We’re in the money!

We’re in the money…

So sang the wonderfully named Gold Diggers of 1933 in a season where we won the FA Cup for the second time. Over 80 years on from that, we’re in the last four of the Champions League and in my last piece about ticket prices for the PSG game, I made the point that the revenue the club would be getting simply for playing that game would be substantial. Having won that game, how much has this, so far successful, run brought us in in total? Due to the re-negotiation of all the various Champions League TV rights deals kicking in this season (and I’ll explain why that’s important shortly) it’s not possible to be 100% accurate but we can make an assumption and take what should be a reasonable guess. To do that, we need to understand how UEFA distributes the money.

UEFA receives revenue from the sale of TV rights across the world and from its commercial partners. A chunk of that money forms the overall prize pot, which is over €1.2bn or £1bn this season. It then splits that pot into two. The first part is paid out via fixed amounts, which are published in advance. These are what we’ll call “stage payments” for qualifying for the group stage, for wins and draws in those six games and for reaching subsequent rounds. This season, UEFA have allocated €724.4m (c£600m) to this pot and the payments are the same for every club, regardless of whether it’s Barcelona or BATE Borisov. There’s €12m for being in the group stage, €1.5m for each win and €1m for each draw in those six games. On that basis, with 4 wins and no draws, City’s prize money for the group stage was €18m (£15m).

The stage payments continue into the knock-out rounds (but not the payments for results). For getting to the last 16, there’s €5.5m, for the last 8, €6m and €7m for the semi-final. There’s €10.5m for being a finalist and an additional €4.5m for winning the final. So by being in the semi-final we’re now guaranteed €36.5m (c£30m) from this pot of money.

The other pot is known as the Market Pool and is distributed in two different ways, both of which very much depend on which country the team comes from. This season the Market Pool is €482.9m which we’ll call £400m for ease of calculation. This is divided between the national associations that are represented in the group stages, based on how much the TV rights have been sold for in their respective countries. Confused? Let me try to explain.

Let’s say the TV rights for the countries represented by the 32 clubs in the group stage were sold for a collective €2bn and the English rights made up €500m or 25% of that. That means the English clubs among that group of 32 get 25% of the total Market Pool to share between them. The initial allocation doesn’t depend on how many clubs from each country are there, just on the fact that one or more team from each country is. It would be significantly beneficial from a financial perspective therefore if the team finishing 4th in the PL lost the qualifying game as the Market Pool would be the same total amount but shared between three, rather than four, clubs.

Last season, the English clubs got 19% of the Market Pool but we don’t yet know what that will be this season as the 3-yearly sale of TV rights took place last season and the new arrangement kicks in this season. What we do know is that the rights that Sky and ITV previously paid £400m for were bought by BT Sport for £897m. The overall picture will only become clear once UEFA publishes its breakdown of the distribution to clubs after the end of the competition.

As we don’t know is what any other national broadcasters paid we’ll have to make a calculated guess. Knowing that Sky/ITV paid £400m in the last round and that represented 19% of the total, we can work out that the total for all countries represented among the 32 clubs was just over £2.1bn and that the total paid by other countries was therefore £1.7bn. The BT Sport deal added nearly £500m to the total that we know of so let’s make an assumption that the rest of the TV deals increased by 25%. That makes the total deal worth £3bn of which the English market will contribute £900m or 30%. As the total Market Pool is worth £400m, the four English clubs will share £120m, assuming our 30% estimate is correct.

Now we have a figure, we can do some arithmetic. The Market Pool for each country is split into two equal pots, in our case of £60m each. One pot is split on the basis of where each club finished in its domestic league the previous season with 40% to the champions, 30% to the runners up, 20% to the third placed team and 10% to the fourth placed team. As we finished as runners up, we’ll get 30% of £60m, which is £18m. But that assumes that this 30% figure is correct.

The other half of the Market Pool is split on the basis of the number of games played by each English club as a proportion of the total played by all those clubs in the group stage and beyond. To illustrate how this works, United got knocked out in the group stage and therefore only played six qualifying games. Arsenal and Chelsea went out after the round of 16 so played eight games each. So far we’ll have played 12 games including the semi-final. That makes 34 games altogether, with one more possible game to play. That means as things stand, even if we lose the semi-final, we get 12/34ths of that second pot of £60m or just over £21m. Adding those two Market Pool pots together gives us just over £39m, plus the £30m from the stage payments pot, making a total of nearly £70m.

To compare that to the other three English clubs, on the assumption of 30% of the TV market United would get £31m, Arsenal £40m and Chelsea £54m.

But in case this is wrong, I’ve also done calculations based on figures of 50% and 75%. If the overall increase for all other packages is 50%, the figure of £70m becomes £65m and if it’s as high as 75%, it will be around £61m. But even if it is that lower figure, it’s still significantly more than last season when we picked up just over £38m from UEFA. And we can add ticket money to that, which could be something like £10m, plus there might well be commercial add-ons for having reached the last four.

The scale of the rewards available from the Champions League show just how important it is to qualify for the tournament and why not finishing in the top four can have a crucial impact on the bottom line. Even if we do finish in the top four, it’s important to finish as high as possible as the difference between finishing fourth and finishing second alone could be something like £10m in the following season’s Champions League.

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