Is Missing Out on the…

While many criticized him at the time, Arsene Wenger had a valid point.

In 2012, following Arsenal’s humiliating defeat to Sunderland in the FA Cup and being down 4-0 against AC Milan before the second leg of their Champions League round of 16 tie, Wenger set the tone for the rest of the season. He stated, “The first trophy is to finish in the top four.”

This sentiment, perceived by some as a reflection of Arsenal’s seven-year drought without a trophy, didn’t fully capture the situation. The financial burden of constructing Arsenal’s new stadium limited their ability to compete financially with clubs like Manchester United, Manchester City, and Chelsea. Wenger’s statement was a realistic acknowledgment of the economic climate they were in.

To remain competitive in the future, Arsenal needed to secure the lucrative revenue from qualifying for the UEFA Champions League by finishing in the Premier League’s top four.

While finishing in the top four doesn’t yield a trophy, it significantly enhances the chances of winning either the Premier League or the Champions League compared to the FA Cup or League Cup. Thus, one could argue that a top-four finish is akin to its own trophy.

Society has come to treat it as such, as the race for top four has become one of the defining narratives of each season, along with the title chase and the relegation battle.

Even with the introduction of a fifth Champions League spot for the Premier League, this season hasn’t deviated from that pattern. Teams like Manchester United, Aston Villa, Liverpool, and Chelsea are now primarily evaluated on their ability to secure one of the five spots. Liverpool manager Arne Slot expressed this sentiment back in February, saying, “If we don’t qualify for Champions League football, it’s been an unacceptable season… This has a significant impact on how the club is operated.”

The financial stakes are immense, but could there be a hidden silver lining for teams that miss out on the Champions League for a season amidst fixture congestion and player fatigue? Notably, both Manchester United and Aston Villa, currently in the top four, are not participating in the Champions League this year.

Perhaps missing out on the Champions League may not be the disaster it seems for some Premier League clubs after all?

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The Financial Implications of Missing Out on the Champions League

Take Liverpool as a case study.

After a near-quadruple achievement in the 2021-22 season, Liverpool stumbled the next year, finishing fifth—the first time Jurgen Klopp’s team failed to qualify for the Champions League in his eight seasons with the club.

The consequences are clear. According to data from Kieron O’Connor’s insightful Swiss Ramble, Liverpool’s broadcast revenue from European competition during Klopp’s full seasons includes:

• 2016-17: none
• 2017-18: €81 million
• 2018-19: €111 million
• 2019-20: €80 million
• 2020-21: €88 million
• 2021-22: €120 million
• 2022-23: €84 million
• 2023-24: €27 million

In the 2016-17 season, Liverpool was absent from European competition entirely, and in 2023-24, they found themselves playing in the Europa League. As Slot noted in February, “When I joined and only signed Federico Chiesa, it came off a Europa League season.”

This observation highlights the relationship between decreased revenue and the club’s ability to invest in player development. However, Slot also indicated that the financial repercussions of missing Champions League wouldn’t manifest immediately but rather a year later. This pattern is suggested by the club’s subsequent transfer activities.

The €12 million acquisition of Chiesa represented Liverpool’s only permanent signing in the summer of 2024. However, they had previously spent €172 million (according to Transfermarkt) on players like Dominik Szoboszlai, Alexis Mac Allister, Ryan Gravenberch, and Wataru Endo after their disappointing 2022-23 season without a Champions League campaign.

Additionally, they had previously reached an agreement for a record transfer to Brighton for Moisés Caicedo, who ultimately opted to join Chelsea, another team that missed Champions League qualification after a period of consistent top-four placements.

While it’s not entirely clear that Liverpool’s reduced spending in 2024 stemmed solely from their lack of Champions League revenue from the previous year, other factors played into their approach as well. They signed backup goalkeeper Giorgi Mamardashvili from Valencia, intending for the deal to be finalized in the following season. They also had a transfer agreement for Martín Zubimendi from Real Sociedad; however, he chose to remain in Spain for another year before joining Arsenal in the subsequent summer. Moreover, they had to address contract renewals for their top three players: Mohamed Salah, Virgil van Dijk, and Trent Alexander-Arnold.

Unlike in 2012, when clubs like Arsenal were competing with the top four teams across Europe for talent, the leading Premier League clubs today primarily compete with elite teams such as Real Madrid, Bayern Munich, Barcelona, and Paris Saint-Germain for top players. Meanwhile, the rest of the Premier League is contending with top-four clubs across Europe.

The overall commercial and broadcasting revenues generated by England’s top tier suggest that the pain of losing Champions League revenue is not as severe as it once was. In the 2022-23 season, Liverpool and Chelsea ranked seventh and ninth globally in revenue, respectively. In 2023-24, even without Champions League participation, they placed eighth and tenth.

The Potential Upside of Missing Out on the Champions League

In the 2016-17 season, Liverpool bounced back into the top four after an eighth-place finish, while Chelsea clinched the Premier League title following a 10th-place finish the previous year, leading to an emerging theory: foregoing Champions League participation could actually improve domestic performance.

A trained astrophysicist and Harvard professor published a blog post analyzing the correlation between the number of European matches played by a team and the change in their Premier League points from season to season.

The author concluded, “[For] each extra game a team plays in Europe, they can expect to lose half a point relative to the previous season.” In other words, if a team contests twelve additional matches, they are likely to be six points weaker than in the previous season.

The individual behind this finding, Laurie Shaw, now serves as “chief scientist” at Liverpool. At the time he wrote the analysis, other studies indicated there was no “hangover effect” for teams playing in European competitions; essentially, teams did not perform worse after competing in Europe. Shaw proposed that extra commitments tied to European matches created a cumulative disadvantage.

Recently, blogger Markstats examined the last three seasons and found no tangible hangover effect in the Premier League. While we can’t have Shaw repeat his analysis for every season since 2016-17, I chose to do a similar inquiry—focusing solely on Champions League matches.

The results reveal a correlation: for every additional Champions League match, a team’s average points tend to drop slightly more than a third of a point. Consequently, every three extra Champions League matches equate to roughly one point lost in the Premier League. When excluding the previous season—when the total Champions League games increased for all—it aligns with Shaw’s findings: a point lost for every two added Champions League games played.

Of course, many factors can influence these outcomes. Teams absent from the Champions League may have faced unsustainable misfortunes, just as those qualifying might have enjoyed statistically improbable winning streaks. It’s essential to consider how much of this is mere regression to the mean versus a genuine decline in performance related to the additional demanding fixtures.

Nonetheless, there seems to be a discernible connection, implying that the best teams may perform better in the Premier League when not burdened by the Champions League’s demanding schedule.

I also analyzed the total number of games played across all competitions and found no significant correlation with changes in points, indicating that the Champions League specifically may have a unique impact on domestic performance.

Importantly, it would be unreasonable to claim that not qualifying for the Champions League is objectively better. We don’t engage in sports solely for the financial implications but rather for the pursuit of excellence and victory. The goal is to win prestigious titles like the Champions League and Premier League, a feat inherently linked to participation in the former.

However, we may have reached a point in the Premier League where the financial might of teams and the intensity of competition could provide an unexpected advantage for clubs that step back from the Champions League for a year. These clubs still benefit from previous season’s revenue streams and may enjoy improved luck and an entire year without the toll of midweek Champions League matches.

Thus, whoever misses out on the top five this season may have a solid shot at returning to the Champions League next year. Liverpool and Chelsea fans can find a sense of solace in this perspective.