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Premier League shouldn't be too affected by falling exchange rates

Four months ago, a British pound was worth €1.30. On Tuesday, it slipped as low was €1.09. Around the same time, a pound was worth $1.49, whereas this week it slipped to $1.21. As I write this on Wednesday, it's around €1.11 with the euro and $1.23 with the dollar.

Why does this matter in a football column? Well, because the single biggest expense for most football clubs is player costs, both transfer fees and wages. And Premier League clubs tend to acquire a disproportionate number of players from abroad with fees negotiated almost exclusively in euros or dollars -- the latter especially in South America.

Basically, a player who cost €50 million in June would have cost an English club £38.4m. On Tuesday, that same €50m guy would have set a Premier League club back £45.9m.

Let's then take that same €50m player and pretend he wants to earn €4m a season for five years. In June, you could have signed him for £3.1 million a year, or around £60,000 a week. On Tuesday, he would have cost you £3.7 million a year, or just over £70,000 a week. Over the life of his contract, that's an additional £3 million.

Sure, Premier League clubs are rich and all, but over time these things add up.

Some of you might remember what happened in Russia a few years back. In 2012-13, the Russian top flight had a net spend of some $284 million. (As a frame of reference, that wasn't too much less than the Premier League, which had a net spend of $440 million that year). Then, for a number of reasons, the Russian ruble lost nearly half its value relative to major currencies.

The result? In 2015-16, Russian clubs actually had a positive net spend (meaning they sold players for more than they spent on them) of around $55 million. Last summer, the positive net spend was $50m. In other words, as a group, they're no longer accumulating assets; they're selling them off.

This past summer, the Premier League's net spend was around $900 million. Could all this change if the pound crashes further? Could it -- gasp -- become a selling league?

Anything is possible, of course. But a closer look suggests these concerns are somewhat simplistic and ignore other factors.

Any dips in the pound's worth shouldn't impact PL clubs from making big signings like Henrikh Mkhitaryan in the long run.

The single biggest is revenue. Or, put differently, the Premier League makes some of its money in pounds and some of it in other currencies, a major benefit of being the world's most globalized league. Season ticket sales, matchday revenue, gate receipts, domestic sponsorship deals and, of course, the mammoth domestic TV deal are all worth less now when it comes to acquiring foreign talent. When UK broadcast rights for 2016-2019 were sold in February 2015, they were worth $7.86 billion. Today, those same rights are worth $6.21 billion.

But that's $1.65 billion up in smoke!

No it's not. It's just one way to look at it. The Premier League also sell their rights abroad for a total estimated to be around £3 billion, except most of those deals aren't done in pounds: they're in dollars or euros. That means that if the pound crashes, these currencies strengthen, and Premier League clubs make more money in pound terms. Many clubs' commercial deals are also denominated in foreign currency.

What all this adds up to is a hedge. Not a perfect one, but enough to offset major damage in the transfer market, whatever the headline figures say. Incidentally that was something Russian clubs, most of whose revenue was purely domestic, did not enjoy back in 2015.

Those clubs involved in European football also benefit from this hedge since UEFA pay their prize money in Swiss francs. Fifty million Swiss francs in prize money back in June were worth £35 million. On Wednesday, that adds up to £41.7 million.

There are other factors to suggest that a currency crash would not be as disastrous to the Premier League as it might elsewhere. Polarization in the modern game -- and the huge wealth gap that exists between mid-table Premier League clubs and all but a dozen of the top continental ones -- means it's unlikely that even with players in England being some 15-20 percent cheaper, the Bundesliga, Liga or Serie A will suddenly start raiding the Premier League for top talent.

(That said, at the top end, where the big Premier League clubs compete with the likes of Real Madrid, Bayern and Barcelona, it will likely become tougher to secure the A-List superstars.)

There are silver linings as well. It will become easier for English clubs to shift unwanted players. Right now, they often have to flog them for less than they're worth or loan them out and pay a chunk of their wages. In future, those wages won't be quite as scary to continental clubs.

Domestic players will become comparatively cheaper, which may push some clubs to seek talent in the lower leagues or even do a better job at growing their own. A weak pound also means that English clubs will become cheaper and more attractive to foreign investors -- or, indeed, British ones with foreign assets -- and that in turn will attract more investment. Since folks tend to splash some cash after they've bought a football club, there will be fresh money coming in.

Of course, there are 101 things that could affect the financial health of the Premier League beyond exchange rates. The economy could simply tank post-Brexit: Some think it will, some think it won't. I'm certainly not opening that can of worms. If that happens, it will affect sponsorships and box office receipts. The next domestic TV deal may well be no higher, and possibly even lower, than the current one since it's the result of a fairly made arms race between rival broadcasters who paid 70 percent more than last time but have seen neither ratings nor subscriptions jump by anywhere near that amount.

Supporters might decide that illegal streaming is a better alternative than paying for games, whether at home or in the stadium. The casual fans who have swelled football's coffers might move on to something else, like mixed martial arts or League of Legends.

All of these are possibilities. And while they seem remote, in the big picture they're probably more likely to affect Premier League clubs negatively than mere exchange rate fluctuations.

Gabriele Marcotti is a senior writer for ESPN FC. Follow him on Twitter @Marcotti.


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