Price elasticity of demand and Premier League replica shirts. Do they pay the players wages?

Listening to the Podcast ‘The Price of Football’ the theory of price elasticity of demand was raised with regard to the sale of Premier League replica shirts. Should clubs actually reduce the price of shirts in order to increase demand and raise revenue revenue for the club? The theory measures the relative amount by which the quantity demanded will change in response to change in the price of a particular good. What price elasticity of demand figures tell us:

Over the years shirt prices have increased but clubs have found that there has been little resistance with the consumer is still buying them – very much inelastic demand. So how much do clubs make from selling shirts? There is an assumption that they make a lot of money but in the larger scheme of things it really isn’t that much. Every time you get a big name transfer, whether it be Messi and Neymar to PSG or Haaland to Man City there is a flurry of activity to buy the replica shirt with the players name on it. The reality is that a typical club only gets about a 7.5% commission on each shirt or as is the case of Liverpool 20% which is unique. The table below looks at the number of shirts sold and the revenue from retail in 2022.

Do shirt sales pay for transfer fees? To put it into context say a Premier League club sells 100,000 shirts in a season at £75 each. That price would generate a total revenue of £7.5 million, of which a club would typically receive a 7.5% fee = £562,500. Liverpool with a 20% commission would make £1.5m. So the myth of shirt sales covering transfer fees doesn’t really stack up. Mo Salah’s earns a weekly income of £1m and for Liverpool to pay his wage from shirt sales they would need to sell to 66,666 per week.

For clubs replica shirts are just a small part of the revenue stream but it is the sponsorship fee from the brand – Adidas, Nike, Puma, Umbro – where the money is. The table above shows the top 7 deals in the Premier League. Notice the big drop off to 6th – Spurs – and especially to 7th – Everton.

Sources:

Sports Journal

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