The Political Economy of Football V2

Sheffield Wednesday fans were hoping for a push for the play offs this season, but instead they find themselves in a relegation battle.   I am sure they will survive, but it might mean a lower midtable position. Now it is being claimed that the club's owners says he can't refund season ticket money to supporters (some accounts say it is just a delay) or guarantee wages will be paid on time next month. Tony Pulis was sacked 45 days into a reported £2m a year, two-and-a-half year contract.  He will presumably receive substantial compensation. Owner Dejphon Chansiri had a two hour session with the media this morning, but I have no details of what he said yet. Rod Liddle remarked recently that when a moderately big club finds themselves in trouble they often send for Sam Allardyce or Pulis to pull off a rescue.   So far it hasn't gone well in either case with Allardyce calling for a Premier League circuit breaker so he can get to grips with his squad.

American company ALK Capital have completed their takeover of Burnley, acquiring a 84 per cent stake:  https://www.skysports.com/football/news/11708/12176097/burnley-american-investors-alk-capital-complete-takeover-of-premier-league-club The company specialises in investments in the sports and media sectors:  https://alkcapital.com/  American companies have been taking over a number of European clubs during the pandemic, especially in Italy. Normally reliable sources are indicating that the deal values the club at more than £200m and that the takeover is being funded by a number of private individuals.  The purchase is being made through Velocity Sports Partners, ALK's sports investment vehicle. ALK intend to make funds available to Sean Dyche to strengthen the squad in the coming transfer window.  It is clearly in their interests to avoid any risk of relegation. In August the Delaware-based company invested in two London-based football technology firms, AiScou...

Leeds owner Andrea Radrizzani is considering a takeover at struggling La Liga club Valencia with the San Francisco 49ers.  He thinks that they are in a similar condition to that of Leeds before he took over there, i.e, a fallen giant:  https://www.football-espana.net/2020/12/28/leeds-united-owner-tipped-for-valencia-takeover-bid Where he would get the funds from is one question, but apparently he has backing from American investors in the form of San Franncisco 49ers.   They are about to increase their stake in Leeds. Radrizzani has been keen to expand his football portfolio for some time with Premier League promotion for Leeds enabling him to look into buying another club.   He previously showed interest in struggling Serie A club Genoa.

Work permit rules may seem a dry subject, but they will affect the ability of clubs to acquire players from Europe after January 1st as the free movement rules will no longer be in place. It's a complicated subject and I am not pretending that this authoritative blog post from top sports lawyer Daniel Geey is an easy read:  https://www.danielgeey.com/post/five-key-takeaways-from-the-post-brexit-fa-work-permit-rules/ From a purely football point of view, some fans will welcome what they hope will be more opportunities for young British players.   Clubs will not be happy about being able to easily pick up players from Europe.  In some cases their heritage is not European or they fall into some special case like the French overseas departments.

The authoritative Swiss Ramble has spent part of the festive season in his Zurich fastness analysing the latest accounts of Millwall FC. The pre-tax loss widened from £0.7m to £10.9m, largely due to profit on player sales dropping £5.3m to £0.1m, though COVID and a run to FA Cup quarter-final prior year meant revenue fell £2.0m (11%) from £18.4m to £16.4m, while expenses rose £2.3m. The revenue decrease was largely driven by match day falling £1.3m (23%) to £4.4m, as five games were played behind closed doors, while broadcasting decreased £0.7m (7%) to £9.4m. Commercial income held steady at £2.7m. The loss of £10.9m is still only mid-table in the Championship. This result is likely to look better when other clubs publish their COVID-impacted 2019/20 accounts. In fact, before the pandemic, no fewer than six clubs posted losses above £20m. It is also worth noting that some clubs’ figures were boosted by once-off accounting profits from the sale of stadiums, training grounds and la...

Bayern Munich's CEO thinks that the Bundesliga has dealt with the Covid-19 crisis relatively well:  https://www.bavarianfootballworks.com/2020/12/27/22201440/bayern-munich-karl-heinz-rummenigge-interview-corona-virus-future-2021-fans-allianz-arena-finances He is also expecting that the crisis will lead to a reduction in 'riduculous' transfer fees: ' We’re not experiencing absurd sums like we did two years ago, and I doubt whether the amounts will ever reach such dimensions again. In principle, that’s good because very few fans had any understanding for those astronomical sums. ' That may be the case, but world class players are in short supply and demand for them is high.  One might regard the price paid for some paintings as absurd but it reflects their perceived value to those who purchase them.   In some ways the analogy is quite useful as the price of a painting is to some extent influenced by fashion and this also applies to football players. Some clubs will st...

Kyril Louis-Dreufus is the new majority shareholder at Sunderland and has been welcomed by fans' organisation Red and White Army:  https://www.sunderlandecho.com/sport/football/sunderland-afc/red-and-white-army-have-clear-message-new-sunderland-majority-shareholder-kyril-louis-dreyfus-3079065 Sunderland is a club with a great history and devoted fans and I hope it all works out for them under their new chairman after the ups and downs (mainly the latter) of the Stewart era. Following the sale of Olympique Marseille the 23-year old was willing to give up on football until the opportunity arose at 'super Sunderland':  https://www.chroniclelive.co.uk/sport/football/football-news/sunderland-takeover-louis-dreyfus-labrune-19523696 More about the new chairman here:  https://www.chroniclelive.co.uk/sport/football/football-news/sunderland-takeover-kyril-louis-dreyfus-19276820

 On the Football League show this morning the pundits expressed doubts about whether League One could be completed.  For example, Sunderland have 13 players currently out because of Covid-19. The pundits suggested that all League Two games were on yesterday because clubs there were struggling to pay for the tests and advised players just to go home and isolate if they were feeling poorly. They also said there was a talk of a so-called circuit breaker.   I cannot offer epidemiological comment, although there is a certain irony that the person I worked with on a study of cattle diseases is now a leading member of SAGE.  I think one lesson I took away from that project is that once a disease is endemic, controlling it is very difficult. Finishing the leagues last year on a points-per-game basis understandably upset the likes of Tranmere Rovers, but the alternative might be three games a week for some teams. If you are interested in my former colleague's insights he...

The current owner of Grimsby Town does not seem to be too popular in some quarters:  http://www.codalmighty.com/site/ca.php?article=7768

Under the 'nice but tough' regime of Thomas Sandgaard, SE7 club Charlton Athletic are starting to rebuild.  However, it takes time to recover from a damaged reputation in League ONE. Sponsors are starting to return to The Valley:  https://www.cafc.co.uk/news/view/5fe3308c4c07e/axis-europe-sponsor-home-dugout-control-tower-and-brand-new-tunnel They have responded positively to the new regime of Thomas Sandgaard and it is to be hoped that there will be more sponsorship successes,.  A successful commercial strategy generating more revenue is key to the club's future. What the club has absolutely no intention of doing is selling the naming rights to The Valley which many clubs see as a useful source of income even if it results in some naff names. It is hoped to make more of an impact in Asia, particularly in India which is seen as a largely untapped market.   However, football is only just starting to make an impression there with cricket still the big mass sport. ...

Many clubs aspire to grow their 'brand' internationally and Sevilla FC is the latest club to try and do this.  The Andualsian La Liga club hopes to maximise revenues off the pitch to compete more effectively on it.  Making effective use of new technology is at the heart of the strategy. Chief executive José Maria Cruz has reaffirmed 'growth in all aspects' plans he first outlined on television earlier this year:  https://www.sevillafc.es/en/actual/news/jose-maria-cruz-we-want-to-be-even-bigger The club has an excellent record in various versions of what is now the Europa League which it has won six times, but aspires to win the Champions League. They want to build a new data analysis department and intend to use artificial intelligence and other technologies to find new insights. Selling players for profit is an important part of the plan to grow club revenues about €100 million to €300 million within four years.  However, all leading European clubs are making that a...

Plymouth Argyle have a generous owner who has put in another £3.5m to keep the club afloat:  https://www.plymouthherald.co.uk/sport/football/plymouth-argyle-weathering-storm-footballs-4823094 Whatever storms hit Plymouth, or the club's many fans on the Isles of Scilly, they should be able to keep afloat financially. The Green Army have also been loyal in terms of buying season tickets.

Egyptian businessman Mohamed El Kashashy and controversial solicitor Chris Farnell have pulled out of a potential deal to buy Burnley. Clarets fans should be breathing a sigh of relief. There has b een no communication with Mike Garlick for six weeks. American investment group ALK are now in poll position.

Millwall income in 2019/20 was down 11% mainly as a result of Covid curtailments. Ticket sale income was down a fifth due to matches not taking place, Most other clubs have not reported for 2019/20 but Millwall is in the bottom third of the league by the looks of things, reports Kieran Maguire. Wigan had the lowest revenue in the Championship at £11.5m while Swansea, Stoke City and West Bromwich Albion were around the £70m mark. Millwall come in at £16.4m, just ahead of Hull City. Please remember that these figures relate to 2018/19. Millwall didn't have any major player sales in 2019/20, making a profit of just £80k to offset the trading losses. In 2018/19 the sale of George Saville was the main reason for a £5.4m profit on player trading. Clubs across Europe are becoming more reliant on profits from players. To cover the losses investors put in just under £8m in the form of 'B' (not voting) shares into Millwall in 2019/20. Loan repayments to John Berylson have bee...

Bayern Munich's finances are still in a good condition despite an anticipated hit on turnover from the Covid-19 pandemic:  https://www.bavarianfootballworks.com/2020/12/20/22192104/bayern-munich-finances-robert-lewandowski-thomas-muller-karl-heinz-rummenigge-joshua-kimmich The German club's turnover including player sales fell significantly from the record of €750 million in 2018/19 to €698m.  However, the club still made a healthy profit.

Charlton's new owner Thomas Sandgaard had a 40 minute interview with Jim White and Simon Jordan on Talksport today starting at about 12.20 pm.  Sandgaard said that he has put about £11m of working capital into Charlton.  He spends five hours a day on the club. He was asked about the various individuals who claim to be the real owners of Charlton.  He dismissed this as 'entertainment', noting that Roland Duchatelet would not have granted him a fifteen year lease if he was not in control.   Roland had a 'big legal team' who would have spotted anything awry.   He said, 'Nobody is messing with Charlton any more.' Over the fifteen year period he did not rule out moving to a new stadium if that was what was needed, but bearing in mind the example of West Ham, he was aware of the need to take the fans with him. He had taken a serious interest in Wigan and also looked at Coventry and Sunderland, but decided that the problems at Wigan were too great and they co...

Kieran Maguire of the PriceofFootball has published some fascinating data on cumulative profits and losses by Premier League clubs since the competition's formation.  21 clubs have losses of more than £10m and 16 have profits of more than £10m. Taking £100m as a cut off point, there are eight clubs with bigger cumulative losses.  One of them is now in League Two, one is League One and one in the Championship.   Only two clubs come from the 'Big Six'.  In other words, there isn't much of a relationship between losing money and success.  The loss makers are: Chelsea £797m Manchester City £638m Aston Villa £335m Everton £326m Sunderland £211m Fulham £186m Middlesbrough £148m Bolton Wanderers £107m The top two profit makers are the North London rivals.  Rather cruelly, Maguire says that is the only table that Arsenal looks like topping for some time.  The top four places are occupied by 'Big Six' clubs. Tottenham Hotspur £482m Arsenal £487m Manchester...

 Fan owned non-league club Lewes FC have attracted a six figure investment from a fashion brand:  https://www.soccerex.com/insight/articles/2020/lewes-fc-announces-groundbreaking-partnership-deal-with-fashion-brand-lyle-scott

Concern has been expressed by Grimsby Town fans after it was revealed that the majority shareholder planned to set up a company with a convicted fraudster, now known as Alex May after a name change by deed poll.  He was at Saturday's game and is said to be interested in investing in the Mariners:  https://www.grimsbytelegraph.co.uk/sport/football/football-news/grimsby-john-fenty-alex-may-4794167

The authoritative Swiss Ramble reviews the 2019/20 accounts of Everton. The £140m loss is the highest reported to date in the 2019/20 Premier League, though all clubs are likely to report worse numbers last season, e.g. Spurs swung from £87m profit tax to £68m loss, while Manchester United went from £27m profit to £21m loss. That said, the £140m loss is actually the third worst ever posted in the Premier League, while the previous year’s £112m is the fifth largest. The Everton board would argue that these results reflect the club’s position in the early stages of a long-term investment cycle. The loss would have been even higher without £40m profit from player sales, £20m higher than prior year. Included Idrissa Gueye to PSG, Ademola Lookman to RB Leipzig, Nikola Vlasic to CSKA Moscow and Henry Onyekuru to Monaco. One of the highest profits from this activity in the Premier League. The club have increasingly relied on profit from player sales, which has averaged an impressive £50m a ...

Everton made a loss of nearly £140m in the 2019/20 financial year as Covid-19 took its financial toll:  https://www.theguardian.com/football/2020/dec/11/everton-make-annual-loss-of-1399m-as-covid-19-takes-toll Over the past three years Everton have posted combined losses of £265m. Majority shareholder Farhad Moshiri intends to make a £250m share issue to plug the financial gap.  He has already invested £400m in the club.

The authoritative Swiss Ramble reviews the 2019/20 accounts of Napoli. The club swung from €48m pre-tax profit to €20m loss, a €68m deterioration, as revenue fell €38m (17%) from €217m to €179m and expenses rose €43m (17%) to €295m, partly offset by €13m increase in profit on player sales to €96m. After tax, €29m profit to €19m loss. All revenue streams were lower with broadcasting being the largest reduction, down €22m (15%) to €121m, though there were also falls in commercial, down €5m (11%) to €42m, and match day, down €3m (17%) to €13m. The post-tax €19m loss is not great, but it is much lower than huge 2019/20 losses at other Italian clubs, impacted by COVID, e.g. Roma €204m, Milan €195m, Inter €102m and Juventus €90m. The pandemic has reduced Napoli revenue by an estimated €32m. Napoli have posted four losses in the last six years, though have accumulated an impressive €196m profits over the last decade, including two hefty profits in 2017 (€101m) and 2019 (€48m). Unless the COV...

A new survey by a leading global strategy consultancy endorses Everton’s recent targeting of South America as a region in which to expand its international footprint, showing that its key target markets of Colombia and Chile have the highest level of interest in the Premier League in any overseas territory. Its findings come as the Blues plan a North American office as a base from which to target its commercial goals throughout the Americas. Chile and Colombia have the highest levels of interest globally in the Premier League, where Everton have unveiled partnerships and become the most popular EPL team. A club in the Chilean league founded by English emigrants is called Everton:  https://en.wikipedia.org/wiki/Everton_de_Vi%C3%B1a_del_Mar

Hearts pre-tax profit fell from £2.9m to £0.4m in 2019/20, as COVID led to revenue dropping £2.7m (18%) from £15.1m to £12.4m and wage bill rose £0.6m to £8.8m. Profit due to £3.7m of donations, up from £3.4m prior year. Debt rose £1.3m to £5.7m, but cash also up to £2.4m. Match day revenue was £5.1m as was commercial. Broadcasting was £2.0m. The wages to turnover ratio was 71 per cent, more or less line with the UEFA recommended limit.

The  Financial Times  publishes some data today on how much clubs are reliant on match day income.  The average figure for the Premier League is 14 per cent, for the Championship 17 per cent and for League One/Two 32 per cent.  The latter figure is incomplete as some clubs at this level take advantage of a loophole in company law to publish shortened accounts. The Pink Un's figures show that there is considerable variability around the mean in all divisions.   In the Premier League five clubs generate more than 20 per cent of income in this way - in order Sheffield United, Leeds United, Arsenal, Tottenham Hotspur and Aston Villa.  Below 10 per cent (in order) are Leicester City, Fulham, Everton, Crystal Palace, Wolves and Burnley. In the Championship, Barnsley are way ahead of everyone else at 40 per cent, followed by Millwall and Notts Forest at around 30 per cent.  The bottom three (in order) are Watford, Huddersfield Town and Bournemouth. ...

Partick Thistle's accounts are out.    Partick Thistle income down 12% in 2019/20 due to Covid and day to day operations go from £46k profit to £356k loss. Club made money from ‘other income’ possibly player sales? Partick wage bill up 5% in 2019/20. Wages represent 76% of revenue, a wee bit above UEFA’s recommended ceiling of 70% but would have been lower perhaps without Covid-19. Club have negotiated big player pay cuts for 2020/21. Partick have had a big cash injection from Three Black Cats Ltd, the majority shareholder, in July 2020 that guarantees the club’s foreseeable financial future. Partick expect balance sheet boost of £1.9m when Firhill is formally gifted to the club.

As we have suggested before, the 'Spanish' takeover of Wigan Athletic might not be all that it seemed and the EFL has refused to clear it, one individual having apparently failed the Owners' and Directors' test:  https://www.wigantoday.net/sport/football/efl-release-wigan-athletic-takeover-statement-3058652 This means that the club will remain in administration. MP for Wigan and Shadow Foreign Secretary Lisa Nandy looked at the positives from the outcome, believing the club can now move forward to find the right buyer. "This decision will finally allow us to move forwards and secure the long-term future of the club," she tweeted. "We now need the administrators to open up the process and press ahead with the right solution for Wigan Athletic."

Leeds United may soon receive another cash injection from the San Francisco 49ers according to a new document submitted to the US Securities and Exchange Commission (SEC). The NFL franchise already has a 13 per cent stake in Leeds.  Their president, Paraag Marathe, who is a Leeds board member, has suggested in recent months that more investment could be imminent. Similar to an investment fund established in 2008, a venture capital fund entitled 49ers Enterprises Leeds II SPV was registered with the SEC two weeks ago from its business address in Santa Clars, Ca.:  https://www.sec.gov/Archives/edgar/data/1832340/000183234020000001/0001832340-20-000001-index.htm Marathe said in September: 'The 49ers want to be more involved and are hoping to be an even bigger partner to Andrea, financially, but also in all other aspects on and off the pitch.'  

Private equity groups have seen the Covid-19 pandemic as a chance to seize new investment opportunities in football as leagues and clubs seek new sources of funding.  Private equity investment in Serie A is a case in point. Now the Bundesliga has leapt on the bandwagon.   It is seeking €300m to set up an international online subscription service.  More than 20 private equity firms have expressed an interest. Deutsche Fussball League (DFL), the body that runs Germany's top two divisions, came up with the plan after multiple firms approached it with emergency funding. As well as a plan for a new internet subscription service to screen games across the Middle East, the DFL is offering a minority stake in a new digital media company offering international services. The pandemic has strengthened rather than weakened globalising forces in football.

The authoritative Swiss Ramble has provided financial overviews for leading Dutch clubs. Ajax's pre-tax profit fell €42m from €69m to €27m, mainly due to revenue dropping €37m (19%) from a record €199m to €162m and expenses increasing by €17m, partly offset by profit on player sales rising €12m to €84m. Debt now includes €151m financial leases. PSV's revenue fell €25m (26%) from €97m to €72m, as they competed in the Europa League, rather than the Champions League in the prior season. As a result, their operating loss widened to €41m, but pre-tax profit only fell from €6m to €2m, due to profit from player sales rising €26m to €47m. Feyernood r evenue was up 4% to €73m thanks to reaching Europa League group stage. However, their pre-tax loss slightly worse at €9m, highest in the Eredivisie, as profit from player sales fell from €8m to €4m. Wages up €3m to €38m, but 51% wages to turnover ratio lowest in league. AZ had the second highest pre-tax profit in Netherlands of €8m, despit...

Kyle Krause is stepping back from running his family's petrol and convenience store chain to run Parma,  the club he acquired in September. He thinks it should be possible to get Serie A to the number two league ranking in the world.  Overtaking the Premier League would be tough because of the English language factor. In the 1990s the club won domestic and European trophies, but it went bankrupt after the collapse of then majority owner Parmalat in 2004.  It went bankrupt again in 2015 and had to work its way back from Serie D. Krause also owns a lower tier American team, the Des Moines Menace.  He is of Italian descent and owns wineries in Italy.

My book on football with Agenda Publishing won't be out until next June, but here is a summary. The state’s presence in professional football has been ad hoc and inconsistent. Football has been largely exempt from the development of the regulatory state and has been left to govern itself. However, new media have raised the profile of the game and globalization has created new pressures as clubs become pawns in the ambitions of states and wealthy individuals. Clubs offer an important sense of identity for fans, but the impersonality and distance of ownership can set up new tensions. In addition, corruption in the international governing body has been a significant problem and the sport’s symbiotic relationship with gambling is a concern. Wyn Grant examines the political economy of football and its uneasy relationship with the market. There are no off-the-shelf solutions for regulation, he argues, but the complexities of the game and its economic size require more attention from gove...

If you want to know why the Sheffield Wednesday points deduction was halved you can read the 41-page judgment here:  https://www.efl.com/siteassets/efl-documents/youth-alliance/201104---sheffield-wednesday-fc-v-efl-appeal---decision-final-201116.pdf The panel decided there was a mitigating factor not taken into account in the original decision in relation to the timing of the stadium sale. Nevertheless, 'it was very substantially in breach on account of the massive overspend. The scale of the overspend was such that in our view a deduction of points was clearly warranted in order to deter egregious overspending by wealthy clubs and to preserve the integrity of the P&S regime.'