The Political Economy of Football V2

As noted in Deloitte’s annual review of football finance, the trade in top footballers is muted. Dan Jones, head of the consultancy’s sports business group, said: “buyers appear to be few and far between as a number of major clubs are in a position where sales are required before purchases can be made.” The two Spanish super clubs are suffering more than most.  Real Madrid   and  FC Barcelona  are eschewing the big money acquisitions they were accustomed to making before the pandemic arrived.  It should be no surprise that neither club has given up on the failed  European Super League , a breakaway competition that would have provided “welcome bonuses” worth €200m-€300m per club. Both were involved in capital-intensive stadium redevelopments when the pandemic hit. Barca also made a series of big-money signings and allowed borrowings to pile up, although this week the club was quick to note that credit rating agency  Fitch  is posit...

The authoritative Swiss Ramble reviews the (13 month) 2019/20 accounts of Crystal Palace. The club swung from £5m pre-tax profit to £58m loss, mainly due to profit on player sales dropping from £46m to only £0.5m. Revenue fell £13m (8%) from club record £155m to £142m, partly due to COVID. The £142m revenue was 11th highest in the top flight, though the gap to the Big Six is enormous, as Palace are more than £200m behind Arsenal £343m. For more perspective, it’s less than a third of Manchester United £509m, Liverpool £490m andManchester City £478m. Although the £58m loss is obviously not great, it is only mid-table in the Premier League, as all clubs have been adversely impacted by COVID with no fewer than nine of them posting higher losses than the Eagles in 2019/20, Main driver of the revenue reduction was broadcasting, which fell £11.7m (9%) from £124.4m to £112.7m, while match day dropped £2.8m (19%) from £14.6m to £11.8m. However, commercial rose £1.4m (9%) from £16.4m to £1...

The combined revenue of Europe's top five leagues fell by £3.4bn because of the Covid-19 pandemic according to the Deloitte Annual Review of Football Finance.   The Bundesliga was the most reslient league:  https://www.theguardian.com/football/2021/jul/29/european-football-clubs-revenue-declines-by-34bn-over-pandemic

Gillingham FC kept losses down to £100,000 in 2019/20 on a turnover of £7m in a difficult year.  Chairman and owner Paul  Scally, who said he was satisfied with the results, claimed £214,000 in consultancy fees:  https://www.kentonline.co.uk/medway/sport/gillingham-chairman-satisfied-with-performance-as-finances-a-251359/

Leicester City are proposing to expand the capacity of the King Power stadium to 40,000 by adding 8,000 seats.  The plans include a hotel and a multi-purpose entertainment and events venue:  https://www.skysports.com/football/news/11095/12365987/leicester-city-plans-to-expand-king-power-stadium-to-40000-unveiled Whilst broadcasting revenues are the main source of income for Premier League clubs, boosting capacity can be a valuable source of additional revenue, although it also demands success on the pitch.

Writing for The Athletic, football finance guru looks at possible ways of restraining spending by top clubs. At present clubs are allowed to lose £15 million pre-tax over a rolling three-year period. However, certain costs (academy, community, women’s team, infrastructure) are excluded, and owners are allowed to contribute via share issues a further £90 million over the three-year period. Maguire tries to work out the effect of a crude version of the La Liga model that focuses on future expenditure Those clubs that have had historic good control over costs would be rewarded, and the Big Six would still enjoy a substantial financial advantage over the other clubs. At the bottom end of the table, the sight of Everton might initially surprise but the club has spent a lot in recent seasons and this has resulted in high wages and amortisation fees, which would be clawed back by a tighter budget for 2021-22. If such rules were to be introduced there would have to be a transition period...

What is the situation with the Premier League's investigation into Manchester City's alleged breach of its profitability and sustainability rules? In August 2019, the league issued a disciplinary complaint against Manchester City and asked them to release documents; the club refused   In October 2019, the league set up an arbitration tribunal to enforce that request; the club challenged the tribunal’s jurisdiction and impartiality.    In February 2020, the league changed its rules to ensure impartiality and the tribunal restated the demand for disclosure In June 2020, the tribunal rejected a fresh challenge from the club, who then filed an arbitration claim at Companies Court.    In July and November 2020, the tribunal again rejected arguments from the club and issued a final demand for disclosure but the order was stayed pending court proceedings In March 2021, Justice Moulder rejected the club’s arguments about the league tribunal, denied it permission to ...

The authoritative Swiss Ramble reviews the finances of FC Barcelona.   He states that Barcelona are facing a financial crisis, due to a combination of mismanagement and the COVID-19 pandemic, which means that they need to make significant savings to meet La Liga’s regulations. These are tough times at Barca. As well as the financial issues, their performance on the pitch has been slipping. In fact, 2020/21 was the first season that they finished outside the top two since 2007/08. Their standard big-spending approach is no longer on the menu. The club had a huge €173m operating loss in 2020 (i.e. excluding player sales & interest), making €432m in last 3 years. Three “Super League” clubs had higher losses (Juventus, Milan and Manchester City), but these are all supported by owners – in contrast to Barca. These problems have not arrived overnight, as confirmed by economic VP Eduard Romeu, “COVID is not to blame for everything. Things were going badly before.” Laporta s...

Crystal Palace latest accounts cover a 13 month period to July 2020.   Lower revenues and higher costs usually result in red ink and Palace made an operating loss of £60m in 19/20. Revenue was down 8% to £142m.     Wages were up 11% to £132m (mainly due to 13 months accounting period).   Player sale profits £0.5m.

The usually reliable business website Bloomberg is reporting that AFC Bournemouth may be up for sale.  Apparently the owners have reached out to a select group of investors in recent months.  Football finance guru Kieran Maguire reckons the club could fetch £80m to £100m. Club revenues have been hit by Covid-19, but there is no certainty of a sale.

Tracey Crouch MP has produced her interim report from the Fan Led Review of Football Governance:  https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1004891/TC_letter_to_Oliver_Dowden_Accessible_Format.pdf In my recent book Political Football I called for an independent regulator, as have many others, and Tracey Crouch endorses this view. However, she also agrees that the regulator's scope should not be too wide to make the task manageable and focus on priorities.   These should be financial regulation, governance and ownership rather than football issues such as VAR. Football finance guru Kieran Maguire comments: 'Lots of measured and reasoned observations in the interim Fan Led Review from  in relation to football. No simple populist suggestions, far more deep than that, which can only be good for the game.'

Manchester City have lost a case in the Court of Appeal which confirms that the Premier League is still investigating them for breaches of financial fair play regulations:  https://www.theguardian.com/football/2021/jul/20/court-ruling-shows-premier-league-still-investigating-manchester-city-over-ffp

West Ham owners David Sullivan and David Gold have turned down an informal offer to buy the club.  The offer was seen as vague and as a property deal rather than a football deal, although the club does not own the London Stadium.  Former QPR chief executive Philip Beard was said to be among those involved:  https://www.skysports.com/football/news/11095/12360223/west-hams-owners-turn-down-informal-approach-to-buy-club-former-qpr-chief-philip-beard-among-those-interested

From his fastness in Zurich, the authoritative Swiss Ramble has been reviewing the 2019/20 accounts of Scottish Premiership clubs. Most Scottish Premiership clubs aim for break-even with five making small profits, led by Hearts £0.5m and Motherwell £0.3m. Rangers’ £17.5m post-tax loss is the big outlier, especially compared to Celtic’s£0.4m deficit, largely due to their recent investment in the squad. Celtic had the highest revenue with £70m, though the gap to Rangers £59m has narrowed. Both Glasgow clubs earn at least four times as much as other Scottish clubs with closest challengers being Aberdeen £14m, Hearts £12m, Hibernian £9m and Kilmarnock £5m. However, it is worth noting that Celtic were boosted by £24m profit from player sales, largely due to Kieran Tierney’s move to Arsenal, which was significantly higher than other Scottish clubs. The next highest were Kilmarnock £1.2m, Motherwell £1.0m. The Old Firm had by far the largest operating losses (i.e. excluding player sales...

How has it been possible for PSG to go on something of a spending spree this summer? “This pandemic actually presents an opportunity for some of the clubs with wealthy owners that can spend because of the relaxed regulations,” Dr Daniel Plumley, a sports finance expert and lecturer at Sheffield Hallam University told The Athletic . “They know they’re OK to take opportunity out of this crisis. A club like PSG has got the financial power to do that.” UEFA’s financial fair play (FFP) rules have been a challeng for both PSG and Manchester City in recent times but an easing of the regulations last summer, deemed necessary as a year of pandemic-enforced behind closed doors football hammered clubs everywhere, has presented a chance for those with well-insulated finances to show their muscle. Owners of Europe’s elite were permitted by UEFA’s FFP rules to put additional money into their clubs as of last June. Those “emergency measures” were an acceptance that a global pandemic would bring u...

The tireless Swiss Ramble has been casting his forensic eye over the 2019/20 accounts of Blackburn Rovers. The club’s loss widened by £4m from £18m to £22m, as revenue fell £3.2m (19%) from £16.7m to £13.2m, while operating expenses grew £3.6m (10%), partly offset by profit on player sales rising £2.5m to £3.1m and £0.6m government furlough income. Since Venky’s arrival in 2010, Rovers have only once made a profit – in 2012 when last in the Premier League (boosted by £23m player sales). In this period they have lost £172m, some achievement considering they had two seasons in top flight followed by four with parachute payment. Debt increased by £14m from £142m to £156m, thanks to another loan from Venky’s, who the club now owe £141m. There is also a £14m bank overdraft (guaranteed by Venky’s) and a £0.6m loan from the EFL.    The £156m debt was the second highest in the Championship, only below Stoke City £187m. In fact, they actually had the 9th highest debt in England at ...

Arsenal fans are unhappy with the club's plans for supporter engagement following the ESL fiasco.  They think they fall short of what is on offer at other Premier League clubs:  https://www.arsenaltrust.org/feed/news/2021/AST-Arsenal-Supporter-Engagement-Response

Swindon Town are in complete disarray with staff not paid in full and even the best case scenario looks bleak:  https://www.theguardian.com/football/2021/jul/16/no-manager-not-enough-players-how-swindon-town-were-left-to-fall-apart?CMP=Share_iOSApp_Other

City Football Group, the parent company of Manchester City, has raised $650m in one of football's biggest ever debt deals.   The loan will become due in July 2028 and exceeds the €525m debt financing arrangement between Goldman Sachs and FC Barcelona. CG intends to use the money to fund infrastructure projects such as a new stadium for its MLS franchise New York City FC. The seven year loan was underwritten by Barclays, with HSBC and KKK Capital helping to arrange and distribute the debt.   CFG has also organised a revolving credit facility worth £100m.  Raising debt is thought to be a cheaper route to cash than selling equity. The money will help prop up the lossmaking group whose finances have been hit hard by the pandemic. CFG's annual revenue dropped to £544m in the financial year ending June 2020, down almost 14 per cent because of lost ticket and broadcast sales,  The group's annual net loss widened to £205m from £84m a year earlier. CFG majority owne...

Football finance guru Kieran Maguire says that Tottenham Hotsour are 'clinging on by their fingertip' in terms of their big six status.  Much depends on a reported £250m naming rights deal to extract value from the new stadium:  https://www.footballinsider247.com/tottenham-clinging-by-fingernails-as-levy-seeks-250m-jackpot-maguire/

Bundesliga clubs at an extraordinary general assembly on Wednesday failed to find common ground on updating Germany's 50+1 ownership rule after the federal cartel office (Bundeskartellamt) issued criticism of its corporate exceptions. The cartel authority thought that the rule itself was unproblematic because of its sporting character but was concerned about exemptions:  https://www.dw.com/en/german-footballs-501-rule-unproblematic-says-regulator/a-57739644  

The 2019/20 accounts for Charlton Athletic relate to the year in the Championship and the company controlled by Roland and then ESI and have been summarised by Kieran Maguire. Charlton’s total losses over the years exceed £71,000,000. Loans are down after £20m of them were converted into shares. 2019/20 income was up on the back of higher gate receipts and the TV deal in the Championship being worth about £6m more than in League One.     Charlton claimed furlough income of £634k until June 2020. Charlton lost £100k a week in 2019/20 but player sale profits and loan interest written off by Roland Duchacelet reduced these losses. Charlton bought players for £262k in the season but spent £522k on motor vehicles.    Charlton owed car leasing companies over £550,000 for future lease costs at end of season, excluding interest payment.     Charlton terminated leases for six vehicles after the end of the season at a cost of £261,000, Total remuneration of...

Port Vale have submitted cut down accounts to Companies House, as they are allowed to do as a smaller company.   The club appears to have lost just under £120k in 2019/20. Port Vale signed players for £53k in 2019/20. Football finance guru Kieran Maguire, 'Looks as if Port Vale owe a lot to Stormin' Norman Smurthwaite.'  He is owed just over two and a quarter million pounds.

The doyen of football club accounts, the Swiss Ramble, analyses the 2019/20 accounts of Sheffield Wednesday from Zurich. Sheffield Wedneday swung from £19m profit to £24m loss, largely due to prior year including £38m profit from selling the stadium and a £6.5m “confidential settlement payment”. Revenue fell £1.9m (8%) from £22.8m to £20.9m, while expenses were flat. Profit on player sales rose £3.4m to £6.2m. The club sold their stadium for £60m, which gave them a £38m profit after deducting the £22m book value. If this transaction were excluded, they would have reported a £19m loss in 2019, which means that the £24m underlying loss in 2020 was £5m higher. Most clubs in the Championship lose money, but Wednesday’s £24m loss is the sixth highest in the division to date, though far below Stoke City £88m.    operating loss (i.e. excluding player sales and interest) rose slightly from £28m to £30m, though much better than LUFC £65m, WBA £53m and Stoke City £49m. Almost ever...

The parent company of Bristol Rovers makes operating losses of almost £50k a week, reports Kieran Maguire of the PriceofFootball.   Loan interest write offs decreased this, but total losses over the years now exceed £25m.  Although losses are down year on year, the full impact of Covid-19 is yet to be felt:  https://www.bristolpost.co.uk/sport/football/football-news/losses-reduced-bristol-rovers-latest-5642646 Nevertheless, football finance guru Keiran Maguire reckons they are heading in the right direction:  https://www.bristolpost.co.uk/sport/football/football-news/heading-right-direction--football-5643069

Reading's Madjeski Stadium may be about to undergo a name change with main sponsors Select Car Leasing making use of their name:  https://www.getreading.co.uk/sport/football/football-news/reading-fc-fans-sent-frenzy-21025724 The name change has gone ahead, drawing a mixed reaction from supporters:  https://www.bbc.co.uk/news/uk-england-berkshire-57860294

 Tottenham chairman Daniel Levy is rumoured to be in advanced talks on naming rights for Tottenham’s stadium and a deal could be confirmed before the new season. It has been more than two years since the Tottenham Hotspur Stadium opened and it still does not have a naming rights sponsor. But sources claim Levy and the Spurs hierarchy are close to a breakthrough. The news will come as a potentially massive boost to Tottenham after seeing their finances badly hit by the pandemic. Clubs have found it more difficult to securing naming rights deals in recent years.

Barca’s financial woes have been much discussed in recent years as they gradually and inexorably accumulated deeper and deeper debts during Josep Maria Bartomeu’s ill-fated spell as president. But now, current chief Joan Laporta and his board suddenly find themselves faced with the consequences of all the years of avoiding facing up to the responsibility for their own actions. As things stand, La Liga will not allow them to register the four players they have signed this summer — unless they first make savings of over €200 million elsewhere. The Spanish league’s strict economic controls (or financial fair play rules) also mean that, unless they make drastic cuts elsewhere, Barca will not be able re-register Lionel Messi, no matter how big a pay-cut he might accept. La Liga set up an economic control department in 2013, staffed by analysts who review the finances of each Primera and Segunda club and establish its strict squad cost limit for each season. This squad cost limit i...

The collapse of a television deal has caused serious problems for Ligue 1, emphasising the reliance of football on broadcasting rights.  The deal would have been worth £670 million annually across Ligue 1. Mediapro, the company looking to make a splash by wrestling packages away from long-term broadcaster Canal+, made one payment of £130 million last August before defaulting on the rest when subscriber numbers dramatically undershot their expectations. That left black holes on balance sheets across the country, and even though Amazon Prime emerged into the market last month to agree fresh terms, the deficit has only been partially closed. They paid just £215 million a year for the same number of Ligue 1 games as Mediapro had planned (eight per week) — a reduction on the previous deal of more than two-thirds. The issue is compounded because Canal+ are taking legal action over the sale of those rights. A partner since 1984, they were not given chance by Ligue 1 to submit a fres...

The excellent article by football finance guru Kieran Maguire on Covid-19 and football is currently free to read online:  https://onlinelibrary.wiley.com/doi/10.1111/1467-923X.12961

Salford City lost £65,000 a week in their first season in the EFL in 2019/20 and total losses now exceed £9 million.  Football finance guru Kieran Maguire comments that it is 'Disappointing that the club takes advantage of legislation to only show the bare minimum information. Other clubs such as Carlisle in L2 are far more transparent.' The parent company of Salford City Project 92 Ltd publishes far more transparent accounts and showed a loss of £3.7m in 2019/20.   Salford owe owners Project 92 Ltd £5.8 million at 30 June 2020. Owners also put £2.5m into club via a share issue.   Project 92 borrowed £3.8m in 2019/20, probably from shareholder Peter Lim.     Project 92 have ‘other creditors’ of over £12m, again likely to be from Peter Lim Project 92 wages more than doubled in 19/20 following promotion to EFL. Wages were £121 for every £100 of revenue, the sort of ratio one might find in the Championship. Salford signed players for £280k in 2019/20. ...

After outside investors acquired shares in Rochdale Football Club, the chairman met with the prospective new owners, a meeting which did not 'ring any alarm bells':  https://www.rochdaleafc.co.uk/news/2021/july/club-statement_07.07.21/#.YOVpESqcWpE.twitter  

Football finance guru Kieran Maguire casts his eagle eye over Sheffield Wednesday's 2019/20 accounts.  The loss could be seen as a reasonable one in a division where large losses are common, but the club still needs to get the wage bill down:  https://www.thestar.co.uk/sport/football/sheffield-wednesday/wages-ffp-furlough-and-a-ps25m-rent-sheffield-wednesdays-201920-accounts-explained-in-plain-english-3298746  

The Premier League’s media sales team have been totting up the bids from almost 40 different territories for overseas broadcasting rights, increasingly key to the Premier League business model. The first round of the European rights auction closed the day after the group stage finished at the Euros, with bids from 23 territories due on Thursday, June 24. What these bidders were bidding for, how their bids must be presented and what obligations they would have to meet before getting any rights is all explained in the league’s 73-page invitation to tender. This is the manual for the Premier League’s business model, and it tells you where the league believes its business is heading. For the first time, the league has asked all bidders to submit two bids for the packages in their territories, one for the customary three-year cycle and another covering six years. Most incumbent broadcasters have wanted longer deals for years, as they believe they can build audiences more effectively i...

A new injunction by the Spanish commercial court threatens to further nullify UEFA’s attempts to punish the Super League clubs. Comments by Andrea Agnelli suggest that negotiations with UEFA are on the horizon. The court ruled that sanctions against Barcelona, Juventus and Real Madrid must be dropped, along with any applying to Premier League clubs:  https://www.reuters.com/lifestyle/sports/spanish-court-rules-against-uefa-case-over-european-super-league-2021-07-01/ Even though it seems like UEFA will need to lower their tough penalties on the founding clubs of the European Super League, experts have differing opinions over whether the new injunction, in reality, forces UEFA to do anything. Andrea Agnelli seems convinced that the founding European Super League clubs have nothing to fear in terms of sanctions from UEFA – but the upcoming French presidency of the Council of the European Union might be a joker in the pack for UEFA. One legal expert argues that the steps taken by...

The authoritative Swiss Ramble reviews the 2019/20 financial results for Watford that covered a season that the club described as “unique and challenging”, as it ended in relegation after they finished 19th in the Premier League and they had three managers: Javi Gracia, Quique Sanchez. The Hornets swung from £10m pre-tax profit to £36m loss, as revenue decreased £28m (19%) from club record £148m to £120m and profit on player sales fell £4m to £18m, while expenses increased £9m (6%). Prior year boosted by £4.5m Marco Silva compensation. During their time in the Premier League Watford reported profits in 3 out of 5 seasons, though there is an overall deficit of £49m in this period, due to the hefty losses in 2018 and 2020. In the Championship, they tended to lose money, though the losses were quite small. One reason for   the club swinging from profit to loss in 2020 is exceptional items. Prior year was boosted by £4.5m compensation for Marco Silva’s move to Everton, while 2020...

Ruhr club Bochum have achieved promotion to the Bundesliga and want an investor who can help take the club to new heights. High valuations in Germany, however, in combination with its 50+1 rule, means taking on a stake in the club is not as straightforward as in other leagues. Managing director explains members are looking for a partner that wants to actively partake in Bochum's growth over the next ten years. Simplicity and continuity are two of the club's unique selling points, rare in an industry that tends to favour short-term planning.

Football finance guru Kieran Maguire says that Oldham Athletic's accounts lack transparency and are misleading to supporters and potential buyers:  https://www.theoldhamtimes.co.uk/sport/latics/19412976.football-finance-expert-assesses-oldham-athletics-accounts/ The stated £75,000 loss is suspiciously low.  The overall ownership position at the club is complicated.

Yet more trouble at Swindon under the ownership of Lee Power.  BBC Radio Wiltshire reports 'Swindon Borough Council is taking Swindon Town Football Club to court over unpaid rent on the County Ground. This comes after staff and player wages weren’t paid this week. We understand the rent arrears dates back to April 2020.' More here:  https://www.bbc.co.uk/sport/football/57693793

Juventus are facing a whopping €185 million loss in 2020/21 forecasts offthepitch.com as the pandemic has thrashed the Italian giant’s finances.  That is a record financial loss in the club's history as the worst result so far was €95 million in 2010/11. Juventus have faced a tough season both on and off the pitch. Sporting performance offered the club no helping hand in balancing the massive negative effect of Covid-19 - which obviously hit matchday income, but more importantly also trashed the transfer market on which Juventus' finances are heavily dependent. A simulation of the financial year without Covid-19 impact reveals that Juventus would have made a massive loss anyway. President Andrea Agnelli said the European Super League was a desperate cry for help in a system which led the industry into insolvency. Without the Super League, it looks as if the club need to rethink their business model. The appointment of Massimiliano Allegri as well as the revision of the...