Can Spurs compete financially? An analysis of Tottenham's present and future financial situation

Richard Heathcote/Getty Images

Over the past couple seasons, as Spurs have catapulted themselves to the upper echelons of the footballing world, we’ve repeatedly found ourselves, Davids, among a crowd of Goliaths, except Goliath traded in his size and muscles for billions of dollars in morally-questionably attained oil wealth. We have simply been unable to compete with other large clubs off the pitch that we hope to eventually unseat in the footballing pantheon, even if we have already surpassed many of them on the pitch. In the span of a week, we’ve lost out to bigger clubs in both our inability to compete in wages (Kyle Walker) and transfer spending (Foyth).

So how can we compete? Fortunately, our chairman has a plan, and has set Spurs on a course to massively boost our revenues. In addition to a shrewd recruitment and development strategy to boost results on the pitch, he’s building an entirely new pitch in itself. The new stadium, as everyone knows, will also enhance our revenue in capacity alone, but will also vault Spurs to new commercial and marketing opportunities unattainable with our historical if slightly decrepit White Hart Lane.

We, Spurs fans, often talk about our brighter future, but to date I have not seen any account of how that bright future translates into reality. Just exactly how much is this new stadium going to earn for us? How are all these new sponsorship and television revenues going to affect the club? What are the implications of all this new-found wealth on Spurs in the mid-term? Will we be able to close the gap on these footballing Goliaths? Or will we continue to find ourselves out-bid and stuck in limbo; too good to settle for occasional European appearances but not good enough to be able to build a team capable of competing regularly in the Champions’ League?

So instead of anxiously awaiting summer signings that may never come, I’ve crunched the numbers, in the hope that maybe next summer or the one after that, we won’t find ourselves priced out of all our targets.

I’ll first give a very brief overview of football financials, the current financial state of Spurs, and then look at our future potential earnings.

And right now is a perfect time to do so. The financial information available at the moment account for the 2015/16 season; a pivotal season for several reasons. First, it was the last season of the old PL TV deal. Second, it was our last season in the Europa League (hopefully for a very long time). Third, it was the last season of several of our old sponsorship deals. 2015/16 was generally the end of the Tottenham of old.

Footballing Financials

A special hat-tip goes to The Swiss Ramble, which is by far one of the most interesting and easy-to-understand football financial blogs out there. I strongly recommend you go there and read his blog post on Spurs from April 2016. It’s an incredibly useful resource, and one I will draw upon regularly in this post (and shamelessly rip off). Another great resource is The Guardian’s annual Premier League Finances article, which I have also drawn on extensively for data (instead of trawling through each club’s annual financial reports).

To simplify matters, there are essentially three ways a club earns money: television revenues, match day income and commercial revenue.

Television revenues are just what they appear to be: clubs get paid for their games to be televised. In the Premier League, there is an extremely equitable division of revenue. The highest earning club will only make about 50% more than the lowest earner. Other leagues aren’t so equitable. In La Liga, for example, Real Madrid earn 500% more than the lowest earner. In 2014, the Premier League set out to renegotiate their broadcasting deals, and… negotiate they did. Their new deal amounted to almost £6billion, nearly doubling the previous deal of £3billion. Consequently, when the new deal came into force, the 2016/17 season, TV revenues to each Premier League team skyrocketed, and we’re now seeing the consequences in the absurdity of the transfer market. While the new television deal does not pose an advantage to any one Premier League team, as the revenues are distributed very equitably (some might argue it actually poses a disadvantage by artificially inflating the cost of everything), the deal does pose an immense comparative advantage on literally every other club in the world. This will have a big impact on Spurs’ financial status.

It’s also important to note that European football revenue is lumped in with reporting on television, or sometimes referred to as ‘broadcasting’ revenue. The majority of Champions’ League revenue comes from Champions’ League television rights, but an important, but minority, chunk of it is based off games won and bonuses for advancing each round.

Matchday income is the revenue earned primarily from the sale of tickets. There are generally two fool-proof ways to increase this: play more games, so you can sell more tickets or add more seats, so you can sell more tickets. The former can be done by competing in more competitions and for longer. Deep domestic cup runs and European football are really the only ways to accomplish this. Adding more seats can be more complicated and costly, but in the long-run a financially prudent decision.

Commercial revenue is less straight-forward than the other two. Clubs can boost their commercial revenue in a number of ways. The most obvious ways are through sponsorship: kit and shirt sponsors being the most common and profitable, but also by appointing official tire sponsors, formal-wear partners, or even IT enterprise networking partner, because when seeking technical business solutions, I always look to my favorite football team for recommendations! These sponsorship deals are complicated and often very shady (see Manchester City’s money laundering scheme with Etihad, as an example). They’re also entirely detached from objective factors like league finish, or tickets sold, but instead on the ability of the club to market their team regardless of on-field success in the past decade and on companies’ subjective perceptions of that club’s ability to market their product. Like in La Liga, where television revenues are massively unbalanced, this is where the real discrepancies in Premier League revenues emerge: Manchester United earned 45 times more than Bournemouth did commercially last year. Manchester United earned more commercially than the 14 poorest teams. Combined.

Wages: Football teams can spend their money in any number of ways, on player transfers, on debt, on executives’ salaries, on sexual harassment lawsuits, on financial fair play penalties, or even on a larger-than-life-sized statue of Michael Jackson. But for the purpose of this article, we’ll only look at the most important expense: wages. Clubs annually report on their wages, though this accounts for more than just the 25 first team players’ weekly wages, but also coaching staff, non-first team and academy players, as well as possibly non-footballing staff. While not as extreme as the commercial revenue disparity, the wage disparity is rather large. The team with the largest wage bill (again, Manchester United) spent four times more than the team with the smallest wage bill (Watford). With each club allocated the same set number of senior players each clubs and in general other staff, that can buy you much higher quality players.

In the Premier League, teams spend anywhere between 45% and 84% of their total revenue on wages. On average, it’s about 60%, and has hovered between 60 and 70% league-wide over the previous seasons. We will use 60% as the ‘sweet spot’ to calculate the expected wages of a club given its revenue.

Spurs past and current financial status

I won’t rehash too much here. I’d again suggest you visit the Swiss Ramble article on Spurs last year for a comprehensive overview of Spurs’ past financial state, but I will briefly summarize.

Spurs’ revenues have steadily increased from 2009, with a boost from first Champions’ League appearance in 2011, we’ve more than doubled our commercial and television revenues since 2009, while matchday income has understandably been maxed out, and only increased by 4% in that same span.


Spurs' Total Revenue 2009-2015 (in £m)

This is admirable, but it becomes less impressive when compared to the other big clubs. For television revenues, all Premier League clubs are, for better or worse, in it together, but the commercial revenues of the other big 5 clubs have far outpaced Spurs.

Top 6 Commercial Revenue 2009-2015 (in £m)

Top 6 Commercial Revenue 2009-2015 (in £m)

Top 6 UEFA Revenue 2010-2015 (in £m)

Top 6 UEFA Revenue 2010-2015 (in £m)

Coupled with the fact that Spurs have not featured as regularly in the Champions’ League as their rivals, Spurs find themselves firmly stuck in limbo between the rest of the League and their five direct rivals.

2014/15 Premier League Clubs

2014/15 Premier League Clubs' Total Revenue (in £m)

However, these charts capture Spurs right before their ascendancy. After all, we did just qualify for the Champions League in consecutive years. We did get a huge boost in revenue from the new Premier League television deal, we signed a few lucrative sponsorship deals, and have a new stadium in the works. Things aren’t quite so dire as they were when these charts were made last year. Let’s look at some updated charts!

The other clubs have continued to rake in obscene sponsorship deals. For example, Chelsea signed a £60m/year deal with Nike, whereas ours is only for £25m. However, the gap has still narrowed a bit.

2016/17 Premier League Total Revenue

2016/17 Premier League Clubs Total Revenue (in £m)

Manchester United have blown away their competition, despite playing mediocre football for half a decade. For all the criticism of Ed Woodward, he’s made them wealthy beyond their imaginations, and can very easily afford to make Pogba-like purchases every summer. Liverpool and Chelsea, however, appear within reach, though we are buoyed by an additional £40m for playing in the Champions League, and them missing out. That narrow gap will widen next year.

Speaking of European football, let’s look at those TV revenue charts again. For this past season, data isn’t available and UEFA’s market pool allocation algorithm makes no sense, so I’ve just taken comparable finishes from 15/16 and used them for 16/17 (for example, United dropped out of CL in the group stages in 15/16 like Spurs in 16/17, so I allocated them the same prize money).

Top 6 UEFA Revenue 2010-2017 (in £m)

Top 6 UEFA Revenue 2010-2017 (in £m)

Still, not very good for Spurs. And with the Europa League being given a financial boost last year (total EL prize money jumped from €240m to over €400m), the CL/EL divide isn’t as great as it used to be. With that said, Spurs very likely made as much money for botching the group stages of the CL, as United did for winning the EL. Also, with 5 of those 6 teams in the Champions League this upcoming season, there is very little ground to be made up here for Spurs.

How about commercial growth? Spurs did recently sign a new kit sponsorship deal with Nike, set to give them £25m per season, £15m more than their previous deal with Under Armour. They also signed a new deal with AIA to extend their shirt sponsorship until 2022. There are no terms publicly available about this deal, which is relatively suspicious. Clubs are often very proud to highlight the terms (United regularly brag about their $500m deal with Chevrolet). All that has been reported is that it is an increase on the previous £16m deal. I wonder if the sponsorship could be tied to the new stadium naming rights, but I’ll get to that later. For the time being, I’m conservatively estimating the sponsorship deal is a modest £5m increase to £21m per season, still far short of the £59m United receive, £40m for Chelsea, and £30m agreements that both Arsenal and Liverpool signed with their sponsors many seasons ago. All in all, this boosts our commercial revenue to at least £80m, but still miles behind our rivals, while only Chelsea have signed a new high-profile sponsor (Nike) in the previous two years.

Commercial revenue growth of the Top 6 (in £m)

Commercial revenue growth of the Top 6 (in £m)

That leaves us with one big fat revenue stream left: Premier League television rights. In 2015/16, Spurs earned £95.2m for finishing in 3rd. In 2016/17, we earned £148.5, a whopping £53m bonus. Every club earned between £27m (Sunderland) and £66m (Chelsea) more than last season.

All in all, Spurs have set them up very nicely. In the last two years alone, we have increased our revenue by over 50% and £100m to just over £300m, with the only variable revenue stream with the potential to drop being Champions League qualification.


Spurs' Total Revenue 2008-2017 (in £m)

This begs the question of how are Spurs spending their money, specifically on players? Well, Spurs are spending a lot of money. In 2015/16, Spurs had a wage bill of £100m, which steadily grew from 2008 to 2011, but has plateaued somewhat since 2011, hovering between £90 and £101m since then.


Spurs' Wages 2008-2015 (in £m)

Our wage bill of £100m was the 6th highest, but orders of magnitude behind our rivals.

2015-16 Premier League wages

2015-16 Premier League wages (in £m)

In fact, our wages only barely surpassed the likes of Aston Villa (£93m), Sunderland (£84m) and Crystal Palace (£81m), which is a testament to Levy and Pochettino’s ability to draw the best out of his comparatively affordable squad. Spurs actually spent the second least as a proportion of wages to total revenue or turnover (48%). Interestingly, United with their mega-wealth, spent the least wages:revenue (45%) but still spent the most in total wages. If we revisit this average of 60% wages:revenue to determine ‘expected’ wages, we can see that Spurs are punching below their weight in this regard, while Liverpool, Aston Villa and Chelsea, for example, are spending a bit beyond their means.

2015-16 Premier League wages vs.

2015-16 Premier League wages vs. 'expected' wages (in £m)

In 2016/17, Spurs overhauled their wage bill without really adding anyone of significance. Spurs signed more than a dozen players to contract extensions with presumably increased wages for each player. The wage bill for the club in the 16/17 season is not yet available, but it’s safe to assume it will have increased substantially. My completely uninformed by educated guess would estimate our wages to have increased between £20-30m, putting us somewhere around £125m, right in line with my ‘expected’ wages calculation.

Spurs future financial status

Ultimately, Spurs future financial status will not be greatly different from its present-day status, with the exception of one of the largest constructions currently underway in the United Kingdom: the new stadium. The new stadium will contribute to our financial well-being in two ways. First, if you look at Spurs' revenue 2008-2017 chart above, the blue bit (matchday revenue) has remained static for the past decade. In moving from White Hart Lane, capacity36,284 31,488, to the new stadium, capacity 61,559, that 25,275 seat increase will a huge boon financially. Spurs’ Director of finance and operations recently estimated Spurs matchday income would be approximately £100m per season, an increase of £60m annually.

A second source of income from the new stadium is the naming rights. Daniel Levy has made it very clear that we intend to shed the White Hart Lane name in return for a massive sponsorship deal. Arsenal, for example, received £100m to name their stadium after the Emirati airline for 15 years. But that was 2004, when 60,000 seat stadiums cost less than £400m to build, and when the Premier League record transfer was £28m for Juan Sebastian Veron. Times have changed. City signed a sketchy £400m deal with Etihad in 2011. Daniel Levy is therefore likely to seek a new mega-deal. Rumours have been swirling of a 6 year, £150m deal, and some more absurd stories of a £400m deal. Perhaps the scant details of the new sponsorship deal with AIA extended through 2022 include stadium naming rights provisions? But again, let’s be conservative, and assume Spurs receive a deal worth approximately £20m per season. All in all, that would boost Spurs revenue at least £80m annually (matchday revenue + naming rights), but potentially far more than that. Look at how that plays out when the stadium would open in 2018:


Spurs' projected total revenue (in £m)

Scroll back up to that 2016/17 Revenue chart above. That £384m in revenue would vault us ahead of Liverpool and Chelsea and just shy of Arsenal. Of course, the other clubs' revenues will also continue to grow in the coming years, but the new stadium will close the gap significantly.

Unfortunately, the stadium will need to be paid for as well. The naming rights deal will go a long way, as will the £180m that Spurs have generated in profit over the previous decade. However, the stadium costs have already ballooned to £800m from an initial estimate of £400m "largely due to construction cost inflation and the impacts of Brexit". As a result, Spurs have been forced to take out a five year £400m loan, which should cover the remainder of the project. Based on the terms of the loan, it appears Spurs intend to aggressively pay off the loan over the first four seasons in the new stadium, meaning our freedom to spend will be constrained initially. However, as I’ve noted our revenue will be increasing from around £210m per season to around £384m in our first season in the new stadium. Even if we earmark £100m per season for four seasons to pay off the loan, we will still have at a minimum an additional £75m more than we did in the 2015/16 season.

Now, that I’ve presented very conservative estimates, always estimating the lowest realistic amount: on matchday income (both in our time at Wembley and our new stadium), on the new AIA shirt sponsor, on stadium sponsorship, let’s have a little fun. What if we took some of the crazier figures – the optimistic estimates, and get carried away. Let’s assume Wembley generates £80m in matchday revenue this season (instead of £60m), that our new stadium generates £120m per season (instead of £100m), that the revised AIA shirt deal is actually worth £41m per season (instead of £21m), that Levy does get that 10 year/£400m deal he's looking for (instead of £20m/season). How would that look?

Spurs projected revenue (best-case scenario) (in £m)

Spurs' projected total revenue (best-case scenario) (in £m)

Now we’re into mega-club territory, matching revenues of the likes of Manchester City! Ultimately, this scenario is extremely unlikely, but perhaps elements of it will become true, though it is fun to imagine.

So, it’s great that billionaires get richer, right? But what effect does all this have on Spurs on the pitch? Well, these revenues boost our ability to recruit players, both in transfer spending, but also wages, two areas that have handicapped Spurs this summer.

With Spurs’ total revenue expected to rise to a conservative estimate of £384m in 2018 when the new stadium opens, we could expect out wages to similarly rise to as much as £230m, using this average of 60% wages:revenue that I used before. £230m would more than double our 2015/16 wages of £100m! To put it simply, this would revolutionize Spurs’ ability to recruit players of a higher caliber.

Knowing Daniel Levy, he will continue to operate a financially prudent business even with these huge increases in revenue, especially over the first several seasons in the new stadium. I would be surprised if our wage bill did reach £230m, but even if that money were not immediately invested in players’ wages, it could be used to fund transfers. No longer would we be required to finance a new incoming transfer with an out-going transfer, having access to an additional £170-260m in revenue per season.

However, the greatest advantage we will gain is not necessarily on our top 6 rivals, but rather on the other clubs in the Premier League, as well as teams from every other league in the world. A team with £350m in annual revenue, as we will earn at a minimum in 2018, would see us climb into the top 10 wealthiest clubs in the world, surpassing giants like Juventus and Borussia Dortmund, trailing behind only Barcelona, Real Madrid and PSG in clubs outside of England. £450m in revenue would put us in the equation for the top 5 wealthiest.

While we may have to endure a few more seasons of financial prudence as we build the stadium and aggressively pay off its loans, if you have managed to stick with me this long, you won’t need me to explain that Spurs’ future is indeed bright, and the future of English football is going to be a bit more lilywhite.

Anyone can write a FanPost, and we encourage you to do so! FanPosts are the voice of the Cartilage Free Captain readership. But before you write one: Lurk! Comment! Talk with your fellow members and get to know the site.

In This FanPost