The Political Economy of Football V2

One of Manchester United's financial strengths has been its success in attracting commercial income. A sophisticated marketing operation has attracted sponsorships on all sorts of aspects of club activity from some unlikely companies. For example, Casillero del Diablo are their official global wine partner. Mlily are their official global mattress and pillow partner. At the regional level, Donaco are Official Casino Resort Partner of Manchester United for Thailand, Cambodia, Vietnam, Laos, Myanmar and South Korea. Somewhat unfortunately. Thomas Cook Sport are their official travel services provider. Banco Guayaquil are their Official Financial Services Affinity Partner of Manchester United for Ecuador. However, examining the recently released 2018/19 accounts, the authoritative Swiss Ramble blogger comments: 'Somewhat disappointingly, the club's commercial income was slightly down from £276m to £275m. Despite Ed Woodward’s comment that “playing performance doesn’t re...

Liverpool's proposed kit deal with Nike is worth £15m less a year than their current deal with New Balance. However, on top of the £30m a year agreement, there is a commitment to pay the club a 20 per cent royalty on net sales of Liverpool products. They would also promote the club through stars such as Serena Williams. The club thinks the deal will allow them to tap into Nike's global marketing reach and distribution. It is below the £50m plus a year deals negotiated with Nike by Premier League rivals Chelsea and Arsenal, and the £71m deal Nike struck with Paris Saint-Germain in the summer. New Balance has commenced legal proceedings in the High Court against Liverpool claiming that it can match Nike's terms. A review the club commissioned into New Balance by Deloitte concluded that Nike can super charge distribution in a way that a challenger brand such as New Balance cannot. New Balance alleges Liverpool are in breach of a matching clause agreement allowing it t...

Kieran Maguire of the PriceofFootball reviews Manchester United's latest annual accounts: Waterfall He notes, 'The matchday income for Manchester United in 2018/19 was £111 million, impressive by Premier League standards and above that of any other club in that division (whose figures are from 2017/18 as no one else has published results yet). However, there has been hardly any growth in matchday revenue since Sir Alex Ferguson retired in 2013 and critics say that Old Trafford is falling behind rivals in terms of modern facilities and comfort.' 'Whilst the annual interest expense has fallen to just £22 million last season the total cost since 2005 has now reached £809 million, exceeding the sum originally borrowed.Overall taking into account interest and tax costs Manchester United made a profit of just under £19 million, lower than some other clubs who had the benefits of much larger player sale gains the previous season. Out of those profits £23 million was then p...

The authoritative Swiss Ramble takes a look at Championship finances. He notes, ' 2017/18 revenue in the Championship was £729m (TV £400m, commercial £177m and match day £152m), but there were hefty £572m operating losses, mainly due to £773m wages (wages to turnover ratio 106%) plus £264m player amortisation/depreciation and £259m other expenses.' It is clear is that the Championship is a highly unprofitable division – and it is getting worse. Despite revenue growth of just £24m (3%) in 2017/18, wages shot up £113m, while player amortisation/impairment rose £64m, leading to operating losses widening from £400m to £572m. 'Leaving aside any issues with the Championship’s Profitability and Sustainability regulations, a business model where the owner finances a football club’s losses can work fine – right up to the point when the owner stops providing funds for whatever reason. That’s the danger.' 'Amongst other things, this analysis has shown that Championship clu...

Championship clubs are still considering breaking away from the English Football League because of their deep sense of grievance over the five year Sky TV deal agreed last November: Breakaway threat

Tottenham Hotspur have refinanced their construction debt on the new stadium through a private placement in the US: Construction debt £637million of loans, originally due for repayment in 2022, are now not due to be repaid until an average of 2042. Kieran Maguire of the PriceofFootball comments, 'At 2.66% interest rate annual finance cost is about £17 million. I would expect the new stadium to increase matchday income from about £40m to £100m. Spurs used to generate more matchday than Arsenal but has reversed since the Emirates was built. Total Premier League figures Spurs £686m Arsenal £1,352m.' Tottenham Hotspur chairman Daniel Levy told the Financial Times that there would be no change to the frugal business plan and player transfer strategy. He emphasised that the right approach was to build from the bottom up. Mr Levy said that the Tottenham bond issue was significantly oversubscribed, reflecting a strong credit rating from investment agencies and confidence from US...

Controversial Billericay Town owner Glenn Tamplin has 'stepped down' from the club: Statement Quite what this means is unclear. Has he sold the club? Sceptics on social media have suggested he will be back next week.

The Chinese owners of Wolves, Fosun International, are open to selling 20 per cent of the club. They value it (realistically) at £350m which represents a considerable profit on their purchase price: £70m minority investment What would be the incentive to buy a minority stake? Probably capital appreciation, although the hesitant start to the season by Wolves might make purchasers cautious.

The High Court has ruled that Kevin McCabe must sell his 50 per cent share in Sheffield United to co-owner Prince Abdullah for £5m: Forced sale At £5m he has got a bargain. Kieran Maguire of the PriceofFootball notes, 'Average value of a non-'Big Six' club based on most recent accounts is £275 million.' Prince Abdullah, who now takes full ownership, has promised to continue investing in the first-team and Academy while also unveiling plans to own Bramall Lane outright. The ground is owned by McCabe through a separate company.

Lower league clubs are more successful in selling naming rights for their stadiums, perhaps because they are so desperate for cash that they will take any offer, however low it is and never mind whether the name is convoluted and inappropriate for a football club. Modern stadiums are generally more likely to be sponsored, but Tottenham Hotspur have not sold the naming rights for their new stadium, nor have West Ham for the London Stadium. 25 per cent of clubs in the Premier League and Championship have sold their naming rights, compared with 46 per cent in League Two and 45 per cent in League One.

Arsenal are heading for a loss suggests Magnus Albersten of Off The Pitch: 'When Arsenal release their 2018/19 accounts, they’ll be in the red for the first time since 2002 in terms of pre-tax profit. The profit of £70.2 million in 2017/18 will inevitably be turned into a loss largely due to no profit on player sales in 2018/19.' 'When Arsenal disclosed their annual accounts for the 2017/18 season, they showed a massive profit but also revealed decreasing revenue. Despite posting a profit, the accounts did not look healthy in the long run for the Gunners. They had an operating loss of £42 million, which was only saved by the profit on player sales of £120 million (with Alex Oxlade-Chamberlain and Alexis Sánchez as the biggest sales of the season).' He concludes, 'Financially, the 2018/19 season will most likely be one to forget for Arsenal. Even though the club increased their total revenue, Arsenal are expected to reveal a pre-tax loss of £29 million. The loss is...

The authoritative Swiss Ramble takes a look at the accounts of Hull City for 2018/19. Profit before tax decreased from £24m to £3m, mainly due to profit on player sales falling by £26m from £31m to £5m. Revenue was down £7m (13%) to £48m, because of lower parachute payments. Partly compensated by expenses being cut by £12m. The main driver of the £7m revenue reduction was a £6m cut in parachute payments from the Premier League from £43m to £37m, but the other revenue streams also declined: match day was down £1.1m (15%) to £6.1m, while commercial was £0.6m (20%) lower at £2.3m. Revenue has dropped £69m (nearly 60%) from £117m to £48m in the two years since relegation, mainly broadcasting £54m, but also match day £10m and commercial £5m. Excluding parachute payments their revenue would put them 18th in the Championship. The revenue reduction was offset by further cost-cutting at the club with wages slashed £6m (20%) to £25m, as more expensive players were released, other expenses do...

Premier League kit deals this season amount to some £390m and are expected to exceed £400m next season: Kit deals The biggest deals are with adidas, £75m at Manchester United and £65m at Arsenal. The smallest are £750,000 at Sheffield United and Watford. Liverpool's five-year agreement with New Balance is set to expire at the end of the 2019/20 season. The Champions League winners are reportedly in talks with Nike over a new long-term kit deal that would eclipse Manchester United's agreement with Adidas.

Kieran Maguire of the PriceofFootball takes an in depth look at the finances of Hull City: Hull City He concludes, 'Hull financially have done well to break even on a day to day basis last season but that ignores that their main income source is about to dry up. Unless a speedy resolution to the conflict between the owners and fans takes place the club is going to struggle to compete in the Championship and attendances could fall even further below the present levels.' 'Some might say the accounts are out extremely early to give the Allams more time to market the club to potential investors before there’s a deterioration in the financial numbers in 2019/20.'

It hasn't been a good few weeks for the English Football League and now they are being sued by one of their own clubs, Middlesbrough. They are alleging that the league failed to enforce its financial rules over Derby County's purchase of its own stadium. Derby beat Boro to a play off place by one point last season, denying them the possibility of a £180m Premier League bonanza. Derby are one of number of clubs who exploited a loophole in the EFL rules to buy their own stadium and thus make themselves meet financial fair play rules. Mel Morris, the club's owner and chairman, used a separate company to buy Derby's Pride Park ground for £80m, with a deal to lease it back, when it was listed as an asset in the club's books with a value of £41m. It meant that Derby posted a pre-tax profit of £14.6m when losses of over £13m a year over a three year period are a breach of the EFL's profit and sustainability rules. The EFL has ordered an independent valuation of P...

The authoritative Swiss Ramble has looked at the 2017/18 accounts and cash flow statements of each Premier League club. There is too much to report in detail, but here a few highlights. More can be found on Twitter @SwissRamble. Arsenal went from £52m operating profit to £42m operating loss, due to lower revenue after failing to qualify for the Champions League, compounded by higher wages and player amortisation plus Wenger pay-off. However, £120m profit on player sales resulted in £70m profit before tax. Following promotion to the Premier League, Brighton and Hove Albion made £9m operating profit, but a small £3m profit on player sales meant that profit before tax was 'only' £12m. However, that represented a £51m improvement over the £39m loss in the Championship, including £9m promotion payments. Chairman Tony Bloom once again put his hand in his pocket, providing £32m new loans. The owner has provided over £300m in total. The Chelsea business model has been to run large...

Barcelona is likely to generate over €1 billion in revenues in 2019/20. The club president sought to allay fears that the club is financially stretched, although development costs are rising: New club record

Plans by some leading European clubs to restructure the Champions League to benefit the biggest clubs have failed to win support. Progress was halted at a meeting of European Club Association clubs in Geneva this week. The ECA represents more than 200 leading clubs and has been in talks with Uefa on the reform plans. It had been suggested that the top 24 clubs in the Champions League would be given automatic qualification for the following year's competition. Four places would be given to teams promoted from a second tier European league and just four sides would qualify on the basis of national league performance. One of the main backers of the proposal had been Andrea Agnelli, chairman of the ECA and president of Juventus. It was also backed by FC Barcelona. However, seven other Spanish clubs, although not Real Madrid, had criticised the plan. All 20 Premier League also opposed the plan as they feared it would detract from the value of their lucrative broadcast rights. Ag...

Britain's richest man, Sir Jim Ratcliffe, considered buying Newcastle United in the summer (he also looked at Chelsea), but considered that Mike Ashley's valuation of £350m was too high: Valuation halted takeover He ended up buying Nice and no takeover of Newcastle is expected any time soon.

Chelsea have been talking to potential shirt sponsors as their deal with Yokohama Tyres enters its last season: Shirt sponsor talks When it was signed in 2015, it was the second biggest deal in the Premier League but it has since been overtaken or matched by other top six clubs.

Are Scunthorpe one of the better run clubs in the Football League as their chairman recently claimed? Kieran Maguire of the PriceofFootball considers the evidence in depth, although he avoids a definitive answer: The light pours out of me He concludes, 'Scunthorpe have [lived] beyond their means under Peter Swann since he acquired the club. There is nothing wrong with this, but it does increase risk if for whatever reason he can’t (Stewart Day at Bury, Tony Xia at Villa) or won’t (Steve Day at Bury, Ken Anderson at Bolton, Ellis Short at Sunderland) underwrite the losses.' 'Peter Swann has been generous to the club and should be given credit for that, but unlike many other owners who have lent their clubs money interest free (Coates family at Stoke, Matthew Benham at Brentford, Tony Bloom at Brighton, Dean Hoyle at Huddersfield etc.) has charged interest. The transfer of tax losses makes sense but also leaves a slightly uneasy taste in the mouth as to what is driving th...

In the 1990s listing football clubs on the stock exchange was all the rage. With lucrative TV deals still getting off the ground, it offered a welcome source of funds. There are just two listed football clubs in the UK after Stan Kroenke took Arsenal private last year (it was listed on the Nex exchange). Manchester United is listed in New York. Its shares have fallen from $18.70 to $18.20 this year. Celtic is the only club listed on a mainstream exchange, the UK's Aim. Dermot Desmond, the Irish entrepreneur who owns 35 per cent of Celtic, says that the objective is to allow 'the Celtic family' to own a small piece of it, not to attract rich investors. In three years Celtic's share price has risen from 75p to 162.5p, despite paying no dividend, valuing it at £151m. With Rangers still recovering from its demotion to the fourth tier in 2012, Celtic is the dominant football force in Scotland. It has won the 'treble treble' in the last three seasons. Its l...

The Premier League have not found it easy to find a new chief executive after Richard Scudamore retired last November after 19 years in the post. The first two choices, both media executives, turned down the job. Head hunters Spencer Stuart have been replaced by Russell Reynolds who are looking beyond TV executives to candidates with experience in big business. General management skills have become more important. Scudamore's great achievement was the mega bucks TV deals, but in a sense they are up and running and domestically actually in decline, although that is offset by increased overseas earnings. The TV rights are crucial to the league's business model, but there is confidence that current league executives such as Paul Mohair, director of broadcasting, can be relied on to run the broadcasting deals process. Head hunters are also said to be seeking a 'politician' type who can broker deals with regulators in the UK and Europe. This follows increasing criticis...

There are quite a few gaps in this list and I am not sure how reliable it is, but some of the figures are interesting. QPR come out top: EFL's richest owners Of course, there's a difference between having a lot of money and being willing to spend it. Some owners have cottoned on to the fact that the easiest way to make a small fortune is to start with a large one and buy a football club. Some are relatively tight fisted, but that hasn't led to prudence across the league. Rather, there is still a willingness to splash the cash in an unsustainable way, illustrated by the recent history of Bury.

The Football Supporters Association has welcomed the decision of the English Football League to set up a comprehensive review of its procedures and regulations concerning the financial sustainability of its member clubs: EFL review Led by independent QC Jonathan Taylor, the review will consist of two phases: an investigation into the events surrounding the crisis at Bury FC followed by an examination of the EFL’s current regulations.

Faced with a sale to an international group, Partick Thistle fans are launching a campaign for community ownership of the club: Thistle Forever The proposed sale to the owners of Barnsley FC will be subject to scrutiny under dual ownership rules. One concern is that Firhill could be sold for housing development as the area gentrifies.

Burnley's chairman talks about the club's finances, saying that they do make a profit and step by step are closing the gap on the top six: Clarets chairman The Clarets have had a net spend of £87.5m since the first promotion under Sean Dyche. Burnley must have the smallest population in the immediate area of any Premier League club.

Juventus is targeting sponsorship deals across Asia as it seeks to close the financial gap with Europe's highest earning clubs. The club opened a branch in Hong Kong last month and said it was in talks over deals. It hopes that spreading the club's brand across the region would have a knock on effect on kit sponsorship deals. The club realises that Serie A is not as well followed in Asia as La Liga and the Premier League. However, it believes that the signing of Ronaldo and recent performances in European competitions has helped its profile in Asia. Tim Crow, a sports marketing adviser, told the Financial Times: 'Asia is a place where star power makes a big difference. In China, they follow stars rather than teams ... but Asia is highly competitive.' In July Juventus announced a sponsorship deal with Konami, the Japanese video game maker behind the Pro Evolution Soccer franchise. It is thought to be worth €15m over three years, representing a substantial increase...

Bayern Munich's turnover and profits were up substantially last season despite an early exit from the Champions League: Record profit and turnover The club argues that a fiscally responsible approach has enabled 'Bayern to compete with clubs reliant on very different financial structures, from billionaire sole proprietors to thinly veiled state sponsorship, even as transfer fees and player salaries have ballooned.'

The authoritative Swiss Ramble looks at how broadcasting money is distributed across Europe. After years of individual deals in Spain, La Liga have introduced a collective deal, based on 50% equal share, 25% performance over last 5 years and 25% popularity (1/3 for average match day income, 2/3 for number of TV viewers). Even after the changes, Barcelona and Real Madrid still receive by far the most TV income from La Liga’s TV deal with around €140m apiece, followed by Atletico Madrid €100m, then a big gap to Sevilla and Athletic Bilbao €70m. Lowest payments went to Girona and Leganes €40m. The Bundesliga TV revenue is distributed using four criteria: the five-year league performance ranking (70%); the five-year ranking for both divisions (23%); the 20-year ranking for both divisions (5%); and the playing time of Germany U23s (2%). As a result, Bayern Munich and Borussia Dortmund received the most from the Bundesliga TV deal with €98m and €88m respectively, followed by Schalke 04 €...

Real Madrid's profits in 2018/19 were up by 23 per cent to €38.4m (€63.5m before tax). However, non-transfer revenues stagnated at €757m, largely because of their exit from the Champions League in the Round of 16: Profits up

An interesting look at the crisis at Bury by a Liverpool blog: This is Anfield It is noted, 'Liverpool themselves have had their own problems with owners in the past, and it’s easy to forget that the club were on the verge of administration prior to being bought by current owners Fenway Sports Group (FSG), then known as New England Sports Ventures.' 'Liverpool’s problems saw the formation of supporters’ union Spirit of Shankly, which continues to hold the club’s owners to account to this day and has been successful in helping come to compromises around decisions which didn’t seem to have the fans’ best interests at heart.'

Scunthorpe United chairman Peter Swann has insisted that the club are in good shape financially. This follows an article in the Mail on Sunday by football finance expert Kieran Maguire which named them as an example of a financially vulnerable club: Chairman's riposte He drew attention to the club's future plans which included apartments on the site of their ground which would provide an income stream.