Europa League and enjoyed the benefits of extra ticket revenue and television coverage. Participation in the group stage alone meant both clubs’ potential earnings were as high as $2.5 million.

For a top level EPL team, success truly breeds more success. A successful team can attract top talent which in turn can help the club achieve more. The EPL and its clubs are also part of a business which needs to make and spend money. Through this, success and money are inextricably linked. Millions must be spent to obtain the services of quality players who in turn help the club win and attain more prize money. At first glance, many onlookers may shake their heads at the astronomical figures that get thrown around in the transfer window. Yet, once you see the potential prize waiting to be scooped, it often ends up making sense – or dollars.

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