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Tottenham's latest financial report matches its new stadium in grandeur

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It is rather fitting, that amid all the heraldry and ceremony surrounding the opening of the new stadium, Tottenham’s annual financial report was posted quietly posted to the UK government’s finance website. It is assumed that once Levy recovers from his well-deserved hangover, the club will post the report on their own website, but I have all the details to tide you over in the meantime.

Contained in the unassuming report is just as much financial heraldry as the stadium opening. Tottenham made £381m in revenue in the 2017/18 season. I have written previously about Spurs’ astounding rise to financial parity with their peers, and this report confirms what was already projected: Spurs are financial heavyweights. Their £381m of total revenue puts them on nearly exactly level terms with their bitter rivals Arsenal, whose revenue amounted to only £7m more than Spurs’ at £388m. Tottenham are also within 20% of their peers, Chelsea (£443m) and Liverpool (£455m); certainly a non-discernible gap, but exceedingly less cavernous than in years past. The Mancunian clubs remain firmly ahead of Spurs, with Manchester City raking in £500m in sketchily obtained revenue, and Manchester United collecting an obscene £590m in revenue, the third most in the world. A few months ago, Deloitte’s Football Money League announced Spurs’ arrival into the top 10 wealthiest clubs in the world, ahead of other mega-clubs like Juventus, Borussia Dortmund and Atletico Madrid, a position which is not expected to change much in the coming years. And their announced post-tax profit of £113m is the most profit ever made by a Premier League side.

Credit to @SwissRamble for some data

Tottenham’s £381m in revenue comes from largely four sources: matchday income, TV revenue, commercial revenue, and UEFA prize money.

Again, I’d like to thank Swiss Ramble for the inspiration in doing these reports. I also used his data for referencing the other Premier League clubs’ revenue streams. Check out his Twitter, it’s really great!

Matchday Income

The 2017/18 season took place entirely at Wembley Stadium. There were already indications that Wembley’s 90,000 seat capacity would have a positive effect on Spurs’ revenue. In 2016/17, Spurs played their 19 home league games at a reduced capacity White Hart Lane, and three maligned Champions League fixtures at Wembley, but we still saw a moderate uptick in revenue, which suggested Wembley would prove to be profitable, and it was. Tottenham’s matchday income increased from £45m in 2016/17 to £71m in 2017/18. Our home games at Wembley averaged 68,500, which was more than double our average attendance at White Hart Lane the previous season, which was the reason for the £26m increase in matchday income. £71m is the 5th most in the Premier League, after United, Arsenal, Liverpool and Chelsea.

TV Revenue

In past years, the new Premier League television deal catapulted Spurs and their 19 English peers to new financial heights, but since the new deal’s arrival, revenues have now remained constant. In fact, Spurs’ TV revenue take home was ever so slightly less in 2017/18 compared to 2016/17, which is attributed to Spurs’ league finish, in which we finished 3rd, compared to 2nd the previous season, and as a result, we took home £148m, about £2m less than the prior season.

Commercial Revenue

Tottenham’s commercial revenue yet again increased sharply from £61m in 2016/17 to £109m in 2017/18. This was buoyed by a few new large corporate sponsorship deals, such as AIA’s new shirt sponsor terms and Nike’s new kit deal entering on the books. In addition, corporate hospitality is included here and not in matchday income. It is likely that Wembley’s corporate hospitality facilities were an improvement upon White Hart Lane’s, enabling Spurs to increase more revenue.

Commercial revenue has always been Tottenham’s weakest revenue generator compared to their rivals, and this continues to be the case, albeit the gap is shrinking. By comparison, Manchester United raked in an incredible £276m in commercial revenue. Manchester City are not far behind, leveraging UAE’s support, to earn £232m. Both Chelsea (£165m) and Liverpool (£154m) earn about 50% more than Spurs. But interestingly, Spurs have actually surpassed Arsenal, who generated only £107m in commercial revenue in 2017/18. Spurs, however, may be approaching their ceiling for growth, locking themselves into long term deals with AIA until 2023, and Nike for an outrageous 15 year deal at £30m per season, which, at the time appears to be moderately below market rate, may prove to be a significant hindrance in years to come.

UEFA Prize Money

The final piece of the revenue pie is UEFA prize money, which proved to be substantial in 2017/18. Aided by our extremely strong group stage performance with five wins in a lucrative market, Spurs collected £53m in prize money alone (total UEFA revenue was £62.2m but portions of this are already factored in matchday income). Despite dropping out in the round of 16, Spurs earned more than quarterfinalists Barcelona and Sevilla, the 9th most in Europe and 4th most in England. Liverpool, for making the finals, earned £70m. Arsenal, for reaching the Europa League semi-finals, earned £33m.

Expenses

Now that we have established Spurs’ emplacement in the top tier of world football clubs in terms of ability to generate money, let’s look at how Spurs are spending that money.

Stadium Debt

No longer the invisible constraint on Spurs’ financials, the new stadium has opened with fanfare seven and a half months later than planned. Spurs have the good fortune of having at least six games in the new stadium to close out the season, but will soon begin shovelling money into debt repayment.

At the time of reporting, Spurs had taken £537m in financing for the stadium from a consortium of banks, drawing £445m of it. However, it should be noted after the reporting period, Spurs obtained a further £100m in financing, bringing the total debt to £637m, which is currently due to be paid in 2022.

Transfers

Transfers, remember those things? Spurs spent £68m in the purchase of players, including Sanchez, Aurier and Moura in the 2017/18 season. These are not, however, the final amounts for these players, simply the amount of money Spurs have paid at this point for them to date. Sanchez’s fee was reported to have a number of performance-based escalators that may not be triggered for several more years, so I would not draw any conclusions about their transfer fees from this figure. In addition, in accounting, players’ purchase price is amortized over the period of their stay with the club.

On the opposite side, player sales (including Walker, Bentaleb, Wimmer, Njie and Fazio) yielded £73m in profit, bringing our net transfer expenses (or profit from intangible assets) to a neat £5m.

Wages

This is perhaps the most interesting aspect of the report. In the 2017/18 season (up until 30 June 2018), as far as I can tell, the following players were granted extensions: Kane, Trippier, Winks, and Pochettino, plus a few academy players like CCV, KWP and Ogilvie (Lamela, Son and Dele’s extensions all came later than 30 June 2018), which isn’t a whole lot. Neverthless, Tottenham’s wage bill increased by £21m from £127m in 2016/17 to £148m in 2017/18. Interestingly, I believe a portion of this increase is not due to football at all, but due to Spurs having to hire substantially more staff. The wage costs include all club personnel, players, coaches and janitors, and Spurs total staff increased by nearly 10% (46 staff) this past year. 22 were "players and football administrative staff", which might lend credence to the fact that Spurs may be reinvesting in support staff like player analysis, conditioning, scouting and recruitment, several fields of which have been in flux in recent years. Another 24 staff were in administration, retail and distribution.

Altogether, the £21m rise coincides with Spurs steady rise in increasing its wage bill. However, this rise in wages does not align at all with Spurs’ meteoric rise in all other facets, as detailed above.

Spurs’ wages still remain well below their financial peers. Remember how Arsenal made £7m more than Spurs? Well, they paid their players £75m more (£223m in total). Chelsea paid their players £244m, Liverpool paid their players £264m, Manchester City paid their players £260m (though these numbers should rightfully be questioned given the revelations about City’s creative financial reporting procedures on wages), and Manchester United paid £296m.

Credit to @SwissRamble for some data

Spurs’ closest comparison was Everton, who paid their players a mere £3m less than Spurs (£145m in total)! Of course, it is remarkable that Tottenham have squeezed so much success with so little pay, but it also raises the question of how much longer can the club get away with underpaying their players. I’ve already written about this topic, so I won't revisit those discussions, but it appears this summer will be a pivotal moment in the future of the club.

The Future of Spurs' Finances

Altogether, Tottenham despite having racked up considerable debt, remain in a fantastic financial situation. They earned a Premier League record profit of £113m after taxes, and remain positioned to earn even more in the future.

Unspoken in the sections above are several subsequent big revenue opportunities, first and foremost is the new stadium. The matchday income of Tottenham Hotspur Stadium is absolutely massive. Early indications by the club suggest the stadium may be substantially more profitable than anticipated. Previously, Spurs leadership have used the Emirates as a standard for revenue to be expected at Tottenham Hotspur Stadium, which generates around £100m per year. But fans’ interest in spending money at stadium at the initial test events have smashed the clubs’ expectations. One rumour suggested that Spurs sold more food and beverages in the first test event with 6,000 fans than they anticipated selling at a regular Premier League match. Therefore, it is not hard to see how with Spurs’ competitive pricing and superior hyper-luxury hospitality offerings compared to the Emirates, that the stadium could exceed annual earnings of £100m. However, in the short term, i.e. next annual report, matchday income will drop. Attendance at Wembley dropped precipitously as the season wore on, which will result in lower revenue next year. But it will only be a minor blip.

In addition, Spurs still have considerable potential in commercial revenue. Daniel Levy remains in the hunt for a naming rights sponsor to the stadium. It appears no company has yet been willing to meet Levy’s asking price of £500m for naming rights, but the man got £18m for Kevin Wimmer, so let’s not dismiss the possibility yet. In any case, Spurs will likely obtain some form of agreement annually worth an eight figure sum for an extended period of time for naming rights.

Linked to naming rights, Spurs are one of two Premier League clubs to have not secured a sleeve sponsor. Levy stated he wanted to keep the sleeve sponsor unattached to package it with the stadium sponsorship rights. Arsenal, despite their commercial revenue woes, recently signed sleeve sponsorship deal with Rwanda worth £10m, so the potential earnings are not to be scoffed at. Furthermore, Spurs have added a range of other corporate sponsors, from tyres to watches to IT enterprise networking, and would be expected to continue to add additional revenue streams via this method. Chelsea have an official deodorant, no seriously, so the possibilities are endless.

In terms of television revenue, this amount is basically maxed out. In fact, revenue will drop as part of the next Premier League television deal by around 10%.

UEFA prize money, however, will rise this upcoming year, but not as substantially as you would expect. At the beginning of the 2018/19 season, UEFA agreed to a new revenue sharing arrangement to stave off interest in a European Super League, placing far more value on long-term historical success. As a result, Spurs are currently expected to earn about £63m an increase of around £10m. If they advance past Manchester City, that number will obviously increase further.

All told, the future truly is bright for Spurs’ financials. With their record profit of £113m set to be broken again in 2018/19 having spent no money on transfers and having made few player extensions, in addition to over £250m in profit generated over the previous decade, Spurs have basically already paid off around £500m of the stadium, and have consistent revenue streams for the next half-decade to remain in good financial shape.

The question now is not how Spurs can spend to compete with their financial giant rivals, but will Spurs spend to compete with their financial giant rivals?

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