The distribution of revenue in the Premier League is a much better system than that found in the NFL, MLB, the NBA, and the NHL. This model revenue sharing system not only contributes to the growing profitability of the league, but may potentially be the cause of it.
The Barclays Premier League focuses on two main aspects for its revenue sharing plan: equality and merit-based reward. Although these seem contradictory at first glance, they both work together to create a system that is fair and encouraging for all teams. Percentage-wise, the more dominant category is even revenue distribution; 50% of total revenue from UK broadcasting is divided evenly amongst all teams.[1] While this itself is impressive, even more aspects of revenue besides local broadcasting are distributed equally. Central commercial and oversees TV revenue are split up equally between the clubs, and when these payouts are calculated for the 2013-2014 season, they are almost 1.5 times higher than the share from UK broadcasting![2] What this means for the Premier League is that the clubs are on a very even playing field. In fact, the ratio between the top and bottom earning club is only 1.57:1, much more equitable than for the four major sports in the US, all with a ratio greater than 2:1. [2][3][4][5][6]
The eternal problem of socialistic systems is that distributing the wealth so evenly leaves little motivation for individuals to try to earn any themselves. This exact qualm is had by many owners or commissioners, who are worried that generous revenue distribution would hurt the total income of the league. The NHL does a good job at combatting this, making revenue benefits only available to teams that are seeing an increase in their earnings, suggesting that they get rewarded only if they show that they are putting in the effort to succeed as a business. The Premier League has this covered as well; some revenue sharing is merit based. 25% percent of broadcast revenue is distributed based on performance, or how the club finished in the standings, and another 25% is dependent on facility fees, or how many times the club was featured in a UK broadcast. 2014 League champion Manchester City received $41.5 million in shared revenue for merit-based play, while the last place finisher Cardiff City received only $2 million. This aspect of revenue sharing certainly is not equitable, but it provides an important incentive to ensure that the best teams have motivation to succeed and will still be able to assist struggling teams financially.
Establishing a successful revenue sharing plan, as may other leagues have made clear, is a difficult feat. Nonetheless, the Premier League did so with ease, and now is reaping the benefits. League revenues have doubled in the past seven years, described by team owner Dan Jones as a “remarkable achievement”.[7] The reason for this is in due to the revenue sharing system, because it allows all teams to reap the benefits of broadcasting and also encourages more wage costs. The equal sharing aspect of the Premier League’s plan leads to all teams earning money from UK broadcasting, providing a sense of community for the league and making the TV deals less lucrative. Unlike for MLB, the broadcasting revenue exists for the Premier League to share, rather than for individual teams to turn immense profits from. The merit based sharing of the Premier League contributes to its widespread success as well, because it incentivizes all teams to spend a higher percentage of their revenue to improving their staff. In fact, wage costs rose to an average of 71%, a very high figure that resulted in debt for many teams, but led to an increase in the quality of soccer being played and thus made the league more profitable as a whole[3]. Both the sharing of broadcasting revenue and the reward for merit in the revenue system of the Premier League are responsible for league revenue increases.
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1.http://www.businessofsoccer.com/2014/05/16/barclays-premier-league-clubs-split-2-6-billion-in-television-revenue/
2.http://www.premierleague.com/en-gb/news/news/2013-14/may/premier-league-broadcasting-commercial-payments.html
3.http://www.forbes.com/nfl-valuations/list/#tab:overall
4.http://www.forbes.com/mlb-valuations/list/#tab:overall
5.http://www.forbes.com/nhl-valuations/list/#tab:overall
6.http://www.forbes.com/nba-valuations/list/#tab:overall
7.http://www.bbc.com/news/business-27667472
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