Parachute payments make life difficult for Bristol City

Bristol City are yet another Championship club hit by the skewed playing field caused by parachute payments concludes the authoritative Swiss Ramble in a review of their recently published accounts.

The Swiss Ramble notes, 'Despite the growth in revenue, Bristol City's £26m revenue is still only mid-table in the Championship. For some context, in 2016/17 Newcastle led the way with £86m, a full £60m more. So far in 2017/18, Norwich City and Hull City have posted £62m and £56m (with Sunderland and Boro to come). It’s difficult to compete with clubs receiving Premier League parachute payments with no fewer than eight clubs benefiting from these in 2017/18.'

'If parachute payments were to be excluded, it would be a very different story. In this case, Bristol City would have the seventh highest revenue in the Championship, which would give them a very decent chance of making the play-offs.'

'Almost all clubs lose money in the Championship, but their £25m loss would have been among the highest in 2016/17, only behind Newcastle United £47m and Brighton and Hove Albion £39m (both adversely impacted by promotion bonuses and exceptional payments).'

All revenue streams were up: commercial by £2.2m (23%) to £11.6m; match day by £1.6m (32%) to £6.6m; and broadcasting by £0.9m (13%) to £7.7m.

'Player sales dried up in 2017/18 with their tiny £0.3m profit unsurprisingly being one of the lowest in the Championship. This is in stark contrast to Norwich City, whose bottom line last season was greatly boosted by £48m from this activity.'

The club have rarely made big money from selling players. In fact, the £14m profit in 2016/17 (largely sale of Jonathan Kodija to Aston Villa) is around two-thirds of the £20m generated in last ten years from this activity. However, this season will include £23m sales of Bobby Reid, Aden Flint and Joe Bryan (cash income £13m).

'Attendances have significantly increased since promotion from League One, rising 80% from 11,681 to 20,953. The redevelopment of the Ashton Gate stadium (capacity 27,000), shared with Bristol rugby club and also used for major concerts, has helped generate revenue.' Even so, 'average attendance of 20.953 was only the 12th highest in the Championship, over 10,000 less than Aston Villa and Leeds United. However, the club has announced a record number of season ticket sales for 2018/19, despite controversy over the pricing scheme.

'The wages to turnover ratio worsened from 98% to 105% [the recommended level is 50 per cent], but still much better than 170% in the 2012/13 Championship season.' More than half the Championship clubs have ratios of over 100 per cent as they compete for the riches of the Premier League.'

'The gross debt of £72m is quite large for a club of their size, but many other clubs in the Championship have larger debts. The debt is not an issue, so long as Steve Lansdown remains a friendly owner, as he demonstrated when converting £37m of debt to equity in 2013.' The Swiss Ramble comments, 'I estimate that he has put in around £134m to date (capital £114m, loan £20m) with little sign of the need for this funding going away. Bristol City are fortunate to have a benevolent owner in Steve Lansdown, but this is in reality a necessity for those Championship clubs that are not in receipt of sizeable parachute payments, if they wish to compete.

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The Political Economy of Football V2

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