The Political Economy of Football V2

In the space of 10 days in early January 2016, the Chinese Super League (CSL) transfer record was broken three times. First, Jiangsu Suning paid Chelsea £24 million to sign Ramires. Then Guangzhou Evergrande paid Atletico Madrid £25 million for Jackson Martinez. Unwilling to be outdone, Jiangsu Suning went even higher, gazumping Liverpool to lure Brazilian winger Alex Teixeira from Shakhtar Donetsk in a deal worth £38.5 million. And that was just the transfer fees. The wages were on another level. Ramires saw his salary double to more than £10 million a year. Likewise Teixeira, who was not even a full international. All of this had been encouraged by President Xi Jinping, who had declared an ambition to turn China into a “football powerhouse”. Huge corporations such as Suning (retail) and Evergrande (real estate) had been urged to bankroll the CSL. In return, they would gain greater global exposure for their brands and, significantly, presidential approval. But...

The authoritative Swiss Ramble analyses the increasing importance of overseas television rights for the Premier League. Total Premier League TV rights are forecast to rise by 11% from £9 bln to £10 bn for the new 3-year deal starting in 2022. UK domestic rights have been held at the same level of £5 bn (Sky, BT and Amazon), but overseas rights estimated to increase by 25% from £4 bn to £5 bn.   As recently as 2007-10, these were worth only £200m a year. In fact, this forecast means that the new deal would see the overseas rights reach the same amount as domestic rights, thus accounting for 50% of the total payment, compared to 37% in the 2016-19 cycle (or 25% in 2007-10). NBC have signed a 6-year deal worth $2.7 bn (£2.0 bn) covering 2022-28, more than doubling the previous agreement, which was worth $1.1 bn (£0.8 bn). The new deal is worth £333m a year, compared to £150m for the last 3 years of the old deal (£116m in the first 3 years). This compares with La Liga £120m, Seri...

The authoritative Swiss Ramble reviews the latest accounts of Real Madrid. Profit before tax fell very slightly from €1.9m to €1.7m (€0.9m after tax), despite revenue dropping €62m (9%) from €715m to €653m, as this was offset by a similar sized decrease in operating expenses. Profit on player sales was up €5m to €106m. The pre-tax €2m profit was an exceptional performance in the circumstances, as other Spanish clubs have posted large losses in 2020/21, e.g. Sevilla €39m, Real Betis €37m and Athletic €25m. All dwarfed by Barcelona’s massive €555m loss (€481m after tax). The €62m revenue fall was due to COVID €116m (92%) reduction in membership fees & stadium to €10m, while other fell €18m to €5m. However, broadcasting increased €59m (40%) to €208m, competitions rose €11m (10%) to €116m and marketing was up €2m (1%) to €314m. Barcelona’s revenue loss is much higher, so Real Madrid have once again overtaken their Catalan rivals (€653m vs. €591m), which means a €146m swing in the...

The financial imperatives behind firing Solskjaer are clear. The Glazer family hope to return to pre-pandemic annual revenues of more than £600m this season, making it one of the richest football clubs in the world. Much of this income is remarkably predictable. Broadcasting rights are sold centrally by the English   Premier League and Uefa ,  European football’s governing body. United’s Old Trafford stadium is sold out every match, maximising ticket and hospitality income. Sponsorship remains strong. The one area of financial volatility surrounds whether the team qualifies for the Champions League, Europe’s most prestigious club contest in which €2bn is shared among participating clubs. A dismal run of five defeats in seven Premier League games means the club risks missing out on next season’s competition. United’s strong business was built on enormous on-field success under Ferguson. Over 26 seasons, he led the club to 13 Premier League titles, two Champ...

The tireless Swiss Ramble applies his forensic accounting skills to the latest financial results from Tottenham Hotspur. The pre-tax loss widened from £68m to £80m (£84m after tax), as revenue dropped £32m (8%) from £392m to £360m, though profit on player sales rose £4m to £19m. Partly offset by a £9m (2%) decrease in operating expenses, while net interest payable was cut £6m (15%) to £37m. Of course, all football clubs have been significantly hit by the effects of the pandemic, so the £84m loss after tax is by no means the largest in Europe. In fact, it is much lower than Inter £215m, Juventus £184m, Roma £163m and especially Barcelona £422m. The main reason that revenue only fell 8% was £71m (52%) increase in broadcasting from £136m to £207m, mainly due to deferred revenue from 2019/20, which compensated for COVID driven reductions in match day, down £93m (98%) to £2m, and commercial, down £10m (6%) to £152m. Revenue was significantly impacted by COVID.   The Swiss Ramble h...

Tottenham Hotspur have reported their financial results for 2020/21:  https://www.tottenhamhotspur.com/news/2021/november/financial-results-year-end-30-june-2021/ They made an operational profit of £97m but the loss before tax was £80m (£150m over two years).   Net debt has increased from £605m to £706m, repayable over an extended period of 22 years. UEFA prize money more than halved because of playing in the Europa League rather than the Champions League. The Chairman says in his statement that the club is financially stable and relentlessly ambitious.  

The tireless Swiss Ramble has been spending the weekend analysing the accounts of Olynpique Lyonnais.  Many clubs throughout Europe have become increasingly reliant on player sales as a source of revenue, but these can be volatile.   However, OL have done better than most and appear to have a good strategy.   Another important point to emerge is how far Ligue 1 lags behind the other top five European leagues.  PSG are, of course, an exception to the rule. Due to a combination of COVID and no European competition, the pre-tax loss increased from €36m to €109m, as revenue fell €63m (35%) from €181m to €118m and profit on player sales dropped €38m from €83m to €45m. After four consecutive years of profits, OL have now reported losses two years in a row, amounting to €145m (2019/20 €26m and 2020/21 €109m). The loss after tax is by no means the largest in Europe. In fact, it is much lower than Inter €246m, Juventus €210m, Roma €185m and especially Barcelona €4...

The Athletic analyses what has happened to Reading following their points deduction. The Dai family have little to show for their enormous investment in the club. Total debts owed to Reading’s owners stood at £87 million by the end of June 2020 and a team now led by former Atletico Madrid midfielder Veljko Paunovic — there have been three other full-time managers since Stam was fired in March 2018 — continue to see the Premier League as a distant dream. The Dai family continue to offer their vast financial support but Reading’s balance sheets have been ruinous. Wages have consistently represented twice the club’s total revenue and pre-tax losses for the last three accounting years have been close to £100 million. And all that without tangible returns. This had not been the Reading way. A club transformed by Sir John Madejski across two decades of ownership used to have ambition underpinned by pragmatism. They would strive to be clever and make every investment count. And now? “It...

The authoritative Swiss Ramble reviews the Q1 results of Manchester United from his Zurich lair. The pre-tax loss improved from £27m to £20m (£16m after tax), as revenue increased £17m (16%) from £109m to £126m and player sales swung from £13m loss to £17m profit, though expenses up £31m (25%). Operational improvement offset by interest payable rising £10m (forex losses). The main driver of the £17m revenue increase was match day, which rose £17m from £2m to £19m, though commercial was also up £4m (8%) from £60m to £64m. In contrast, broadcasting fell £5m (9%) from £48m to £43m. Interest went from zero in Q1 2021 to £10m net payable in Q1 2022, largely due to an unfavourable swing in unrealised foreign exchange movements on the club’s debt, which is denominated in USD, compared to a favourable swing prior year. This is the second year in a row that United have reported a pre-tax loss in Q1, even though it was lower in 2021/22. It is worth noting that last season’s £27m loss in Q1...

 The return of fans to stadiums can be seen in Manchester United's first accounts of the season, with revenues for the three months to September 30 rising to £126.5 million, up from £109 million at the same stage of last year. Match-day income at Old Trafford accounted for £18.8 million, a huge increase from the £1.7 million in 2020, and a sign that normality is coming back to football finances. The jump meant that United's loss for the quarter was down from £27.1 million to £10.2 million and expectations are the club will turn a profit again as the games continue at maximum capacity. United's commercial revenue was up by eight per cent despite a slight dip in sponsorship earnings because the Megastore was reopened after laying dormant for more than a year. The interest generated by Cristiano Ronaldo's signing only accounts for one month of the figures released. Broadcast revenue was down nine per cent because of fewer matches being shown on television, after th...

The respected Swiss Ramble reviews Championship finances and says that it is not a pretty picture. Championship loss before tax widened in 2020 from £238m to £449m, as the initial effect of the pandemic began to bite. However, it is clear that this division bleeds money in any case with total losses of £2.5 bn in the last decade, including £1.4 bn in last 5 years alone. At an operating level, i.e. including player amortisation and depreciation, but excluding player sales and interest, the situation is even worse. Championship operating losses have been steadily widening, increasing from £203m in 2011 to £689m in 2020. This emphasises the importance of profit from player sales to mitigate operating losses, but this has seemingly reached a plateau in the Championship. Having nearly doubled in 2017 from £123m to £222m, profit from player trading has only grown to £260m in the 3 years since. Championship revenue shot up from £547m to £718m in 2017 (new TV deals), but has been relativ...

I discuss some of the main findings from my recent book on Political Football in an American podcast which asked me some good questions:  http://www.eplpod.com/?p=3409

Former Watford owner Lawrence Bassini is interested in buying Birmingham City for £27m:  https://www.mirror.co.uk/sport/football/news/laurence-bassini-birmingham-takeover-watford-25438757 Described as 'controversial' in the article, football finance guru Kieran Maguire alleges that 'He's not controversial, he's a deluded danger man.' The owners have never said they would sell and given that they have debts of £100m it is difficult to see how £27m would be sufficient compensation.

With Steven Gerrard moving as manager from Rangers to Aston Villa for a reported £4.5m in compensation for the Glasgow club, Kieran Maguire of the PriceofFootball makes a few financial comparisons between the two clubs for 2019/20. Rangers make about three times the matchday income as Villa (£35.7m versus £11.1m). The Villa wage bill is £65 million higher than that of Rangers (£108.8m versus £31.1m). Villa spent £156m on players in 2019/20, compared to £11m at Rangers.   [One might add that the failure of some of these signings was a factor in Dean Smith's downfall.   Wealthy owners are prepared to splash the cash, but expect a payback].

Czech tycoon Daniel Kretinsky has acquired a 27 per cent stake in West Ham United.  He will have a seat on the board.   It shows that there is an enduring appetite among overseas investors for Premier League clubs. He is paying roughly £160m for the stake, valuing the club at roughly £600m or £700m including debt.  West Ham said that the deal would allow it to reduce its long-term debt. Kretinsky is co-owner of Sparta Prague.   Starting his career in energy he has diversified into other sectors and has stakes in J Sainsbury and Royal Mail.   His fortune is estimated at £2.9 billion. He could eventually acquire a majority stake in the club leading to profits of £300m for the current owners.

The pension fund behind the recent investment in Ipswich Town insists it is there for the long haul and that promotion to the Championship would give a 'nice return':  https://www.eadt.co.uk/sport/ipswich-town/ed-schwartz-on-itfc-funding-8473468 The co-owner emphasised that it was not a toy or ego investment.   Football clubs available to invest in were scarce.

The authoritative Swiss Ramble reviews the latest accounts of Celtic. The club swung a from £0.1m pre-tax profit to £11.5m loss (£12.6m after tax), as revenue fell £9m (13%) from £70m to £61m and profit on player sales fell £15m from £24m to £9m, partly offset by £5m other income (business interruption coverage) and £9m (9%) reduction in expenses. The pre-tax loss in 2020/21 is the first since 2014/15, breaking a sequence of five profitable years in a row. In fact, they have generated profits in seven of the last nine seasons, amounting to a net £42m gain over that period, despite last year’s £11m deficit. Celtic mitigated revenue losses by “tight cost control” with lower wages, down £4.5m (8%) from (restated) £56.2m to £51.7m; player amortisation, down £0.4m to £11.8m; player impairment, down £2.1m; and other expenses, down £1.7m (8%). Includes £0.6m for Neil Lennon departure. Clearly, the pandemic has had a major impact on the financials at all clubs with the cumulative revenue...

Can Tracey Crouch deliver in the impending fan-led review of football.   One unanswered question relates to the Premier League's TV money:  https://thecharltondossier.com/can-tracey-crouch-save-football-from-the-wronguns/

Financially troubled ADO Den Haag has been taken over by an American company, Globalon Football Holdings (GFH):  https://www.dutchnews.nl/news/2021/11/football-club-ado-den-haag-taken-over-by-american-company/ GFH already owns a Belgian club and has shares in Crystal Palace and several American sides.

When Glazer bought his first wedge of United shares in March 2003, spending about £9 million on a 2.9 per cent stake, the club was on its way to an eighth Premier League title in 11 seasons and had cash in the bank without debt. By the time he completed his hostile takeover, just over two years later, the club was £660 million in debt, with half of that borrowing placed on the club itself and the other half on his takeover vehicle, Red Football. The split was pretty academic, though, as Manchester United were paying the interest and that bill was enormous. In 2006, the club’s interest payments totalled £113 million, against annual revenue of £168 million. Over the next four years, United paid an average of £95 million a year in interest, which meant more than a third of the club’s total earnings were being taken to service Malcolm Glazer had needed some eye-wateringly expensive loans to get over the hump in 2005, and these payment-in-kind (PIK) loans ended up in the hand...

With Spurs sacking Nuno today, are they getting a hard press, asks football finance guru Kieran Maguire? He offers a few stats compared to the rest of the 'Big Six'. Spurs income since 2010 is £700m- £2.2bn lower than the other clubs. Spurs wages bill since 2010 was over a billion pounds less than that of Manchester United, Manchester City and Chelsea.   Spurs' net transfer spend since 2010 is between a quarter and a half of the other Big Six clubs. On the plus side and I'm sure some at Spurs are very proud of this, says Maguire, the club is the most profitable of all the Big Six since 2010.

The authoritative Swiss Ramble looks south to review the latest accounts of ASRoma.  The2020/21 accounts cover a COVID-impacted season when they finished 7th in Serie A and reached the semi-finals of the Europa League. First season under the ownership of The Friedkin Group, who purchased the club from fellow American James Pallotta. The pre-tax loss reduced by €20m from €204m to €184m, but still club’s second highest ever. Revenue rose €48m (32%) from €149m to €197m, but profit on player sales fell €18m to just €256k and operating expenses increased by €11m (3%). Loss after tax was €185m. The €56m (22%) revenue fall in the last 3 years from €253m to €197m is obviously partly due to the impact of the pandemic, but also highlights the importance of qualifying for the Champions League, which was worth €98m in 2018 (TV €84m plus match day €15m).    It is imperative that ASRoma do well in Europe to boost broadcasting income, as TV rights in Serie A are relatively low. Eu...

Plymouth Argyle chairman Simon Hallett is profiled in this week's Football League Paper.  He's put £15m into the Pilgrims but emphasises that he is not the traditional club chairman who phones up the manager to complain about his selections.   'I am very much hands off,' he says. The 66-year old lives 3,500 miles away but gets over to his Devon home three or four months a year, his visits tied into watching Argyle.   Plymouth is his emotional home where his family moved in 1966 when he got a job as a mechanical engineer.   He went to school in Plymouth before Oxford University.  His fortune comes from data analytics as chief investment officer for £60bn American company Harding Loevner. He joined Plymouth as a director in 2016 and now owns 97 per cent of the table topping club.  He emphasises the importance of data analytics in play recruitment: 'I'm from an investment background and understand the importance of data in making decisions....

 Hull City have released a statement confirming due diligence is taking place between the Allam family and a prospective buyer as the takeover of the club moves a significant step closer. A deal to buy Hull City has been agreed in principle between controversial owner Assem Allam and Turkish media mogul Acun Ilicali.   Allam's family have owned the club since 2010. The Turkish businessman has agreed to pay a fee believed to be £30m for the club, with a further payment taking the total to £50m should the Tigers win promotion to the Premier League within a certain timeframe. The prospective new owner is said to want to appoint a Turkish coach to replace Grant McCann according to the EFL show. Ilicali is a former journalist who has built up a successful TV empire in his native Turkey. He owns the popular TV8 channel and the streaming service Exxen, which broadcasts Champions League and Europa League coverage. The 52-year-old came close to buying Dutch club Fortuna Sittar...