The Political Economy of Football V2

The authoritative Swiss Ramble reviews Norwich’s financial results for 2020/21, when they increased pre-tax profit from £2.1m to £21.5m, despite the impact of relegation to the Championship and COVID reducing revenue by £62m to £57m, thanks to £60m profit from player sakes. it was a notable achievement for to post a £21.5m pre-tax profit. In fact, this was better than any other club in the Championship in 2019/20, when just three clubs were profitable (all of which were only around £3m).    It used to be the case that they were profitable in the Premier League, but lost money following relegation, but they were also profitable twice in last 4 years they were in the Championship. Main driver of the revenue decrease was broadcasting, down £41m (46%) from £90m to £49m, as TV deal much more lucrative in Premier League, while gate receipts dropped from £7.6m to just £0.1m as games played behind closed doors and commercial fell £13m (62%) from £21m to £8m.    Despite the significant decr

Czech billionaire Daniel Kretinsky is considering the purchase of a minority stake in West Ham United, The Athletic understands. The 46-year-old, who is known as the “Czech Sphinx” because of his inscrutable investment style, is expected to buy 27 per cent of the Premier League club initially but may eventually take a majority stake at a later date. This deal, which has been months in the making, would therefore spell the beginning of the end of West Ham’s so-called “GSB” era, a reference to their majority owners and co-chairmen David Gold and David Sullivan and vice-chair Karren Brady, who have controlled the club since 2010. The staged nature of the proposed deal is understood to be linked to a clause in the club’s agreement with their ultimate landlords at the London Stadium, the London Legacy Development Corporation (LLDC), which says Gold and Sullivan must pay a percentage of any profit they make on a sale of the club to London’s taxpayers. This would be worked out on a s

The Californian-based businessman and Shakers supporter who is a prospective investor in Bury is contemplating a German model in which fans would have 51 per cent of the votes.   However, a condition of proceeding is resolving tensions between AFC Bury and Bury FC supporters:  https://www.burytimes.co.uk/news/19674929.new-benefactor-shakers-wants-reconcile-rival-bury-clubs/

Birmingham Sports Holdings, owners to Birmingham City Football Club, have published their accounts in Hong Kong. Income was up 29% to £15.4m, wages up 4% to £34.5m. Operating loss was about same at £33.5m.  Player sale profits up 140% at £26m.   Across the board, player sales are becoming more important to clubs.

The influx of foreign club owners in Italy is a new phenomenon, particularly compared with the Premier League.  Of the 20 Serie A clubs, eight now have non-Italian owners.  Six of these were acquired by American individuals or financial groups in the last three years alone Among the recent deals were hedge fund Elliott Management's takeover of AC Milan in 2018; billionaire Dan Friedkin's €591m acquisition of AS Roma and the 777 Partners sports investment fund purchase of Genoa last year. This reflections an imbalance of supply and demand with more wealthy individuals seeking to buy top clubs than are available across Europe. Infrastructure is a big problem.  As a legacy of the 1990 World Cup, many teams have to play in crumbling, government-owned stadiums.  Grounds are rarely full, partly because 'ultras' put off families from attending.   New owners seeking rebuilds of stadiums in cities such as Milan and Rome have been delayed by local political wrangling. Covid-19 ha

Norwich City made a £15 million profit after tax in their latest set of annual accounts, released on Wednesday morning. They cover the 2020-21 season in which Norwich recovered from Premier League relegation to take the EFL Championship title with a club-record tally of 97 points, a campaign that was played almost entirely behind closed doors. The club now believe COVID-19 has cost them about £30 million in total, while their posted profit relied on record player sales including Emi Buendia’s £38 million move to Aston Villa. Without income from player sales last season, which also included instalments from Everton and Newcastle from the departures of Ben Godfrey and Jamal Lewis, Norwich would have posted a £26.6 million operating loss. As for Norwich’s subsequent investment in the squad following promotion, only Milot Rashica’s £9.4 million transfer from Werder Bremen is included in the latest set of accounts. Another £52.7 million has been committed to further arrivals, includin

Unlike some other clubs, Plymouth are debt free, with over £6 million in the bank, and have a sustainable business model. Great to hear they are planning a fan forum to explain the numbers too. A model approach that others should follow states Kieran Maguire of the PriceofFootball. Revenue was down 19% in 2020/21, mainly due to the season taking place behind closed doors. The main hit was in terms of matchday (down 68%) but broadcast was up and academy/merchandise/commercial was solid. Main costs are wages, Argyle's hardly changed during the year although went up from 69% to 85% of income due to Covid. Plymouth's underlying loss increased to £3.7m, but the club was smart enough to have business interruption insurance which paid out £2.5m due to Covid, as well as receiving a £1.1m grant from the Premier League. Furlough income was £310k. Plymouth player trading was modest, with £210k spent on recruitment, decent by division standards, and sales of £78k.

Rochdale fans have fought back against the threat of a hostile takeover and safeguarded the club. Since early August, Rochdale have been embroiled in a fight for their future after several major shareholders including Andrew Kilpatrick, the son of former chairman David, and former chief executive David Bottomley sold up to new investors Andy Curran and Darrell Rose. New investment is rarely treated with caution in football but alarm bells started ringing when Curran and Rose began paying well over the odds for shares — in some cases as much as £10 for shares only valued at £2 each — with little explanation. The pair had a limited digital footprint and no obvious connection to Rochdale — neither the town 10 miles north of Manchester or its football club — to explain their desire to invest so heavily in a team that is self-sustainable and has spent the bulk of its recent history in League Two. They quietly amassed enough to constitute ownership of roughly 42.3 per cent of the club be

Real Madrid, Barcelona and Juventus, the three clubs behind the Super League, are taking legal action against Fifa and Uefa.   In a case at the European Court of Justice which could be as significant as the Bosman ruling, the clubs will accuse the game's governing bodies of breaking EU competition rules. The court will be asked to rule whether Uefa can continue to act as a regulator that is able to place sanctions on clubs, while also acting as a participant, profiting from tournaments such as the Champions League. The Super League accuses Uefa and Fifa of abusing their dominant position.  They claim that the governing bodies defend a monopolistic position in European football that goes against competition law. 16 European governments plan to intervene in the court hearing, most of them to defend 'the European model of sport'.  The European Commission will also comment on the compliance of Uefa and Fifa rules with EU competition and internal market rules. Uefa said that the

Following Newcastle United’s takeover by a consortium led by Saudi Arabia's Public Investment Fund (80% stake), fans are eagerly anticipating a spending spree, due to the enormous wealth of the new owners, but how much can the club really spend, especially with FFP rules?   The authoritative Swiss Ramble provides some answers from his Zurich fastness. The club’s spending ability will be limited by the Premier League Profitability and Sustainability rules. These allow a £5m loss a year, which can be boosted by £30m equity injection, giving allowable losses of £35m a year. This works out to £105m over the 3-year monitoring period. The Magpies made £38m pre-tax profit over 3 years up to 2020 (latest published accounts), but they can make a £30m adjustment for “good” expenditure (depreciation, women’s football, youth development & community). Adding this £68m to £105m allowable loss gives £173m possible spend. However, clubs can also adjust for COVID impact, which was £27m fo

After last night's 5-0 Liverpool win at Old Trafford, Kieran Maguire of the PriceofFootball compares the finances of the two clubs. In the past decade Manchester United have earned over £1.4 billion in revenue more than Liverpool, spent £310 million more on wages and £600 million more net on transfers. The biggest expense for clubs is wages, and Manchester United have spent £310,000,000 more than Liverpool in the period 2011-20. Manchester United have made £346m in profits in the decade (although a lot of that has gone in dividends to owners) compared to £62m for Liverpool. Relatively small return perhaps explains why both sets of owners so keen on locked in profits from the Super League. Since the Glazers acquired the club in 2005 Manchester United have paid £122 million in director pay, £824 million in interest fees on loans, £400 million in dividends to shareholders and £17 million in auditor fees

Cardiff City are facing 'multi-dimensional' challenges and are seeking additional finances, although it is not clear where they might come from or what form they might take.   The pandemic has hit the club hard because of its reliance on match day income and it has also hit Malaysia hard:  https://www.bbc.co.uk/sport/football/59022910

  Championship club Queens Park Rangers have reached the maximum amount (£6.8m( that could be raised through its QPR Bond launched at the end of September. The bond was available through the sports advisory and capital solutions firm Tifosy Capital & Advisory. Senior figures at Tifosy say it is seeing increased interest in these types of schemes as clubs look for alternative financing tools and aim to strengthen the connection between the club, its supporters and other retail investors. “We're in dialogue now with seven or eight clubs across England and Italy. I think there's a momentum building around this kind of financing.”

It is being suggested that a 'tweaked' version of the European Super League is being considered.   It would have no permanent members, one of the features most objected to.   All countries would be able to qualify and there would be a two division structure.   Whether this would overcome fans' objections is doubtful:  https://www.spurs-web.com/spurs-news/report-super-league-project-still-alive-but-with-major-tweaks/ Kieran Maguire of the PriceofFootball has written: 'In 2018-19, the Super League clubs made a collective pre-tax loss of just under £45 million. This, especially for some of the American owners used to their sporting franchises being very lucrative businesses, is unacceptably low. Given that profit is income minus costs, COVID-19-related reductions in income and static costs meant that these losses ballooned to more than £1.1 billion in the most recent accounts. These losses are likely to have grown further once the full set of figures for 2020-21 are known.

NFL veteran Malcolm Jenkins has become a minority investor in Burnley, saying that the club is a perfect fit for him:  https://www.soccerex.com/insight/articles/2021/nfl-star-invests-in-burnley-fc

Financial institutions are keen to get involved in a €7bn pandemic relief fund being set up by Uefa.   The cash will be distributed to clubs that play in competitions such as the Champions League.  The money will be secured against Uefa's broadcasting rights. It is thought that the finance will be inexpensive, possibly with a 2 per cent interest rate.  With rates rising, that would be very attractive.  These are better terms than clubs could secure on their own. The package shows how sports leagues and authorities are turning to financial groups to fund their operations.  The growing financialisation of football has been accelerated by the pandemic. Uefa estimates that European clubs lost around €9bn of revenue during the pandemic.

The authoritative Swiss Ramble reviews Barcelona's latest accounts and it's a sorry tale. The pre-tax loss widened from €133m to a shocking €555m (€481m after tax). Revenue dropped €138m (19%) from €729m to €591m and profit on player sales fell €64m to just €4m, partly offset by operating expenses down €66m, though net interest payable rose €22m. President Joan Laporta blamed this on the previous management, who “delivered the worst accounts in Barca history”. This resulted in €161m player impairment and €110m other impairment and provisions (law suits, tax cases) following the Due Diligence report. Before the 2020 loss, Barca had reported profits 8 years in a row, amounting to around a quarter of a billion pre-tax over this period. However, they have now posted massive €689m losses in last 2 years. Club has budgeted a return to profitability (€4m) in 2021/22. The €555m pre-tax loss is by far the highest in Spain, though worth noting that next largest losses were made by

The Premier League is setting up a working group on related party contracts, which will be populated by representatives from clubs who put themselves forward, to create long-lasting measures. The expectation is that they will report back in three weeks to discuss the solution they have come up with. There are relatively few clubs in the Premier League that rely on major related-party contracts, which is why Newcastle’s submitted a letter claiming that rules forbidding or restricting deals of that nature would be discriminatory. Newcastle feel that new regulations are specifically targeting a very small group of clubs and owners. Manchester City have been accused of earning heavily from related-party deals in the past. Reflecting on their abstention, one director told  The Athletic : “It’s not that City will be massively affected immediately. They just don’t like the direction of travel.” For now, the 18 clubs voting in favour has imposed a three-week moratorium on related-party s

The authoritative Swiss Ramble reviews Premier League finances from his Zurich fastness.   Loss before tax widened in 2020 from £155m to £992m, as the initial effect of the pandemic began to bite. It is true that the division was already loss-making in 2019, but it had reported profits in four of the preceding five years, amounting to £1.3 bn in this period. Most clubs lose money.   This emphasises the importance of profit from player sales to profitability. This rose 25% from £434m to £542m in 2020, though this was much lower than the £836m peak in 2018. This will be an issue in 2021, as the transfer market has been less active during the pandemic. Revenue had been on a steady upwards trend, more than doubling from £2.3 bn in 2011 to £5.2 bn in 2019, before falling £648m (13%) in 2020 to £4.5 bn. The effect of new 3-year broadcasting deals can be clearly seen, as they commenced in 2014 and 2017. Broadcasting revenue has been driving growth, nearly tripling from £1.2 bln in 2011

Premier League clubs have voted through a measure to prevent Newcastle United striking lucrative new sponsorship deals.   However, Newcastle argue that it anti-competitive and may therefore be illegal and they could be right (Manchester City abstained on legal advice):  https://www.theguardian.com/football/2021/oct/18/premier-league-clubs-vote-to-block-newcastle-sponsorship-deals-at-emergency-meeting Given that other clubs have not been short of such deals, it does look like a case of sour groups.

The late Trevor Hemmings was a generous and low profile benefactor to Preston North End and the future direction of the historic club must now be somewhat uncertain:  https://www.deepdaledigest.com/analysis/trevor-hemmings-preston-north-end-tribute/

Despite relegation to Scotland’s third tier the previous season and Covid-19 Partick Thistle managed to break even financially, get promoted and publish full accounts by mid-October. Why can’t other clubs operate such a model asks Kieran Maguire of the PriceofFootball? Revenue  was down 44%, furlough income £500k. Partick balance sheet is strong with over £600k in the bank and cumulative profits of a similar amount. The club have had a historic benefactor but have not frittered the money away. Partick’s wage bill was down 29% to less than £1.5m for everyone at the club. Average Premier League salary for a single player is £2.7m

A detailed analysis of why clubs and Liverpool in particular should not partner with Socios, the fan token platform that claims to be promoting fan engagement:  https://www.thisisanfield.com/2021/10/why-liverpool-fc-should-continue-to-avoid-fan-token-socios-partnership/ In fact it is cryptocurrency trading masquerading as fan involvement, a way of monetising the relationship between the fan and the club.

Derby County's administrators have stated that there has been no approach about the club from Mike Ashley:  https://www.bbc.co.uk/sport/football/58890351 The administrators are appealing against the 12 point deduction for entering administration.

Greenock Morton are now a fan owned football club:  https://www.supporters-direct.scot/greenock-morton-are-now-a-community-owned-football-club/?utm_source=newsletter&utm_medium=email&utm_campaign=scottish_supporters_network_october_2021_newsletter&utm_term=2021-10-12 There are now seven SPFL clubs where the fans have majority ownership of their club, and a further seven have a degree of representation within the governance of their club.

A combination of the Glazer family sell off of 9.5m shares and threat of increased competition in the medium/long term from Newcastle has resulted in the value of Manchester United's shares in NY falling by $607million in a week, 50% more than PIF paid for NUFC, reports Kieran Maguire of the PriceofFootball.

Premier League clubs are calling for an emergency meeting to discuss the Saudi-backed takeover of Newcastle United.  All the other 19 clubs are apparently backing the move, complaining that the brand image of the Premier League could be damaged.  However, they may also be worried about the competitive threat from a well-funded Newcastle:  https://www.reuters.com/lifestyle/sports/premier-league-clubs-demand-emergency-meeting-over-newcastle-takeover-2021-10-09/ I don't think that the Owners' and Directors' Test could be changed retrospectively or, if it was, it would be open to challenge in the courts.

What do the purchasers of Newcastle United get for their money?   The authoritative Swiss Ramble provides some answers from Zurich.  What is clear is that the club has been starved of investment. A 10-year overview up to 2020 shows a profitable club. The only losses came in 2017 (after relegation to the Championship) and 2020 (COVID impacted).   There is a relatively low profit from player sales for a club in the Premier League.    The wage bill has been very low by Premier League standards. Revenue growth has been driven by central broadcasting deals. In contrast, match day has declined, while there has been virtually no commercial growth in the last few years. As a result, broadcasting accounts for 70% of total revenue. Financial debt   is only £108m, almost all owed to Ashley, while transfer debt was cleared. Low transfer spend (just £165m in 10 years). There has been the lowest owner financing in Premier League since 2010. The high £63m cash balance is misleading, as it include

Amanda Staveley has declared that Newcastle United could be as big as Manchester City and Paris Saint-Germain after the £305m Saudi financed takeover was completed. As the sleeping giant awakens, Newcastle fans are already talking about the Champions League.  However, there are a number of challenges to be overcome.   The January transfer window is often a difficult one in which to secure value through transfers.  Any new manager will have to work largely with the existing squad this season. St.James's Park needs modernisation and the speedy removal of 140 signs advertising former owner Mike Ashley's Sports Direct.    The training ground has barely changed in 20 years and lacks standard facilities like a swimming pool or hydro facility.  It would be better to develop the nearby Academy site. Commercial revenue has not risen significantly since Ashley took over while that of Manchester City has increased tenfold.   Investment in people in this area is required.

Newcastle's prospective new owners will have plenty of headroom in terms of financial fair play as they face the challenge of dealing with years of under investment in the playing side. Kieran Maguire of the Priceof Football comments: ' Whilst Mike Ashley is not popular in Newcastle, his legacy for new owners is a profitable club. In the last three years profit has been £38m, factor in FFP adjustments for academy etc. of about £50m and this means the new owners have an allowable FFP loss of £105m plus £88m= £190m+ to play with.'

Two members of the Glazer family are set to receive a windfall of up to £137m after putting 9.5 million Manchester United shares up for sale.  The prospectus makes clear that none of the money will go back into the club. Seven months ago co-chairman Avram Glazer received about £70m after selling five million of his Class A shares. The sales will not weaken the family's control of the club.   They will still have a 69 per cent stake and, more importantly, they own most of the Class B shares which have ten times the voting rights of Class A shares. The club's debts amount to £491m.

The latest club accounts to be subjected to forensic security by the Swiss Ramble from Zurich are those of Borussia Dortmund. The club’s pre-tax loss widened from €47m to €73m, as revenue dropped €35m (9%) from €379m to €345m and profit on player sales fell €25m from €40m to €15m, partly offset by cutting operating expenses by €31m and net interest payable decreasing €2m. The €73m pre-tax loss is the highest in Germany, though it should be emphasised that these accounts are the first published for the 2020/21 season, so the only ones that include a full year of the pandemic. In 2019/20 eight of the 18 clubs lost more than €20m. After nine consecutive years of profits, which generated €227m between 2011 and 2019, BVB have now posted losses in each of the last two years, amounting to €120m. The board expects another net loss in 2021/22, albeit much lower (between €12m and €17m) The €35m revenue fall was due to COVID driven reductions in match operations, down €32m (98%) to €1m, and

FC Barcelona were “technically bankrupt” when Joan Laporta took over as president earlier this year, with chief executive Ferran Reverter saying the club would have been “dissolved” in April if it was a public limited company (PLC). Barcelona confirmed last month that the club made a loss of €481m in the last financial year. Reverter on Wednesday presented the full extent of the club’s financial woes at a news conference at Camp Nou, with debts and future liabilities of €1.35 billion. “When we came in this March, we found a club that was technically bankrupt; if it was a PLC, (the club) would have been dissolved,” Reverter said. “There was no cash flow and we had difficulties paying salaries. Debt and future liabilities amounted to €1.35 billion and there was an urgent need for refinancing.” Reverter said it was imperative for the new administration to restructure the club’s debts, which was the driving factor behind the decision not to offer Lionel Messi a new and improved c

Burnley owners ALK have made an offer to buy out minority supporter shareholders who make up six per cent of the shareholders:  https://www.lancs.live/sport/football/football-news/alk-capital-alan-pace-burnley-21763747?utm_source=twitter.com&utm_medium=social&utm_campaign=sharebar

The Saudi Arabia-financed consortium's bid for Newcastle United is expected to go through in the near future following the reversal of a ban on beIN Sport in the Gulf nation. A takeover saga which has now dragged on for 18 months and seen the club embroiled in legal disputes with the Premier League is now closer to resolution and the group, led by Amanda Staveley, the British businesswoman, could soon bring to an end Mike Ashley's 14-year ownership of Newcastle. The announcement on Wednesday that beIN Sport, the Premier League’s official Middle East broadcaster, will no longer be barred from operating in the kingdom means the takeover is on the cusp of being completed. In July last year, Staveley’s group pulled out of a deal to buy Newcastle after the Premier League failed to give regulatory approval. The issue was the separation – or lack of – between the Saudi state and its Public Investment Fund (PIF), which would have owned an 80 per cent share of the club. Staveley would h

Crystal Palace co-owner Josh Harris explains why he invested £50m into the club with its very special catchment area.   He also discusses other topics such as the Super League:  https://londonnewsonline.co.uk/crystal-palace-co-owner-josh-harris-on-why-he-invested-in-south-london-club-backing-for-patrick-vieira/

In an extensive interview, Danish-American Charlton owner Thomas Sandgaard admits that the club's promotion hopes this season have been dented, but his vision of reaching the top flight remains unchanged.   He has been talking to Brentford, and taking inspiration from them, although their approach is different in many ways out, not least in relation to the Academy:  https://www.standard.co.uk/sport/football/charlton-thomas-sandgaard-exclusive-interview-b959028.html To me it's another case of a successful businessman unable to transfer his mode of operation to football which is a very distinctive and difficult business environment.

Football finance guru Kieran Maguire thinks that Hull City are an attractive takeover prospect despite a reported £8m loss in the last financial year.   He discusses the toxic relationship between fans and the owners:  https://www.hulldailymail.co.uk/sport/football/football-news/hull-city-attractive-takeover-prospect-6015163

The authoritative Swiss Ramble provides a forensic analysis of the latest accounts of Ajax. Ajax swung from €27m pre-tax profit to €12m loss (€8m loss after tax), a €39m decline, largely due to revenue dropping €37m (23%) from €162m to €125m. Profit on player sales rose €2m to €86m, while operating expenses were up €1m. The €12m pre-tax loss is the highest in the Netherlands, though it should be emphasised that these accounts are the first published for the 2020/21 season, so the only ones that include a full year of the pandemic. In 2019/20 no fewer than 11 of the 18 clubs were profitable. The €8m post-tax loss is dwarfed by the massive losses reported by other leading European clubs for the COVID impacted 2020/21 season, including Barcelona €481m, Inter €246m, Juventus €210m. Ajax have a sustainable business model, so their 2021 loss was only the second they have reported since 2010 (the other loss was less than €1m in 2016). In fact, in the last 10 years they have accumulated

Inter Milan have posted record losses for an Italian football club of €245m:  https://www.espn.com/soccer/internazionale/story/4487723/serie-a-champions-inter-milan-post-italian-record-losses-of-245m

Queens Park Rangers have launched a bond in an attempt to partially crowdfund their plans for a new £20 million training ground. QPR this week received planning permission for a new training base at Heston Sports Ground in Hounslow. It is hoped that the state-of-the-art complex will open during the 2022/23 season. A QPR bond will finance part of the project with Tifosy Capital and Advisory. The financing model is similar to that used by Norwich City when they revamped their academy in 2018. The bond will pay five per cent gross interest annually, with an additional three per cent gross in club credit. Investors will meanwhile be paid a one-off 25 per cent bonus if Mark Warburton’s side win promotion to the Premier League during the lifetime of the five-year bond.  There is a minimum subscription of £500 and no upper limit. In a statement, QPR chairman Amit Bhatia said: “As a board, we have a clear vision for QPR: to deliver competitive and entertaining football while ensuring t

La Liga has signed a lucrative eight-year deal with Disney to deliver its games to U.S. fans and perceives this to be a relaunch of the league in North America. La Liga North America aims to gain wider reach through content and net bigger dollars that will go back to its clubs. ESPN boosts its English and Spanish coverage with this deal, focusing more on giving core Hispanic fans what they want from a network. Relevent Sports Group sees the benefit of making dollar investments, moving away from the typical broker model for international leagues trying to enter foreign markets.