Project Cinderella

What Luton Town FC Must Do To Become Premier League Champion

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Rundown

• LTFC will need to generate £5.6B in revenue to fund £4.0B of player wages and transfer fees over 13 years to win the Premier League

• LTFC must focus on progressing up the table as EPL merit payments create a financial advantage most quickly

• Winning the Conference League and the Europa Leagues should be priorities, while merely advancing to the knockout rounds in the Champions League is sufficient

• Creative stadium design is necessary to attract a wide range of entertainment options and justify premium pricing to overcome limitations of LTFC’s stadium size

• EPL-level sponsorships will only begin to close the 35x commercial revenue gap; sustained sporting success is needed to close the rest

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Who is Luton Town?

For Luton Town Football Club (“LTFC” or “the Hatters”), the 2023-24 English Premier League (“EPL” or “Premier League”) season is the culmination of an improbable 15-year journey that began after a 30-point deduction for financial irregularities resulted in their relegation to the 5th tier of the English Football Association (FA) pyramid. (Ogden, 2023)

Their run to the EPL has been nothing short of exhilarating, punctuated by a 6-5 penalty shootout win to beat Coventry City in the English Championship playoff final. Their incredible 4 promotions in 10 seasons made current midfielder Pelly-Ruddock Mpanzu the first player ever to play in England’s top 5 divisions for the same club. (Al Jazeera, 2023; Ogden, 2023)

Currently 18th in the EPL and at risk for relegation, this may be the Hatters’ pinnacle and where the journey stops. But what if it wasn’t? What if the clock never strikes midnight on this fairytale of a ride? What if the proverbial “glass cleat” fits the Hatters and they become EPL champions? What would it take to build the most unlikely of winners? In this report, we explore the financial requirements and the business strategies necessary for Luton Town to wear the EPL crown.

Preface

The financial projections presented in this report are based on available data and assumptions made at the time of analysis. It is important to note that these projections are subject to various uncertainties and risks. The model used for these projections is not intended to create a complete profit and loss (P&L) statement but rather offers estimates of player costs and revenues required to fund them.

Additionally, it is crucial to highlight that potential investments or contributions from club owners or other related entities have not been factored into these projections. Outside investments can significantly impact the financial position and performance of the club but have not been included in this analysis.

As such, these projections are intended to strategically understand the task ahead of LTFC rather than provide a prescriptive investment evaluation. Actual financial results may vary significantly.

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Our Findings

According to our model, Luton Town will have to spend around £4.0B on players - wages and transfer fees - to win the EPL trophy in 13 years during the 2035-36 season. Its annual wage bill will have to reach £370M, 5.4x its current size. And to cover these expenses and comply with Union of European Football Associations’ (UEFA’s) Financial Fair Play (FFP) regulations, it will need to generate £5.6B in revenues.

The £5.6B in revenues comes from 3 sources: Media, Matchday, and Commercial. Over the 13 years, media revenues accounted for 59%. Matchday and commercial revenues accounted for 2% and 39%, respectively. When compared to Traditional Powers (which includes Arsenal, Chelsea, Liverpool, Manchester City, and Manchester United who have accounted for all of the top 3 finishes in the EPL for the past 5 years), Luton Town’s revenue mix is overly reliant on its media revenues.

It should also be noted that this analysis does not account for potential revenues from the Football Association Challenge Cup (FA Cup), the Carabao Cup (EFL Cup), or the expanded FIFA Club World Cup. While the FA Cup and Carabao Cup are prominent tournaments with rich histories, their combined maximum potential payout for winning both tournaments is relatively insignificant at less than £5M. At time of writing, the payouts for FIFA’s Club World Cup were unknown. Historical payouts indicate that this tournament will only be marginally more lucrative than the FA Cup and Carabao Cup, and still considerably less lucrative than UEFA’s tournaments. This may change with the revamped format and increased emphasis FIFA is placing on it. (Bosher, 2023)

Media Revenues - EPL

In May 2021, the EPL signed an extension on its £5.1B television deal which is one of the most lucrative in the world - only the NFL and Indian Premier League (cricket) generate more domestic revenue per game. Abroad, the broadcasts are incredibly valuable as well, with NBC signing a £2B agreement for exclusive EPL broadcast rights for the US. The current international broadcast rights are reportedly on par with the domestic broadcast netting the EPL a total of £10B per season in broadcast revenues. The EPL distributes these media revenues to participating clubs in three tranches: 50% equal share, 25% merit based on final table position, and 25% distributed for match broadcast payments. (Mackey, 2023)

To maximize EPL revenues, on-field performance must be the Hatters’ focus. While LTFC stands to gain significant media revenues from promotion, the true competitive advantage in the league comes from merit payments and facility fees. Of the two, merit payments offer the fastest path to generating incremental revenues. Firstly, the incremental gains between positions are on average larger for merit payments. Secondly, merit payments immediately and directly reflect on-field performance. For the 2022-23 season, merit payments started at £2.2M for last place and grew sizable to £8.8M for finishing 17th - the lowest a club can finish without being relegated. By comparison, the Hatters generated total revenue of £17.7M for FY 2022. Facility fees, on the other hand, are at the discretion of broadcasters and, thus, are contingent on LTFC’s ability to draw large broadcast audiences. Although this may take time to establish, it’s also somewhat sticky as Everton and Leeds United received the 8th most facility fees despite finishing 16th and 17th, respectively, in the table. LTFC must immediately focus on avoiding relegation and, longer term, finishing higher and higher in the table to capture a larger share of the merit payments. (Brennan, 2023)

The English Football league divides its domestic broadcasts into time slots which broadcasters rent as part of their rights agreement. These broadcasters select teams for their slot over the course of the season. Facilities fees are awarded by the number of times a team was selected for broadcast. Facilities fees averaged £17.8M for the 2021-22 season for EPL clubs. LTFC can increase their appeal to broadcasters with consistently strong on-field performances and compelling off field narratives that drive large audiences. If Luton Town can perform well in the league and become recognized as a “giant killer”, they will increase their chances of selection and potentially their facility fee share. (STATISTA, 2023)

Media Revenues - UEFA Tournaments

Given that less than half of EPL clubs participate in UEFA tournaments, this revenue stream is absolutely essential in a model where money correlates with sporting success. That being said, in trying to win the Premier League, there is a need to balance the lure of additional financial payouts with the potential for fatigue and injury from playing a more intense schedule to derail EPL performance.

UEFA’s tournaments (i.e., Champions League, Europa League, and Conference League) offer incredible opportunities with payouts just for participation, current performance, and sustained success across. In the 2031-32 and 2032-33 seasons when LTFC is projected to be in the Europa League, UEFA payouts account for ~10% of all revenues. That figure rises above 25% when it participates in the Champions League (2033-34 season through 2035-36 season).

It also creates a virtuous cycle of sorts. The additional home games increase matchday receipts and the increased exposure for the club allows it to attract more supporters and more lucrative sponsorship opportunities. Quite often there are incentive clauses in existing deals that are triggered by participation in a UEFA tournament (or failure to do so). Manchester United’s 3rd place finish in the 2022-23 season saved it £11.3M for this season and next because their kit sponsorship deal with Adidas contained a clause that would reduce payment by 30% if United failed to qualify for the Champions League two seasons in a row. (Sheldon, 2023)

In evaluating UEFA’s tournaments, success in the Conference League and Europa League is best for preventing the club from sliding down the league table. The disparity of the payouts for the Champions League relative to the other UEFA tournaments means that far less success is required to create the financial advantage necessary to building a team - lending credence to legendary Arsenal manager Arsene Wenger’s claim that “the first trophy is to finish in the top four.” (Taylor, 2012)

Given the payout disparity, LTFC should prioritize winning the Europa and Conference Leagues, should it qualify for them. This will give them the same financial benefit as finishing 5-8 places higher than teams below them. Once they’ve qualified for the Champions League, winning that tournament is not nearly as important because advancing to the Round of 16 is more lucrative than winning either the Europa League or Conference League. Considering that winning the EPL as the primary goal, they should work to advance to the knockout stage at which point they can then shift priority back to winning the EPL. This will give them the financial boost to build stronger teams to get them over the top, while minimizing the risk of injuries and fatigue from playing more games against stronger teams.

Matchday Revenues

Matchday revenues are currently constrained by stadium capacity. Because most EPL clubs have near 100% attendance, matchday revenues are primarily driven by stadium capacity. With a capacity of 11,050, the Hatters have the smallest stadium in the division. Luton Town reportedly has plans to construct a 23,000-seat stadium that would open for the 2026-27 season. This would still be significantly smaller than any of the Traditional Powers. On average, the stadiums of Traditional Powers are 2.5x the size of Luton Town’s proposed stadium. For reference, Chelsea has the smallest stadium of the Traditional Powers with a capacity of 40,853, per transfermarkt.

To overcome this discrepancy, LTFC needs to find as many revenue sources inside and outside the stadium. This ranges from unique seating experiences that demand premium price points on game days like the pitch boxes and the pier in Snapdragon stadium to event spaces that can host private events even if a game isn’t happening.

They should also invest in the technological infrastructure necessary to make the venue flexible to attract other entertainment acts. Real Madrid’s renovated Bernabeu Stadium has a retractable field that allows the club to host NFL games, NBA games, and world class concerts while protecting the playing surface. LTFC’s new stadium may not attract that caliber of entertainment option, but it must be able to accommodate a range of entertainment options to further boost its revenue potential. (Youtube: The B1M, 2023)

Finally, a critical component of Luton Town’s proposed new stadium is the mixed use development around it. Increasingly stadiums are part of larger districts where people can play, dine, drink, shop, work, and live. By being involved in these developments, clubs can capture a share of the money supporters spend pre and post match as well as benefit from visitors who are interested in something other than football. It’s noteworthy that Mark Cuban sold his majority stake in the Dallas Mavericks to find a partner well-versed in real estate to continue growing the team’s revenues. (Associated Press, Dec 2023)

Commercial Revenues

Compared to current league winners, Luton Town’s Commercial revenue will have to grow to 35x its projected level during the 2023-24 season. Such a staggering figure will require long-term, strategic planning to capitalize on the organic growth that is inherent to Premier League promotion. As top flight football has evolved into a global presence - the commercial operations of some clubs have become just as large as the on-pitch football operations. This is in contrast to lower league clubs which often are not staffed well enough or oriented to operate within a ruthless business environment. That doesn’t come without benefits though. The value of football, particularly the EPL, has grown significantly. Clubs are now attached to the Premier League brand which carries a certain gravitas for fans around the world. That brand affinity alone can play dividends for Luton as it seeks to build its own brand and commercial appeal.  

A key in the process for Luton Town will be building a recognized brand and story. That brand must then serve as a vehicle to drive commercial success. We’ve mentioned the importance of this strategy in our other reports but believe it is an integral piece of commercial operations for a football club. The Wrexham AFC experiment demonstrates building an international brand quickly is not impossible, but the Wrexham ownership’s connection to Hollywood is an asset Luton Town may not currently possess. That being said, they do have a compelling story that could draw in supporters similar to Wrexham AFC and Sunderland AFC with their respective docuseries. 

Building a compelling brand drives interest, creates a recognizable association, and solidifies the “story” of the club with the goal of creating a following for the club. Demand from supporters creates demand for external firms to want to be associated with the club, particularly in the form of sponsorships. As a brand story and larger fan following emerge, Luton Town can begin to capitalize on commercial negotiations such as sponsors and lucrative kit deals. 

The potential size of these deals can be staggering, especially compared to Luton’s current finances. Manchester United currently owns the largest kit deal with Adidas for £90M per year from 2025-2035 (Reuters, 2023). By comparison, LTFC generated £17.7M of revenue in FY2022 (LTFC FY22 Finances). Jersey sponsors are a primary cash source for clubs. Shirt sponsors - the name on the front of the jersey) are another valuable asset for Luton Town with EPL exposure. Southampton, who have bounced between promotion and relegation, signed a front-of-shirt sponsorship with Sportsbet through 2024, rumored to be valued at £7.5M per season. The overall potential growth in these revenues is also illustrated by Tottenham’s £14.2M per year sleeve sponsor (Flanagan, 2023). This small logo location on the sleeve generates as much revenue for Tottenham as nearly all of LTFC’s commercial operations. The growth of these deals as Luton remains in the EPL and advances up the table becomes exponential. Thus, we see that Luton’s on field performance can drive business gains that function as a flywheel to drive further improvements in the on field performance with the correct investments and business steps. 

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Our Approach

Foundational to our approach is the well-researched fact that in English football a club’s finish is strongly, positively correlated with the amount club spends on players’ wages. In their analysis of clubs in the EPL and the Championship, Simon Kuper and Stefan Szymanski found that salary spending explained 92% of the variation in league position (Kuper and Szymanski, 2009). With this as the starting point for our analysis, we executed 3 steps to reach our outcomes and develop our insights:

1. Model Luton Town’s Premier League table finish

2. Project their corresponding wage bill and transfer fee net spend

3. Calculate revenues from the media, match day and commercial streams that ensure compliance with Financial Fair Play (FFP) regulations.

All currency is presented in Pounds (£). Certain line items required conversion from Euros (€) to Pounds (£), in those instances we used the average conversion rate for the last decade (rates taken from ExchangeRates.org.uk).

Each section can be expanded below for detailed explanations.

Premier League Table Finish

To determine Luton Town’s league finish, we looked at league table finishes across top flight leagues in England, France, Germany, Italy, and Spain for the past 20 seasons (2003-04 to 2022-23). Of the 207 teams that have played in top flight leagues in these countries, only 5 (2.4%) have earned promotion and gone on to win the league, with Napoli most recently accomplishing this feat with its Serie A championship this past season - 16 seasons after it earned promotion back to Serie A.

Only Leicester City in 2015-16 have done this in the English Premier League (EPL) over the past 20 seasons. Leicester City’s progression is an outlier and likely impractical to replicate with any predictability. If we expand the data set to include the 2001-02 season, Manchester City’s title win in 2011-12 is another example of a club gaining promotion and winning the Premier League title. So for this analysis, we tracked Manchester City’s rise and observed that on average they finished approximately 1.2 places higher than the year before. Assuming a 2023-24 finish of 17th place, the lowest place a club can attain without being relegated to the Championship, it would take Luton Town 13 seasons to become EPL Champions.

Wage Bill and Transfer Fees

Wage Bill

Using Kuper’s and Szymanski’s finding that table finish correlates with wage bill as our basis, we replicated their research to determine the ratio of wage bill for each league table position relative to the average Premier League club’s wage bill. Inherent in this analysis, though, is that teams must spend efficiently. Simply paying higher salaries will not buy results. A club must pay a player their market value.

To project future wage bills, we took a linear regression of the average Premier League wage bill for the past 10 seasons using FBref.com. We found the average wage bill increases £4.62M annually (R-squared = 0.949). From there, we constructed a matrix of wage bill by position and year to ascertain the wages LTFC for each season.

Transfer Fees

Transfer fees are not as strongly correlated with league table performance. They are idiosyncratic negotiations dependent on the needs and capabilities of the two clubs and the player(s) involved in the transfer. As such they are partially influenced by a club’s wealth and its revenue potential, among several other factors.

So, much like the Wage Bill, we projected transfer fee net spend by calculating the average net spend in the EPL from Transfermarkt. We then grew it at 17.2%, reflecting the compound annual growth rate (CAGR) of the past 9 years. Next, we calculated the average multiple for teams finishing 1-5, 6-10, 11-15, and 16-20, reflecting the relative net spend for teams in each tranche. Based on where Luton Town was projected to finish, we multiplied the projected average transfer net spend by the corresponding multiple. Finally, we amortized transfer net spend across 3 years, which reflects the average remaining duration of EPL player contracts.

Financial Fair Play (FFP) and Revenues

Financial Fair Play (FFP)

For this analysis, we adopted UEFA’s FFP regulations, which currently requires that no more than 90% of a club’s revenue go toward wages and transfers expenses on players. The allowable percentage drops to 80% next year before settling at 70% for the 2025-26 season (UEFA, 2022). This is a requirement for clubs that participate in European club tournaments (i.e., Champions League, Europa League, or Europa Conference League). While the EPL has its own Profitability and Sustainability regulations, for simplicity's sake and because Luton Town will be participating in some of these tournaments in our scenario, we have chosen to assume UEFA’s FFP restrictions.

Media Revenues

Media revenues come primarily from two sources: EPL and European tournaments (i.e., Champions League, Europa League, Europa Conference League). Each competition has its own breakdown of fixed and merit-based compensation. Our methodology for each competition is discussed below.

EPL

EPL media revenues are distributed across 3 categories: Equal Share, Merit Payments, and Facility Fees. As the name implies, Equal Share revenues are evenly distributed amongst the 20 EPL clubs. There are separate buckets for revenues from domestic (UK) broadcast rights and international broadcast rights. Merit Payments also come from domestic and international broadcast rights buckets and are distributed based on a clubs’ performance over the course of an EPL season, with the winner getting the largest share and the 20th placed club receiving the smallest. Finally, Facility Fees are payments to clubs based on how frequently their games are televised. (STATISTA, 2023), (Mackey, 2023) 

Based on the 2021-22 payouts and the broadcast rights values, we calculated that 80% of media rights revenue paid out to EPL clubs. We then calculated how that pot was distributed amongst the categories identified as described above. Finally, we grew the domestic and international broadcast revenues by 6.48% and 8.72%, respectively - the implied 15-year CAGRs.

UEFA Tournaments 

Starting in the 2024-25 season, UEFA will be expanding the number of participants to 36 and adopting the “Swiss Model” for its tournaments. Critically, this means that each team will be guaranteed 10 games before the knockout rounds. At the time of writing, no finalized details about the payout structure under this new “Swiss Model” have been released. So, this analysis assumes a similar payout structure to the structure currently employed, despite reports indicating that changes in how prize money is distributed are likely. (Associated Press, May 2023)

Currently, UEFA tournaments have payouts across four categories: Starting Fees, Coefficient-Based Fees, Market Fees, and Performance Fees.

Note: Figures above are taken from UEFA publications

Coefficient-Based Fees are payouts that reflect the relative historic performance of each participating club. UEFA calculates the coefficient annually, ranks each team by the coefficient, and pays out higher amounts to the highest ranked clubs. Click this link to find out how coefficients are calculated and to discover each club’s coefficient. For this analysis, we used the average Coefficient-Based Fee paid out to teams in accordance with the 2023-24 schedule.

Market Fees are composed of payouts for the club’s performance in its domestic league the prior year and payouts for the performance of clubs from the same football association in the tournament during the current year.

Finally, Performance Fees are distributions for wins and draws during the group stage and amount of progress during the knockout stage. This analysis assumes LTFC has the average number of wins and draws EPL teams earned during the 2022-23 UEFA tournaments’ group stages. We then assume that they advance to the semifinals of the Conference League and the quarterfinals of the Europa and Champions Leagues.

Qualification for UEFA tournaments is solely determined by the club’s table finish in the previous year. Based on the proposed qualification criteria for the “Swiss Model”, we made simplifying assumptions that a 5th place finish in the EPL would result in participation in qualification for the Champions League, while places 6-8 would qualify for either the Europa League or the Conference League. Note that all payouts are inflated at 8.72% annually, reflecting the 15-year CAGR for EPL International broadcast rights. 

Matchday Revenues

To project Matchday revenues, we analyzed reported revenues from 18 EPL clubs for the 2021-22 season. Due to consistently strong attendance across the league, we observed that matchday revenues were driven by number of home games played and stadium capacity.

The number of home games played varied based on where teams finished in the league table. Logically, this makes sense given that every EPL team is guaranteed 19 home games in league play, but additional home games are possible by advancing in the EFL Cup, FA Cup, and UEFA tournaments - all of this is more likely if a team has a strong EPL season.

Based on the 2021-22 results, we assumed that every year Luton Town finished in the Top 6 it played 2 EFL and FA Cup home games. If they finished outside of the Top 6, they played only 1 home game in each of the EFL and FA Cups. For European Tournaments, we assume that they played half of their games at home for a total of 6 home games.

This analysis assumes Luton Town will move into a new 23,000-seat stadium starting in the 2026-27 season. (Lewis, 2023)

Commercial Revenues Given the detailed information we have about media and matchday revenues and the required wage bill and transfer net spend, this analysis treats commercial revenues as a true-up to make sure the revenues and player expenditures are in line with assumed FFP regulations. Clubs’ business operations have more control in how they generate revenues through commercial operations so we believe this is a reasonable approach. In the first couple of seasons when media and matchday revenues are sufficient to cover player expenses, we grow 2021-22 commercial revenues by an inflation factor and a 3.43 EPL multiplier - based on the average revenue growth rate for promoted clubs in 2018-19.

Citations & References

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Brennan, F. (2023, August 10). Premier League prize money by position: What can each team win in 2023/24? | Sporting News. The Sporting News. https://www.sportingnews.com/us/soccer/news/premier-league-prize-money-position-each-team-win-2023-2024/zj02ltjwx26h3n5evnjeorp8

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Flanagan, J. (2023, February). Anger in South Africa at government’s £42.5m deal with Tottenham. The Times. https://www.thetimes.co.uk/article/anger-in-south-africa-at-governments-42-5m-deal-with-tottenham-59mdqx85c?utm_medium=Social&utm_source=Twitter#Echobox=1675265937

Inside Real Madrid’s $1BN Stadium Upgrade. (2023, November 22). YouTube; The B1M. https://www.youtube.com/watch?v=k6m6h2ukSU0

Kuper, S. and Szymanski, S. 2009. Soccernomics: Why England Loses, Why Germany and Brazil Win, and Why the US, Japan, Australia, Turkey-- and Even Iraq-- Are Destined to Become the Kings of the World's Most Popular Sport. New York, NY, Nation Books.

Lewis, K. (2023, May 26). Luton Town: Club reveals new stadium pictures and plans. BBC.  https://www.bbc.com/news/uk-england-beds-bucks-herts-65718990

Luton promoted to Premier League after beating Coventry City. (2023, May 27). Al Jazeera. https://www.aljazeera.com/news/2023/5/27/luton-promoted-to-premier-league-after-beating-coventry-city#:~:text=Luton%20Town%20made%20it%20to

Mackey, E. (2023, August 25). How Premier League TV Rights Work and How They Impact Your Costs and Subscriptions. The Athletic. https://theathletic.com/4240951/2023/08/25/premier-league-tv-rights-how-work-cost/

Manchester United sign $1.1 billion Adidas kit deal for 10 years. (2023, August 1). Reuters. https://www.reuters.com/business/retail-consumer/manchester-united-renews-adidas-partnership-another-10-years-2023-07-31/

Ogden, M. (2023, May 26). How Luton Town got within 90 minutes of the Premier League. ESPN.com. https://www.espn.com/soccer/story/_/id/37727161/luton-town-premier-league-push-via-championship-playoff

Sheldon, D. (2023, May 12). United and the Champions League: The financial consequences of qualifying. The Athletic. https://theathletic.com/4505780/2023/05/12/manchester-united-and-the-champions-league-the-financial-consequences-if-they-fail-to-qualify-again/?source=emp_shared_article

Slater, M (2020, September). Explained: The true cost of promotion to the Premier League. The Athletic. https://theathletic.com/2056700/2020/09/12/explained-premier-league-promotion-cost-fulham-west-brom-leeds/

STATISA. (2023, November) Premier League broadcasting payments 2021-2022, by club. Satista. https://www.statista.com/statistics/240912/broadcasting-payments-to-clubs-in-the-english-premier-league/

Taylor, L. (2012, February 19). Arsène Wenger says Champions League place is a “trophy.” The Guardian. https://www.theguardian.com/football/2012/feb/19/arsene-wenger-arsenal-fourth-place

The Associated Press. (2023, December 28). Mark Cuban explains why he sold his majority stake of the Dallas Mavericks. NBC News. https://www.nbcnews.com/news/sports/mark-cuban-explains-sold-majority-stake-dallas-mavericks-rcna131499

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UEFA (2022, April) Explainer: UEFA’s new Financial Sustainability regulations. UEFA. https://www.uefa.com/insideuefa/news/0274-14da0ce4535d-fa5b130ae9b6-1000--explainer-uefa-s-new-financial-sustainability-regulations/