The Political Economy of Football V2

The cost of Everton's new stadium to replace Goodison Park has escalated significantly. The club still hope to move in by the 2022-23 season, but the cost is likely to be much more than the originally envisaged £300m: New stadium The new stadium is essential if Everton are to re-establish themselves as a top team. They are confident that the cost can be recouped through a naming deal, sponsorship and increased attendances, although whether all these would yield even £300m is questionable. Arsenal found that a stadium move can inhibit investment in the team.

Chelsea had the lowest growth in income in 2017 compared with 2016 of teams have reported so far, figures provided by Kieran Maguire of ThePriceofFootball show. Their income went up just under 10 per cent from £329m to £363m. Leaving aside the special case of Hull City, Everton had the biggest increase from £122m to £171m or 41 per cent. They were followed by Stoke, up 31 per cent from £104m to £136m. But then Stoke's income is under a quarter of that of Manchester United at £581m, up 13 per cent. Manchester City grew by 21 per cent to £473m. Arsenal were up 20 per cent to £424m, £63m more than Chelsea. Chelsea can expect a big growth in income when they complete their stadium redevelopment.

James Gheerbant had an interesting article in The Times yesterday about the growing gap in quality between the top six clubs and rest of the Premier League. The top six are the two Manchester clubs, Arsenal, Chelsea, Spurs and Liverpool. They thus represent just three cities in the country. Birmingham does not have a club in the top flight, despite its claims to 'Second City' status. The Manchester clubs have done a lot for the city's global profile. Gheerbant shows that the big six teams have had a win percentage of 73.6 per cent this season when facing clubs from the rest of the league. It was 64.9 per cent in 2014-15. There is an even starker contrast in terms of goal difference. In 2014-15 the average scoreline in a match between a big six team and a team from outside the big six was 1.86-0.93. This season it is 2.43-0.71. In just two seasons, the average goal difference in a match between a big team and a smaller team has more than doubled, from 0.75 to 1.72. ...

Charlton, owned by Belgian Roland Duchatelet are in talks with two consortiums about a takeover, one Australian and one described as 'British based': Takeover talks Australian interest in the club has been known about for some time. British based could mean a number of things, but most likely it would mean British front men (or possibly participants) with the real money coming from elsewhere, e.g., Kuwait.

Following criticism from fans, Swansea chairman Huw Jenkins has given a long interview to Wales Online: Interview In it he admits that since the American owners they have put no new money into the club, in particular for the player reinforcements needed at the bottom of the table club. The club has had to increase its overdraft. However, he hopes that their commercial contacts will boost commercial revenue. Swansea are not a very attractive proposition for sponsors when they are threatened with relegation.

That question is posed by the £75m signing of Virgil van Dijk by Liverpool from Southampton. It is believed that he will be paid £180,000 a week. Traditionally, it is strikers who have commanded the big transfer fees. To win matches you have to score goals. Moreover, in terms of attracting sponsors, a marquee signing of a striker gives a club a high profile. However, to win matches you also have to avoid conceding too many goals and defensive fragility has been Liverpool's problem. One player won't solve that, but he will provide much needed leadership. Southampton tend to end up selling their best players, usually at a good profit. That gives the club financial stability, even if it puts paid to any hopes of pushing on to the next level. The risk for a solid mid-table club is getting sucked into a relegation battle, and it is a risk that the Saints face at the moment. The price of defenders has been going up over time. In 1998 Jap Stam commanded £10.6m when he went ...

José Mourinho said that Manchester United would have to spend more money to build a team capable of winning the Premier League after yesterday's draw with Burnley. When it was put to him that he had spent nearly £300m on players since joining United at the start of last season, he said: 'It is not enough. City are buying full backs for the price of strikers.' Kieran Maguire of the PriceofFootball has dismissed Mourinho's claims as 'fake news'. He points out that United's spend on both players and wages has been ahead of City over the last five years. The wage bill went up by 12.2 per cent in the first quarter of 2017/18. In the first year of the Premier League in 1992 Manchester United and Arsenal had the same wage bills. Since then United have paid out £413m more and their wage bill has increased by 4,220 per cent. Tony Cascarino, writing in The Times takes a different view. He argues that United do not have many world class players: 'They ha...

There is only one route upwards out of the Championship and that is spending a lot of money. Even doing that does not guarantee success. Bournemouth spent 237 per cent of their income on wages in their promotion year. Huddersfield spent 126 per cent last season. Ipswich Town have been out of the top flight for 16 years. That makes them the longest stayers in the division. For some Ipswich fans it's a hard cross to bear: Boring? Ten years ago Marcus Evans rescued the club from oblivion. Since then he has spent £100m of his own money just to keep the Tractor Boys going. Relegation has been avoided, but promotion remains an elusive dream. At least they can console themselves that they are ahead of rivals Norwich where the clamour for a change of owner is being heard again.

Everton recorded a turnover of £171.3m in 2016/17, £50m more than the previous highest figure. A loss of £24.3m in the preceding year was turned into a £30m profit. Broadcasting revenues were up from £82.5m to £130m. Average attendances at Goodison exceeded 39,000 for the first time since the creation of the Premier League. Gate receipts were down because of a policy of reasonable pricing. Net payments on player transfers totalled £24.7m, while new contract extensions were secured for James McCarthy, Kevin Mirallas, Mo Besic, Brendan Galloway and Bryan Oviedo. This investment led to staff costs rising by 8 per cent to £84.0m, compared to £77.5m in 2014/2015, with new contracts contributing to the Club’s wages as a percentage of turnover (including outsourced catering and retail revenues) reaching 65 per cent in 2015/16. The club continues to benefit from the long-term support of key partners such as Chang, Fanatics and Umbro. However, without European football, the Club missed ou...

Brighton and Hove Albion have posted their 2016/17 accounts online and they show big losses in their promotion year: Albion Accounts The amount that the Seagulls lost (£39m) was the same as that lost by Bournemouth in their promotion year in 2014/15 (in real terms, this means it is a bit less). Losses were up from £25.8m to £38.9m, largely because of money spent on players. £9.1m was spent on promotion bonuses. In the longer run, however, £159m of the money that Tony Bloom has spent on the club has gone on the stadium and training ground. £108m covered operating losses. Gross debt is £207m, by far the biggest amount in the Championship, but almost all of that is owed to Tony Bloom. The losses are equivalent of Tony Bloom subsidising every seat sold last season by £60.40 per game. His total investment in the club is now £286m. The wages to turnover ratio is 107 per cent, but such high ratios are not unusual in the Championship. The wage bill was not the highest at £30m. No...

Sheffield United have taken out two loans secured on club assets from Shawbrook Bank which provides loans to those unable to borrow from commercial banks. There will be an extra 7.5 per cent penalty interest charge if they fail to meet repayments. After an excellent start to the season Blades have faltered recently. They are currently sixth in the table, but sixth from bottom in the form table. Manager Chris Wilder has said that the side needs strengthening and plans to be active in the January transfer window. Could the loans be for this purpose? The formal documentation is available online, although it says nothing about the amounts involved: Filing history

AC Milan have total debt of €300m which is similar to that of rivals Inter. However, the greater part of this debt carries an interest rate of 11 per cent and the rest is at 7.7 per cent. Inter Milan are paying 4.9 per cent on their debt. AS Roma carry a smaller debt at 7 per cent. AC Milan is struggling to investors to refinance more than €300m in high interest loans it has from US hedge fund Elliott Management. If it is unable to refinance the debt by next October, Elliott Management will seize control. It is thought that they have a 50-50 chance of success. Uefa has voiced concerns about the club's financial situation. Asset managers have typically been unwilling to lend to football clubs, due to the unpredictability of cash flows that can vary considerably depending on how a club does on the pitch. Little-known Chinese investor Yunghong Li bought the club earlier this year for €740m from Silvio Berlusconi. The limited information about Mr Li's wealth is proving a ...

The accounts of Red Football, the parent company of Manchester United, for 2016-17 have just been published. They make fascinating reading, not just in terms of the club itself, but as an illustration of how a major football club is seen as a brand to be marketed. Among the stated objectives is 'treating fans as customers'. Many fans object to this as they see it as downgrading their identification with the club so that they become the mere object of marketing ploys. Elsewhere they are referred to as 'the follower base' which reflects the fact that many of them never come to Old Trafford. Another objective is 'leveraging the global brand'. Leading the list of key business risks is 'maintaining and enhancing our brand and reputation'. 'The performance and popularity of our first team' is listed third. The report states, 'To be successful in the future we must preserve, grow and leverage the value of our brand across all revenue strea...

Barnsley FC have agreed to a takeover by a duo of investment groups. The deal is headed up by NewCity Capital led by Chinese billionaire Chien Lee and Pacific Media Group led by Paul Conway and Grace Hung. It involves Billy Beane, the US baseball executive behind the stats-heavy 'Moneyball' approach to sporting success. He is understood to be taking a 10 per cent stake in the club. He was attracted to Barnsley as they are already using a version of the data-driven methodology that he pioneered in Major League Baseball with Oakland Athletics. He believes that the modest price for a Championship club represents a good investment. Neerav Parekh, a Mumbai-based technology entrepreneur, is another investor. The sale is believed to have been somewhere in the range £10m-£20m, although some sources use the higher figure. Chien Lee and Pacific Media Group led a group which purchased 80 per cent of OGC Nice in June 2016. The consortium have been trying to break into the English f...

Walsall in League One manage to break even each season, revenues staying more or less level in 2016/17 at £6.6m. One reason is that they don't pay a lot out in wages, a total bill of £3,12m that works out an average of £470 a week, although the directors get paid quite well. It should be noted that this figure includes support staff, so most players would get rather more. This means that wages as a share of revenue fluctuate around the 50 per cent mark: Balanced finances Solidarity payments from the Premier League increased from £360,000 to £645,000 which offset a fall in matchday income. It may be that Walsall's prudent finances makes a push for the next level unlikely and fans may get turned off staying in League One after a while.

For the first time El Classico between Real Madrid and Barcelona will kick off at lunchtime so that it can be watched on television by Asian audiences in the evening: Chasing Asian cash La Liga is aware of the fact that it lags behind the Premier League in foreign television revenues with Asia the most lucrative market. However, another important motivation is to showcase sponsors. Last year Barcelona signed a €220m sponsorship deal over four years with Japanese online retailer Rakuten. However, some analysts think that La Liga is missing a trick. It should exploit its cultural and linguistic affinities with Latin American audiences.

There was an interesting piece of analysis on Match of the Day Two last night comparing the top six clubs in the Premier League with the 'other fourteen'. For these purposes, Burnley were not treated as one of the 'top six', but as temporary guests. It turns out that the other fourteen have seen a decline in goals scored and shots on goal. On average they are scoring about one goal a game. This implies a much more defensive style of play. (Thanks to Plumstead Emirates for telling me that 2.62 goals per game have been scored in the Premier League this season compared with 2.8 last season). This is also reflected in the reliance on 'retreads' when it is thought there is a need for a change of manager such as Alan Pardew at West Bromwich Albion. Safety first is the motto. The financial penalties of relegation are now huge. Moreover, for the many foreign owners relegation means that they lose the prestige and the global profile offered by the Premier Leagu...

Bristol City lost £330,000 a week in 2016/17, mainly because wages were 125 per cent of turnover. This is way above the recommended level of 50 per cent but sometimes it is necessary to take risks to progress and the club has wealthy backers. Judging by recent performance, the £9.5m net spent on transfers in the summer window was well worth it. Income was up 38 per cent and a lot of this was accounted for by the Premier League solidarity payment of £4.2m which represented 30 per cent of total revenue (Championshp clubs get a percentage of the Sky/BT television revenue). Matchday income and season tickets accounted for 35 per cent. A challenge in the longer run is to improve income from sponsorship and merchandise, but promotion to the Premier League would give a big boost to both these streams. For a thriving, prosperous and very lively city Bristol has long punched below its weight in football terms, but this could be about to change. It is, of course, a two club city and somet...

Sheffield United lost £7.7m in League One in 2016/17. Wages were equal or in excess of income for three of the years they were in the third tier, but it still took a club that attracts big crowds six years to get back to the Championship: Sheffield United finances analysed An interesting point made is that 'The ownership of the club is a little muddy. The McCabe family, who had owned the club for a long time, sold a 50% share of the parent company Blades Leisure Limited to a Saudi investor via a company called UTB LLC, registered in the West Indies in 2013. Hopes of a Manchester City style splashing of the cash from Middle East ownership have never materialised though. This may change perhaps in the Championship, with the allure of Premier League exposure being so close.'

Celtic's income has gone up £52m to a record £90m due to Champions League qualification and increased season ticket sales. Having Rangers in the same division also helped. 41 per cent of the revenue was derived from the stadium, 40 per cent came from media and merchandise accounted for 18 per cent. The wage bill was up 40 per cent because of player recruitment, the cost of hiring Brendan Rogers and player bonuses. However, at £46.2m it was a prudent 51 per cent of turnover and still three times that of Rangers. £13.8m was spent on player signings compared with a £66.8m average in the Premier League. A full analysis of the Celtic accounts can be found here: Price of football

New snags have hit the Newcastle United takeover deal over the issue of relegation. Prospective purchaser Amanda Staveley is not satisfied with the prospect of a rebate if the club is relegated. She would prefer to pay a lower price for the club now and then top it up in May if Newcastle stay up. Newcastle are now just one point above the relegation zone and PCP Partners have calculated that they have a 65 per cent chance of going down. Unless a deal is reached soon it may not be concluded until after the end of the January transfer window. This would mean that much needed investment in new players would not take place and might be the last straw for manager Rafael Benitez. He has not been slow to express his concern: Transfer budget uncertainty It might not even be completed until February when the results of the last Premier League broadcasting auction are known. However, negotiations are still going on and there is always the chance of a sudden breakthrough. Staveley and ...

The supporters trusts at Blackburn Rovers and Charlton Athletic have issued a joint statement ahead of the meeting of the two clubs at Ewood Park tomorrow on 'the importance of ownership'. They argue that their clubs have suffered from incompetence, arrogance, instability and absence, adversely affecting supporter morale: Ownership Charlton's ownership is Belgian and the Trust has produced an interesting analysis of the differences between British and Belgian culture, suggesting that they are more different than is assumed. I am not sure that I agree with the argument that there is a relative absence of hierarchy in Britain and we tend to see everyone a equal, but it is an interesting piece: Culture clash

A deal to sell Newcastle United now looks closer after Amanda Staveley made an improved offer of £300m: Takeover It might not be possible to get all the formalities completed until February and Newcastle urgently need quality signings in the January transfer window to boost a side that still looks like a Championship team. However, it might be possible to make an arrangement whereby purchasers PCP Capital Partners paid for any signings. A sum of £30m is being talked about. Ashley bought Newcastle a decade ago and has invested around £260m in the club. He had hoped to sell for nearer £400m and turned down Staveley’s opening £250m offer. The Sports Direct owner has not yet accepted the improved bid but it is understood he is minded to do so. Newcastle's recent poor form appears to have concentrated his mind. The identity of Staveley’s backers remains opaque but the 44-year-old is believed to have secured funding from the Middle East – quite possibly Saudi Arabia – and China. ...

Paris Saint German have been given the green light by France's football financial watchdog despite their summer spending spree: Green light However, they still face an investigation by Uefa into whether they have breached financial fair play rules. While PSG have escaped a transfer ban, one has been imposed on Lille.

Real Madrid continue to match success on the pitch with financial success off it, the one clearly contributing to the other, but it also requires good financial and commercial management. The financial results for 2016/17 show that revenue rose nine per cent to reach a record high of €675m: Financial results. Revenue for 2017/18 is estimated to be €690m. Revenues are once again higher than rivals Barcelona by €25m. They are three times as high as those of Atletico Madrid, the next nearest challenger. Manchester United displaced Real Madrid from the top of the Deloitte Money League in 2015/16, but Real Madrid could regain the top spot in 2016/17, depending on the exchange rates used. In that season the club won La Liga, the Champions League, the Club WC and the European Super Cup. The club regards these trophies as among the greatest sporting achievements in its history. They are regarded as the team to beat in this year's Champions League competition. Since 2000 revenue...

AC Milan look likely to face financial fair play sanctions after they failed to convince Uefa that they had a multi-year plan to balance the books. Uefa were not convinced by any of the arguments put forward by the Serie A club: AC Milan The club is likely to be banned from Uefa competitions in 2018/19. They may also be looking for a new owner with Li Yonghong due to make a €50m interest payment on the money he borrowed to buy the club next October. AC Milan had been confident of avoiding financial fair play penalties: Misplaced confidence

This is the question that is posed in an in depth analysis of City Football Club, the multi-club operation based around Manchester City: Globalisation The group already has clubs in Australia, Japan, Spain, Uruguay, the UK and the US. Clubs may be added in China and India. It claims to be 'the first truly global football organisation'. However, the benefits in terms of developing players appear to be marginal. It is difficult to see the operation as constituting a powerful brand. The allegiances of fans are to their own individual clubs and they probably do not give the international operation much thought. There aren't many imitators, suggesting that Shiekh Manosur's wealth and the desire to create 'soft power' for the Emirates are special factors. The only comparable operation is that of Red Bull which is primarily a means to promote their energy drinks. Barcelona chose not to go down the route of having international sister clubs. Not mentioned here ...

The Premier League has issued its tender document for the new round of television rights: New round. The value of domestic rights increased by 70 per cent over the last two sales. As widely anticipated, Saturday night matches kicking off at 7.45 will be screened for the first time. It may be difficult or at least inconvenient for away supporters to get to these games. For the first time entire rounds of Premier League games will be shown. These will have to be mid-week matches because of the prohibition on screening Saturday afternoon games to protect attendances at lower league fixtures. 200 of the 380 games will be on offer, 42 more than at present. It is anticipated that BT may be able to reduce the £960m it pays for its two packages. The Football Supporters' Federation is concerned that Premier League attendances could suffer because more matches are being broadcast live. They have said that clubs should cut ticket prices and subsidise travel for away fans, particula...

What will happen in the impending Premier League television rights auction? Premier League clubs have become used to regular substantial increases in the income they receive from broadcasting, but can this be sustained? Sky has become more strategic in terms of where it puts its money. As was noted in an earlier post, BT, which is facing pressures on a number of fronts, has edged away from sports. A lot of attention has focused on possible new kids on the blocks, in particular hi tech giants like Amazon, Google and Facebook. This blog post looks specifically at the possibilities of a bid by Amazon: The Premier League auction. The blog provides a number of cogent reasons why Amazon is unlikely to bid. It wouldn't really be a good use of two to three billion pounds. It doesn't really fit in with the Amazon Prime business model. It is even open to question whether the internet infrastructure could cope with a substantial number of simultaneous live streamings. Consumers...

Price of Football have produced a condensed commentary on the Mayor of London's report on the Olympic Stadium. West Ham United cannot be blamed for playing a strong hand as the only feasible tenant, even if it was at a considerable cost to the public purse. The blame must rest with mismanagement by politicians and the deal is reminiscent of poor PFI deals concluded over the last ten to fifteen years: Flares and slippers Fair enough, but dealing with legacy stadiums after an event like the Olympics is always a major challenge. Think of all those stadiums left empty and desolate in Greece after they staged the Olympic Games. See some pictures here: Abandoned venues

Crystal Palace would be open to selling naming rights for their redeveloped Main Stand at Selhurst Park which has not undergone a major refurbishment since 1924. However, they insist that they would never be part of the prawn sandwich brigade: New main stand The new stand will expand the capacity of their stadium from 26,000 to 34,000 and will cost £100m. Chairman Steve Parish and American co-owners Josh Harris and David Blitzer have committed to redeveloping Selhurst Park and the project will go ahead whether or not Palace stay in the top flight. Parish said, 'We want to leverage the London-based high-end supporter and then put in as much general admission as we can and keep the cost low for the normal supporter. We are not being over ambitious about the corporate support we want.'

Amanda Staveley has given Mike Ashley a fortnight to accept £250m for Newcastle United in a one off payment. Ashley rejected proposals for a series of staged payments that would have yielded a higher total. He had been hoping to receive £380m for the club. Analysts think that Newcastle's value would halve if they were relegated to the Championship, so there is likely to be a significant relegation clause in the contract that would require Ashley to return money if they went down. Staveley is concerned about running out of time. She wants to complete the takeover well before the end of the January transfer window and the Premier League requires 30 days to a ratify a deal. Newcastle's run of six games without a win has increased the importance of the transfer window and the urgency of the negotiations. There are not believed to be any other offers on the table, despite rumours of another bidder emerging.

Bayern Munich's profit before tax increased by 23 per cent to a record €66m in 2016/17. The profit increase was largely due to player sales, but this is the 25th consecutive year in which the club has made a profit. Only Manchester United have a bigger commercial income and commercial income was 58 per cent of revenue. This reflects a kit deal with Adidas worth €600m a year and a shirt sponsorship scheme with Deutsche Telekom worth €30m a year. However, the high share of commercial income also reflects relatively low incomes from broadcasting by international standards. The broadcast revenue of €148m in 2015/16 was well behind the amounts earned by English and Spanish clubs, even before the new Premiership deal. However, the next four year Bundesliga deal from 2017/18 will deliver a 85 per cent increase. €267m was earned from European competition. The wages to turnover ratio of 45 per cent is comfortably below the 50 per cent target recommended by Deloitte.

BT may sacrifice its Premier League television rights in the upcoming auction. BT's television growth has stalled in recent months, after it started charging for its sports channels. With the company facing a range of problems, the share price has lost a third of its value this year. BT has spent £3.8bn on football rights since 2012 and £1.1bn this year alone. The cost of the move into football is equivalent to 22 per cent of the BT consumer unit's entire cost growth and is no longer driving customer growth. A move away from football would be popular with some shareholders who fear that the increase in the cost of sports rights will continue to eat into BT's profit margin. BT did pay £1.2bn to retain its exclusive rights to show European football games for three more years in March and also has the rights to the FA Cup. However, it is the Premier League rights that are crucial in attracting and retaining customers. If BT bids relatively low in the auction, this coul...

Mayor of London Sadiq Khan has taken charge of the Olympic Stadium after a report found that it was losing more than £20m a year. Sadiq Khan criticised his predecessor, Boris Johnson, claiming that he had 'panicked' and allowed the taxpayer to foot the £300m bill to convert the venue into a football stadium for West Ham United. The conversion has cost £113m more than estimated and the stadium is forecast to lose £24m in 2017-18. Under the deal struck by Mr Johnson when he was mayor West Ham pays £2.5m a year as part of a 99-year lease, which is reduced to £1.25m if they are relegated from the Premier League. The costs of converting the stadium were largely borne by the taxpayer with the club contributing £15m. Stewarding and policing costs, along with such items as cleaners, turnstile operators, goalposts and corner flags are picked up by the publicly owned operator E20. The review commissioned by the mayor found that since that deal was signed, policing and stewarding co...

According to The Times Charlton Athletic has been placed on the market. 'Roland Duchâtelet, the controversial owner of Charlton Athletic, has put the club up for sale and admitted that he should not have invested in football. The Belgian bought Charlton nearly four years ago when they were in the Championship but has faced strong protests from supporters in recent seasons over the way that he has run the club, who are now in League One. CARD (Coalition Against Roland Duchâtelet), a supporters’ group, have put pressure on him to either invest or sell his stake in the club. Stunts have included a mock funeral being held before kick-off, beach balls being thrown on the pitch and a pitch invasion. Until now, Duchâtelet,71, had been adamant that he would not sell Charlton. “I have not decided anything, I am open to possible offers, I will take the time to think, but contrary to popular belief I have not made any money from football, this rarely happens for investors, those who say o...