Is failing to qualify for the Champions League actually better for Premier League teams?

Everyone mocked him at the time, but Arsene Wenger had a point.

In 2012, after Arsenal lost to Sunderland in the FA Cup and while they were down 4-0 against AC Milan before the second leg of their round of 16 tie in the Champions League, Wenger solidified the focus for the rest of his team's season. He said: "The first trophy is to finish in the top four."

While this lack of ambition seemed to some like it was a cause of Arsenal's then-seven-year trophy drought, that wasn't quite true. The construction costs of Arsenal's new stadium had hamstrung their ability to spend as much as Manchester United, Manchester City and Chelsea -- Wenger was merely citing the economic reality in which he was living.

To have a shot at competing with those teams in the future, the Gunners needed to secure the extra millions of dollars in revenue generated from qualifying for the UEFA Champions League by finishing in the top four of the Premier League.

While you don't get any silverware for finishing in the top four, finishing there was much more likely to lead to a Premier League or a Champions League title than winning the FA Cup or the League Cup. And if a top-four finish is more important than two of the competitions they hand out trophies for, well it kind of is its own trophy.

It's not like we don't treat it as such, either -- the top-four race is one of the three ways we give texture to each season along with the title race and the relegation battle. (I don't think it was done on purpose, but I applaud our collective hive mind for not settling on "race" to describe a competition between teams that are trying to avoid, rather than achieve, something.)

Even with the added guarantee of a fifth Champions League spot for the Premier League, this season hasn't been any different. From here on, Manchester United, Aston Villa, Liverpool and Chelsea will mainly be judged by whether or not they secure one of the five spots. As Liverpool manager Arne Slot put it back in February: "If we don't have Champions League football, it's definitely not been an acceptable season. ... That does have an enormous impact on the way this club is run."

The impact on revenue is massive, but in the world of fixture bloat and player burnout, might there be a hidden benefit to missing out on the world's most prestigious competition for a season? After all, Man United and Aston Villa, two of the teams in the current top four, aren't playing in the Champions League this year.

Maybe missing out on the Champions League isn't such a terrible thing for Premier League teams after all?

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The economic impact of missing out on the Champions League

Let's take Liverpool as an example.

After nearly winning the quadruple in the 2021-22 season, everything fell apart the following year. Jurgen Klopp's team finished fifth -- the first, and only time, in his eight full seasons at the club when they didn't qualify for the Champions League.

The impact here is pretty straightforward. Per data from Kieron O'Connor's excellent Swiss Ramble, here's the club's broadcast revenue from European competition in all of Klopp's full seasons at the club:

• 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 2016-17, Liverpool weren't in Europe competition at all, and in 2023-24, they were in the Europa League. As Slot said in February: "When I arrived here and only signed Federico Chiesa, it was after a Europa League season."

This is true, and less revenue means less money to spend on improving the team. But what's interesting is that Slot is suggesting that the financial impact from missing out on the Champions League actually comes a year later. The transfer spending at the club suggests as much, too.

The €12 million deal for Chiesa was Liverpool's only permanent move in the summer of 2024. But after the disappointing 2022-23 campaign, Liverpool spent €172 million combined (per Transfermarkt) on the acquisitions of Dominik Szoboszlai, Alexis Mac Allister, Ryan Gravenberch and Wataru Endo ahead of a season without Champions League matches.

Don't forget: They also agreed to a nine-figure, Premier League-record deal with Brighton for Moisés Caicedo, who instead decided to join Chelsea -- another club that failed to qualify for the Champions League after four consecutive top-four finishes.

Now, I'm not totally convinced that Liverpool only cut their spending in 2024 because of the lack of Champions League revenue from the preceding season. They also signed current backup goalkeeper Giorgi Mamardashvili from Valencia to a deal to be made permanent the following season. They had agreed to sign Martín Zubimendi from Real Sociedad too, only for him to make a last-second U-turn and stay in Spain for another season before joining Arsenal this past summer. Plus, they also had to sort out the contract situations for their three best and most expensive players: Mohamed Salah, Virgil van Dijk and Trent Alexander-Arnold.

Unlike in 2012, when clubs such as Arsenal were competing financially with the top four teams in all of Europe's other major leagues and added European revenue might mean you would sign someone who otherwise would've went to AC Milan, the biggest Premier League clubs are now only really competing with Real Madrid, Bayern Munich, Barcelona and Paris Saint-Germain for talent. The rest of the Premier League is competing with the top-four teams in all of Europe's major leagues now.

The combined commercial and broadcasting revenues generated by the topflight in England means that losing out on Champions League revenue, on average, isn't as painful as it used to be. In 2022-23, Liverpool and Chelsea ranked seventh and ninth, respectively, in global revenue among all clubs. In 2023-24, with neither club in the Champions League, they ranked eighth and 10th.

The potential benefit of not being able to win the Champions League

In 2016-17, with Liverpool rebounding into the top four after an eighth-place finish and Chelsea winning the Premier League title after a 10th-place finish the previous season, a new theory seemed to emerge: Not having to play in the Champions League was actually beneficial for your Premier League performance.

To test this, a trained astrophysicist and Harvard professor wrote a blog post where he looked at the relationship between the season-to-season change in European matches played by a given team and the season-to-season change in Premier League points won.

"[For] each extra game a team plays in Europe, they can expect to lose half a point relative to the previous season," he wrote. "So, if a team plays 12 more games, it will be 6 points worse off [on average] than the previous season."

The author, funnily enough, was Laurie Shaw, who now holds the title of "chief scientist" at Liverpool. At the time Shaw wrote the piece, a number of other analyses had determined that there was no "hangover effect" for teams playing in Europe. In other words, teams that had just played a match in Europe didn't perform worse than expected in their following Premier League match. Shaw's work suggested that there's a kind of cumulative effect from extra devoting resources -- energy, strategy, travel, etc. -- to European matches.

Last month, the blogger Markstats looked at the past three seasons and found there still to be no clear hangover effect in the Premier League. Since we can't ask Shaw to just rerun his analysis for every season since 2016-17, I decided to do it -- but only with Champions League matches.

This is how it looks when you plot all of the pairs of seasons when a team competed in the Champions League in at least one of them:

While it's not a strong relationship, it's close to the same relationship that Shaw observed in 2016. You can see it in the downward slope of the trendline.

Based on this data: For every extra Champions League game a team plays, they lose a little more than a third of a point on average. So, every three extra games in the Champions League are worth about one point in the Premier League table. And if we remove last season, when the total number of Champions League games increased for everyone, then the numbers match Shaw's -- a point lost for every two extra Champions League games played.

Now, there are lots of confounding factors here. When some teams miss the Champions League, they've usually been unlucky to an unsustainable degree. The same goes in the other direction: Sometimes teams qualify for the Champions League because of unsustainable hot streaks. How much of this is inevitable regression to the mean? And how much of this is a genuine decline in performance related to the extra intense games on your schedule?

But at the very least, there's something here. It seems reasonable to expect the best teams to actually play more games in the Champions League, so the fact that on average teams perform better in the Premier League while playing fewer Champions League games suggests to me that there is a real negative effect of the added toll of extra high-level matches.

I also looked at the total number of games played from season to season across all competitions, and there's basically no relationship to changes in points, so that suggests there's something about the Champions League in particular that affects domestic performance.

Of course, it would be absurd to say that it's better not to be in the Champions League. We don't watch or care about sports because of the financial results they produce -- the finances help produce the results and get produced by the results. The point of all of this is to try to win things like the Champions League and the Premier League. The way you do that is by, you know, actually participating in the Champions League.

But I do think we've potentially entered a stage of the Premier League's growth where the teams are so rich, and the competition is so grueling, that there's potential for a one-year exponential boost for a club that drops out of the competition. You'll still have lots of money to spend on your roster because of the European revenue from the previous season, you're probably going to have some better luck going forward, and you'll get a full season without the potentially deleterious effects of all those midweek Champions League matches.

Whoever misses out on the top five this season would seem like a logical pick to bounce back into the Champions League places next year. So, Liverpool or Chelsea fans: There's something that might be able to help you sleep at night.