The Political Economy of Football V2

American money has been flowing into European football, but it doesn't always end well, as has happened at Bordeaux. The Ligue 1 club's majority shareholder, American investment firm King Street, recently withdrew funding, placing Bordeaux into administration. French fiduciary law firm Poulmaire Avocat & Fiduciaire has been asked by the city to analyse the takeover which also involved American investor Joseph DaGrosa. A plan for the continuation of the club's activity will have to be presented and validated by the French league's financial overseer before mid-July. If their debt is not restructured and a buyer is found before then, the club could be placed into judicial liquidation.

The Swiss Ramble has been undertaking his usual forensic analysis of the latest accounts of Liverpool FC. The club swung from £42m profit before tax to £46m loss, as the impact of COVID-19 resulted in revenue falling £43m (8%) from £533m to £490m, while expenses increased £31m (6%). Profit on player sales fell £18m to £27m, but £4m gain from sale of Melwood. Loss after tax was £39m. Although the £46m loss is obviously not great, it is actually not too bad compared to others, as all clubs have been adversely impacted by COVID with no fewer than 11 in the Premier League posting losses above £50m to date in 2019/20. This is the first time Liverpool   have posted a loss since 2016. In fact, even with the chunky loss in 2020, their profits in last six years add up to around £200m. The preceding four years (2011-14) saw total losses of £139m, so the improvement in the club’s financial position is evident. The main driver of the revenue reduction was broadcasting, which fell £59m (2...

The pattern of new American owners entering European football set over the past few years is set to continue, despite the dramatic collapse of European Super League just days after its announcement. American investors do still see great value in European football clubs, and they have not been scared by the events of the past week. Both institutional investors and private individuals from the US would still be very keen to purchase clubs in Europe. The Super League meltdown could be seen as a stabilizing factor in the industry. Revenues might even take a jump if fans feel empowered to protect the structure of leagues and competitions they like. European sports teams are extremely cheap compared to US franchises – but one source points out that the financial problems in European clubs are massive. Super League failure may see new type of US investors enter the industry as certain clubs may seek new owners.

In his Zurich fastness the Swiss Ramble has been analysing the latest accounts of Aston Villa in his usual forensic style. Despite promotion Villa’s loss widened from £69m to £99m. Revenue more than doubled from £54m to £113m, though profit on player sales fell £11m to a small negative result, while investment in the squad to compete in the Premier League increased expenses by £76m (55%). Main driver of the £58m revenue increase was broadcasting, up £56m from £22m to £78m, due to the much more lucrative Premier League TV deal, though commercial also rose £4m to £21m. The £99m loss is obviously not great, but everyone has been adversely impacted by COVID with half the clubs to date in the Premier League 2019/20 posting losses above £50m. That said, only Everton £140m and Manchester City £125m have reported larger losses than Villa. COVID resulted in £48m reduction to club revenue, split between £12m lost (match day £5.5m, TV rebates £6.9m) and £36m broadcasting deferred to 2020/21...

Real Madid president Florentino Pérez was the prime mover behind the failed European Super League project. Real Madrid has been €400m short of budget over the last two seasons, has an outstanding loan of €575m for the redevelopment of its Bernabéu stadium and has a reported €200m in emergency government-backed coronavirus loans. Pérez was elected club president in 2000 and make Real Madrid a more commercial proposition.  This was initially through the signing of 'Galatico' marquee players such as David Beckham and Luis Figo.  This was largely financed by a €500m property deal in which the club's old training ground was transformed into high end office space.   The club also increased its global presence and profile, not least in Asia. The ESL deal made use of Key Capital, a little-known Madrid-based brokerage and advisory boutique.  One of the firm's partners, Anas Laghari, was expected to be the general secretary of the company set up to run the ESL. Although h...

Managerial turnover is a feature of modern football. It is always the manager who gets blamed for poor performances by owners and fans, rarely the players.  But although it is headlined 'This has to be a brutal year to be a manager' a Chris Dunlavy story in The Football League Paper actually suggests otherwise. There could still be one or two dismissals, but it's a bit late to make a change.   This season 35 managers have been dismissed in the English Football League, three below the 2015/16 peak of 38. What is remarkable is the consistency of the figures.   In general over a ten year period they hover around the mean of 30.   In the past four seasons they were never more than four away from this figure.   In other words, about 42 per cent of managers get sacked each season. What has changed this season is that the pandemic has led to new hires being offered shorter contracts, often as little as six months  or until the end of the season...

Clubs wishing to abandon the Super League could face a €150 billion break fee, according to leaked documents published in Der Spiegel. Super League president and Super League prime mover Florentino Perez emphasised that the “contract is binding.” Withdrawal before start of competition requires written consent of at least 10 other members, but Off The Pitch.com has been told that two clubs did not even inform the Super League of its withdrawal. Barcelona and Juventus, who are still to withdraw, previously hinted at ongoing legal issues in statements. If the matter is pursued, one can expect a battle in the courts.

Arsenal are sceptical about Spotify co-founder Daniel Ek's declaration on Twitter that he want to buy the club.  It's not the first time that billionaires have made public declarations of intent without following them up with a serious offer. Ek is worth about £3.4bn.   The club is valued at £2bn.  Any offer would be with a partner or as part of a consortium. Arsenal fans would be glad to see the back of 'Silent' Stan Kroenke, but the Kroenke family insist they are invested for the long haul. Nigerian billioniare Alike Dongote has also previously suggested he might table an offer.

Carlisle United are contemplating life after Edinburgh Woollen Mill collapsed into administration, leading to a loan facility created by them no longer being available and in the hands of someone else, although it has not been called in:  https://www.newsandstar.co.uk/sport/19252498.carlisle-uniteds-david-holdsworth-finances-edinburgh-woollen-mill/

What happens next after the collapse of the European Super League?   The Premier League is considering new measures to ensure a breakaway cannot happen in the future.   The top six have in effect devalued their best bargaining chip, the threat of a breakaway. Uefa hasn’t ruled out sanctions against the rebels, although might not be in a strong legal position given that it didn’t actually happen. Highly-indebted clubs like Real Madrid, Barcelona and Inter Milan are teetering.    Their problems predate the pandemic, even though it has made them worse. Largely overlooked, Uefa rolled out a radical revamp of the Champions League this week, with 100 more matches between top sides (which many of their managers don’t welcome). There are ongoing talks to create a joint venture between Uefa and elite teams, given them equal control over future media and sponsorship rights for the competition. The Super League may be dead and the leading clubs have suffered ...

These materials I produced for the Orwell Youth Prize are timely given events this week:   https://www.orwellfoundation.com/the-orwell-youth-prize/2018-youth-prize/politics-football-and-place-wyn-grant/

The Swiss Ramble analyses the 2019/20 accounts of West Bromwich Albion. The pre-tax loss widened from £7m to £23m, mainly due to promotion bonuses and COVID. Revenue fell £17m (24%) from £71m to £54m, while operating expenses increased £19m (22%), partly offset by profit on player sales rising £19m to £29m. Loss after tax up from £6m to £21m. The main reason for the £17m revenue reduction was broadcasting, which dropped £12m (23%) from £53m to £41m, mainly due to lower parachute payment, though gate receipts also decreased £2.5m (34%) to £4.8m, while commercial was down £2.4m (22%) to £8.4m. Despite the fall in broadcasting, this remained the most important revenue stream for the Baggies accounting for 75% of total revenue.   This is followed by commercial 16%, then just 9% from match day.    They will receive much more TV money in the Premier League, e.g. current 19th place would be £102m based on 2018/19 distribution, though they will have to pay £7m rebate as a pro...

The proposal for a breakaway European Super League has drawn a storm of protest from Uefa, the Premier League, La Liga, former players, fans and even prime minister Boris Johnson.   Sir Alex Ferguson has condemned the plan in his first public intervention since retiring as Manchester United manager in 2013. 12 clubs have signed up to a plan backed by $6bn in debt financing from JP Morgan which would supersede the Champions League.   It is claimed that another three clubs will sign up this week (thought to be Bayern, PSG and Borussia Dortmund).   Bayern Munich and Borussia Dortmund have now issued a statement saying they will not join the Super League. The breakaway clubs include England's top six; Barcelona and Real Madrid; and AC Milan, Inter Milan and Juventus.   PSG and Bayern Munich have not signed up so far: PSG are said to be concerned that the initial novelty of the Super League would wear off after a couple of seasons.   Real Mad...

The proposed £300m Saudi-led takeover of English football club has become highly political.   The Daily Mail revealed a message sent by Saudi crown prince Mohammed bin Salman to British Prime Minister Boris Johnson following the collapse of the deal last year. It reads: “We expect the English Premier League to reconsider and correct its wrong conclusion.”  In April 2020, Newcastle owner  Mike Ashley  agreed to sell the club to an investment consortium including  Public Investment Fund of Saudi Arabia  (PIF), the British financier Amanda Staveley and the billionaire  Reuben brothers . The Newcastle Chronicle this week published a series of emails between the UK government and the Premier League showing how British officials constantly sought information for months on exactly when the sale — seen as crucial to Anglo-Saudi relations — would be completed. Instead, the transaction got stuck in the appr...

From his Zurich base, the authoritative Swiss Ramble analyses the recently published 2019/20 accounts of Reading FC.  It doesn't make for comfortable reading and brings home the financial challenges facing Championship clubs seeking promotion if they don't have parachute payments. This was the third season that Reading were under the control of Chinese businessman Dai Yongge (and his sister Dai Xiu Li), who own 96% via Renhe Sports Management Co Ltd. Former manager Mark Bowen said, “He has spent a hell of a lot of money on the club and still wants to spend money.” The club’s loss increased from £30m to £42m, largely due to no repeat of prior year’s £8m from sale of the training ground and £2m other operating income. Revenue dropped £3m (16%) from £21m to £18m. Profit on player sales fell £0.8m to £1.6m.   This is one of the lowest gains in the Championship.  The Royals have made very little from player sales, averaging only £4.2m a year since 2011. Much poor recruitm...

Reading have published their 2019/20 accounts.   Operating losses were £43m. Wages were a massive 211% of revenue, way above the Uefa recommended level of no more than 70 per cent. Total accumulated losses are £138m.   Borrowings are £87m. Player signings cost £16m.   Average weekly wage is £17,460. Reading’s creditors include £87m in loans to owner, £9.7m outstanding instalments on transfer fees and  the club has taken advantage of Rishi Sunak’s ‘tax pay delay’ scheme to increase outstanding PAYE due to £6.4m. Loans would have been almost £100m but owner swapped debt for shares.

The authoritative Swiss Ramble reviews the 2019/20 accounts of Leeds United., a year that saw them promoted as title winners from the Championship.   Some fans saw it as a 'now or never' season. The club paid a price for success, as their pre-tax loss widened from £21m to £62m, despite revenue rising £5m (11%) from £49m to £54m, as significant investment led to expenses increasing £44m (52%), including £20m promotion bonuses and £7m TV rebate to broadcasters. The main reason for the £5m revenue growth was £7m (25%) increase in commercial income from £27m to £34m (largely merchandising), as gate receipts fell £1.2m (9%) to £11.4m and broadcasting was down £0.5m (5%) to £8.7m. Profit on player sales dropped £6m to £10m. Commercial income is by far the highest in the Championship and more than all but eight clubs in the Premier League.    Commercial income will further rise, as lucrative new deals have been signed in 2020. SBOBET shirt sponsorship reportedly worth £...

An Off The Pitch analysis highlights how Dutch clubs outperform much bigger European clubs on commercial income. Feyenoord's commercial income is greater than that of many clubs like Sevilla, AS Roma and Southampton, all playing in leagues with more exposure than the Dutch. Lower income from TV deals forces clubs to focus on other, more controllable revenue streams, explains Feyenoord's commercial director. An extensive KPI-model along with database utilisation are the focal points of their strategy. More than 50 per cent of Feyenoord's turnover stems from commercial revenue while the figure is less than one fifth for many other clubs.

Gamechanger, the investment vehicle led by Los Angeles-based businessman Brett Johnson, have completed their takeover of Ipswich Town. The League One club have been owned by British multi-millionaire Marcus Evans since December 2007, but the 57-year-old has sold all of his shares to the new group. The Athletic  understands Gamechanger are paying close to £30 million for the deal, but that includes them taking on the club debt. Evans will wipe all of the debts he is owed, but will receive 5 per cent of Gamechanger in return.   Evans will also keep some development land at Portman Road. Johnson is the founder and chairman of Fortuitous Partners, a sports investment fund, and Benevolent Capital Partners, a private equity firm with investments in manufacturing, property and sport. In 2015, Johnson bought a minority stake in Arizona United, a new team in the USL Championship, American soccer’s second tier, and became the club’s co-chairman and president. Within a year, ...

The authoritative Swiss Ramble analyses Manchester City's 2019/20 accounts from his Zurich base. The main driver of the £57m revenue reduction was broadcasting, which fell £63m (25%) from £253m to £190m, while match day dropped £13m (24%) from £55m to £42m. This was partially offset by commercial rising £19m (9%) from £227m to £246m. The loss of £125m is obviously not great, but all clubs have been adversely impacted by COVID with no fewer than 9 in the Premier League posting losses above £50m to date in 2019/20. That said, only Everton have reported a larger loss than City with £140m. The Swiss Ramble's rough estimate is that COVID resulted in £61m reduction to club revenue, split between £30m lost (match day £17m, TV rebates £13m) and £31m broadcasting deferred to 2020/21. Without this, revenue would have been £539m (similar to prior year), but would still have lost £64m. Although player sales are still not as high at City as many other clubs (e.g. Chelesa £475m since 201...

Manchester City have recorded a loss of £126m for 2019/20, their first since 2014.   This was mainly due to deferred revenue and increased player investment.  The Covid-19 pandemic was also a factor:  https://www.independent.co.uk/sport/football/premier-league/manchester-city/man-city-news-covid-finances-b1827390.html Turnover fell by almost £57 million to £478.4 million due to the delay of revenues from the Premier League and Champions League. Operating expenses rose by £80.1 million to £641.2 million primarily because of an increase in wages and amortisation. Wage bill now above £350 million mark and wages-to-revenue ratio exceeds 70 per cent. The club have assigned fixed charges in relation to Premier League media revenue and matchday income to HSBC as security for a credit facility with the bank.

The Zurich-based Swiss Ramble reviews the 2019/20 accounts of Burnley FC. Profit before tax dropped from £5m to break-even, mainly due to COVID impact, including an additional month of expenses. Revenue fell £4m (3%) from £138m to £134m and expenses increased £9m, though profit on player sales rose £8m to £15m. Profit after tax was £0.5m.    Break-even is the fourth best result reported to date in the 2019/20 Premier League Without COVID, revenue would have been £10.5m higher at £144m, due to £8.5m broadcasting rebate and £2m other lost income. The Clarets have made profits for four years in a row, aggregating £77m. In fact, they have been profitable each season in the Premier League, including 2010 and 2015. Losses reported in the Championship in 2014 and 2016 were driven by promotion bonuses. The profit from player sales more than doubled from £7m to £15m, mainly Tom Heaton to Villa and Nakhi Wells to Bristol City. Despite the increase, this was still firmly in the bot...

From his Zurich fastness, the authoritative Swiss Ramble casts his forensic eye over the 2019/20 accounts of Sheffield United. Following promotion the Blades swung from £21m pre-tax loss to £19m profit, a £40m improvement, as revenue shot up £122m from £21m to club record £143m, though profit on player sales fell £10m to £4m and competing in the Premier League increased expenses by £72m. Profit after tax was £18m. The main driver of the £122m revenue increase was broadcasting, up £109m from £8m to £117m, due to the much more lucrative Premier League TV deal, though commercial also rose £13m from £7m to £20m, while match day was up £0.8m (13%) from £5.9m to £6.7m. Revenue of £143m is an incredible 13 times as much as the £11m they reported in League One just three years ago with £115m of the £132m increase coming from broadcasting, which contributes 82% of total revenue.   There was slso significant growth in commercial, up from £3m to £20m. £143m revenue was a very respectabl...

Burnley 2020 accounts are out. Headlines: Revenue down 3%, wages up 16%, loss from day to day operations £15m but offset by player sale profits. No debt and over £80m in bank at 30 June 2020, reports Kieran Maguire of the PriceofFootball. Total income puts Burnley 15th in the income league, compared to 10th in the Premier League Broadcast income   was down just 1.5% due to Burnley extending their accounts to 31 July 2020 to income all of 2019/20 season. Improved league position increased the prize money element of broadcast revenue. Rebate to TV companies about £8.7m Commercial/other income slightly down on previous season. Second lowest in the Premier League. Burnley's wages were 75% of revenue in 2019/20, although slightly distorted because wages are for 14 months and income only really generated over a single season Burnley had another modest year in the transfer market in 2019/20, with a net spend of less than £14m. Total value of the Burnley squad at 2019/20 was £1...

For the first time since 2008, the 2019/20 accounts of Sheffield United show a working profit.. It is not some minuscule sum, either, with the surplus for the club’s first season back in the Premier League for a dozen years standing at £17.5 million. The huge increase in turnover that accompanies a place in the world’s richest league helps explain how United have made some money for a change.   Revenue increased by more than sevenfold to £143.1 million in a season that saw Chris Wilder’s side finish ninth, in the process earning a larger chunk of the top flight’s prize money pot. Outgoings also increased significantly at Bramall Lane in 2019-20, with transfer expenditure up to record levels along with the wage bill. Broadcast revenue shot up, from £8.3 million in the Championship to £116.8 million. Included in this is Premier League prize money awarded dependent on league position.   Sponsorship, including shirts and ground advertising, also rose sharply to £14.8 mi...

From his Zurich fastness the Swiss Ramble reviews the 2019/20 accounts of AFC Bournemouth. The club’s loss almost doubled from £32m to a club record £60m, largely due to revenue dropping £36m (27%) from £131m to £95m, partly offset by profit on player sales rising £20m to £23m. The revenue decrease was mainly attributable to COVID, which contributed to broadcasting falling £35m (30%) from £116m to £81m, though match day was also down £1.5m (29%) from £5.0m to £3.5m. These reductions were partly compensated by commercial rising £1m (9%) to £11m. The Cherries have now reported losses three years in a row, amounting to £103m, having made money in their first two seasons in the Premier League. Before that they posted four consecutive years of losses, including a hefty £39m deficit in the 2014/15 promotion season. Without COVID, revenue can be estimated as £25m higher at £121m (8% less than 2019), as £18m broadcasting deferred to 2020/21 and £7m foregone (TV rebate £6m, match day £1m)...

A total of £272 million was handed over to agents by the Premier League’s 20 clubs during a 12-month period from February 1, 2020, £9 million up on the previous season and £12 million more than in 2018-19. The numbers keep on climbing for an industry “only” able to command £211 million back in 2017-18. Chelsea spent £35 million, Manchester City £30 million, Manchester United £29 million, Liverpool £21 million, Arsenal and Tottenham both £16 million. Even Newcastle United, a club fearing relegation to the Championship, had an outlay of £11 million. For every £10 that comes into a Premier League club through central funding, £1 effectively goes to those who look after the club’s players. A total spend of £41 million in the Championship included close to £7 million spent by Norwich and £5.6 million from Bournemouth, two relegated clubs eager to find an instant return to the Premier League. Stoke City, meanwhile, managed to hand over £3 million to agents, a figure greater than all of...