Does Money Mean Success in the English Premier League?
By: Wyan Wan and Joshua Gunawan
Since its inception, the English Premier League has grown massively in wealth. In terms of revenue, the Premier League has generated €6.2 billion in revenue (compared to €3.7 billion for Spain’s LaLiga, €3.2 billion for Germany’s Bundesliga, €2.7 for Italy’s Serie A, and €2.3 for France’s Ligue 1) in the 2020-2021 season alone, which is distributed evenly across its 20 clubs, including merit-based bonuses for top performers. As a result, spending power among Premier League clubs greatly overshadows the spending power of their overseas counterparts.
However, that does not mean that the wealth of Premier League clubs is fairly distributed. Although the clubs are generally richer than others of comparable ranking, there still is a noticeable gap in terms of how much each club is able to spend. In terms of wealth and net spending, the so-called “Top 6”, made up of Manchester City, Manchester United, Liverpool, Chelsea, Tottenham and Arsenal, consistently spend more than other clubs in the league. Of the Top 6, while clubs such as Manchester United, Liverpool, Tottenham and Arsenal have gradually risen to riches by building a brand for themselves through past and present successes, others such as Chelsea and Manchester City have shot straight to fame with ultra-rich owners willing to shell out large sums of money to ensure the success of the club.
From the data, we see that Top 6 teams (left) make up just over 53% of total money spent in the league, more than the rest of the Premier League teams combined (47%). With massive spending power concentrated in the Top 6, there is increasing worry that clubs not in the Top 6 will no longer be able to compete against the league leaders due to the lack of ability to afford the best players, or to afford higher wages for their own best players, as well as providing similar resources for their club.
Indeed, these fears have been valid for the most part: Since 2000, 20 out of 21 Premier League seasons have been won by a member of the Top 6. However, Leicester City’s title win in the 2015-2016 season despite a significantly lower budget has brought hope that even the poorer teams are capable of succeeding. This article will thus analyze whether, and to what extent, money contributes to success in the Premier League.
Due to the onset of the Covid-19 pandemic affecting spending power and performance amongst teams in the Premier League, we have decided to focus on data from the latest season unimpacted by the pandemic, the 2018-19 season.
From our analysis of the 2018-19 season, we saw that Manchester United topped the league in spendings, with a total of 332 million dollars spent. We also found that Manchester United hosted 3 of the top 5 of the highest paid athletes that season, including some of the biggest names in Europe’s top 5 leagues, such as Paul Pogba, Alexis Sanchez, and Romelo Lukaku among many other players. However, despite this star-studded line up, Manchester United finished the season with underwhelming results to say the least. They finished 6th in the league, the worst result among all teams in the Top 6, and by a significant margin of 32 points behind longtime rivals Manchester City who topped the league with a total of 98 points. On the other hand, Cardiff City found themselves at the bottom of the chart in terms of league spendings. With only 54 million dollars spent for the season, and no major signings, they saw themselves in 18th place out of 20 teams at the end of the season. From this data alone, we can conclude that spendings alone do not determine the proficiency of a team or a team’s success, but this does not tell us to what extent spendings play a factor in team success.
To test this hypothesis, we conducted a Pearson Correlation test to test the correlation between team spending and team success and found a low p-value of 9.876e-07 and a high correlation coefficient of 0.862736, thus rejecting our null hypothesis that there is no correlation and indicating that there
is indeed a correlation between money spent by each team and team success in the league.
Because we found that there was a correlation between team success and team spending, we decided to continue our analysis by focusing on the overachieving and underachieving teams, where overachieving teams were teams that performed better relative to how much they had spent that season, and underachieving teams were teams who performed underwhelmingly relative to how much they had spent that season.
From the data that we collected and the graphs we created, specifically the line graph “Points per Money Spent”, we found the overachievers by looking at the teams who were above our red fit line, where the vertical distance from the fit line measured to what degree the team overachieved. On the other hand, we found the underachievers by looking at the teams who fell below our red fit line, where the vertical distance from the fit line measured to what degree the team underachieved. With this in mind, we decided to look at 1 overachiever and 1 underachiever. For the overachiever, we decided to look at Tottenham Hotspur, which overachieved despite their status as the lowest spender in the Top 6. For the underachiever, we decided to focus on Manchester United, which was by far the biggest underachiever, earning ~40 points less than expected despite spending the most money during the 2018-19 season.
A closer look into Manchester United’s use of funds shows us that ~40% of funds were used for player purchases, while 15% and 28% were spent on debt and interest payments respectively from 2010-2018. This use of funds reflects a more short-sighted plan which seeks to boost the immediate quality of the team through the purchase of quality players. This came in the form of rising stars such as Fred ($65M) in the 2018-2019 season as well as established, quality signings such as Paul Poga ($115M) and Romelu Lukaku ($94M) from previous seasons. In comparison, only 6% went to capital expenditures, showing a lack of attention to long term growth (through new and improved resources such as training grounds and facilities). This reflects a more risky strategy to success, as there is less guarantee that new transfers would perform well compared to investing in higher quality resources, which would provide for the long term health and quality of the club in general. Unfortunately for Manchester United, that strategy did not translate into results as the players underachieved and did not perform to the worth of their transfer value. Fred, for example, dropped in value from $65M, the most expensive transfer of Manchester United’s season, to $35M by the end of the season, according to Transfermarkt. This combination of a lack of resource investments as well as poor results from expensive transfers led Manchester United to underachieve, leading to a poor result to the 2018-2019 season.
Next, we take a look at Tottenham Hotspur’s use of funds. While part of the Top 6 like Manchester United, Tottenham spent significantly lower than any other club in the Top 6. From the chart above, we can first see that the club spent a whopping 75% of funds on capital expenditures. These capital expenditures would have included renovations and additional improvements to training grounds and facilities, as well as the building of a new, state-of-the-art stadium, now regarded as one of the best in Europe. These new improvements may have contributed to the well-being and morale of the team, allowing them to train and therefore perform better in important games. On the other hand, Tottenham had spent just 5% on player transfers, a shockingly low number compared to Manchester United’s 28%. While not being able to splurge large amounts of money on big name players such as Lukaku and Pogba, Spurs instead relied on cheaper, young, talents with high potential such as Harry Kane (Free- Academy Product), Son Heung-Min ($33M) and Dele Alli ($5M). Under the expert management of manager Mauricio Pochettino, proper investment into club resources and infrastructure, as well as a bit of luck, these players were able to perform well beyond their original values and produce results for the team, which allowed them to overperform for many seasons including the 2018-2019 season. However, the low amount spent on transfers may be risky and unsustainable, and could lead to the team’s stagnation in the long run, as seen in the club’s poor run of results since the beginning of the second half of the 2018-19 season.
From our analysis, while money definitely does play a factor in the success of a team, it does not guarantee it. A large factor contributing to success has to do with how the funds of each team are allocated, as shown by our comparison of an underachiever in Manchester United and an overachiever in Tottenham Hotspur. Aside from this, team success is also influenced by uncertainties such as luck and the conditions of the players during the season. Factors such as injuries, health, and internal problems are also large factors that no money can guarantee, and can oftentimes be the difference between a win and a loss, especially at the highest level of play.