The Political Economy of Football V2

Janan Ganesh is a self-confessed Arsenal season ticket holder.   He uses his column in the Weekend FT ('Citizen of Nowhere') to make a comparison between 'short term' Chelsea and 'long term' Arsenal. I should add that the comparison is not entirely flattering to Arsenal.  As Ganesh admits, 'The parable of Chelsea is that short-termism can work ... long-termism at its worst amounts to rigidity in the face of a changeable future.' In fact Ganesh uses the Pink 'Un to have a go at his own club, not that there is anything unusual about fans slagging off their own team.  He notes, 'As well as keeping a coach for 712 years, the club husbanded a cash pile that became reputedly the largest in world football.' Ganesh then goes on to accuse the Gooners of 'hyperopia'.  I must admit I didn't know what this meant, but in the interests of improving my word power, I looked it up.  Apparently it's a defect of vision in which long range vision...

Transfer spending across Europe's top five leagues is estimated to have fallen by 61 per cent as a result of the Covid-19 pandemic according to a report by CEBR:  https://www.standard.co.uk/sport/football/january-transfer-spend-expected-to-fall-by-61-due-to-covid19-pandemic-b917928.html The transfer market in the UK held up well in the summer when more than £1bn was spent by top English clubs.  However, it was distorted by one or two clubs with unlimited funds. The winter window is usually quieter than the summer one.  Even so, Premier League clubs spent £230m in last year's pre-pandemic transfer window.   They have spent just £65.1m so far this month.  The last time the total was below £100m was in 2012. In addition to the effect of the pandemic which has made clubs more reluctant to spend money, Brexit has also been a factor.  All foreign players must adhere to a new points-based system, based on factors such as how often they have played in top leag...

That is the headline on  The Non-League Paper's  coverage of the National League crisis.   Clubs will have to decide tomorrow what happens to the rest of the season, although the League's preference is for the season to continue.   The Step 2 leagues are currently suspended for a fortnight. It is possible that Step 1 will continue, but not Step 2.   Less likely, but just about possible, is that National League South would continue but not the North.   My sense is that more clubs in the south think they are in a position to continue. For example, Dorking Wanderers have stated that they have £500,000 of sponsorship and commercial revenue.   Their suggestion is that individual clubs could be allowed to opt out. The repayment terms for loans are two per cent interest over ten years with a two year holiday on interest and capital or a four year holiday and repayments up to 20 years. Sport England will decide whether some clubs might...

Oldham Athletic were in the Premier League when it was founded, now they are languishing in League Two and facing all sorts of problems.   It is. of course, never easy for clubs on the outer edge of Greater Manchester. The Athletic has undertaken a well-informed in depth analysis, but the whole story is so complex that I am not sure that I have grasped it.  There is an extraordinary story about a plastic bag containing £48,000 in £20 notes being handed over to pay wages, although it has been denied.   One complication is that the former owners still own Boundary Park. It is noted: 'Stretched finances have come to typify the turbulent reign of Lemsagam.  Wages have consistently arrived late, while a sequence of winding-up petitions have been served by Her Majesty’s Revenue & Customs. The lingering threat of administration was also staved off in June last year.' They conclude: 'For all [Abdallah] Lemsagam says he has long-term plans to take Oldham up to t...

Speculation and critical comment continues to surround the takeover of Burnley.  Some of this may just arise from envy that an 'unfashionable' club like the Clarets could attract an investor, but there is enough substance to merit consideration. The report below from off the pitch.com contains as many questions as answers.   Calling them a 'small' team seems a bit harsh given the club's historical and recent record.   I don't like the word 'journey' in a football context very much and I doubt whether it is much used in Burnley, e.g., people don't say 'I'm going on a journey to Blackburn.'  In this case, a destination has been identified, but getting there may be more tricky. Asked for a comment, the local Claret said: 'I am both apprehensive and a bit excited by the new model. Faced with the realities of the transfer market Mr. Pace seems to have followed his predecessors in doing nothing. Predecessors also talked about a “global br...

The Athletic has reported that a  group fronted by former Manchester United and Everton star Darron Gibson has emerged as the new favourite to buy League One side Wigan Athletic.  He  is part of a group that includes a management team with a strong track record in British football and it is backed by a foreign investor with British links. The group is understood to have shown it has the required funding to complete the deal and is scheduled to meet the English Football League this week. The asking price for the club is £3 million but a prospective new owner also has to show the EFL they have £4 million to fund the club for two seasons. Gibson’s group, which might be joined by two other footballers, is understood to have the funds to purchase the club in a bank account and a loan lined to fund the club going forward. Bolton-based businessman Martin Halsall is still in the mix, as is a group that includes South African-based British businessman Saul Loggenberg. In the meant...

An investigation into a £10.25m council loan to Northampton Town Football Club had 'serious failings' according to a public interest report from accountants KPMG and decision-making over the deal may have been illegal:  https://www.bbc.co.uk/news/uk-england-northamptonshire-55799753 Local authorities elsewhere in Europe and the United States often get involved in stadium financing, but this is perhaps a cautionary tale.

Unconfirmed reports are stating that the DCMS intends to provide £14m of funding to Step 3-6 clubs mainly in the form of grants.  National League clubs will get £11m mainly in the form of loans. National League clubs will then have to vote on whether to end the season, currently suspended for two weeks. A detailed analysis of the situation is available here:  https://www.bbc.co.uk/sport/football/55818377?fbclid=IwAR02S9uxgRfl6tortFohZ3t8rsN_A0Z8znzRLXHeXgL32ART9S_3ifl19Co Chesterfield's MP is the latest one to call for grant support for the National League, but as a Labour MP writing to a Conservative minister he is not likely to be successful:  https://planetradio.co.uk/greatest-hits/north-derbyshire/news/national-league-funding-chesterfield-fc-toby-perkins/

Liverpool FC have broken off talks with RedBall which could have seen the club listed on the stock exchange:  https://www.liverpoolecho.co.uk/sport/football/football-news/liverpool-fsg-redball-investment-breaking-19700243 The club is pursuing other investment opportunities which would be less high profile such as a more traditional private equity deal but could help it to secure its objectives. Fenway Sports Group is reported to be in talks to sell a minority stake to RedBird Capital, a private investment firm founded by former Goldman Sachs veteran Gerry Cardinale.   This would probably result in a lower valuation for Fenway than the $8bn mentioned for the RedBall deal, It would appear that RedBall failed to raise enough outside capital at the asking price for a 25 per cent stake.

The authoritative and tireless Swiss Ramble has tweeted from Zurich on the 2019/20 accounts of Bristol City.  [I should add that I am client of Hargreaves Lansdown]. The Swiss Ramble states: ' Like most Championship clubs, Bristol City make operational losses, though they have limited the damage with profitable player trading. This revenue source is under pressure (as are others) in the current pandemic, so they are lucky to have a benevolent owner in [Steve] Lansdown.' The Swiss Ramble estimates that Lansdown ' has put in around £203m to date (capital £133m, loan £70m) with little sign of the need for this funding going.' [He is the co-founder of Hargreaves Lansdown which is now a listed company]. [As at many clubs] ' Player trading has become increasingly important at the club with £78m profits in the last four years, compared to only £6m in preceding six years. As Lansdown said, this “is all part and parcel of the process” of making the club sustainable. That s...

Aberdeen supporters have voted overwhelmingly to stay in a location by the North Sea rather than move inland:  https://www.eveningexpress.co.uk/fp/sport/football/aberdeen-fc/donsnews/aberdeen-supporters-vote-overwhelmingly-in-favour-of-building-a-new-stadium-at-the-beach-instead-of-kingsford/ There was a time when I was on the FlyBe Birminghan-Aberdeen flight quite often and one supporter showed me the stadium from the outside.  They're hardy types up there like my Scottish ancestors and I think any new stadium should be by the beach.

Brighton and Hove Albion fan and football finance guru Kieran Maguire reviews the club's finances:  http://priceoffootball.com/brighton-2019-20-reel-around-the-fountain/ He notes that getting to the Premier League can be costly, but so can staying there.   This is even more important given the uncertainties arising from Covid-19. He concludes: ' Brighton are fortunate to have an owner in Tony Bloom who has a strategy for the club and as such is unlikely to indulge in some of the madcap short term schemes that have left many in the EFL looking very vulnerable.' Kieran Maguire has noted that Brighton's losses in 2019/20 take them to 12th in the table of all time losses since the Premier League was established in 1992 (Chelsea are top and Manchester City second).   One note of caution: not all clubs have yet published their 2020 accounts. Despite the £67.2m loss, around £25m of it down to Covid-19, Bloom is still considering further investment.  But what will ...

As predicted, NFL franchise San Francisco 49ers have increased their stake in Leeds United to 37 per cent in an interesting cross sports collaboration:  49ers Enterprises increases Leeds United ownership stake to 37% - Leeds United Leeds is now valued at £277m after being purchased for £45m four years ago.  The deal will strengthen the strategic link with the 49ers commercial experience highlighted as being of most benefit. Leeds owner Andrea Radrizzani said: 'I love what Leicester has done over the past 10 years in the Premier League.  That's what I aim as a model to follow.' Many ambitions in football are unrealistic, but this one is given the status of the city of Leeds as a vibrant regional capital and the history of the club.   It is anticipated that one outcome will be work to enhance the Elland Road stadium. More about the deal here:  https://www.soccerex.com/insight/articles/2021/49ers-enterprises-increases-leeds-united-ownership-stake

European football clubs are continually looking for new areas to develop their business interests, expand their global campaigns and extend the international reach of their brand management. Efforts to increase their global reach are often focused on the US and Asia, especially among the top clubs in Europe. But not Olympique Marseille, reports off the pitch.com  The 1993 Champions League winners are taking a different path as they have made Africa their number one priority in terms of boosting their international business interests and growing their global fan base.  With up to 150,000 people with African ties living in Marseille, Olympique Marseille want to increase their PR and marketing efforts in familiar territory. The decision to increase their brand-management efforts in Africa coincided with the arrival of general director Laurent Colette in 2018. Marseille have doubled the sale of official PUMA Olympique Marseille gear in Africa and extended their fan base in French-...

Deloitte Sports Business have produced an update of their 2020 Money League to take account of the impact of Covid-19 on the football industry.   I will attempt to summarise some of the main insights, but the whole document repays reading:  https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/covid-19-football-and-digital-2020-21-season-and-beyond.html The main take home lesson is that the impact of Covid-19 is potentially destructive, but it is up to each club to be agile and develop strategies that will enable them to cope.   Deloitte estimate the total revenue loss for the 20 richest clubs at €2bn by the end of the season. Bayern Munich overtook Manchester United to become the third highest earner behind Barcelona and Real Madrid.  The German club's revenues were €634m compared with €580m at Manchester United.  The Bundesliga's quicker resumption of play in 2019/20 was a factor for Bayern Munich.   The Bundesliga was also a...

Unconfirmed but prolific media reports (now confirmed by the club) are stating that Frank Lampard is to be sacked as manager of Chelsea.  Kieran Maguire of the PriceofFootball reveals that under Abramovich Chelsea have spent a cumulative £110m on manager payoffs before today. It is being reported that Thomas Tuchel will replace Lampard:  https://www.theguardian.com/football/2021/jan/25/chelsea-set-to-sack-frank-lampard-premier-league My builder is in at the moment and he is a Chelsea fan.  He thinks that Lampard is a nice guy, but not up to the job.  He is uncertain about Tuchel as a replacement. Owner Roman Abramovich said: 'This was a very difficult decision for the club, not least because I have an excellent personal relationship with Frank and I have the utmost respect for him.  He is a man of great integrity and has the highest of work ethics. However, under current circumstances, we believe it is best to change managers.' Lampard leaves with the lowest poi...

Tweeting from his Zurich fastness, the authoritative Swiss Ramble reviews the 2019/20 accounts of Barcelona. The club swung from €4m pre-tax profit to €128m loss (€97m after tax, due to €31m tax credit). Revenue dropped €135m (14%) from record €990m to €855m, including €21m reduction in gain on player sales. This was only slightly offset by expenses falling €7m. Revenue fell €123m (14%) from €852m to €729m. Largest decrease in broadcasting €50m (17%) to €248m, followed by marketing & advertising €40m (11%) to €323m, competitions €33m (29%) to €81m and season tickets €6m (9%) to €55m. Even though Real Madrid and Atleti saw profits fall in 2019/20, due to the pandemic, they both just about managed to break-even, so Barca's €97m loss is a real outlier. Worth noting Barca’s figures include €43m losses from other sports, eg. basketball €28m. Clearly, COVID has had a major adverse impact on finances in 2019/20 with many leading clubs across Europe reporting horrific losses, e.g. Roma...

The idea of a European Super League has been around for some time, but the latest proposal has clearly got Fifa and Uefa rattled.   Fifa chief Gianni Infantino has stayed neutral on such proposals in the past.  It is unusual for them (and the other confederations) to issue a joint statement:  https://www.fifa.com/who-we-are/news/statement-by-fifa-and-the-six-confederations Fifa has threatened that any player taking part would be barred from the World Cup or the European Championship.    However, could Fifa hold the line if world class players decided to play in the Super League anyway?  The World Cup would then be devalued, hitting Fifa hard in the pocket. The European Leagues have also issued a statement supporting the stance taken by Fifa:  https://www.soccerex.com/insight/articles/2021/european-leagues-issue-statement-on-european-super-league JPMorgan has backed plans for a super league featuring 20 clubs.  15 massive clubs would be there ...

Speculation is mounting that British private equity investment fund BC Partners is closing in on a minority or a majority stake acquisition of FC Internazionale from Chinese Suning Group.  They would be prepared to stay at the club for seven years:  https://sempreinter.com/2021/01/20/new-stadium-could-persuade-bc-partners-to-stay-with-inter-for-longer-italian-media-claim/ As close as he could without confirming the negotiations Inter Milan CEO Giuseppe Marotta said that 'the owners are considering the opportunities in the interest of Inter and in respect of the history of the club.' Due-diligence process, led by advisors Goldman Sachs, is taking place and various media outlets believe that the total value of the club would be around €1 billion. Off The Pitch have analysed the accounts of the club and used different valuation-methods to conclude it is hard to argue for such a high valuation of the Nerazzurri.

The EFL has never done much to enforce its financial fair play rules that would serve as a warning to other clubs.  In part this is because it knows that the whole FFP structure is open to a legal challenge as a breach of competition law. One exception was the fine imposed on QPR.   Now that QPR's chief executive Lee Hoos has sent a letter to Championship clubs asking for the fine to be cut. Kieran Maguire of the PriceofFootball reckons that the fine wasn't £42m as £20m was a debt to equity swap of loans that would never be repaid.  £3m was legal fees and the remainder was not to be repaid until 2028 so Maguire prices its current value at about £9.5m - still a lot of money at that level. Hoos believes that the punishment was too harsh and refers to the impact of Covid-19.  What the reaction of other clubs was is open to debate:  https://www.dailymail.co.uk/sport/football/article-9165339/QPR-CEO-Lee-Hoos-sends-letter-fellow-Championship-clubs-request-cut-42m...

Arsenal and Tottenham Hotspur, together with the Football Association showed the way.  Now the EFL is hoping to secure a low interest loan from the Bank of England under its Covid Corporate Financing Facility (CCFF). The scheme, which was Treasury backing, is intended to help 'larger' companies with cash flow problems arising from the pandemic.   The central bank buys commercial paper issued by businesses. The EFL would like to borrow as much as £225m, but £150m is a more likely figure.   However, private lenders are also interested in lending money to the EFL, including US insurer MetLife.   Perhaps they would like a deal similar to that negotiated by Serie A where private investors in effect acquire a stake in the league. It should be noted that the Premier League has pledged to cover £15m of interest payments and loan costs for Championship clubs.

Football finance guu Kieran Maguire says Leeds United would benefit from a cup run or qualification for Europe:  https://www.leeds-live.co.uk/sport/leeds-united/leeds-united-finances-kieran-maguire-19652777 Kieran talks about how Covid-19 has highlighted existing financial weaknesses in English football here:  https://politicalquarterly.blog/2021/01/14/how-covid-19-highlights-existing-weaknesses-in-english-football/

There are increasing doubts about whether Sheikh Khaled can complete his takeover of Derby Country.  I have been concerned about this for some time given his track record:  https://www.derbytelegraph.co.uk/sport/football/football-news/derby-county-takeover-cast-fresh-4906205 The search is on for alternative investors, but that will take time.  Meanwhile, the club needs the funds to pay players and secure new ones. Derby County have a great football pedigree and I am sorry to see them facing this off the pitch challenges.

Fifa has produced its annual transfer report which considers the impact of Covid-19:  https://img.fifa.com/image/upload/ijiz9rtpkfnbhxwbqr70.pdf The report notes: 'In January 2020, the number of international transfers was up 9.2% compared to the same period in the previous year, and this increase would probably have been even more significant in the second transfer window.' 'But after the pandemic started spreading across the globe, the usual peak in July did not happen, with a large number of competitions not being completed and many member associations shifting their registration periods. Instead, there was a longer and more extensive period of transfer activity, beginning in early July and reaching its peak in September and even continuing into October.'

France' Ligue 1 is the least attractive and successful of the top five league competitions in Europe.   Apart from anything else, its domination by Paris Saint-Germain does not make it a very interesting competition.  Now Ligue 1 has made a mess of its television deal.  Its ambition was to be a price maker and it has ended up a price taker. Mediapro simply stopped paying instalments on its €780m annual television rights deal.  Not enough people want to sign up to its new Téléfoot channel.   It was able to return the rights in return for paying what is reported to be just €100m. Canal Plus is most likely to take the rights over, but can name its price.   It will not meet Ligue 1's ambition of getting a deal closer to the more lucrative ones in England and Spain. This will leave a huge hole in the finances of some French clubs with those with high debts such as Lille in a vulnerable position.  Rennes expects to post a €40m loss in 2020. Bo...

S outhampton have ended their kit sponsorship with Under Armour two years before the contract ends, reports The Athletic.     The existing deal will be terminated by mutual consent at the end of 2020-21 season and brings a close to a four-year partnership. The club have also announced a new five-year sponsorship deal with Danish manufacturers Hummel, starting from July 1 2021.  The partnership sees the club reunite with a brand who featured on Southampton kits between 1987-1991. The official statement details that Under Armour have shifted their marketing strategy. In recent times, the American sportswear company has started pulling out of sponsoring teams with their focus said to be on individual athletes. The Athletic  understands Southampton felt Hummel were seen to be the best fit for the club. There were internal concerns that if the club went with a more prominent brand, such as Nike or Adidas, there was a possibility they might have become “just another c...

The authoritative Swiss Ramble has cast his eye over the recently published 2019/20 accounts of Southampton FC from his Zurich fastness.   Like many clubs across Europe, Southampton have become increasingly reliant on player trading as a source of funds.   However, Saints have pursued this route more than some other clubs, possibly to the detriment on their performance on the pitch.   Following quotes from the Swiss Ramble's Twitter account. ' Player trading has been a key part of Southampton's strategy. In the five years up to 2018/19 they made a hefty £205m profit from this activity with only Chelsea £332m and Liverpool £306m ahead of them. For more context, Arsenal, Manchester City and Manchester United only made £170m, £147m and £60m respectively.' Southampton 'e xplained that their ability to generate profits from player trading was significantly impacted by the summer 2020 transfer window not opening until July, after the financial year ended. Tran...

Assessing the consequences of the Covid-19 pandemic for football finances is far from easy.   Apart from anything else, we don't know what the future course of the pandemic will be, e.g., whether mutations will significantly reduce the efficacy of the available vaccines. In any case there has already been pressure on broadcasting contracts which have been coming in around 10 per cent below previous values which would mean a £450m fall in revenues for the Premier League.  In the UK, Sky has new leadership, BT has decided that its optimal strategy is to settle for second place and Amazon is an opportunistic purchaser:  https://www.theguardian.com/media/2021/jan/11/tension-everywhere-premier-league-back-foot-uk-tv-rights-auction-nears There is a temptation in this situation which some analysts have fallen to resort to hyperbole and overly pessimistic accounts of the end of football finance as we know it (this does not apply to the cited article which is a very balanced ...