Leicester City FC’s win means big money

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With a team that cost just a quarter of other major football teams, Leicester City FC winning the Premier League for the first time in its 132-year history is a phenomenal achievement.

Besides the feel-good feeling of winning, the financial benefits of coming out on top are important: both for Leicester City FC and for the city of Leicester itself.

Leicester City FC’s win is a heroic feat, which (nearly) no one would have predicted at the beginning of the season. The bookies certainly have been caught off guard – as the very low odds show.

Despite the big figure of 5000-1 odds, David Peel, professor of economics at Lancaster University Management School explains that the ‘real life’ odds were even slimmer.

“Although the odds were 5000-1 of Leicester City winning the Premiership, the true odds were much longer,” he says. “Bookmakers give odds on long shots that have very low expected return relative to favourites.”

Due credit certainly must go to the players of Leicester City FC as well as to their coach, Claudio Ranieri, who guided the team to the top.

Bottom-line impact

Looking at Leicester City FC from the business standpoint, the club is certain to benefit from the team’s win, and Thai owner Vichai Srivaddhanaprabha is without doubt a happy man.

Let’s break down the numbers.

For winning the league, Leicester City FC will receive around £93m – some £23m more than last year.

The club’s accountants can also add an additional £29m for playing in the Championship League, bringing the additional income to around £122m. In fees alone, this is an increase of 74 per cent in year-on-year income – enough to keep any bookkeeper more than happy.

As a grand total, thanks to its higher finishing position and being selected for more live matches broadcast on TV, Leicester City FC’s revenues are estimated to top £155m, according to Deloitte’s sports business group. The club is also likely to see an increase in match day and commercial revenue (such as merchandise).

Next year, this could increase by a further £50m or more, depending on its performance in the Premier League next year and how it progresses in the UEFA Champions League (i.e. through prize money payments and other parts of the market pool distribution), Deloitte predicts.

That’s not to say that its costs will not increase, too.

Of course, Leicester City FC will have to pay more money to retain star players. As a general rule, next year, across the Premier League, you can also expect greater expenditure on new players by the ‘big clubs’ – they will do their best to protect their income base from the unexpected result and the likely competition for the top four slots.

City of Leicester

The city of Leicester will also benefit thanks to increased tourism and new business starts.

Business growth could increase by almost double the national average, according to research by data platform Company Check and Sheffield Hallam University’s Sports Industry Research Centre.

We’ve seen this before: Bournemouth experienced a revival after its football club was promoted from League Two to the Premier League between 2010-15. The total number of businesses in the town grew by 15 per cent in 2011 after the first promotion, compared with 9 per cent for the UK as a whole. For the two years after that, business count was up 11 per cent and 10 per cent respectively, versus a national average of 6 per cent a year.

This isn’t an isolated case. Swansea, too, saw a boost to its local economy – to the tune of £58m – after its football team was promoted to the Premier League in 2011.

Leicester City FC’s achievement of winning the Premier League out of nowhere is, however, without precedent.

This makes it difficult to quantify how much England’s 11th biggest city will benefit. Tom Copson, associate director in the Leicester office of Grant Thornton, estimates this will be around £49m. This includes the benefit from having Champions League games at the King Power Stadium as well as estimates of the financial impact of the intangible benefits to Leicester.

Professor Simon Shibli, head of Sheffield Hallam University’s Sports Industry Research Centre, warns that while sporting success is often a catalyst for growth, there are no guarantees.

“The economic impact of football is an interesting one,” he explains. “On one hand, it’s only 19 home games in a season and the economic impact of visiting fans tends to be cancelled out on away matches.

“Most of the global television coverage is about the sport, not the city, but nonetheless there is huge value in the ‘place marketing’ effect resulting from the English Premier League being televised in around 200 countries.”

Jason Hesse is a journalist who specialises in writing about entrepreneurship and small business.

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