In 1992, when the Premier League kicked off, the world was a very different place. The UK was a member of the European Union, pound sterling was still part of the European Exchange Rate Mechanism – at least until 16 September (Black Wednesday) when it was withdrawn by the government – and the concept of minimum wage was introduced in the Labour Party’s manifesto. Finance, much like football, had to navigate this changing landscape. Technology was advancing, with the invention of the first smartphone, and the rate of inflation was at 3.74%.

Football was emerging from tragedy: the 1980s had seen disasters at Hillsborough, Heysel Stadium in Brussels and in Bradford, and the popularity of the sport was declining. The Premier League’s inauguration was a response to this diminishing appeal and a bid to leverage untapped opportunities.

A new structure

Author and consultant Alex Fynn, who has been called ‘the spiritual godfather of the Premier League’ because of his involvement in early discussions around its creation, championed a structure comprising slimmed-down leagues and regionalisation. “We had the idea that fewer games and more emphasis on a showcase division at the top would reap benefits for the England national team and also prestigious competitions like the FA Cup. But this was not intended to be the creation of a breakaway.” At that stage, nobody could have foreseen that the Premier League, which became the epitome of a globalised, cosmopolitan product, employing players, coaches and managers from abroad, would come under threat from the UK’s own breakaway from the European Union.

Initially, however, the Premier League merely resembled the same product with a different label. “In reality, little changed in those early years and broadcasting revenues were not as substantial as history tries to tell us,” says Alex. The first cycle (1992–1997) amounted to £38m per season for domestic rights and the most recent deal for the 2022–2025 cycle is £1.5bn per season.

Impact of technology

To some extent, the rise of broadcasting rights as a source of valuable income was a reflection not just of football’s resurgence but of the technological revolution taking place across all aspects of business. This was reflected in the dot-com boom, which gathered pace between 1995 and 2000. The US index, Nasdaq, climbed by 400% during this period, only to spectacularly collapse in late 2002.

New technology made broadcasting more dynamic and enhanced the product. People clamoured for football on TV and broadcasters benefited from subscription channels. Club revenues grew dramatically. For example, Arsenal’s financial statement 1991/92 shows a turnover of nearly £14m in 1992, growing to £325m by 2021.

Dropping the ball on gender representation

Women’s football was also gaining popularity in the 90s. According to Football Association (FA) history, in 1991 the Women’s Football Association launched a national league with 24 clubs. The following year, 137 teams entered the Women’s FA Challenge Cup, and by 1994, the league becomes the FA Women's Premier League. More recently, women's football in England reached new heights when England won the UEFA European Women's Championship in July 2022, beating Germany 2–1. When you compare this representation at the highest level to the finance sector there is a stark difference. Since the late 1990s women’s representation at board level has been slow-moving – it was only 2021 that the number of women on the board of financial firms hit 32%, according to HM Treasury’s annual review, published in March 2021.

Runaway wage growth

The Premier League’s growth trajectory drove unprecedented wage increases for players. In 1992, the country’s biggest club, Manchester United, paid wages of £5.3m to its squad, representing 43% of its income. In 2021, the total wage bill was £312m, some 67% of total revenues. Compared to the average weekly earnings of £71.50 (around £3,718 per year) in 1992 (according to the National Average Earnings index) and the national median weekly wage of £611 (around £32,000 per year) in 2021, (according to the Office for National Statistics), footballers’ salaries have grown out of all proportion – Manchester United’s wages effectively rose by almost 6,000% in 30 years compared to an average wage rise of 761%.

Increasing investment

The demographic of Premier League match goers has also changed as average ticket prices have gone up, with several headlines in recent years drawing attention to the ‘gentrification’ of football. Today, no stadium is complete without its bankers, celebrities and CEOs, and clubs have tried to meet this new client base, with Chelsea FC, for example, charging from around £4,000 to £85,000 for annual VIP packages.

Football has become an attractive asset. The traditional model of club ownership, largely philanthropic, has given way to soft power plays and portfolio investments. Like the corporate world, UK clubs have been taken over by foreign investors and only four Premier League clubs in the 2021–22 season were 100% owned by British investors.

As the Premier League grew, the financial sector moved closer to the game and, as well as consultancies producing reports about the finance of football, clubs are now using a broad range of financial instruments to refinance debts, hedge risk, issue shares and securitise their assets. In addition, alternative investors such as hedge funds, private equity and family offices have also become involved, such as US private equity investors Silver Lake at Manchester City, US sports investment firm ALK Capital at Burnley, US investment group RedBird Capital at Italian club AC Milan, and US investment group MSD Holdings, the investment arm of the Dell family, with several clubs.

Catalysts for change

In financial services, the catalyst for greater regulation and governance was the global financial crisis of 2007 to 2008. Football is currently going through a similar period of reassessment following three crises: misaligned incentives to ‘chase success’, club corporate structures that lack governance and diversity, and the inability of the existing regulatory structure to address new structural challenges. A UK government study, led by Member of Parliament Tracey Crouch, has concluded that the game needs an independent regulator. This project will also introduce greater levels of financial discipline.

FTSE and football

Over the past three decades, the English Premier League has developed into a fully-fledged industry. Moreover, the financial sector and football have become partners, with investors seeking value from sports team ownership and banks providing sophisticated products and services for football clubs. The world has been volatile in recent years, with economic, social and geo-political disruptions challenging both football and the financial industry. It is not unreasonable to suggest that as both emerge from this period of extreme uncertainty, the partnership may become much stronger. How the world will look in the aftermath of the pandemic, the war in Ukraine, oil price rises and economic turmoil remains to be seen, but it is probable that both financial services and football will experience changes to their basic structure.

Neil Jensen is a member of the Football Writers’ Association and writes about the finance of football.