The Political Economy of Football V2

A senior member of the Abu Dhabi royal family who recently failed with high-profile bids for Liverpool and Newcastle United is interested in a Derby County takeover.    Sheikh Khaled bin Zayed Al Nehayan, 62, is the cousin of Manchester City's owner Sheikh Mansour and owns the Bin Zayed Group, a Dubai-based conglomerate. Current owner Mel Morris bought Derby in 2015 but it is understood he has been trying to sell at least a significant chunk of the club since last season. Last month, Derventio Holdings (UK) Limited was registered at Companies House, the UK's registrar of companies, with three directors: Bin Zayed Group managing director Midhat Kamil Kidwai and two Swiss-based British entrepreneurs, Andrew Obolensky and Christopher Samuelson. Sheikh Khaled is listed as a 'person with significant control'.  R epresentatives of the new company are understood to have attended Derby's recent home against Watford. Sheikh Khaled was unsuccessful with a bid for Liverpool in...

The authoritative Swiss Ramble has reported on Ajax's  2019/20 accounts. Profit before tax fell €42m from €69m to €27m (profit after tax down from €52m €20m), largely due to revenue dropping €37m (16%) from a record €199m to €162m and expenses increasing by €17m to €220m, partly offset by profit on player sales rising €12m to €84m. The club are known for their strategy of developing and selling players. They have earnt €400m from this activity in the last 10 years, averaging €69m a season since 2017. Despite the fall, the club's €27m profit is still the highest in the Eredivisie, well ahead of the next highest, AZ €8m. As a rule, very few Dutch clubs make big money, so Ajax €69m surplus in 2018/19 was something special and unlikely to be repeated. Ajax have a sustainable business model, reporting profits in nine of the last 10 years (only loss was €1m in 2015/16). In that period, they have accumulated over a quarter of a billion Euros profit, averaging €26m a season. However...

Inter Milan have run into difficulties with their commercial operations. Inter Milan's sponsorship revenue fell by €61 million in the 2019/20 season mainly because they failed to replace two Asian firms whose contracts either expired or were terminated the year prior. A wrongful termination suit has been filed against the Italian club over their cancellation of a sleeve deal committed to in June due to a sponsor's "failure to comply with its contractual payment obligations". On a positive note, business interruption insurance coverage has ensured losses resulting from the closure of stadiums were kept at an absolute minimum.  

There is uncertainty about the takeover of Burnley after controversial solicitor Chris Farnell became involved.  Farnell has been involved in takeover bids at Charlton and a number of other clubs.  More about Farnell here:  https://www.lancs.live/sport/football/football-news/burnley-takeover-chris-farnell-profile-19183152  and also here:  https://theefl.co.uk/chris-farnell Nevertheless, American group ALK Capital LLC remain in talks with the club despite the approach from Farnell and Egyptian businessman Mohamer El Kashashy.   They have provided proof of funding and thought to be prepared to bid around £200m.  

A threat of legal action has been making against the Premier League for halting the Saudi Arabian takeover of Newcastle United:  https://www.shieldsgazette.com/sport/football/newcastle-united/exclusive-newcastle-united-takeover-bombshell-premier-league-served-legal-letter-demanding-anti-competition-disclosure-3016073 The action would be based on competition law and would go before a specialist court.   In my view football leagues have always been vulnerable to action under competition law (indeed, it has been used by the EU in the past) and it would be interesting to see a case in the domestic courts.

Football finance guru Kieran Maguire takes an in depth look at Manchester United's latest financial figures:  http://priceoffootball.com/manchester-united-2019-20-spoilt-victorian-child/ Maguire notes, ' Whether United can hold onto top spot in the revenue table is uncertain, as Liverpool and Manchester City both had the benefit of higher league positions and Champions League participation last season.' He comments, ' Even when compared to other clubs 2018/19 figures, Manchester United’s ability to strike deals with sponsors is peerless, effectively earning the same as the combined commercial income of the "Other 14" clubs added together.' Revenue fell faster than salaries and so Manchester United paid £56 in wages for every £100 of income, the highest proportion for a decade, but still well below UEFA’s ‘red line’ of 70%. The authoritative Swiss Ramble has also taken a look at the figures and states: ' £23m loss after tax is much smaller than many ann...

Southend United are unlikely to be able to pay off their £500,000 debt to HMRC and are due in court again in Wednesday:  https://www.echo-news.co.uk/sport/18820393.southend-united-chairman-ron-martin-clubs-debt-hmrc/?ref=twtrec Owner Ron Martin put the debt down to being ambitious and investing, but the investment clearly has not paid off given Southend's current league position. It is argued to be the most worrying and depressing time in the club's 114-year history.   The club has been papering over the cracks for too long with short-term solutions to long-term problems:  https://www.echo-news.co.uk/sport/18821344.final-say-southend-united-fighting-future-off-pitch/

Despite the premature cancellation of the Dutch league and the financial fallout associated with the coronavirus pandemic, AFC Ajax recorded a pre-tax profit of €26.9 million in the 2019/20 season as the club continued to benefit from a highly successful talent monetising strategy.  However, this was considerably below what the club achieved in the previous season. The result was driven by an €84.5 million profit on player sales (€72.6 million the season prior) which weighed up an operating loss that rose from €4.4 million in the 2018/19 season to €55.6 million mainly due to declining turnover. Turnover fell by just below €40 million as Ajax failed to replicate the European venture that brought them to the semi-finals of the Champions League in 2018/19. The club expect the current season's financial result to be negative due to the effects of the coronavirus pandemic.

The Government is considering banning betting firms from front of shirt sponsorships.  The Spanish Government banned gambling companies sponsoring teams in La Liga which will affect eight teams in the top league. 10 out of 20 teams in the Premier League are sponsored by a betting company and 17 of the 24 Championship teams.   Last season Premier League teams sponsored by betting companies signed deals worth a combined £69m.

One thing that has always given Manchester United an edge over their rivals is the sophistication of their commercial operation which has managed to sell obscure sponsorships to remote parts of the globe. Despite an 11 per cent drop in revenues, compared with the same period a year ago, to £59.4m ,  the income from sponsorship was more resilient than broadcasting and match day income. They fell almost 60 per cent and 77 per cent respectively. However, sponsors deferred over £80m of payments to United. The club has gone to great lengths to ensure that cash from commercial partners continues to flow, for example allowing General Motors’ Chevrolet flexibility in its remaining payments as the team’s main shirt sponsor. But as well as protecting the value of its current contracts, the club is looking for a new shirt sponsor ahead of the expiry of the $559m seven-year deal with   Chevrolet   at the end of the current Premier League campaign in summer 20...

Manchester United's accounts for the year to June 2020 have been made available.   They lost £23m, mainly due to Covid-19 disruption.  There were £26m net finance costs, mainly on Glazer debts.   They still paid out £23m in dividends, largely to six members of the Glazer family. Total revenue was down by a fifth to £509m, but it's going to get worse.  Revenue for April to June was down by two fifths. For the three month period commercial revenue was down by 11 per cent from £66.7m to £59.4m. Broadcasting revenue was down by 59 per cent from £40.9m to £16.7m.   Matchday revenue was down by 77 per cent from £23.8m to £5.5m. Over the twelve month period the biggest fall was in broadcasting revenue down by 42 per cent from £241m to £140m.   This was mainly due to non-participation in the Champions League. United's net debt at the end of June 2020 was £474m, an increase of £271m over the year, partly because of adverse movements in the GBP:US...

Football finance guru Kieran Maguire has produced some interesting figures on the median income levels for clubs in English football.    The Big Six have 3.3 times the income of the other 14 Premier League clubs.   Big Six wages are three times those of the other 14.  The other 14 have 2.6 times the income of parachute payment clubs.    In turn the parachute clubs have three times the income of other Championship clubs, bringing home the distorting effect of parachute payments. The Championship has 2.9 times the income of League One and League One has 1.6 times the income of League Two.

The authoritative Swiss Ramble reports on the 2019/20 accounts of Hull City when they still made a profit of £3m despite Covid-19, but were helped by player sales where there was a £23m profit.   This was in a division in which most clubs lose money.    They have been profitable for six of the last seven years.  Player sales have averaged £18m a year from 2015.  Only five Championship clubs were profitable in 2018/19, with the highest profits at Bristol City and Brentford. The Swiss Ramble states: ' After initially saving the club from going bust, the Allams have managed a steady decline, going from Premier League to League One in the past 4 years. Although their finances look better than most in the basket case that is the Championship, the lack of investment has cost them.' Revenue fell from £48m to £16m. This was one of the lowest revenue figures in the Championship. The average is £32m. It should be noted that Championship revenue is heavily influ...

The EFL rejected a £375m offer from an American investment firm for a 20 per cent stake in the league.  It is rather similar to the offers that have been made for a stake in Serie A. TPG Capital would have put in place a management team to handle the EFL's broadcasting and commercial rights, believing it would have a much greater ability to maximise its potential.

The authoritative Swiss Ramble has been looking at the impact of the Covid-19 pandemic on European clubs.  He comments: ' Although it’s early days in the reporting period for football club accounts from the extended 2019/20 season, we can already see the significant impact of the COVID-19 pandemic in a few selected announcements from some European clubs.' 'Clearly, football clubs are suffering from the impact of the pandemic. This is only a small sample, but it is a sign of things to come at every club, namely large revenue reductions, partly mitigated by cost savings, covered by taking on more debt or capital put in by owners.' Barcelona have estimated a further €65m reduction in revenue in 2020/21 from €856m to €791m, partly mitigated by including TV money for 2019/20 competitions completed in July and August. That would mean a total revenue loss of nearly half a billion (€471m) over two years. Barcelona were keen to emphasise that without COVID they would have achiev...

Borussia Dortmund in August reported a financial loss of €44 million – the club's first deficit in 12 years. However, the club have now revealed that the pandemic nightmare is far from over.  In a recently released 224 pages financial report, Dortmund's management writes that Covid-19 is also expected to have a huge impact on the club's finances in 2020/21. Dortmund with managing director Hans-Joachim Watzke in the lead expect to lose between €70 million and €75 million in the 2020/21 financial year. The club state that there is a high degree of uncertainty and that "Covid-19 will affect almost all revenue streams". In 2019/20, Dortmund had a turnover of €442.1 million including transfer revenue. That figure is predicted to drop by about 20 per cent "mainly due to a decline in revenue from transfer business." The just finished transfer window was very unusual for Dortmund as they only had transfer income of about €5 million. However, if Jadon Sancho is s...

Liverpool and Manchester United have come up with a radical plan to shake up the Premier League which would see it reduced to 18 clubs:  https://www.bbc.co.uk/sport/football/54499998 The plan is being opposed by the league itself, but is expected to attract the backing of the other top six clubs who have been involved in talks.  They would have special voting status, alongside three other clubs with a long-term Premier League record (Everton, Southampton and West Ham United).   Changes could be made with the support of just six of these nine long-term 'shareholders'. The EFL would get its £250m bailout package and 25 per cent of all future revenue, but the highly distorting parachute payments would be scrapped.   Another sweetener is fan away tickets to be capped at £20. Football finance guru Kieran Maguire is concerned that every time Championship clubs get more money they spend it on wages.  He also thinks a big issue is that the top six would get a ...

Liverpool owner John Henry is in talks to publicly list his sports holdings in a merger with a blank cheque company.  The move would value his company at $8bn in a proposed tie up with Billy Beane, the US baseball executive depicted by Brad Pitt in his film Moneyball. RedBall Acquisition Corp, a special purpose acquisition company, raised $575m in August.  Red Ball aims to raise a further $1 billion and acquire a 25 per cent stake in Fenway. If a deal was reached, the listed vehicle could be used to acquire other teams across Europe.

Leeds United owner Andrea Radrizzani is considering a bid for Valencia.  The club's Singapore owner, Peter Lim, knows Radrizzani well and is under pressure to sell from the club's fans who have protested about his stewardship. Radizzani is considering building up a group of clubs that would have synergies with Leeds.  However, unlike Manchester City his focus would be on Europe and in particular France, Italy, Portugal and Spain. The San Francisco 49ers NFL franchise, which has a 13 per cent stake in Leeds, has said that it is keen to invest more in the club.

If I was a Wigan fan, I would be concerned by the news that Chris Farnell is getting involved in the club's takeover.  We have experience of him at Charlton and one fan made a complaint to the Solictors Regulation Authority about an alleged conflict of interest:  https://london-post.co.uk/wigan-athletic-takeover-in-chaos-as-former-charlton-athletic-director-looks-to-gain-control/ 'Sources understand [named purchaser] Garrido Cristo is to be connected to Manchester based IPS law firm owner Chris Farnell. Former Wigan Athletic director Farnell (who was involved in the club in 2013) was also previously involved in the liquidation of Northern English club, Bury, and has a string of associations with other clubs including Charlton Athletic, who have suffered huge mismanagement.'

AS Roma will report a loss of €204 million for the 2019/20 season, the club have revealed in a message to the stock market.    The results have been published just a few months after the Italian club were taken over by the American privately held consortium of businesses and investments The Friedkin Group, who in August finalised a full purchase of the club from fellow American James Pallotta in a €591 million transaction. "The fourth quarter of the 2019/20 financial year saw a significant deterioration in the economic and financial situation and the equity of the company and group, mainly due to the spread of Covid-19," the statement read. As a result of the loss, the club's shareholders' equity has decreased by €115 million to negative €242.5 million. Accordingly, AS Roma require financing of €140 million for the 2020/21 season. The club saved €30 million from players and some staff foregoing wages for the months of March, April, May and June and have agreed individ...

The test event organised by Brighton and Hove Albion has no discernible impact on the spread of the coronavirus:  https://www.theargus.co.uk/sport/18776630.paul-barber-urges-government-help-bring-football-fans/ Brighton's chief executive is frustrated with the inconsistencies in government policy, particularly in relation to outdoor events compared with indoor events.

Olympique Lyonnais has been hit hard by Covid-19.   A profit of over €6m in 2018/19 became a loss of €36.5m in 2019/20:  https://nairametrics.com/2020/10/07/football-lyon-lost-e36-5-in-the-2019-20-financial-year/ The club remains confident that its 'full entertainment' growth strategy will deliver positive results in the longer run.

The Premier League is going to sue its former Chinese broadcasting partner for $213m.  Football finance guru Kieran Maguire says it has no alternative to taking action in the courts as the failure to pay broadcasting fees has cost each club $10m.

Football finance guru Kieran Maguire looks at the ability of EFL clubs to survive Covid-19.   He notes that they were in financial trouble before the pandemic with a combined loss of £286m in 2018/19:  http://priceoffootball.com/the-same-deep-waters-as-you/ Maguire thinks that there is a real danger of insolvency, especially in Leagues One and Two. Of the various sources of funds he looks at, I would add that much will depend on whether a club has a benefactor owner with sufficiently deep pockets.

Football finance guru Kieran Maguire has given a reassurance that there is nothing for Sheffield Wednesday fans to worry about after the owner Depjohn Chansiris took a charge on the stadium.  It's no different from taking out a mortgage on your house:  https://www.thestar.co.uk/sport/football/sheffield-wednesday/what-why-and-how-theres-certainly-nothing-panic-about-regarding-dejphon-chansiris-charge-over-sheffield-wednesdays-hillsborough-2995129

The identity of the London-based Spanish businessman who has taken over Wigan has been revealed.  He has been involved in two Spanish clubs:  https://www.thebusinessdesk.com/northwest/news/2067372-new-owner-of-wigan-athletic-revealed

According to The Times this morning, the Premier League is prepared to offer the English Football League just £50m in bailout money.  Another £100m would be available as loans with interest rates similar to those charged by banks. The EFL says it needs up to £250m to cover losses arising from the coronavirus pandemic.  Some clubs in League One and League Two doubt whether they will be able to pay their wage bills at the end of the month. Some top flight clubs are questioning why they should have to subsidise EFL clubs.   Crystal Palace Steve Parish says that he knows of no other industry that has been asked to bail out its competitors.  Of course, in football without competitors the sector would not be viable. However, as Parish points out, supermarkets are not asked to bail out corner shops.

The pandemic has not hit Premier League transfer spending as much as many anticipated.   This was not the case in La Liga, Serie and the Bundesliga where spending fell drastically from last summer.   La Liga and the Bundesliga both turned a small profit. The Premier League spent £1 billion overall with a net spend of more than £800m, a considerable increase on last summer.  Chelsea (£155.9m net) and Manchester City (£87.1m,) were responsible for much of the spending, followed by Leeds (£79.4m), Tottenham Hotspur (£76.9m) and Aston Villa (£74.1m).  Between them these five clubs were responsible for 59 per cent of the net spend. Of other top six clubs, Liverpool had a net spend of £34m, Manchester United £32.3m and Arsenal £16.5m.   Burnley's net spend was negligible and West Ham, Crystal Palace and Brighton all made net profits. One sign of caution was that there was no run on superstars in their late prime.  Of the 27 biggest fees paid this s...

Barcelona has reported a €100m loss last season while seeing a doubling of debt to €488m.  Revenues fell by 14 per cent to €855m.   There was a coronavirus induced income fall of just over €200m. Commercial revenues were down 9 per cent to €297m.   Some commercial deals which were at advanced stage of negotiation before the pandemic fell through.  Merchandise sales were also down. Match day revenues dropped 24 per cent to €162m with no spectators since March.   Broadcasting income fell 17 per cent to €249m, partly due to fewer European matches.   Barcelona said that it expected revenues to fall to €791m this season, although that assumes a partial return of spectators to the Nou Camp. The club made €74m of savings, including agreed wage cuts with players. Barcelona has announced a new financing to plan to raise €815m for the redevelopment of its stadium.  Goldman Sachs will manage a new vehicle that will pay investors a portion of t...

Germany's 50+1 rule is often praised by fan groups in the UK as means of giving fans a stake in a club, although it is by no means watertight as the examples of RB Leipzig and Hoffenheim show. Wolfgang Holzhäuser was one of the key figures in implementing the 50+1 rule in 1998.  Holzhäuser now says the rule needs to be modified for German clubs to be able to adapt to innovative business methods in modern football. The former Bayer Leverkusen CEO has called for changes if German football is to improve its international presence to help boost the value of the Bundesliga TV and media rights.  A majority of the 36 Bundesliga clubs in March 2018 voted to retain the rule – but discussions are ongoing between the DFB, DFL and the clubs.

Arsenal's mascot Gunnersaurus, who has been in the role for 27 years, is the latest victim of cost saving measures at the Emirates:  https://www.joe.co.uk/sport/gunnersaurus-arsenal-covid-251822 This decision has not gone down too well with Arsenal fans given that he can't cost more than a few hundred quid a week and at least two players are on £350k a week.   It will be recalled that Arsenal recently made 55 backroom staff redundant. One fan has set up a GoFundMe page to try and save the mascot:  https://www.standard.co.uk/sport/football/gunnersaurus-let-go-arsenal-mascot-latest-victim-coronavirus-costcutting-a4563256.html Still as one Arsenal fan commented, he is a dinosaur and he has come back from worse. West Bromwich Albion's Ideal Boiler Man is thought to be safe.  

The authoritative Swiss Ramble looks at football club debt, noting that it is a complicated subject becaue of different definitions and standards.   I would add that it is important to note that many businesses run on debt.  For example, I am familiar with the agricultural sector and most farm businesses have an overdraft and various kinds of loans.   The important consideration with debt is whether it can be serviced. Tottenham Hotspur had the highest gross debt in England as at end of 2018/19 season with £658m (to fund the new stadium), followed by Manchester United £511m (Glazers’ leveraged buy-out), Arsenal £211m (remaining Emirates stadium mortgage) and Liverpool £129m (Anfield main stand expansion). Because of cash balances four of the Big Six had net debt below £100m: Liverpool £91m, Chelsea £43m and Arsenal £42m, while Manchester City even had net funds of £57m. That left two clubs with hefty net debt: Tottenham Hotspur £534m and Manchester United ...