The Political Economy of Football V2

 As the full scale of Derby County’s debt mountain becomes clear, doubts have been cast on the ability of a new buyer to take on the club’s post-administration debt burden.  Owner-chairman Mel Morris put the Midlands club into administration earlier this month, and is understood to be prepared to walk away from £100 million of “soft” loans he is owed by the club and “hand back” Pride Park, which he owns separately. An industry insider told offthepitch.com: “This could be a £70-80 million project to re-stablise the club. Billionaire owners will be likely be put off by the high risk nature of turnaround and local businessmen, supporters groups will not have means to do this.” An insolvency practitioner commented: "The decision to delay administration after implementation of new HMRC rules could cost new buyer extra £20 million." Derby owner-chairman says he will underwrite nine-figure soft loans and that “liabilities aren't a lot different to what the purchase price f...

Uefa has run into trouble over its efforts to punish participants in the European Super League.  It has had to announce that disciplinary proceedings against Real Madrid, FC Barcelona and Juventus were 'null and void'. Whilst other clubs have pulled out of the Super League project, these three clubs have persisted with a legal case against Uefa in a Madrid court.   The Spanish judges have referred the matter to the European Court of Justice on competition grounds.   I also thought that attempting to restrain the ESL could constitute a breach of competition law. This could be another landmark case like Bosman which could profoundly affect football.  The ECJ will have to decide whether Uefa can act as a regulator that can sanction clubs while also profiting from tournaments such as the Champions League. In a message to national associations, Uefa warned that 'the persistent pursuit of the ESL project and the resultant court cases compromise an ongoing existen...

The Premier League meest face-to-face again at the Landmark Hotel in London’s Marylebone last week, and the continuing growth of the competition was a particular area of focus. The US, China, India, Brazil and Indonesia have been identified as markets in which the Premier League could appeal to new fans and an enhanced pre-season tournament next summer in the States has been discussed as an initial step. Longer term, however, one of the key aspects in the League’s attempts to gain greater global appeal is playing competitive matches on foreign soil. A possible “roadmap for meaningful matches abroad” was mentioned last week, after “taking Premier League matches to the world” was discussed at June’s AGM. It would take several years for a top-flight match outside of England to come to fruition but it is interesting that the idea could be on the table following the collapse of the European Super League, more than a decade after former Premier League chief executive Richard Scudamore ...

The Swiss Ramble reports from Zurich on the latest financial results of Juventus.   One interesting general point to emerge is that Juventus are yet another club who have become increasingly reliant on player trading, but it is a volatile source of funds, especially after the pandemic. Juventus remained in 10th place in the Deloitte Money League, based on 2019/20 revenue, having overtaken Arsenal the previous season. However, their €255m revenue growth since 2010 is the lowest in the top 10, miles below the likes of PSG, Manchester City, Barcelona, Liverpool and Spurs. They are still very much the biggest club in Italy, certainly in financial terms. Although the 2021/22 season will deliver another large loss, the club expects the economic performance to “improve significantly starting from 2020/23 financial year.” The pre-tax loss more than doubled from €82m to €208m (€210m after tax), despite revenue rising €43m (11%) from €407m to €450m, mainly because profit on player s...

BT has amassed an enviable collection of sports rights — Premier League, Champions League, UFC   — but it has proved more popular with fans than shareholders.   The executive team that led the foray into sports are long gone. Their successors have worked hard to make the business work. BT Sport was costing the company around £400m a year. After raising prices and lowering costs it is now breaking even. BT is estimated to have racked up £2bn in operating losses on its aggressive sports foray but it is important to remember that it was playing defence as well. Rival  Sky , now owned by US media giant  Comcast , was offering free broadband to its sports subscribers a decade ago and eating into BT’s market share.  BT fought back on Sky’s turf and arguably breathed life into its somewhat staid image in the process.    Yet broadcasting sport is a distraction for a telecoms company now focused on fibre and 5G upgrades. It kic...

Experienced football administrator Paul Appleton of Begbies Traynor discusses the challenges facing Derby County's administrators with The Athletic. 'The key discussions this week between the administrators, the club’s owner and the secured creditor will have been over who is going to fund the club while it’s in administration. It is hard to see how there will be enough money coming through the turnstiles, merchandise sales and sponsorship deals to fund the club, and any central funds from the EFL or Premier League, who provide solidarity funds, are withheld if there are any football creditors. The likelihood is that the club will not be generating anywhere near enough money to meet the club’s ongoing liabilities. So the administrators will be looking at what they can do, for example, in terms of selling players but some may have clauses in their contracts that say they can walk away for nothing. The administrators will also look at the manager’s wages and his assistants....

St. Mirren has been crowned as financially the best-run club in 2020 among the eight finalists, ahead of Manchester United and Burnley in second and third places, respectively. St. Mirren were crowned on Thursday at the Football Business Awards 2021 as the best-performing club in financial terms.  The club finished 9th in the Scottish top tier in 2019/20, after the season was called off due to uncertainties regarding the pandemic. However, the Scottish club also managed their finances highly satisfactorily in 2019/20, as they improved their EBITDA-margin from a negative 12.3 percent to a positive 2.7 per cent. Bearing in mind that the overall average for all UK clubs included in the analysis was a negative 28 per cent, the turnaround for The Buddies was very pleasing. Although the club’s return on assets before tax was just 1.2 percent, they did significantly outperform the average of clubs included, which was a negative 21 per cent.  On top of that, the club doubled...

Derby County owner Mel Morris says his decision to part company with the club was a necessary trigger to force a sale of the club. The decision to walk away, which resulted in Derby being forced into administration, came after spending two and a half years trying to find a buyer. “When the two deals on the table fell through, I just continued to fund it. But with that level of total debts, shareholder loans, everything, eventually, you have to draw a line in the sand.” Morris told offthepitch.com buyers circling the club wouldn’t do a deal until a “critical event” unleashed interest. He confirmed tax liabilities of at least £27 million and that former manager Philip Cocu was owed £500,000. He stated that ownership of stadium won’t stand in way of a deal with a variety of options possible.

Why did Manchester United back the European Super League - and pull out when they saw the reputation of their brand being threatened? United’s owners, the Glazer family, are footing a UEFA levy that will ultimately cost between €5 million and €10 million (£4.3 million-£8.6 million) as well as a one-sixth share of the £22 million fine imposed by England’s governing bodies after United joined five other Premier League clubs in signing up for the breakaway competition. But that commitment of at least £8 million still falls short of the £10.7 million in dividends United paid to shareholders on July 30 — the second such payment of the year. United are the only Premier League club to pay semi-annual dividends.    The Glazers receive about £8m each time. Since 2006, United have spent more than £1 billion on financing the Glazers’ leveraged takeover the previous year, with dividends and interest payments on the debt costing roughly £44 million each year. When discussing broadcasti...

Reading face the prospect of a nine point deduction for breaking financial rules, having accumulated losses of £138m:  https://www.mirror.co.uk/sport/football/news/reading-derby-points-deduction-efl-25037594 This once again emphasises how easy it is easy for a Championship clubs finances to get out of control as they pursue the Premier League dream.   There needs to be a mechanism for earlier intervention. Kieran Maguire of the PriceofFootball comments: 'Looking at Reading's accounts for last three years this probably should not come as a huge surprise. Total lack of attempt to control the business side of the club and spending out of control, especially since parachute payments ended.'

No football fan can be happy with what has happened at Derby County, but it is a blatant case of financial mismanagement.   Championship clubs too often overspend in the hope of trying to reach the Premier League, but Derby have also tried to bend the rules. The Athletic  has been speaking to people with knowledge of the club’s financial position and they have not been very upbeat. “It’s 50/50 they get liquidated,” said one source, while another said: “I can’t see how they get out of this — they’re ****ed.”  The picture they painted in such depressing tones was one of a club that is worth less than nothing. Much less.  They said any prospective buyer would need to shell out more than £50 million simply clearing Derby’s debts before spending a penny on rebuilding the club and putting a competitive team on the park. This is because the club has football creditors, who must be paid up to £10 million in full, as well as secured debt of £20 million owed to an A...

The authoritative Swiss Ramble reviews the latest annual accounts of Manchester United, once again deploying his in depth knowledge and forensic analytical skills. The pre-tax loss was up from £21m to £24m, as revenue dropped £15m (3%) from £509m to £494m and profit on player sales fell £11m to £7m, while expenses rose £16m (3%). Operational decline offset by interest swinging £39m from £26m payable to £13m recoverable thanks to forex gains. Net loss after tax rose £69m from 23m to £92m, due to April 2023 increase in corporation tax from 19% to 25%, which meant that United wrote down the value of a US deferred tax asset, as it is no longer expected to give rise to a future economic benefit. This is a non-cash impact. The main reason that revenue only fell 3% was £115m (82%) increase in broadcasting to £255m, mainly due to return to Champions League, which compensated for COVID driven reductions in match day, down £83m (92%) to £7m, and commercial, down £47m (17%) to £232m. As a s...

Celtic have published an abbreviated set of financial data for 2020/21, reports Kieran Maguire. Income held up well due to record sales of merchandise and somehow generating £20m from the stadium operations during lockdown. Day to day losses just under £25m but reduced by £5m ‘other income’ and player sales. Celtic balance sheet strong with £19m cash in bank mainly from season ticket sales receipts for 2021/22. The full statements is here, referring to the club's 'robust business model':  https://www.celticfc.com/news/2021/september/Celtic-plc-annual-results-2021/

Wycombe Wanderers owner Rob Couhig is monitoring the fall-out from Derby County’s decision to enter administration and has told  The Athletic  his side lost £10 million through their relegation to League One last season — when Derby stayed up on the final day by a point. Couhig says there could be as much as another £10 million of “residual loss”. He and Wycombe are assessing their next move. “There is no doubt in my mind, and everybody knows, that Derby should have been penalised last season, that we should be playing in the Championship now and that this has cost the club upwards of £10 million that we can immediately show,” Couhig says. “There is then a residual loss that’s probably another £10 million. “It’s a lot to digest, but for a club like Wycombe that had never played in the Championship in 133 years of existence, to be there and stay for a second year would be transformative. It changes the whole basis of things, with sponsors and the like.” The EFL...

Juventus made losses of nearly €210m in 2020/21.  The club remains confident of the legitimacy of the European Super League project:  https://www.juvefc.com/juventus-announce-major-finances-losses-in-2020-21/

Manchester United's losses have widened after the pandemic kept fans out of stadiums and prevented the team from taking part in lucrative pre-season tours. In the full year to 30th June, revenues were down by 3 per cent to £491m.  The club blamed the loss of ticket income, the closure of its megastore hitting merchandise sales and a fall in sponsorship income because the team was unable to go on a summer tour of exhibition matches. There was a net loss of £93.2m, up from £23.2m, although this was blamed mainly on accounting charges related to an increase in the UK corporate tax rate.  The club said that its operating loss of £36.8m, compared with a profit of £5.2m the year before, was a better reflection of the impact of the pandemic on the business. However, it appears to have weathered the crisis better than many other top European clubs, with an increasing in broadcasting income partly because of the team's return to the Champions League.  Net debt fell by 11 per cent ...

Derby County are to enter administration and face a 12 point deduction as a consequence:  https://www.bbc.co.uk/sport/football/58604851 The club blames the effects of Covid-19, but that has affected all clubs and as the local BBC correspondent suggests there has been financial mismanagement at the club,

Ronaldo certainly showed he can deliver on the pitch on Saturday, but what about the revenue side of the equation?  He will cost at least £50m or five per cent of United's projected revenues over the next two years.  The money could not be recouped through shirt sales or sponsorship deals. The club is hoping for more intangible returns.   These include a belief that Ronaldo will raise standards in the team, excite fans who protested against the club's involvement in the European Super League, and draw in a new generation of supporters.  With 340 million Instagram followers, it is believed he will attract younger and international audiences. At Juventus commercial income rose from €143m to €175m during his three years at the club, but the Serie A side were starting from a lower base.  The marginal benefit for United is not so high.  United's commercial revenue was £279m in 2020.  It has already secured its biggest endorsement deals, such as a five ...

With Cristiano Ronaldo in line to play his first game back at Old Trafford this weekend, Nielsen Sports has predicted that the club will be the most watched in the world this season.   Analysis shared with Off The Pitch suggests that Ronaldo could add more than 60 million viewers of the club’s matches in the Premier League this season. After Ronaldo moved to Juventus in 2018 the Turin club experienced a 15 per cent increase in cumulative TV viewership globally during his debut season there.  Spencer Nolan, managing director for the UK and Ireland at Nielsen Sports, says the signing of Ronaldo provides a major opportunity to drive a significant increase in United’s commercial revenues, which have flatlined over recent years. “The commercial impact of Manchester United re-signing Ronaldo will generate significant exposure for the clubs’ current sponsors, but it will also help the club secure sponsorship deals in the years ahead,” he says.

Barcelona's president believes that the European Super League is still a viable project, but he may be whistling in the dark.   Without the Premier League clubs, it will not get off the ground:  https://www.football-espana.net/2021/09/07/joan-laporta-super-league-premier

The Swiss Ramble has been used his analytical skills to examine the way in which Liverpool spend money and he has come up with some interesting findings. Many Liverpool fans are unhappy that their club has not bought more players in this summer’s transfer window. This thread looks at where the money has gone, reviews the business model under FSG and explains why the approach is less restrained at other clubs. Low spending is a calculated risk, as Liverpool might be overtaken by others in the race for the Champions League (and its lucrative rewards), especially as the team is growing old together, but as Klopp said, “we were quite successful given the limits in the last two years. This summer he club only spent £36m on RB Leipzig defender Ibrahim Konaté, by far the lowest of the Big Six. Four clubs splashed out more than £100m: Arsenal £149m, Manchester United £126m, Manchester City £115m and Chelsea £108m. On a net basis, the club’s £11m was second smallest, as Chelsea made £110m s...

Premier League clubs spent £1.1 billion in the summer transfer window, the lowest amount since 2015, but still above expectations.   Overall, spending is robust.   Deloitte Sports Business analyse the figures:  https://www.bt.com/sport/news/2021/september/premier-league-spending-still-robust-despite-falling-again-deloitte