The Political Economy of Football V2

A very useful report from KPMG detailing how the pandemic is not deterring investors in football, particularly from the US:  https://footballbenchmark.com/library/pandemic_not_discouraging_football_club_investors American investors hold major stakes in one-fifth of the top 60 teams playing in England, Italy and France. One interesting insight is that European football often offers a better return than investing in major American sports.

From his fastness in Zurich, the authoritative Swiss Ramble takes a look at the 2019/20 accounts of Rangers. The club's pre-tax loss widened from £11.4m to £17.8m, despite revenue rising £5.9m (11%) to £59.0m, though profit on player sales fell £2.4m to £0.7m. This was due to £11.5m (18%) increase in operating expenses, as the club invested in the first team. After tax loss was £17.5m. The main driver of the revenue increase was the Europa League, which was worth £20.7m compared to £14.3m prior year. However, player and other wages surged by £8.9m. To increase their revenue by £6m (11%) in a COVID impacted season is a noteworthy achievement, especially considering the hefty reductions in most other leading clubs across Europe. Rangers have consistently lost money in recent times, aggregating £70m of losses in the last seven years. The £18m loss in 2029/20 is the largest in that period, partly due to the investment in the squad, but also adversely impacted by the pandemic. The cl...

Atlético Madrid's debt is nearly €1 billion.  However, despite a fall of nearly 10 per cent in revenue, the club still managed to make a profit against the background of the pandemic:  https://www.sportspromedia.com/news/atletico-madrid-debt-2019-2020-broadcast-advertising-revenues-la-liga?_hsmi=101315867&_hsenc=p2ANqtz-_37nY_96enPEavzK-rkQtSqy7vrUKjg469zWcPcFvbq8LuKR-wf2cPVW5NuzC2LxKUikdoXPmWZ5AB_eQsyx9Ha3742gA1Q4cUnmDTIkwdASmUvE4

The authoritative Swiss Ramble reports on the 2019/20 accounts of Aberdeen FC. In 2019/20 Aberdeen's loss narrowed from £5.0m to £3.2m, largely because prior year included £4.3m impairment of Pittodrie. Revenue dropped £1.6m (10%) to £14.3m due to COVID, while wages rose £0.5m (6%) to £9.8m. Debt cut from £7.2m to £1.3m after equity conversion. Overall revenue declined £15.9m to £14.3m. Match day revenue was down because of the effects of the pandemic, a fall of 32 per cent from £5.4m to £3.7m. Broadcasting was more or less steady at £3m, a third of that coming from European competitions. The wages to turnover ratio went up from 58 per cent to 68 per cent, still within UEFA guidelines. In many clubs across Europe player sales are an important contributor to revenue. However, Aberdeen showed a small deficit of £0.2m after a small surplus of £0.3 the previous year.

Inter Milan recorded a loss of €102.4 million for the 2019/20 season, a period remembered for the massive impact the coronavirus pandemic had on football.   The club's loss is more than tice that of the preceding year. If it had not been for deferred income, turnover would have been stable at €423.7m. Their results were revealed after a number of other big Italian clubs presented historic deficits; AS Roma a loss of €204 million; AC Milan €195 million; and Juventus €89.7 million. "The financial year saw economic and financial streamlining measures implemented, with a particular focus on monitoring costs and carefully managing working capital, investment and liquidity," the club said in a statement.

The idea of a European Super League (ESL) has been around for some time and so far it has remained a pipe dream.  However, every time there is a serious proposal Europe's leading clubs use it to leverage more concessions from UEFA and the Champions League.   Currently in favour is a so-called 'Swiss model' based on chess competitions in which ten clubs would play each other in a league with the top clubs going on to a knockout competition. This format guarantees ten European matches each season instead of six in the Champions League and it would also avoid some big clubs getting knocked out early. This increases the financial divide in football.  According to Deloitte, revenues at the 10 richest clubs in Europe were €6.3bn last season, up from €2.6bn a decade earlier.  Covid-19 just enhances the need to boost sources of revenue. Fans don't like the idea because they are more interested in ancient rivalries.  But globalisation remains a strong force in footb...

The authoritative Swiss Ramble reviews the latest financial results for 2019/20 for Tottenham Hotspur. Tottenham Hotspur’s 2019/20 financial results covered a season that was disrupted by the COVID-19 pandemic, but they still benefited from the new stadium. The club swung from £87m profit before tax to £68m loss, a deterioration of £155m. Revenue dropped £69m (15%) from club record £461m to £392m (including exceptional £11m TV rebate), while profit on player sales rose £4m to £15m and expenses increased £85m. After tax loss was £64m. This is the first year that Spurs have reported a loss since way back in 2012 – and that was only £7m. In the intervening 7 seasons, they have generated an impressive £412m of profits, averaging £59m a year. In 2018 and 2019 alone they delivered a hefty £226m. Main driver of revenue fall is broadcasting, down £108m (44%) to £136m, due to Premier League deferral/rebate and reaching Champions League final prior season. However, new stadium led to growth in m...

Currently 70 per cent of television revenue in the Bundesliga is distributed on the basis of league performance over the last five years compared with just 25 per cent determined by league position in the Premier League. A recent proposal drafted by current Bundesliga side FSV Mainz 05 and explicitly supported by fellow recently promoted first-tier teams Arminia Bielefeld and VfB Stuttgart seeks to raise that number as high as €50 million. Second-tier side Jahn Regensburg is also attached to the initiative. Germany's "Bild am Sonntag" published details of the redistribution motion over the weekend. The band of clubs aims to cap TV revenue redistribution for the 18 top-flight Bundesliga clubs at 80 percent of income received.  The current system reserves 100 percent of the income for the 18 Bundesliga clubs. The second Bundesliga receives a separate stipend from the DFL, which automatically increases by €1 million each year.  Several German news sources report that several...

Cardiff-based specialist dental accountant Craig Freeman is about to buy Lex Dominus off Manchester businessman Paul Elliott as a prelude to taking control of Charlton Athletic:  https://londonnewsonline.co.uk/cardiff-based-businessman-set-to-complete-deal-for-lex-dominus-and-targets-taking-control-of-charlton-athletic/ He says that he will serve the court order that will give the company full control of Charlton. A legal friend reckons it is a ploy to get hold of the £500k perceived debt plus interest. Fanzine editor Rick Everitt tweeted: ' Not taking this guy very seriously if he believes Lex Dominus owns Panorama Magic - AFAIK the court order gives it control of East Street Investments, not ESI’s owners (Panorama and Southall).' The Ramsgate-based fan added: ' Hard to believe any serious party wanting the club would buy into this situation knowing they had to go to law to remove the current owner - and would bring a ton of shit down on their head from fans in the process...

Football finance guru talks about the Government's decision not to give any money to the EFL, leaving the Premier League to bail out their loss-making clubs.  As usual, he talks a lot of sense:  https://insidersport.com/2020/11/26/kieran-maguire-the-premier-league-cannot-be-expected-to-come-to-efls-financial-rescue/

Yeovil Town may sell their Huish Park ground to South Somerset District Council and lease it back to cope with the financial consequences of the Covid-19 pandemic:  https://www.bbc.co.uk/news/uk-england-somerset-55070683

Leeds owner Andrea Radrizzani reckons that Leeds United will take a £40m hit from the Covid-19 pandemic this season:  https://www.leeds-live.co.uk/sport/leeds-united/leeds-united-radrizzani-coronavirus-finances-19341056 The limited return of fans to stadiums may not help Leeds as the city could well be allocated to tier three where no fans are allowed.   In any case, most clubs estimate they will lose money on the return of limited numbers of fans given additional stewarding costs and the loss of drinks sales. It is particularly hard for Leeds as they wanted to celebrate their return to the Premier League after a long absence with their fans.

West Bromwich Albion 88 per cent shareholder Guochan Lai earlier this year turned down an offer of £150m for the club he bought for around £200m in 2016. He is in negotiations with an American consortium, but even £150m is too high a price for them given the threat of the club being relegated from the Premier League:  https://www.birminghammail.co.uk/sport/football/football-news/west-brom-takeover-latest-slaven-19339853 Lai's interest in Albion has been questioned in recent years with the owner absent from matches.  Fans have also been frustrated with the level of investment in the club.

Tottenham Hotspur lost £67.7m last season after a profit of £87.4m the previous season, largely due to increased interest payments and declining revenues:  https://www.tottenhamhotspur.com/news/2020/november/financial-results-year-end-30-june-2020/ Operating expenses rose, mainly due to a full year of depreciation at the Tottenham Hotspur Stadium. Spurs have refinanced their debt position, but the club's liabilities rose by £70m.

Sunderland may be the latest club to form part of a global network of football teams.   The Pozzo family has owned Udinese since 1986 and Watford since 2012, as well as other clubs.  They are the only group in Europe to have been in control of more than one club in five top leagues at one time. Owning multiple clubs allows an owner to invest heavily and hopefully smartly in scouting and recruitment.  Players can be tested in different environments and move to clubs and leagues that suit their particular skill set. Juan Sartori, the incoming owner of Sunderland, has linked up with Kyril Louis-Dreyfuss, a 22-year old with a £2bn trust fund whose family own a five per cent stake in Olympique Marseille.  Sartori's wife is the daughter of wealthy Russian oligarch Dmitry Rybolovlev who owns AS Monaco. Sartori and Dreyfuss are planning a takeover of top Uruguayan side River Plate (not to be confused with the Argentine side of the same name).  Subsidised loans from...

The authoritative Swiss Ramble reports on Celtic's 2019/20 accounts.   They posted a small £0.1m pre-tax profit (£0.4m loss after tax), despite revenue falling £13m due to COVID. Figures boosted by £24m profit on player sales. This year’s figures will likely see a large loss due to COVID, but the club “remain committed to the strategy of careful use of our financial resources”. This will probably mean the profitable sale of some of their better players like talented French striker Odsonne Edouard. All three revenue streams were lower, especially match day, which fell £7.5m (17%) from £43.3m to £35.8m. Commercial dropped £3.6m (15%) from £24.4m to £20.8m, while broadcasting was also down £2.0m (13%) from £15.7m to £13.7m. The club have posted pre-tax profits five years in a row, amounting to a £36m surplus in that period. In fact, they have generated profits in seven of the last eight seasons with the sole loss in 2014/15 being only £4m. The figures greatly benefited from £24...

Here's what the Financial Times Scoreboard has to say about the takeover at Wrexham by two Hollywood stars: The unlikely narrative was swallowed up by global media. Wrexham supporters told BBC Radio they expect to fly up the divisions as a result of the £2m the Hollywood pair have pledged to invest into the club. And the new owners’ rib-tickling video to announce the takeover went viral — as they surely intended. Plenty of US investors have flooded into football in recent years, attracted by the huge worldwide interest in the sport and its multibillion-dollar broadcasting deals.  These huge TV contracts rarely trickle down to Wrexham’s level. When Texas millionaire Kent Teague poured his fortune into lower league side Leyton Orient two years ago, he  told the FT  that he fully expected to lose money, but that the investment was mainly for him to have fun. By contrast, Reynolds and McElhenney’s takeover, brokered by New York-based Inner Circle Spor...

Salary caps don't really create a level playing field.  Here is an article I wrote on the subject for the Charlton fanzine Voice of the Valley : There is a continuous search for new ways of regulating football so as to create more of a level playing field between clubs.    Unfortunately, some of the proposals create more problems than they solve and this applies to the introduction of salary caps.     Charlton have, of course, been restricted to £1,200 a week because of the salary embargo.   Formerly, clubs in the League 1 and League 2 operated within a spending constraint framework termed the Salary Cost Management Protocol (SCNP). SCMP limited spending on player wages to a percentage of a club’s turnover. In League 1 clubs could spend a maximum of 60 per cent of their turnover on wages, in League 2, the limit was 55 per cent.    The wages of coaching staff were not included. There were no restrictions (in themselves) on the amount a club ...

Aberdeen have reported an operating loss of nearly £3m compared with £1m last year and the effects of the pandemic and fans being locked out of the ground could mean a £5m loss in the coming year.  The club might have to take unspecified 'painful measures':  https://www.afc.co.uk/2020/11/20/2019-20-financial-update/

The Government has announced its winter bailout package for sport.  By far the largest sum goes to egg chasing. The National League, which has already received  £10m of funding via the National Lottery to enable it to begin its 2020-21 season, will be given a further £11m to cover the period between January and the end of March. Steps three to six of the pyramid will receive £14m, while the Women's Super League and Championship have been awarded £3m. The government has repeatedly said professional men's football is wealthy enough to support itself through the crisis.  The EFL will have to rely on a subvention from the Premier League and negotiations have yet to be completed. New Charlton Athletic owner Thomas Sandgaard has told the BBC he expects to lose £20m in his first year at the club:  https://www.bbc.co.uk/sport/football/54994484

While Tottenham Hotspur have almost closed the gap to Manchester City in terms of turnover, the London club are far behind when looking at wages, paying just €203 million to their €358 million in the 2018/19 season. One thing Tottenham excels at, however, is profitability. The latest public figures reveal Spurs recorded a pre-tax profit of €99.1 million to Manchester City's €11.4 million. Meanwhile, Manchester City recorded an operating loss every season in the three years leading up to and including the 2018/19 season. Tottenham in the same period had a combined operating profit of €248 million.