The Political Economy of Football V2

A range of clubs below Premier League level is talking to the media about the threat to their survival and indeed to the whole structure of the football pyramid.   However, some clubs were in trouble even before the pandemic and in the rest of the economy would not be regarded as viable businesses.   Clubs, however, have a special place in their communities. A case in point is Southend United.   They have a £500,000 tax bill due in a few weeks.  This is not the first time the club has left the taxman waiting, notably in 2010 when they came close to administration. Property developer Ron Martin has owned the club for 22 years. Over the years he has loaned the club £19m via his holding company to offset losses. His long term goal has been to move out of Roots Hall to a new stadium at Fossetts Farm.   This, he thinks, could be the springboard that would take the club to the Championship. Quite a lot of people have moved into Southend in recent y...

The authoritative Swiss Ramble reviews the 2019/20 accounts of Borussia Dortmund.   They  went from €22m profit before tax to €47m loss (€44m after tax), mainly due to profit on player sales falling €43m to €40m. Despite the COVID restrictions, revenue was basically flat at €379m, but operating expenses rose €25m and net interest payable was €2m higher. The €47m loss was their first since 2010. In the nine years up to 2019, they generated €227m profits, averaging €25m a season. In light of the high degree of uncertainty related to all revenue streams, the board expects a net loss in 2021 between €70m and €75m. The only revenue item to decrease was match operations, down €12m (27%) to €33m, but the pandemic restricted growth in broadcasting, up €3m (1%) to €170m, commercial, up €10m (6%) to €168m, and other operating income, up €1m to €9m. In 2018/19, i.e. before the pandemic, the €22m pre-tax profit was fifth highest in the Bundesliga, only surpassed by Bayern Munich €75m...

In an open letter to Charlton fans, Thomas Sandgaard said he wanted them to know before anyone else that he had completed his acquisition of the club:  https://www.cafc.co.uk/news/view/5f6dd60385c8a/an-open-letter-to-charlton-fans-from-thomas-sandgaard Sandgaard has confirmed that he has passed EFL's OADT test and that he expects official confirmation that the transfer embargo is gone - adds "it kind of is already". Richard Cawley of the SLP reports: ' Sandgaard's deal has seen him increased the lease on The Valley and TG to 15 years. Says costs on that side have risen as part of deal with [Belgian owner Roland] Duchatelet. It buys everyone peace of mind that we'll keep playing at The Valley and have the training ground."

The authoritative Swiss Rambles reviews the accounts of Juventus.  2019/20 accounts cover a COVID impacted season when they won the league (for the 9th year in a row), but were eliminated in the Champions League last 16 by Lyon. The loss before tax widened from €27m to €82m (€90m after tax), as revenue fell €88m (18%) from €494m to €407m, partly offset by €43m (13%) wages cut from €328m to €284m and profit on player sales rising €40m to €167m, though non cash flow expenses were up €48m. So after four years of profits, the club have now reported losses three years in a row, aggregating a €119m deficit over that period. However, the club is no stranger to losses, having racked up €151m between 2011 and 2013. They forecast that 2020/21 will end in another loss. The €234m is the worst operating loss in Italy. It is true that their accounts are the only ones impacted by COVID to date, but this had already been on a steady downward trend from €(1)m in 2015. The €142m loss in 2019 was th...

Two Hollywood stars, Ryan Reynolds and Rob McElhenney, are interested in investing in National League side Wrexham FC.   Supporters of the club which has been fan owned since 2011 have voted to go ahead with talks. As much as £2m could be invested in the club.  Quite why Hollywood A-listers are interested in a fifth tier club in North Wales is as yet unclear:  https://www.bbc.co.uk/sport/football/54274142

How will barring fans from matches, probably until March, affect Premier League revenues?   The authoritative Swiss Ramble has some answers. In 2018/19 Premier League clubs had around £700m of match day revenue with Manchester United leading the way with £111m, followed by Arsenal £96m, Liverpool £84m, Spurs £82m, Chelsea £676m and Manchester City £55m. At the other end of the spectrum, clubs like Burnley, West Bromwich Albion and Sheffield United had less than £10m. Even though Arsenal matchday revenue was not the largest in the Premier League, it was by far the highest as a percentage of total revenue at 25%, much more than Spurs and Manchester United , both 18%. In fact, Arsenal are more reliant on this revenue stream than any other leading European club. Based on the number of matches played in 2018/19, we can calculate the average revenue per match, ranging from Manchester United £4.3m to Burnley £0.3m. If we assume that all matches are played behind closed doors...

  West Ham United owners David Sullivan and David Gold face paying a huge rebate to the Government if they sell the club before 2023. Covenants relating to move to the former Olympic Stadium tie the pair to levies in the event of a club sale. West Ham are reported to be the subject of interest from a US consortium, but the club deny any bid or that the Hammers are for sale. CEO Karren Brady has put a £800 million valuation on the Hammers.

Lower league clubs will be hit hard by the decision not to allow fans into matches, as they are particularly dependent on matchday revenue:  https://www.bbc.co.uk/sport/54246745 Kieran Maguire of the PriceofFootball comments: 'National League c lubs will be especially hit by the decision to not allow matches to take place before fans. Only 3 clubs out of 24 made a profit in 2018/19, and total losses were £318,000 a week across the division.' Wrexham made the biggest profit (£755k) and Dover Athletic the biggest loss (£494k). Streaming games is one (relatively small) source of income for clubs, but how it works does not constitute a level playing field.  Here is the chairman of Colchester United on the issue: 'The way it works currently is that the home team keep all of the revenue for the tickets they sell through their own website and they also get the revenue for the first 500 that buy via the away team. For example: for Saturday’s game against Bolton, we sold 452 iFollow...

Merthyr Town have announced that they are suspending their season in the Southern League because of rising Covid-19 cases in Wales and local lockdowns in neighbouring areas:  https://www.merthyrtownfc.co.uk/news/boardstatement210920/   The club states: ' We are currently in a unique position out of the 88 Clubs at Step 3, as the only one that is prevented from playing home games in front of our own fans.' They did consider playing games in England, but costs would increase and matchday revenue would decline.

In total, the clubs playing in Serie A last season had net debts of €3.9 billion - a staggering amount, especially considering the enormous uncertainty created by Covid-19.   Napoli had the fifth lowest debt figure in 2019 as the club were able to pay off a significant portion of their liabilities through cash reserves.   Bressica and Lecce had the smallest debts.  Juventus had net debt of around €850m and Inter Milan was just over €700m.

The Premier League has negotiated a new broadcasting deal in China, but it does not match the $700m deal it had with PPTV which was cancelled after they wanted to cut back on the amount they paid. The new deal with Tencent, which runs until the end of the season, includes a fee and a revenue sharing arrangement based on the number of subscribers  .   However, it is thought to be worth 10 per cent of the amount of the PPTV deal. Clubs have reassured that they will not be out of pocket as PPTV had already paid up half of its contract.  The Big Six have backed the new deal because for the first time it allows them to show clips on the Chinese version of their club channels, something they have wanted for a long time as a means of building their fan base. The Premier League is still searching for a longer-term replacement for PPTV in its most important overseas market. Pandemic-related losses already brought a fall of £850m last season for the Premier League.  A fur...

Examining the problems that have arisen with Uefa's Financial Fair Play rules, the Forenisic Risk Alliance argues that football needs to take account of best practice in other industries, in particular developing a more cooperative relationship with regulators. They argue that 'Clubs in various sports are struggling to meet compliance obligations and failing to proactively engage regulators. It is clear that the wider global trend of intensifying regulation has gained traction in the world of sport, and this is unlikely to reverse given public opinion and the potential commercial consequences. The better long term strategy for sports teams would be to shift into higher gear in their cooperation with their regulator.' They suggest that clubs should be given incentives to borrow from the corporate compliance playbook.  But what would these incentives be?   They also highlight the importance of organisational culture, but for many football clubs, especially the richer ones, ...

Any sale of Charlton has been delayed after an appeal was allowed and an injunction granted until November.  Reasoning of court here:  https://addicksdiary3.blogspot.com/2020/09/appeal-allowed-injunction-until-november.html

Macclesfield Town have been wound up over debts exceeding £500,000:  https://www.bbc.co.uk/sport/football/54177582   It is never easy for clubs on the edge of Manchester, but the owner clearly has a lot to answer for in this case. A discussion of what has happened and the broader context here:  https://www.football365.com/news/save-crocodile-tears-macclesfield-town

The US billionaire Krause family is nearing an agreement to acquire a majority stake in Parma in a move that would make it the latest American investor in Serie A.   A deal valuing the club at more than €100m could be reached by the end of the week. The Krause family would control 60 per cent of the club and existing investors would retain a stake for at least five years.   The new owners outbid a potential Qatari investor. The Krause Group already owns lower tier US football club the Des Moines Menace.   The family built its fortune on the Kum & Go convenience store chain in the US. Last month AS Roma was acquired by Texan billionaire Dan Friedkin for €591m while last year ACF Fiorentina was bought for an undisclosed sum by New York media mogul Rocco Commisso, Under the ownership of dairy company Parmalat the club won three European titles in the 1990s.  After Parmalat collapsed in 2003 following a huge financial fraud the club was reformed under ...