Wolves have to spend big to win promotion

The authoritative Swiss Ramble has taken a close look at the accounts of Wolverhampton Wanderers. He no longer posts his findings in a blog, but tweets them, so I have selected a few highlights. His general tone is positive, in particular noting that Wolves should not have financial fair play problems given that one can deduct Academy and other expenditures amounting to some £6m.

He states, 'Under former owner Steve Morgan Wolves were very prudent, making profits 6 times in 7 years. Fosun have a very different strategy: “increased expenditure both on and off the pitch is essential to ensure Wolves are able to compete with other clubs of a similar size and ambition.”'

'In fairness, almost all Championship clubs lose money as they gamble on promotion. That said, Wolves £23m loss is the 2nd largest of clubs that have reported to date in 16/17, only below Brighton £39m (including £9m promotion bonuses).'

'Revenue has fallen 61% (£37m) since relegation from the Premier League in 2012 from £61m to £24m. The previous 4 seasons were cushioned by a total of £56m parachute payments, which ended in 2016. Revenue mix now quite even: commercial 39%, broadcasting 34% & match day 28%.' Broadcasting would become the dominant element following promotion.

'£24m revenue was still miles below leading Championship clubs in 2016/17, e.g. Norwich £75m, Aston Villa £74m. Worth noting that the only club above Wolves not benefiting from parachute payments is Brighton (though Leeds also likely to overtake when publish accounts).'

The distortion introduced by parachute payments is once again apparent: 'Revenue is greatly influenced by those Premier League parachute payments, e.g. £41m to Villa, Newcastle & Norwich. This has increased from £26m in 2015/16 thanks to the new PL TV deal, making the task more difficult than ever for clubs like Wolves – unless they spend big.'

'As might be expected, Wolves attendances have been declining since relegation from the Premier League. Wolves have lost around a quarter of their crowd since the peak of 28,366 in 2009/10. Wolves had the eighth largest crowds of 21,572 in the Championship last season, though there was a fair gap to the seventh placed club, Norwich City, with 26,354. That said, Wolves’ attendance was higher than five Premier League clubs.

'Commercial income rose 16% (£1.3m) to £9.2m, as The Money Shop replaced Silverbug as shirt sponsor with a “significant commercial agreement”. This was still lower than some other Championship clubs, e.g. Norwich £15m, Villa £13m, Brighton £10m and Bristol City £9m.'

'Although Wolves 119% wages to turnover ratio is clearly far from ideal, it is not uncommon in the Championship. To date in 2016/17, it has been surpassed by three clubs: Nottingham Forest 137%, Birmingham City 128% and Sheffield Wednesday 126%. The £28m wage bill is still nowhere near the level of some Championship clubs, especially those boosted by parachute payments, e.g. Villa £61m, Norwich £55m.'

What Wolves now need to do is to concentrate on their performance on the pitch and ignore ill-founded criticisms of their financial arrangements. In the absence of parachute payments, their new owners have had to splash the cash, but that is nothing unusual in the Championship.

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The Political Economy of Football V2

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