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English top-flight generates more cash but German counterpart is better run

EXCLUSIVE
By Wayne Veysey | Chief correspondent

The England and Germany teams that take to the field in Blomfontein tomorrow for perhaps the most eagerly anticipated of the last 16-clashes – certainly the most ancient footballing rivalry - will very much reflect their own domestic leagues.

All the players in Joachim Low’s 23-man squad are attached to Bundesliga clubs. Likewise, England - denied their best-travelled player, David Beckham, through injury - play in the Premier League.

Whether this is down to a desire for the comforts of home, or not, it can be no coincidence that the Premier League and Bundesliga are way ahead of most of their rivals when it comes to generating cash and, of course, lining the players’ pockets.

A report released this month by the influential Deloitte’s Sports Business Group revealed that the Premier League has been overtaken by the Bundesliga as the world’s most profitable league, based on figures for the year 2008-09.

While the Bundesliga has established a reputation as perhaps Europe’s only fit and proper football league, the Premier League – where one club has diced with relegation (Portsmouth) and others have amassed mountains of debt (Liverpool and Manchester United) – is on a less sure footing.

Here, Goal.com UK examines the state of the finances in the world’s two most profitable leagues.


Turning Tide |
Profitable Bundesliga has brighter future than debt-riddled Premier League


REVENUE



Premier League – The highest generating league in world football with its clubs generating £1.89billion.

“The Premier League is very advanced in terms of revenue,” said Emmanuel Hembert, football business expert for management consultants AT Kearney.

“It has the broadcasting rights and the modern stadiums, but also an extremely developed commercial strategy, particularly in the overseas markets, and makes a lot of money from merchandising.”

Bundesliga – Its clubs generated £1.29bn, a ten per cent increase, after it moved ahead of Spain’s Primera Division in the 2008-09 season to become the world’s second richest league.

The league has fed off the £1.4bn stadia development triggered by Germany’s hosting of the 2006 World Cup, which has driven attendances and commercialisation.


PROFITS



Premier League – Operating profits fell from £185m to £79m due to wage growth being greater than revenue growth.

“The record wages to revenue ratio of 67% in the Premier League in 2008-09 is a concern, and we expect wages growth to outstrip revenue increases again in 2009-10,” said Alan Switzer of Deloitte. “This will further reduce operating profitability, a decline that cannot continue indefinitely.”

Bundesliga – Europe’s most profitable league. Operating profits increased to £141m as, for the second time in three years, the Bundesliga was ahead of the Premier League.

The 51 per cent wages/revenue ratio is the healthiest of the ‘big five’ European leagues.

“The Bundesliga as a brand, a competition, is in good shape,” Bundesliga chief executive Cristian Seifert has said.

“We have a very interesting competition, [and] a stable and sustainable business.”


BROADCASTING RIGHTS
 


Premier League – The main factor behind the great Premier League success story is the value of the BSkyB domestic TV deal, and a recently negotiated overseas broadcast deal comes into effect from 2010-11, which Deloitte forecasts will drive revenues to £2.2bn.

Bundesliga – All this prudent financial management is achieved despite the Bundesliga’s television income being relatively modest.

Legal issues restrict pay TV deals and annual revenues of around £488m are the lowest in the ‘big five’ European leagues.

DEBTS
 


Premier League – Debt increased from £3.2bn to £3.3bn, fired by mammoth debts at clubs such as Manchester United and Liverpool.

Deloitte’s accountancy figures for the 2007-08 season show all but one Premier League club (Aston Villa) are in debt.

Bundesliga – The licensing system, which is linked to profitability, protects German clubs from financial risk.

The Bundesliga report for last season recorded that “only 11 of the 18 clubs are now in the black”.

Hembert observed: “If they had a licensing system in the UK, Portsmouth would not have gone into administration. They would have been prevented from recruiting.”


FUTURE



Premier League – “You have a bucket with lots of water coming in but there are lots of holes in it,” said Hembert. “In England there is some risk of bankruptcy and owners leaving their clubs.”

Bundesliga – “In Germany, there is less water coming in than the Premier League but the holes are smaller,” observed Hembert. “Bundesliga clubs have a much stronger economic basis to get through the downturn.”

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