The Political Economy of Football V2

Juventus have signed Serbian forward Dusan Vlahovic from Fiorentina for a €70m transfer fee (plus €10m add-ons) and €11.6m agent fees/FIFA solidarity payments. Given the financial challenges outlined by chairman Andrea Agnelli, some fans are wondering how this is possible.   The authoritative Swiss Ramble explains the underlying finances. Juve reported a massive €210m net loss in 2020/21, only “beaten” in Europe by Barcelona €481m and Inter €246m. The club has lost money 4 years in a row, including €300m in the last 2 years alone, and has forecast another “significant loss” for this season. The operating loss, i.e. excluding player sales and interest, has been on a steady downward trend, falling from just €1m in 2015 to €228m last season. In fact, their €234m deficit in 2020 was the highest (worst) in Europe. Clearly, the pandemic has had an adverse impact on Juventus revenue, which has fallen by €45m (9%) from the €494m pre-COVID peak to €450m, though 2021 was boosted b...

If there was ever any doubt that fans would return to English Premier League   matches after lockdown, the numbers prove that fandom survived the pandemic. An average of almost 39,600 people attended the first 204 league games of the season, according to sports marketing agency  Two Circles , putting the League on course to achieve record attendance figures this season, as reported in the FT this week. That’s more than welcome to the division’s 20 clubs, which lost out on £1.3bn of broadcast and match-day revenues across the 2019-20 and 2020-21 seasons, during which fans were largely barred from stadiums because of coronavirus restrictions. Whereas broadcast deals are centrally negotiated by the league itself, clubs are responsible for their own ticket sales and the delicate balance between lucrative “posh” seats in hospitality and the price of standard admission. As noted by football finance guru  Kieran Maguire , clubs have been operating at close...

The original deadline of February 1, imposed by the EFL for Derby’s administrators to source funding until the end of the season, has been extended by a month.  The sense of immediate peril has been eased but concerns persist that the extension to the deadline is just the can being kicked down the road. Derby fans remain no closer to hearing the long-term solution to their club’s uncertain future than they were in the aftermath of the EFL meeting two weeks ago that had promised so much. Quantuma had initial hopes of announcing a preferred bidder before the new year and having them officially in place before the end of the January transfer window. However, several issues have prevented it from finding a new owner. Since Chris Kirchner’s dramatic exit from the fray, the Binnie family from the US, founders of private investment firm Carlisle Capital, is the only bidder to go public with its interest. It submitted a £28 million bid to buy Derby last Friday, the only offer made p...

The authoritative Swiss Ramble reviews the 2020/21 accounts of Hearts. After Ann Budge transferred the shares to the Foundation of Hearts in August 2021, Hearts became the biggest fan owned club in the United Kingdom. It is difficult for any Scottish club to compete financially with Celtic and Rangers, but Hearts seem to be on the right track Hearts 2020/21 accounts, when they increased pre-tax profit from £0.4m to £2.0m, despite the impact of relegation and COVID, which reduced revenue from £12.3m to £7.7m, mainly thanks to £6.4m donations. Hearts reported the largest profit in Scotland with £2.0m, albeit only because of their “very generous” donations of £6.4m. In contrast, both Rangers and Celtic made large losses with £24.2m and £12.6m respectively, followed by Aberdeen £2.3m. The last loss Hearts reported was £0.9m in 2015, when they also won the Scottish Championship. Since promotion, they have been profitable 6 seasons in a row, though the £27m profit in 2014 is a bit misl...

This week Burnley chairman Alan Pace released a statement in which he dismissed concerns about the club’s financial situation and sought to reassure supporters after reports that payments owed to former directors had been delayed.    The concerning reports had arisen during a transfer window in which Burnley have so far failed to sign any new players and sold first-choice striker Chris Wood to relegation rivals Newcastle United for £25 million. There have always been question marks around ALK Capital’s purchase of Burnley and how it was financed. The owners, who took over in December 2020, bought an 84 per cent stake in the club for in excess of £150 million. They are understood to have taken out a significant loan from MSD Holdings and used a large portion of the club’s cash reserves to help finance the move, while sources suggested they invested around £15 million of their own money. Pace’s statement was welcomed by some supporters, as he went public ...

Dragan Solak   is the billionaire who likes to operate outside of the limelight. He’s spent more than two decades building a media empire but it was the acquisition of an English Premier League   football club that changed everything. Through London-based investment vehicle  Sport Republic , Solak bought an 80 per cent stake in  Southampton in a bet that demand for football rights will continue to rise, as online streaming platforms compete against traditional broadcasters to screen sports around the world. “If you look at the inflation of the prices of elite sports rights,” he told the Financial Times, “I thought if it goes crazy like this I’d rather be in the sports business than in the broadcasting business.” The Serbian-born media tycoon says he’s been fielding calls from compilers of rich lists to ascertain his net worth ever since confirmation of the acquisition, which valued the club at around £250m including debt. This is far...

The Football League has given the administrators of Derby County until February 1st to find enough money to fund the club for the remainder of the season, or they could have their “golden share” suspended, which means the EFL could remove them from the Championship.  Given Derby were penalised for breaches of the Profit and Sustainability rules, Middlesbrough owner Steve Gibson believes Derby “systematically cheated” in the 2018-19 season and, as a result, unlawfully prevented his club from competing for Premier League status in the play-offs.   Wycombe Wanderers, feel aggrieved that Derby secured survival last season at the expense of their club. A bidder already has the enormous task of settling debts of £60 million. In previous football administrations, HMRC, who Derby owe £29.3 million, would only be entitled to 25 per cent of what they are owed. However, in response to the country’s effort to rebuild the economy from the pandemic, HMRC regained preferential creditor s...

The authoritative Swiss Ramble reviews the 2020/21 accounts of Brentford whose pre-tax loss slightly improved from £9.1m to £8.5m (£2.4m after tax), as profit from player sales rose £19m to £44m and revenue grew £1.4m (10%) from £13.9m to a club record £15.3m. The £8.5m loss is actually one of the better results in the Championship. Even before the full effects of the pandemic were felt in the 20/21season, many clubs lost more than £20m. In fact, the Bees would have posted a £3.5m profit without the £12m promotion bonus. Their ability to punch above their weight is amply demonstrated by the fact that their £15m revenue was comfortably in the bottom half of the Championship, only around a quarter of clubs benefiting from parachute payments.    Emphasising their outperformance, their £15m revenue in 2020/21 is the lowest for any Championship club that secured promotion in the last 5 years. Six of those promoted clubs enjoyed revenue over £50m, while three more were above £30...

After Rafael Benitez was sacked by Everton, the Spaniard released a statement, claiming that his task had been made harder by the “financial situation”, so from Zurich the authoritative Swiss Ramble takes a quick look at the club’s challenges (in advance of the publication of the 2020/21 accounts). The club have reported losses five times in the last six seasons up to 2019/20 with another hefty deficit anticipated in 2020/21, as almost all games were played behind closed doors. In fact, the losses in the last two seasons (£140m and £112m) are both in the top seven ever recorded in England. Given that the 2020/21 figures are likely to be even worse, Everton have a tough challenge to be compliant with FFP regulations. At an operating level (i.e. excluding player sales & exceptional items), Everton’s   loss has shot up from £12m to £144m in just 3 years. In fairness, few clubs post operating profits, but Everton’s loss is the second highest in the last 2 seasons, only surpas...

Football finance guru Kieran Maguire reviews Brentford's 2020/21 accounts published as club promoted to Premier League.   Key numbers:   Income £15m (up 10%) Wages £41m (up 60% & incliding £12m promotion bonus).   Wages £270 for every £100 of income loss pre player sales of £53m Player sale profits £44m. Pre tax loss £8m, easily within FFP limits. Matchday income down 95% to £0.2m due to Covid, otherwise would have been a record sum due to new splendid stadium. Broadcast income up 47% to £10.7m due to iFollow passes. Expect to add another zero to the total for 2021/22.   Commercial income was up 26% to £4.5m but again expect a big rise in first PL season 2021/22. Brentford wage bill hits £41m, of which £12m was promotion to PL bonuses. Wages were £270 for every £100 of income, which is an EFL record, but ignores Brentford's amazing player development model.   Brentford continue to buy, develop and sell. As a result losses before player sales over £1m...

The Swiss Ramble reports on Manchester City’s 2020/21 accounts when they swung from £125m pre-tax loss to £5m profit, as revenue rose £92m to £570m, due to deferred TV income and CL, while profit from player sales up £29m to £69m. It is a pretty impressive feat for City to post a profit in 2020/21, when all clubs had to contend with a full year of the pandemic. The other Premier League clubs that have published accounts to date have all made big losses. They managed to make money, despite revenue being significantly impacted by COVID. The Swiss Ramble estimates the revenue loss as £58m in 2020/21 (mainly match day), which would make £89m lost over the last 2 years. Main reason for revenue growth was £107m (56%) increase in broadcasting from £190m to £297m, including deferred revenue from 2019/20 and higher CL money, plus £25m (10%) growth in commercial to £272m, which offset COVID driven reduction in match day, down £41m (98%) to £1m. Few clubs have made big money in a transfer...

Fifa has published its annual international transfer report:  https://digitalhub.fifa.com/m/2b542d3b011270f/original/FIFA-Global-Transfer-Report-2021-2022-indd.pdf There were 18,068 international transfers in men’s professional football, representing an increase of 5.1% compared to 2020 and signalling a return to the levels of 2019 despite the ongoing COVID-19 pandemic. Transfer fees decreased for the second consecutive year in 2021 to USD 4.86 billion, a fall of 13.6% from 2020 and 33.8% from the all-time high of 2019.

Manchester City’s annual accounts, published in brief this week, revealed a record-breaking year at the Etihad Stadium. Total income for 2020-21 stood at £569.8 million in a campaign that ended with defeat to Chelsea in the Champions League final. United, meanwhile, were left trailing in their wake with annual revenues totalling £494 million. City’s financial growth over the last decade has been unparalleled. A club that failed to even make Deloitte’s Football Money League top 20 for 2006-07, lagging behind Celtic and Marseille, has been transformed since the takeover of Sheikh Mansour bin Zayed Al Nahyan with Abu Dhabi’s millions in 2008. From an annual turnover of £87 million in 2008-09 to almost £570 million last season, income has gone up more than six-fold in 12 years. City’s run to the Champions League final was the undoubted driver for their achievement,   KPMG, the renowned accountancy firm, says that was worth £108 million in prize money...

Barcelona have signed the young forward Ferran Torres from Manchester City for a hefty €55m transfer fee (plus €10m add-ons). Given the club’s well documented financial difficulties, this deal will have left many fans scratching their head.   The authoritative Swiss Ramble explains how this is possible. Barca reported a shocking €481m post-tax loss for the 2020/21 season (€555m before tax), which is not only by far the worst in Spain, but also in Europe. In fact, it’s the highest ever loss posted by a football club. In contrast, Real Madrid delivered a €1m profit. Total debt (including bank loans, transfer fees, wages, tax authorities, trade creditors and other creditors) has more than tripled in the last 5 years to stand at €1.2 bln, the second highest in Europe, only behind Tottenham Hotspur (who funded a state-of-the-art new stadium). The cash for the transfer comes from a Goldman Sachs loan to FC Barcelona. The good news is that debt has been restructured with a 10-y...

Two clubs - Brighton and Hove Albion and West Bromwich Albion - have secured legal rights to the name 'Albion' in an attempt to prevent fans buying unofficial merchandise.   However, some have argued that the ancient name should not be owned by private companies.   It is one of the oldest descriptions for Britain. Shakespeare in King Lear states 'Then shall the realm of Albion come to great confusion.' Several clubs including Chelsea and Tottenham Hotspur have trademarked their club names for products and services despite them referring to geographical areas.   However, Liverpool failed in a similar attempt in 2019 because of its 'geographical significance'. West Bromwich Albion were originally called 'West Bromwich Strollers' and it is hard to envisage a top club being so termed today with its implication of a lack of effort.  Indeed, it is used for walking football clubs. However, the term is used in Scotland including (perhaps appropriately) Civil S...

The authoritative Swiss Ramble reviews the latest accounts of AC Milan. The club’s pre-tax loss more than halved from €192m to €92m, thus improving by €100m, as revenue increased €69m (40%) from €172m to €241m. Profit on player sales rose €3m to €18m, while operating expenses fell €30m (8%). The loss after tax was €96m.   The €96m post-tax loss is nowhere near the highest in Italy in 2020/21, as it is comfortably surpassed by Inter €246m, Juventus €210m and Roma €185m.     It is worth noting that Milan are responsible for six of the 20 worst losses in Serie A, but for some perspective Barcelona posted a €481m loss last season.   In fact, the big four Italian clubs have lost a staggering €1.3 bn in the last two seasons (€591m in 2019/20 and €737m in 2020/21), though Milan were the least bad with their €291m deficit being the smallest, behind Roma €389m, Inter €348m and Juventus €300m. Milan have lost an amazing €827m in last 8 years (pre-tax), though president Pao...

Burnley are in a more perilous position than they were when ALK arrived last season. They sit in the relegation zone with just 11 points from 17 matches. After the same number of matches last season, they had 16 points and were four points clear of the bottom three. Concerns remain about the structure of the takeover deal with its reliance on a loan and how relegation would affect the club financially. Broadcast payments make up 84.7 per cent of Burnley’s revenue. That will significantly decrease if they drop down a division although they will be supported by parachute payments. Pace has remained clear throughout that the new owners have a plan in place should the worst happen. Commercial development and the process of professionalising the women’s team have begun with another new shirt sponsor, to follow the one-year deal signed with Spreadex Sport last summer, towards the top of the agenda.

A leaked letter shows Oxford United have approached local councils with a plan for a new 18,000 seater stadium outside the city and at the other end from their current Kassam residence. The new stadium would be near Kidlington and Oxford Parkway station on land owned by the county council:  https://www.oxfordmail.co.uk/sport/19835468.letter-reveals-oxford-uniteds-hope-leave-kassam-stadium-stratfield-brake/ The Kassam is a three sided stadium.  The club originally played at the old Headington United ground.

Mike Ashley has brought a High Court legal action against Amanda Staveley who led the takeover of Newcastle United, but what it is all about is unclear:  https://www.thisismoney.co.uk/money/markets/article-10381629/Mike-Ashley-vs-Amanda-Staveley-High-Court-showdown.html

Mike Ashley is to make a £50m bid for Derby County which would eclipse the offer made by a consortium including a former chairman:  https://www.mirror.co.uk/sport/football/news/mike-ashley-derby-takeover-update-25887842 Ashley also intends to purchase Pride Park which remains under the ownership of former Derby owner Mel Morris.

Southampton seems to have been beset by chancers and dodgy individuals before finally agreeing a sale this week.  A Premier League club for sale attracts plenty of bidders, but then one has to sort out who is serious and credible. For nearly two years, potential buyers expressed interest but then walked away due to economic uncertainty, the global pandemic, the threat of a European Super League and a host of other reasons. It should be said there was also an element of Southampton being picky in terms of who they were sold to, ensuring the eventual purchasers would have a plan in place should they acquire Gao Jisheng’s 80 per cent majority shareholding. Many prospective owners were spurned because of this. The Athletic  has reported on the process throughout the last 18 months and is led to believe around 25 different potential buyers presented themselves to the Premier League club. It is thought about half of them managed to sit down with those inv...

Football finance guru Kieran Maguire strikes a sceptical note in a comment on Manchester United: ' Despite losing £23m in 2020 and £92m in 2021 Manchester United are today paying an £11m dividend to shareholders, the vast majority of which will go to the Glazer family. Meanwhile there’s rain coming through the roof, seats are cramped and as for the "product".' United have named managing director Richard Arnold to succeed 'executive vice-chair' Ed Woodward as chief executive officer.   One of his key tasks will to rebuild trust with fans after the ESL fiasco. United's commercial strength has enabled it to weather the worst of the pandemic which cost it £150m in lost revenue.  Other clubs have had to sell players or raise capital.  Commercial revenues totalled £232m in the last financial year, down 17 per cent.   Match day revenues fell more than 90 per cent. Shares in United are 12 per cent down on the past year.

The European Super League has been widely condemned as a threat to the game.  However, this article takes the unorthodox view that allowing it to go ahead could have been a good thing.   It would have led to a more sustainable game to the benefit of match going fans:  https://www.theguardian.com/football/2022/jan/04/european-super-league-premier-league-championship-finances

Southampton have confirmed that Setbian-born cable television tycoon Dragan Solak and sports investment firm Sports Republic have completed a £100m takeover of the club for a 80 per cent majority stake (Katharina Liebherr retains the remaining 20 per cent):  https://www.skysports.com/football/news/11700/12509028/southampton-takeover-club-confirm-serbian-born-businessman-dragan-solak-has-completed-100m-deal   The transaction gives the club an enterprise value of £200-£250m including debt.  Southampton's pre-tax loss increased from £41m to almost £76m in the 2019/20 season.  Revenues fell from £144m to £126m with matches being called off because of the pandemic.   Southampton borrowed £78.8m from MSD Partners, a football lender linked to computing billionaire Michael Dell. The 80 per cent stake has been acquired from Gao Lisheng, a Chinese real estate magnate who has controlled the club since 2017.   Gao's decision to offload his stake continues the...

Football finance guru Kieran Maguire reviews the report on football by Tracey Crouch MP which called for an independent regulator.  This article is free to read for a fortnight:  https://onlinelibrary.wiley.com/doi/epdf/10.1111/1467-923X.13098 Maguire concludes that the report cannot 'fix' the game and guarantee the existence of all clubs going forward, but it is a step in the right direction.

The authoritative Swiss Ramble reviews the latest accounts of West Ham United. The pre-tax loss reduced from £65m to £27m, as revenue rose £53m from £140m to £193m despite COVID impact on gate receipts, as £26m TV money deferred from 2019/20 accounts. Owners provided £30m share capital.    Player sales fell £7m to £18m. Although the £27m loss is not great, it’s one of the better financial results of the clubs that have reported so far in 2020/21, with only Manchester United having a lower loss of £24m. Two other London clubs have posted much higher losses: Chelsea £156m and Tottenham Hotspur £80m. West Ham   have now posted losses three years in a row, adding up to a combined £120m deficit over that period, though they did make profits in four of the previous five years. The £193m revenue is currently 7th highest in the Premier League. It has increased by £72m (60%) since 2015, which is pretty good, but the problem is that the Big Six has seen even more growth , e.g...

Saudi Arabia's Public Investment Fund have made no secret of their plans to invest in football clubs around the world, but football finance guru Kieran Maguire admits he is 'perplexed' by their reported interest in Inter Milan:  https://www.chroniclelive.co.uk/sport/football/football-news/pif-told-inter-milan-investment-22619746