Spending Money: A primer on Spurs’ financial situation ahead of the new stadium opening

Introduction

On January 31, another transfer window closed without Tottenham making any new signings. As pressure mounts for Mauricio Pochettino to lead Spurs to their first trophy in over a decade, he and Daniel Levy face scrutiny, both for failing to bring in new players and for not paying our current stars enough. However, to understand what the club can and can’t do in transfer windows and wage negotiations, it helps to have a sense of our unique financial position. We are on the cusp of a new financial era at the club, thanks to the new stadium’s increased capacity, so it’s an especially crucial time to have a grasp of the club’s business. What matters for Tottenham fans is gaining a sense of both the club’s financial standing—and the opportunities that our business position does and does not afford us—as well as an understanding of Daniel Levy’s standout business approach and the way that the club is likely to proceed under his strategic guidance. Before going any further, I’d like to thank Willl for his excellent post on the subject last year.

A football club’s business is defined by a few key factors. Revenue, the total amount of income the club generates, is the most important, because it dictates the pot of money that the club will have available to spend. The Deloitte Football Money League, an annual report on the finances of top football clubs, looks at club revenue from three main categories: Broadcast, the money that teams receive for their televised matches, commercial, the money that teams receive through the sales of jerseys, stadium tours, and other products that they sell, and matchday, which includes ticket sales and other matchday earnings. As you might expect, nearly as important as revenue are expenses. For football clubs, around half of expenses are paying player and staff wages, with the remainder being made up of transfer operations, operating costs (stadium building, for example), and other miscellaneous sources. Debt is also an increasingly influential feature of the modern game, and can complicate a club’s financial situation. It’s important to note that the data used in this article comes from the Deloitte Football Money League and other online sources, and not from the club directly. Thus, while these estimates are more or less accurate, there are certainly some inaccuracies, although it’s not possible to tell where.

Revenue

Over Pochettino’s tenure, Tottenham have grown their revenue significantly, improving their earnings and closing the gap on wealthier teams (most importantly Arsenal). This is definitely good, and we are now in the top ten richest teams in the world for only the second time, meaning that our financial firepower is beginning to reflect our on-field success and hopefully improving our chances of future success. The change has come mostly from broadcasting revenues, which have grown due to improved broadcasting deals between the Premier League and TV companies, better domestic finishes by Tottenham, which earn them a greater share of Premier League broadcasting revenue, and Champions League participation. In 2017-18, Spurs earned more than the average amount for the world’s 20 richest clubs in both broadcasting and matchday earnings, while lagging behind in the commercial section.

Part of what this reveals is the vast inequality between the richest teams and the ones that lag behind. Tottenham is somewhere in the middle: in their best year, Spurs earned £150 million less than the Manchester teams but £200 million more than Everton. This is a good description of Tottenham’s unique position in general: smaller than the big hitters but gaining on them, while also pulling away from the smaller clubs. The same pattern will hold true for wages. Notably, the Premier League is not set to receive a significant increase in broadcast revenue for at least a couple of years, so Deloitte forecasts that commercial and matchday earnings will differentiate between teams in the next couple of seasons. The outlook once the new stadium is completed should change these numbers, but more on that later.

Spurs fans are well aware of the club’s unusually strict wage structure, but these numbers reveal just how significantly the club is lagging behind the teams ahead of it. In terms of scale, Tottenham’s wage spending has been just higher than Everton’s and West Ham’s and significantly less than Arsenal and the other richer clubs. It’s remarkable that with a wage bill less than 65% of Arsenal’s, over recent years, Tottenham have been competing with and even outperforming Arsenal, Chelsea and Manchester United, among others. This speaks volumes about the quality of play and teamwork that Pochettino has managed to instill in his team, but it also begs the question: what would Pochettino do with a wage bill worth as much as the other teams? Of course, some of this is due to Spurs playing their best players far less than other clubs, but if the purse strings were looser, top talent would likely give Tottenham a longer look. People will protest that we don’t have the money, and there’s definitely credibility to the idea that Daniel Levy is an outlier in a smart way, rather than a stingy way. On the other hand, Spurs spend a smaller proportion of their money on wages than other teams:

Only Manchester United spend as little of their revenue on wages as Tottenham, and their low wage-to-revenue ratio is likely due to their massive revenues. Compared to Arsenal, for example, Spurs were not only outspent by Arsenal in 2015-16 and 2016-17, they also spent less of their revenue on player wages. It would seem, then, that Daniel Levy is indeed as careful with his spending as his reputation suggests. Why he’s so hesitant to increase his wage bill is another matter entirely. One explanation is that he doesn’t need to pay players more: the team is already performing incredibly well, and he has succeeded in negotiating with agents to keep the club’s wage bill low. Another is that the stadium project has been consuming an outsize proportion of the club’s revenue. Finally, the impact of overhauling the wage structure is difficult to imagine, and it’s possible that it wouldn’t result in substantive increases to player deals. Nevertheless, with key players like Christian Eriksen at risk of departing unless they get a better deal, the pressure is mounting for Levy to improve the deal for Spurs stars.

Again, it should come as no surprise to Tottenham supporters that the club has spent comparatively little in recent transfer windows, but the sheer numbers illuminate the gap between Spurs and other clubs. This is another important indicator of how the club’s finances are likely to play out on the pitch. Levy is spending the minimum possible amount on the maintaining the squad’s quality, even running significant profits in two years. If the club want to achieve a new level of success, it will soon be necessary to invest in the squad not only to maintain current quality, but with loftier goals in mind. In short, the next few transfer windows are essential if Tottenham want to be considered among the strongest squads in the league.

Debt and the new stadium

Tottenham have added significant amounts of debt over the past year. On June 30, 2017, the club reported that it had £14.6m cash in hand (a net debt of -£14.6m), while on June 30, 2018, the club reported £366m in net debt. This is entirely due to the stadium project, and the number will likely grow until the work is completed and the stadium is hosting games. Most clubs have around £50m or less in net debt, but the stadium project is the only factor that is worsening the amount Tottenham owes, and if earnings continue to grow when the new stadium is finished, we should be able to resolve it rather quickly. Thus, some caution is warranted, but the club’s debt is still within reason, given the outlook over the next couple of years.

Conclusion: Tottenham are already a success story

From the footballing side, it’s easy to feel like Spurs aren’t quite achieving what we’d like to, but focusing on trophies as a measure of success conceals what’s really going on. Over the past five years, the richest teams have become less and less beatable as money buys on-field success. There are few clubs outside of this rich few who have been able to seriously compete, and although Tottenham is now moving in the direction of joining that pampered pantheon, our success on the field has been outsized relative to our share of the football business. The past five years have been a new era of footballing success for Tottenham, but perhaps more remarkable is that the team achieved this with a business was better than mid-table, but until recently, far off the pace of the biggest clubs.

Spurs financial standing reveals a different situation than the popular narrative among commentators, who say often that Tottenham are already a big club, and our hesitation to spend money is costing us the glory that other big teams have laid claim to. That story, which is repeated at every transfer window, is wrong: while Tottenham have been performing like one of the best two or three clubs in England for the past few seasons, our business is taking longer to catch up. The club’s financial profile is somewhere between Everton and Arsenal, and if finances predicted league outcomes, the team could be expected to finish around sixth. The fact that the club has regularly beaten teams far larger than it for several consecutive seasons is a testament to Pochettino’s managerial quality and Daniel Levy’s business savvy.

On the other hand, if the club are serious about growing—as both a business and a team—to be truly competitive with teams like Manchester City and other club superpowers, significant investment is necessary. The new stadium is a perfect first step, and will likely enable the other developments that would make Tottenham a true contender, like an increased wage bill and bolder transfer activity. At what cost these investments might come is unclear. Perhaps a takeover would make them happen, although personally, I am prouder that Spurs have achieved what they have organically. Rather than letting business cloud what really matters, supporters should remember that today’s Tottenham has grown out of a prolonged, communal effort over many seasons to become a uniquely-competitive outfit in the Premier League and in Europe, and whether we win a trophy this season or not, that is something to be proud of.