The Political Economy of Football V2

Doom and gloom merchants are out in force forecasting the end of football finance as we know it.  All sorts of claims are being made and most of them are highly speculative. The latest to jump on the bandwagon is entrepreneur is Marcus Luer, CEO of Total Sports Asia, Asia's leading sports marketing agency.   Perhaps he hopes he can whip up some business? Luer told Kasper Kronenberg of offthepitch.com 'Football clubs all over the world should realise the bonanza is over.  The prodigious broadcasting deals, spearheaded by the Premier League, won't happen again.  And it is not because of Covid-19.  The pandemic simply fast-tracked the inevitable, which was already very clear to anyone paying attention: the pay TV model is dead.' Surprising, then, that the Bundesliga has just secured a deal above pessimistic forecasts with only a small financial hit. Still, Luer may have a point, although the pay TV model was never alive for me as the local council bans Sky dishes...

The President of Olympique Marseille, Jacques-Henri Eyraud has denied the club is for sale.   French businessman Mourad Boudjellal is reportedly leading a bid to take over the club with funds from the Middle East. Eyraud said that owner Frank McCourt was not interested in selling, expressing clear irritation about the 'umpteenth rumour' at a press conference.

Burnley's cautious model of spending is coming under strain and boss Sean Dyche is urging the club to spend to reinforce the squad.   In part the club has done well in the past by getting bargain buys off cash strapped clubs like Charlton (Nick Pope £1.5m; Johann Gudmundsson £2.2m).  But Dyche reckons those days are over. Dyche commented: 'I have said for a long time that we need to get ahead of the curve.  But doing that costs a lot of money.  You can't work for ever on a net spend of £9m a year.' This is the challenge for clubs that seem secure in the Premier League mid-table.  It can all suddenly fall apart: think Stoke City and Bournemouth and Watford this season.

Leamington FC chairman Jim Scott makes a number of interesting points in this interview.  He notes that sponsors are very wary of coming forward because of the financial challenges they face.  The Brakes supremo also criticises the current calls for greater regionalisation of leagues, pointing out travel costs are a fraction of wages - and clubs from the Championship downwards have been paying above the odds:  https://nonleaguedaily.com/having-lost-a-club-in-the-past-we-wont-allow-that-to-happen-again-leamington-chairman-jim-scott/?fbclid=IwAR1t6QYPUe0pKapmXjkz7wIzhxCHpC6bst1n3miMDL9m5jjavcr2X2AxDwg

There are many admirers in the UK of the German 50+1 ownership model, but in fact it encounters more problems than is often admitted.  Having lived and worked in Germany, I also think that German models are not that readily translatable to the different climate of the UK. Now it's all kicking off again between the league and the ultras, reports Off the Pitch.com.   It all started with the protests against Hoffenheim's ex-president Dietmar Hopp who managed to get round the 50+1 rule. One consequence of the rule was that ultras were allowed to stage their protests inside stadiums, but many felt they went too far with some of the slogans they used against Hopp. Meetings with fan representatives before the pandemic failed to find a solution and it is feared that it will all kick off again once crowds are allowed back in the stadiums.   It is certainly not the Ordnungspolitik which the Verein model is supposed to offer. It brings back all the arguments I had with German c...

Unfortunately I can't insert commentary beneath the turnover table I published for Liverpool by year, but the message is clear enough.  Turnover is now three times the 2011/12 level.  Growth has been particularly marked since 2015-16 - 76 per cent. Jurgen Klopp's genius is rightly praised, but one must not forget what a good job Fenway Sports Group have done.   The main elements of their strategy have been: Improving football performance through a positive playing style and investment in young players Improving the fan experience and the relationship with the club (match day income has doubled since 2011/12) Leveraging the club's global following to deliver revenue growth (commercial income from sponsorship has trebled since 2011/12)

 2011-12  £169m  2012-13  £206m  2013-14  £256m  2014-15  £298m  2015-16  £302m  2016-17  £364m  2017-18  £455m  2018-19  £533m

What is the Crown Prince of Saudi Arabia up to, asks the Financial Times? The Pink 'Un revealed this week that representatives of the Saudi state approached Germany’s Bundesliga about acquiring the football league’s media rights across the Middle East.  The Gulf kingdom has spent big to bring heavyweight boxing, motor-racing events and top European football club matches to the country. The Public Investment Fund, the Saudi sovereign wealth fund, is leading a £300m takeover of Newcastle United (a deal that awaits approval by the English Premier League). Why are football broadcast rights next on the agenda? Prince Mohammed is following a playbook written by Gulf neighbours Qatar and the United Arab Emirates . They were first to invest heavily in sports, in an effort to diversify their economies away from a reliance on petrochemicals and project soft power around the world. Saudi efforts to break into sport also stem from a regional rivalry, particularly since 2017, after Riyadh an...

Works teams were once a familiar feature of football,  My father, as a non-league footballer, had a particular dislike of them with their guaranteed jobs and time off for training during the week. When one of the last of them, Westland Yeovil, visited Falmouth Town he was very much on edge. There are one or two survivors in Germany, Vfl Wolfsburg-Fussball GmbH is a wholly-owned subsidiary of Volkswagen.  For Bayer Leverkusen, the links are historic.  In the Netherlands, PSV Eindhoven retains close ties with Philips through sponsorship, shared technology and board members. They belonged to a more paternalistic era when company owners thought that running a football team would build worker identity with the company and raise its profile. For a time it seemed as if university teams competing in the non-league system might be a new type of works team.  Team Bath from Bath University had some success and aroused resentment: https://en.wikipedia.org/wiki/Team_Bath_F.C. ...

Premier League clubs spent £263m on agents last season, a slight increase on the season before.  Liverpool paid out the most and Burnley the least:  https://www.bbc.co.uk/sport/football/53170215 There was an approximate correlation with league placings, although Tottenham Hotspur paid less than might be expected from their league position.   This is not a surprise when one considers their restrained wages and transfer policies.   Everton paid a bit more than one might expect, but they are an ambitious club, Agents are unpopular because they are seen as they taking money out of the game, but many markets need intermediaries to function well.

Tottenhan Hotspur's new stadium has gone straight to the top of rankings produced by stadium design specialists Buro Happold:  https://offthepitch.com/a/stadia-these-are-not-decisions-should-be-made-purely-according-cost-programme-and-architectural?wv_email=wyn.grant%40btinternet.com&wv_id=afd8be48-d951-48c2-9da2-8588a6cd078f&wv_name= Buro Happold argue that stadium design should reflect the individuality of the club and not simply cost or an intellectual beauty parade.

It seems that there is a softening of the market for broadcast television rights, although not a dramatic one.  The Bundesliga is the first major league to conclude a television deal since the pandemic and it is down by €200m on the previous deal:  https://www.theguardian.com/football/2020/jun/22/bundesliga-domestic-tv-rights-fall-by-200m-in-post-pandemic-deal However, it could be argued that it is a better outcome than anticipated and one that provides stability. The commercial director of Mainz has argued that smaller clubs are hit harder by any reduction in a deal as they are more reliant on television money and hence there should be a more equal distribution of funds

Another US investment firm has expressed an interest in bidding for a stake in Serie A:  https://www.insidesport.co/football-business-serie-a-gets-another-suitor-advent-international-looking-to-buy-stake/ The bid from Advent International would value the league at $13 billion.

Has the Covid-19 pandemic changed the balance of power between clubs and players that has been in place since the Bosman ruling 25 years ago.  This claim is being made by lower league managers in relation to out of contract players and may well apply to them:  https://www.lep.co.uk/sport/football/morecambe-boss-sounds-warning-out-contract-players-2891639 A similar point has been made by the Shrewsbury Town chief executive:  https://www.shropshirestar.com/sport/football/shrewsbury-town-fc/2020/06/23/contract-poser-for-shrewsbury-players/ Whether it is the case for elite level players in Europe's top leagues is more open to question.

Writing from his Zurich fastness, the authoritative Swiss Ramble compares the 2018/19 finances of the Big Six Premier League clubs with the rest. He states: 'The Bi g 6 were more profitable than Other 14 on most metrics: EBITDA around twice as much (£716m vs £324m); operating loss much smaller (£97m vs £393m); £33m profit before tax vs £188m loss. The only exception was profit on player sales, where the other 14 were higher (£241m vs £193m).   This was on a "needs must" basis.' Thanks to player sales, Premier League clubs have largely managed to post pre-tax profits in last eight years: Big 6 every season since 2013; Other 14 losses come in third year of TV deal.  However, Big 6 profitability dropped more than other 14 against prior year, especially pre-tax profit, falling £406m from £439m to £33m, while the other 14 “only” decreased £221m, albeit moving from £33m profit to £188m loss. Big 6 and Other 14 tend to report operating losses with the best performance in the...

With Liverpool securing the Premier League title considered to be just a matter of time, the Financial Times yesterday provided an in depth analysis of the factors underlying the club's success. According to the Pink 'Un, this was a case of the manager making a difference.  Jurgen Klopp came to Liverpool with a clear plan and when it hit obstacles he adjusted it.   After his pressing game tired players out and led to inconsistent results, he went for a style of possession football that conserved energy and protected players. There are lots of inefficiencies in football but FT sports correspondent Murhad Ahmed identifies two efficiencies at Anfield.   First, the team is ruthlessly efficient in the sense that it often wins matches by a single goal.   Second, according to football analyst Omar Chaudhari, 'Football is an efficient market, but there are inefficiencies in that good players will end up at bad teams occasionally.  If you know that, and no one else is ...

Women's football could be hit particularly hard by the Covid-19 pandemic.   In Spain, however, after the women's game there had been purely amateur, a players' strike led to a fully professional league and proper contracts:  https://www.soccerex.com/insight/articles/2020/spanish-women-given-professional-league-boost

Marseille have been fined €3m for a breach of a financial fair play settlement agreement, but can keep their Champions League spot next season:  https://www.espn.co.uk/football/marseille/story/4115730/marseille-fined-3m-for-breach-of-ffp-settlementwill-keep-champions-league-spot Uefa can only suspend so many clubs from the competition without undermining it.

The financial hit being taken by medium-sized Scottish clubs is illustrated by the case of Dundee which has already lost half a ,million pounds because of the pandemic and expects to see its revenues halved next season:  https://www.thecourier.co.uk/fp/sport/football/dundee-fc/1386425/breaking-dundee-reveal-500000-revenue-hit-and-warn-of-difficult-conversations-ahead/ The Scottish Championship is not scheduled until October and even then fans may not be allowed back into grounds.  That may not happen until 2021. The small Scottish clubs, which are the equivalent of non-league clubs in England, can probably be survive with donations or share purchases from fans.   For example, Arbroath have passed £75,000 on their Supporters Wall fundraiser and have been left speechless by the level of fan support. A Hibs supporter told me: 'After Celtic and Rangers (admittedly a long way after) they have the largest home gates in Scotland and should survive the crisis. Hearts have a...

Murhad Ahmed, sports correspondent of the Financial Times, reckons that the situation regarding the Saudi-backed takeover of Newcastle United is complicated.  On the one hand, the evidence of piracy from the World Trade Organisation looks compelling.  On the other hand, blocking a takeover would damage the key economic relationship between the UK and the desert kingdom. He thinks that one possibility is that Realpolitik wins out and the takeover is approved.  Some kind of loophole is find to get the Saudi sovereign wealth fund through the owners' and directors' test.  My view is that would involve quite considerable reputational damage for the Premier League. Second, the Premier League gives advance warning that the test may be failed and the deal is withdrawn to save face.  I would rate this as more likely. Third, the deal is restructured with, for example, less direct involvement for the Saudi public investment fund or assurances on measures to tackle piracy...

Uefa has made a number of temporary changes to its financial fair play rules to allow clubs to adjust to the effects of the Covid-19 pandemic:  https://www.uefa.com/insideuefa/news/newsid=2642261.html In particular the financial years for 2020 and 2021 will be assessed as one financial period.   The combined deficit of the two years will be averaged and there will also be specific Covid-19 adjustments.

Former owner Roland Duchatelet owns the key to a successful takeover of Charlton Athletic by the two bidders backed by most fans.  Duchatelet still owns The Valley and the training ground and will need to lower his valuation:  https://www.standard.co.uk/sport/football/charlton-takeover-news-roland-duchatelet-championship-a4473866.html

The influential chair of the House of Commons international trade committee has written to the international trade minister Liz Truss asking for the Saudi-backed takeover of Newcastle United to be blocked until claims of TV piracy in Saudi Arabia have been investigated:  https://www.bbc.co.uk/sport/football/53104800 Whether the Government could or should intervene is a moot point.   The Government's initial position was that it would not intervene.  International trade secretary Liz Truss is something of a lightweight and the Foreign Office is targeting her department for a takeover. However, it is perhaps significant that foreign secretary Dominic Raab made some rather opaque remarks about the matter earlier this week before he was engulfed in controversy about his remarks over taking the knee.  Some Whitehall wags have harshly nicknamed him 'Dim Dom'.

Watford representatives are in discussions with Hertsmere Borough Council over a potential move from their historic Vicarage Road to Bushey Hall Golf Club, a local counciller confirmed to offthepitch.com.  In October, it was revealed the club were looking to increase the capacity of their stadium by 11,000 seats to 32,000 in a £40 million project. The club now appear to have made other plans of instead building an entirely new venue. Bushey Hall is just one of a number of sites being looked at, but it meets all the club's criteria.

Bolton Wanderers face a £1m financial hit from relegation even before taking account of the effects of the Covid-19 pandemic according to football finance guru Kieran Maguire:  https://www.theboltonnews.co.uk/news/18524271.bolton-wanderers-facing-minimum-1m-drop-revenue-relegation/ There continues to be expressions of concern about some lower league clubs going out of business, but as Kieran Maguire points out in his book The Price of £ootball soccer is unusual compared with other sectors of the economy because businesses rarely completely fail.

With the Saudi-backed bid for Newcastle United in jeopardy, a second bidder has emerged.  It comes from Henry Mauriss, an American businessman who is chief executive of Clear TV.   Unconfirmed reports suggest that he has met Newcastle owner Mike Ashley.  The bid is said to be £350m. More about Mauriss here:  https://www.shieldsgazette.com/sport/football/newcastle-united/who-henry-mauriss-story-behind-man-reported-have-tabled-ps350m-takeover-bid-newcastle-united-2886942 Meanwhile, Premier League Middle East broadcast partner BeinTV have submitted legal evidence suggesting that the beoutQ alleged pirate operation would become a shadow director of Newcastle if the Saudi-backed bid succeeded. BeinTV are represented by Stephen Nathan QC of Blackstone Chambers.  He is a specialist in many areas of company and commercial law.   He has argued that the government of Saudi Arabia would become a director of Newcastle within the meaning of the Premier League's rules an...

The Saudi-backed takeover of Newcastle United has been placed in jeopardy by a report by the World Trade Organisation that found Saudi Arabia in breach of intellectual property rules by the broadcaster beoutQ, an Arabic language network.  This followed a complaint by Qatar about piracy of Premier League matches. Qatar argued that beoutQ was streaming content rightfully owned by its broadcaster beIN Sports that has paid billions of dollars for exclusive rights to major sporting events.    In addition to piracy on social media, giant screens were used to allow viewing of 2018 World Cup matches. The 125-page report is indigestible even for someone who knows something about international trade law, but the key passage is on p.90: [The evidence]  supports Qatar's assertions that: (a) beoutQ's piracy was promoted by prominent Saudi nationals, (b) beoutQ targets the Saudi market, (c) beoutQ's pirate broadcasts are transmitted via Arabsat satellite frequencies, and (d) beout...

Tranmere Rovers fans are angry about the 'monstrous injustice' of the club's relegation from League One on a points per game basis. The owner, Mark Palios, is considering the possibility of legal action against the EFL, although he says that he would prefer to settle the matter by discussion:  https://www.skysports.com/football/news/11733/12007526/mark-palios-says-tranmere-rovers-considering-legal-action-over-relegation-from-league-one I can understand why the club and its fans think they have become the victims of rough justice.  I greatly enjoyed my one visit there. However, I am doubtful whether a legal action would succeed.  The owner points to similar actions in France, Belgium and Scotland succeeding.  Some of the circumstances may be different and, in any case, these are different legal jurisdictions. Palios seems to think that one proceed on the basis of anti-competitive behaviour and unfair prejudice.  I don't recall the latter in law, but there might b...

Four times German champions Kaiserslautern have declared themselves insolvent.  Now playing in the third division, they have debts of €20m:  https://www.news24.com/sport/soccer/international/bankrupt-kaiserslautern-expect-to-survive-despite-insolvency-20200615 However, the club should survive with the German taxpayer footing the bill for player salaries.

The owners of AS Roma are seeking new buyers for the club after a planned €750 sale collapsed because of the pandemic.  A deal with Texas-based billionaire Daniel Friedkin fell apart.   Steep falls in revenue for clubs have made it difficult for buyers to assess the value of teams. Apparently Mr Friedkin made a revised offer of €575m in May which was not accepted.   This involved paying in instalments starting with €125m on signing.   He would also have covered €300m in debts by the end of the year. The collapse of the deal has caused dismay at the club.  They are now working with Goldman Sachs in a search for new bids.

Although a projected deal to buy Newcastle United didn't get through, American investor Joseph DaGrosa is in the market for Premier League and other European clubs, sensing a buying opportunity in the pandemic:  https://soccer.nbcsports.com/2020/04/21/joseph-dagrosa-interview-premier-league-la-liga-newcastle-bordeaux-getafe-mls/ ' If the market is down 20-30 percent, segments of the public market that will be down 30-40 p ercent, football could be down 50-75 percent. It’s a great time to buy with dry powder so after the acquisitions you can build up a world-class team at a fraction of what it would otherwise cost. In our discussion with investors, we can essentially buy today and invest 25-40 cents on the dollar relative to what we would’ve paid six months ago.' He has now done an interview with Off the Pitch. He has up to €1 billion to spend to create a City Football Group-style network of primarily European clubs.   He believes it's in UEFA's best interest to ease...

The action being brought by Amanda Staveley against Barclays Bank is leading to some interesting comments in open court (albeit streamed by a live feed) which can then be reported. Ms Staveley was questioned about how much PCP, her investment firm, had made helping to broker the sale of Manchester City to Abu Dhabi investors in 2008.  She replied: 'We netted £5m in total.' Her firm is reported to be involved in the current Saudi bid for Newcastle United.

How does one explain Brentford punching about their weight?   This is what their co-director of football, Rasmus Ankersen, told Off the Pitch, emphasising that their player development model is as important as their recruitment model: He explained how the club changed their academy strategy and how they organise and work with their B-team. They used to be caught in a classic academy mindset, which saw them beaten by wealthier rivals According to Ankersen, Brentford's success is only partly due to the data mindset they have when recruiting players. People tend to forget all the hard work that is required when new players arrive in a new environment. Brentford see their players as assets they need to develop. And therefore, they work intensely on improving those assets from the minute they arrive in West London.  They depend on turning other clubs' misjudgements into quality players. The foundation on which Brentford's progress has ...

Former Charlton chairman Matt Southall has launched an insolvency action against the club over unpaid fees:  https://www.thesun.co.uk/sport/football/11841942/matt-southall-charlton-high-court-fees/?utm_source=twitter&utm_medium=social&utm_campaign=sharebarweb The action against the troubled SE7 club will not be heard until December. Charlton Athletic have responded vigorously:  https://www.cafc.co.uk/news/view/5ee3447fc921c/club-respond-to-alleged-high-court-claim-from-matthew-southall

Birmingham City have been reprimanded for breaching an EFL imposed business plan, but are not going to have a sanction imposed in the form of a points deduction:  https://www.birminghammail.co.uk/sport/football/football-news/birmingham-city-reprimanded-after-efl-18401669

Jim Scott, chairman of National League North club Leamington, has said that non-league football will not be financially viable if it has to be played behind closed doors:  https://www.leamingtoncourier.co.uk/sport/football/non-league-footballs-return-not-viable-without-crowds-says-brakes-chairman-scott-2881022#gsc.tab=0 Reflecting the views of many in the non-league, the Brakes supremo said that it would be financial suicide for clubs at Leamington's level to play behind closed doors.

Deloitte have produced their authoritative annual review of football finance.  It was compiled before the Covid-19 pandemic, but contains some warning signs on the financial challenges faced by football:  https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/annual-review-of-football-finance.html Revenues in the 'top five' leagues rose to a record €17 billion, but much of the growth was swallowed up by increases to players' wages.   Deloitte predicts that revenues will fall to €15.1bn in the coming season (which could be optimistic). Revenue for the Premier League topped £5bn for the first time in the 2018/19 season, but its 20 member clubs recorded a combined pre-tax loss of £165m. Wages in the English top tier rose 11 per cent to €3.6bn last season, but agreements on temporary pay cuts for players have not been reached at most clubs. France's Ligue 1 recorded an operating loss of €306bn, while in Serie A an operating profit of €59m the previous season t...

Miguel Delaney investigates for The Independent 'How football has become broken beyond repair':  https://www.independent.co.uk/sport/football/premier-league/champions-league-superclubs-liverpool-man-utd-barcelona-real-madrid-a9330431.html He argues , 'f ootball’s embrace of unregulated hyper-capitalism has created a growing financial disparity that is now destroying the inherent unpredictability of the sport. This is not just the big clubs often winning, as has been the case since time immemorial. It is that a small group of super-wealthy clubs are now so financially insulated that they are winning more games than ever before, by more goals than ever before, to break more records than ever before. They are stretching the game in a way that has caused the entire sport to transform and shift.' Of course, what is more difficult is to devise solutions and he admits, in a second report, that every turn comes up against a brick wall.

The chief executive of Lincoln City says that the true cost of the Covid-19 pandemic to clubs will not be known for some time.  The Imps have lost £1m in revenue, but that has been offset to some extent by cost savings resulting from putting the club into hibernation.  However, they still face a six figure loss compared to forecasts:  https://www.lincolnshirelive.co.uk/sport/football/football-news/lincoln-city-1million-coronavirus-efl-4211136

Despite a record annual revenue of £5.156billion and prior to the advent of Covid-19, Premier League clubs achieved record economic losses totalling £599.54m for last season (2018-19), according to financial analysts Vysyble. With four EFL (English Football League) Championship clubs yet to release their full 2019 accounts, the second senior tier of English football behind the Premier League has so far achieved collective economic losses of £307.47m from revenue of £695.82m. The final economic loss total for all 24 EFL Championship clubs is expected to be at least £350.00m. The overall result is that the 44 clubs in England’s top two tiers of football will generate almost £6billion in revenue yet are highly likely to produce record economic losses close to £1billion in a single season. “The latest loss numbers will have already placed the Premier League clubs in a seriously difficult position leading up to subsequent and devastating public health-related events. The Covid-19 virus is n...

Charlton Athletic has confirmed that the SE7 club has been sold to a consortium led by Manchester-based businessman Paul Elliott:  https://www.cafc.co.uk/news/view/5edf3aa26a41c/consortium-led-by-businessman-paul-elliott-purchases-east-street-investments Fine words butter no parsnips, but it would appear that his immediate intention is not to sell the much traded club on.  The stadium and training ground are, of course, leased out by the former owner, the controversial Belgian Roland Duchatelet.

Football finance guru Kieran Maguire has been commenting on the financial implications of the end of the League One season.    Last season clubs in the division were losing £1.9 million a week between them in a pre-Covid economy, he states. Maguire adds: ' If lower league clubs are to survive post Covid they will need to cut costs. For those clubs who do show details (frustratingly too many are opaque on this) on average 83% of income went on wages in League One. UEFA have a 70% 'red line'.' Congratulations to my local EFL club Coventry City on winning the League One championship.  Hopefully, they can return to the Ricoh. I can understand the pain felt by clubs who might have won a play off place, not least Sunderland, but congratulations also to Rotherham, a well-run club.