The Political Economy of Football V2

Football finance guru Kieran Maguire has explained that Spurs fans should not be concerned about the £250m loan taken out by the club.  It is an interest only loan that can be paid back over thirty years:  https://www.spurs-web.com/spurs-news/finance-expert-explains-how-spurs-250m-loan-repayments-will-work/   The second edition of Maguire's excellent book The Price of Football is available from Agenda Books.

US investment manager Ares Management Corporation has acquired a 34 per cent stake in the holding company and majority shareholder of Atletico Madrid. The move was unanimously confirmed as part of a €181.8 million capital increase of which the firm that owns 66 per cent of Atletico Madrid will contribute about €120 million. The injection of capital is designed to help shore up Atletico’s finances, mitigating what the club described as ‘the adverse economic effects’ on income caused by Covid-19. The La Liga holders also said the funds will ‘reduce the level of indebtedness derived from both the investment in the new stadium and the acquisition of players’. In November 2020, digital soccer outlet Goal reported the club's debt had reached just short of €1billion  following the 2019/20 season.

Published by Agenda Books I presented a summary of some of the arguments in my recent book Political Football at the online ECPR Regulation and Governance conference. The European Super League fiasco has revived the debate about the regulation of football.   The particular challenge in the case of football is that ‘its regulatory and competitive structures were formed in the nineteenth century when the economy in which football operated was totally different to that of today.’    Regulation by the state has been largely absent from football which, sporadic and ad hoc interventions aside, has largely been left to regulate itself despite evident deficiencies in its regulatory arrangements.   Measured against the advance of the regulatory state, it has continued to enjoy considerable autonomy in its governance arrangements.        Football has largely regulated itself, reflecting the extent to which it is a closed policy community with its o...

 Burton Albion revenue was down £1m but costs fell twice as fast so losses just £100k from day to day trading in 2019/20 despite Covid at end of season. Burton received £496k in furlough payments in 2019/20. Burton sold/released players who originally cost £991k in 2019/20.

An independent disciplinary commission has fined Derby County £100,000 and required the club to restate its accounts for three financial years:  https://www.efl.com/news/2021/june/-derby-county/ As a contingency an interchangeable fixture list has been developed for the Rams and Wycombe Wanderers should the EFL appeal. As far as the restatement of accounts is concerned, Kieran Maguire of the PriceofFootball comments: 'Rough calculations suggest Derby would still be within the £39m loss limit for 2016-18 because the profit on sale of Pride Park more than offsets the higher depreciation charge. Further issue is how the £12m profit on writing off some shares in 2016 is classified for FFP.' He adds, 'Broadcast income approximately £7m in Championship and £1.1m in League One, makes it very difficult to budget for next season unless EFL decide not to appeal.'

Over the past five years Lincoln City have risen from the National League to reach last season’s League One play-off final, with attendances more than trebling in size. The club has also earned recognition for its family and community values. Now the club has received new investment from the States, with the Phoenix, Arizona-based Jabara family taking a nine per cent stake. It is a further indication of the growing appeal of lower-league English clubs to US investors. As part of the new developments, former USA international Landon Donovan is to join Lincoln City as a strategic advisor. Lincoln City are now firmly focused on promotion to the Championship, and the new investment will go towards the first team squad, the club’s Elite Performance Centre, and a stadium expansion and upgrade. 

Two non-league clubs have had to resign from their leagues after a dispute with their Singapore-based landlord. Whytesheafe have had to leave the Isthmian League and Abingdon Town have had to leave the Hellenic League after the leases on their grounds were terminated.  The leagues are keeping their places open. Irama Sport purchased Whytesheaf's ground for £495,000 and Abingdon's Culham Road for £300,000 last year. At Abingdon they had to pay £200 to hire the pitch for a game and even £25 for use of the kitchen.   Irama took 75 per cent of any sponsorship. Irama also own the ground of Northern Premier League East side Brighouse Town who have five years left on their lease.

Tottenham Hotspur have paid back the £175 million loan they took from the Bank of England last year, putting them in position to complete the new contract for Son Heung-min. Spurs took the loan as part of the COVID Corporate Financing Facility at the start of the COVID-19 pandemic, as the Bank of England made low-interest loans available to companies with a sufficient credit rating, and then re-drew the loan in March 2021. But last month Tottenham raised £250 million through a private placement scheme organised by Bank of America, effectively converting short term debt into long term refinancing. That money came through to Tottenham earlier this month, effectively allowing the club to pay back the Bank of England, which they have done in the last week.

Premier League clubs recorded the largest aggregate pre-tax loss in the league’s history because of the pandemic, increasing to just under £1 billion (2018/19: £0.2 billion) as the immediate revenue shortfall coupled with an inflexible short-term cost base hit the bottom line. Clubs in the Premier League have only recorded pre-tax profits four times in two decades, all since 2013.    On an operating level, clubs had moved towards profitability under 2-18/19 when costs grew faster than revenues. The Covid-19 pandemic forced the Premier League clubs to defer or return revenue from broadcasters and sponsors. Premier League clubs’ combined revenues for 2019/20 have fallen for the first time, to £4.5 billion, down 13% from 2018/19 (£5.2 billion).    Due to the relatively fixed nature of Premier League club costs, the decline in revenue had a significant impact on operating profits, falling by 95% to £42m (2018/19: £0.8 billion).   Clubs’ combined wage expendi...

Erik Alonso has talked to The Athletic about his failed bid to buy Derby County. He commented: “Mel Morris is obviously not an easy person to negotiate with. But he has been very successful, and it is for that reason: he is tough. He was fighting for the long-term interests of the club. That is to be expected from a good businessman. He was not aggressive. If he had an idea, he tried to get it across and will fight for his idea.” “It predominantly broke down because the EFL kept putting up more barriers,” says Alonso. Alonso claims the EFL changed the criteria after he had submitted the relevant documents — included showing proof of funds. Alonso showed  The Athletic  three months of bank statements, as well as a deposit of €40 million, which he claims were shown to the EFL. Alonso denies the claims recently made by EFL chief executive Trevor Birch to talkSPORT in early June that Alonso “wasn’t able to deliver” when it came to “tangible proof”. It is understood that the...

Why would Stan Kroenke not want to accept an improved offer for Arsenal that would double his money?  This blog essay offers an interesting explanation and also refers to the experience of Charlton Athletic:  https://www.justarsenal.com/opinion-why-would-kroenke-turn-down-over-1-billion-profir-from-arsenal-sale/284362

Norwich City has cancelled its controversial sponsorship deal with Asian gambling firm BK8 after an outcry from fans, admitting that it made an error of judgment:  https://www.bbc.co.uk/sport/football/57424206 Norwich is generally one of the better run clubs in football and I was surprised by this decision.  Some of the underlying pressures are indicated in the club's statement: 'As a self-financed club there is always a fine balance between generating the revenue levels required to help maintain that model, whilst working within our vision and values.' A broader question is how much longer clubs will be allowed to accept betting sponsorships.   I devote a chapter of my new book Political Football to the relationship between football and gambling: https://www.agendapub.com/books/124/political-football  '

The authoritative Swiss Ramble has reviewed the 2019/20 accounts of Cardiff City. The club swung from £3m profit to £12m loss, as revenue fell £79m (63%) from £125m to £46m due to relegation and COVID, partly offset by profit on player sales rising £12m to £14m, while expenses were down £33m and no repeat of prior year £20m provision for the Sala transfer. Although the £12m loss is clearly not great, it was around mid-table in the Championship with many clubs reporting much larger losses in 2019/20, including Stoke City £88m. In the decade since Vincent Tan bought the club in May 2010, they have accumulated £142m of losses, half in last 4 years. In that period the club has only had two (small) profits, £4m in 2015 and £3m in 2019. They even contrived to lose £12m in the Premier League in 2014. The £79m revenue fall was largely driven by broadcasting’s £70m (66%) decrease from £107m to £37m, due to lower TV money in Championship, though commercial also dropped £5m (48%) from £10m ...

Manchester United have a particularly successful and sophisticated commercial operation.   In the recent fans' forum, Joel Glazer explained that without a successful commercial operation, you cannot have a successful football club but admitted these interests may have come to the fore too much.  He felt that when his family took over, the commercial area was one he felt his family could help and claimed many positives had come from this: United had among the highest net transfer spend and wages in world football and they haven’t raised ticket prices in 10 years (though they had shot up in the five years prior, when his father Malcolm was making decisions). With United leading the way on issues like ticket prices, he said, other clubs were pressured to do the same. This segment of the meeting was later included in United’s press release quoting Glazer as saying: “We want this club to always be successful and win trophies. To compete for trophies requires significant inve...

The authoritative Swiss Ramble has reviewed the 2019/20 accounts of Huddersfield Town. The club swung from £3m profit to £8m loss, as revenue fell £66m (56%) from £119m to £53m following relegation, partly offset by profit on player sales increasing £15m to £18m and player loans rising £3m to £6m, while operating expenses were cut by £37m, though interest was up £2m. The £66m revenue fall was largely driven by broadcasting’s £59m (57%) decrease from £104m to £45m, due to lower TV money in Championship, though commercial also dropped £6m (59%) from £10m to £4m and match day fell £1m (18%) from £5m to £4m.   The £8m deficit was actually one of the better financial results in the Championship. Many clubs have reported much larger losses in 2019/20, including Stoke City £88m. The revenue decrease was cushioned by the £42m Premier League parachute payment, though the COVID rebate reduced this by £2.6m. Despite broadcasting falling from £104m to £45m, it still accounts for 85% of tot...

Manchester United are to set up a scheme to allow fans to buy shares.   The plan is to create high vote 'B' shares that will have the same voting value as those owned by the Glazers. The Manchester United Supporters' Trust is insistent that there should be no cap on the number of shares, but fans would have to buy a considerable number to come anywhere near those owned by the Glazer.  The club's market capitalisation has risen to about $2.6 billion.

Huddersfield income was down £66m in 2019/20 following relegation, reports Kieran Maguire of the PriceofFootball.  Club has gone from a £1m profit to a £22.7m loss, although player sales reduced this by £18m. Interest on loans is over £80,000 a week. Huddersfield have outstanding loans of £57m in 19/20, repaid £11m in the year and have annual repayments of director loans over next few years. Huddersfield wages about mid table for Championship.     Huddersfield have the second lowest wage/income ratio of clubs in the Championship at 57 per cent.   Many clubs have ratios of over 100 per cent.   Only Rotherham has a better ratio than Huddersfield.

Swindon's troubles continue with £4m allegedly missing from the directors' loan account:  https://www.swindonadvertiser.co.uk/news/19347374.questions-4m-missing-swindon-town-directors-account/ The Supporters' Trust has expressed concern about the governance of the club, the uncertainty about ownership and the club's financial position. Martin Calladine has commented: 'There's a frustrating inevitably with the drip-drip of revelations about struggling lower division clubs. By the time this stuff comes out, fans will have been raising concerns for years.'

Player sales are becoming an increasingly important, if unpredictable, source of revenue for clubs.  This is even the case at non-league level as shown by the annual accounts of Leamington FC.  The National League North team is acquiring a good reputation for player development. The loss for the year was £22,284 compared to £52,282 in 2019. The accumulated loss now stands at £64,148 up from £43,814. Transfer fees were up from £20,000 to £62,500 without which the loss would have been much worse. The report notes, ‘It continued to be a challenge for the club to retain our National League status whilst operating on a playing and management budget that remains substantially below the average of our competitors. It is a credit to the structure and operational stability of the club and the manager that it continues to attract players when the financial rewards for them are greater elsewhere.’ The total revenue of the club increased from £331,000 to £359,800.    The p...

Shrewsbury Town made losses of nearly £725,000 in 2019/20 as Covid-19 started to hit income.  Bigger losses are expected in the current financial year:  https://www.shropshirestar.com/sport/football/shrewsbury-town-fc/2021/06/02/shrewsbury-town-accounts-reveal-loss-of-more-than-700000-for-201920-season/ Revenues were boosted by a lucrative FA Cup run including a tie against Liverpool. The club considers that it is well positioned to deal with a challenging financial environment.

Cardiff City made losses of £12.2m following relegation to the Premier League.   The club's debt amounts to over £100m owed to owner Vincent Tan:  https://www.walesonline.co.uk/sport/football/football-news/cardiff-city-record-122m-losses-20726022 Other Championship clubs formerly in the Premier League such as Stoke City have made much bigger losses.

The authoritative Swiss Ramble has been reviewing the recently published 2019/20 accounts of Stoke City. The club’s pre-tax loss widened from £15m to £88m, as revenue dropped £21m (29%) from £71m to £50m and profit from player sales fell £15m (83%) from £18m to £3m. Total expenses increased £37m, mainly due to £43m impairment charge (reducing player values). Loss after tax was £86m. Unsurprisingly, the £88m loss is the highest to date in the 2019/20 Championship, though others have also reported significant losses in 2019/20.    Only three Championship clubs made a profit. Following four consecutive years of (small) profits between 2014 and 2017, Stok have now posted losses three years in a row, adding up to a hefty £134m in total, though it is worth noting that £74m of this is due to player impairment (non-cash) charge The main reason for the £21m revenue reduction was broadcasting, which dropped £20m (39%) from £51m to £31m, mainly due to lower parachute payment, thoug...