Footballers in the English Premier League are some of the most highly paid workers in the world. With unique talents and skills and hence a limited supply of labour, together with an insatiable appetite from the British public for football, we would expect to see high wages and a market ripe for investment, with high returns on offer. But, is this case?
The article below is by Linda Yueh, the Chief Business Correspondent for BBC News, and she has looked into the football, asking why on earth buy a football club? Despite the success of the English Premier League in drawing fans, TV and commercial revenues, many teams find it difficult to break even and investing in a team is unlikely to yield much of a return (if any!). Yet, we still see successful businesspeople, especially from abroad, purchasing English football teams.
Many club owners have hugely profitable ventures in other markets and historically only invest their money when they see an opportunity for a high return. But, not in the case of football. A return is unlikely and yet they still invest. So, with positive returns unlikely, what is it about this market that attracts investors? The article by Linda Yueh considers this question.
Why on earth buy a football club? BBC News, Linda Yueh (27/2/14)
Annual Review of Football Finance – Highlights Deloitte, Sports Business Group June 2013
- How can the returns to investment be measured?
- How can a company’s operating profit be calculated?
- Using a labour market diagram, explain why footballers are paid such a high wage.
- Is it monetary or non-monetary factors that seem to explain why businessmen invest in football clubs?
- Why are English football clubs typically unprofitable? Should they be?
- Which factors can explain the growing financial inequality between clubs in the Premier League and in the divisions below? Is there an argument for government involvement to regulate football?