The Political Economy of Football V2

The last minute bid by Sir Jim Ratcliffe for Chelsea has muddied the waters, but it is too late in the day. Ratcliffe has offered the £2.5bn required by Roman Abramovich, plus £1.75 billion of investment in the club.  He reckons that his firm's experience in big civil engineering projects would enable the redevelopment of Stamford Bridge without having to play elsewhere. Ratcliffe is also claiming his is the only British bid, although he is resident in Monaco.   Lancashire born, Ratcliffe was originally interested in Manchester United, but reckoned (probably correctly) that it was over valued.   He thinks that Chelsea is expensive 'but not foolish'. His vision is to make Chelsea the No.1 club, so that London would have an equivalent of Bayern Munich, Real Madrid or Barcelona.   Other London clubs are available and might feel they have an equivalent or greater claim. Part of the motivation is to make his company Ineos more than 'the biggest company you'...

The consortium led by LA Dodgers owner Todd Boehly is set to be the preferred bidder for Chelsea, despite a late and out of time bid by Sir Jim Ratcliffe:  https://www.bbc.co.uk/sport/football/61267010 A formal announcement is expected on Monday.   More here:  https://weaintgotnohistory.sbnation.com/2022/4/29/23049120/further-reports-of-todd-boehly-consortium-winning-the-race-for-chelsea-football-club DCMS secretary Nadine Dorries warned yesterday that there were only a few weeks left to seal the deal.

[This is an edited version of an article that originally appeared in the Charlton fanzine, Voice of the Valley.    Almost all references to Charlton have been excised]. In his excellent book The Football Manager: a History Neil Carter shows how managers often started out as the club secretary with the board selecting the team.  Gradually they achieved greater responsibilities.  He argues that Herbert Chapman at Arsenal was the most important figure in the development of modern football management.   The other two key pioneers were Frank Buckley at Wolves and Jimmy Seed at Charlton. Carter points out how football and the role of the manager changed after 1992.   Success on the pitch became even more important commercially making football even more of a results business.   Managers assumed a much higher profile in the media. In modern football the manager is generally seen as being responsible for everything that occurs on the pitch.  ...

Owen Oysten has failed in an attempt to sue the receivers of Blackpool Football Club for £78m in compensation:  https://www.blackpoolgazette.co.uk/sport/football/blackpool-fc/owen-oyston-fails-in-ps78m-claim-against-receivers-that-sold-blackpool-fc-3672080 He has the right to appeal.

Football finance guru Kieran Maguire has produced a report with a colleague at Portsmouth University for the DCMS on the financial sustainability of football and it does not make for comforting reading:  https://news.liverpool.ac.uk/2022/04/27/new-report-finds-serious-concerns-around-financial-sustainability-in-football/ Using industry-based limits from pre-pandemic club figures (2018-19), the research found that in the Premier League, only three clubs were not deemed at risk under any of the applied risk metrics (Arsenal, Manchester City, and Newcastle), while over half were deemed at risk under at least two metrics. I n the Championship, there was only one club that was not deemed at risk under any of the three applied risk metrics (West Brom, in receipt of parachute payments that year) and 20 were deemed at risk on at least two risk metrics. In Leagues One and Two, where only balance sheet metrics were applied due to available data, 14 and 10 clubs respectively were deemed at ...

The threat of relegation is real for Everton, although I think they will just about survive.  However, if they did go down, it would be a big blow to their status and finances.  What it does show is that having a benefactor owner who spends big can be a route to failure as well as success. Everton have flirted with the threat of relegation from the Premier League, but they always managed to find a way out: most famously on the final day of the 1993-94 season when they looked doomed, 2-0 down at home to Wimbledon, only to win 3-2 and stay up by the skin of their teeth (at Sheffield United’s expense) thanks to a brace from Graham Stuart (later a great player for my club, Charlton) and the goal of a lifetime from Barry Horne. Four years later, Gareth Farrelly’s strike earned Everton a nerve-fraught 1-1 draw with Coventry City, sending Bolton Wanderers down instead on goal difference. On other occasions, intervention has come earlier via a change of manager (the timely ap...

The formidable Swiss Ramble reviews Middlesbrough’s 2020/21 accounts, when they reduced pre-tax loss from £36m to £31m, but still one of the highest in the Championship. Boro reduced their pre-tax loss from club record £36m despite revenue dropping £4.9m (25%) from £19.4m to £14.5m, as other income rose £2.7m to £4.6m, operating expenses were cut £5.7m (10%) and profit on player sales rose £0.8m to £4.3m. Loss after tax was £27m. They have lost money eight times in the last decade with their cumulative losses adding up to £157m. Over the last two years their deficit is £66m, partly due to COVID, but also the end of parachute payments.   They posted a £7m profit in the Premier League in 2017. The club also benefited from parachute payments in 2018 (£42m) and 2019 (£35m), but these have now ended. These are so significant that they make it difficult for others to compete, e.g. in 2019/20 a relegated club received £42m in year one, £34m in year two and £15m in year three.  ...

The inspiring Swiss Ramble has been working this weekend on the achievements of Villareal  which reveal a record of good financial management that other clubs could learn from.  Their European achievement To place their achievement in reaching Champions League semi-finals into perspective, their €124m revenue is far below €164m required to be in the top 30 of the Deloitte Money League. Bayern Munich, who they beat in the quarter-finals, have five times as much with €611m. Europe is important to the club strategy, as seen in 2020/21, when the Swiss Ramble estimates they earned €32m for winning the Europa League. Still a lot less than the Spanish representatives in the Champions League received, e.g. Real Madrid got more than three times as much with €111m. They will earn big money from this season’s Champions League. The Swiss Ramble’s model suggests around €78m, though is restricted for two reasons: (a) nothing from first half of TV pool, as qualified via Europa League...

Liverpool are in talks over a new shirt sponsorship deal as their £40 million-a-year contract with Standard Chartered is set to expire in May 2023. And although discussions are continuing about extending their partnership, the club are also talking to firms from sectors including electronics, media and tourism. Among those parties,  The Athletic  has revealed, are companies from the cryptocurrency sector. They include a crypto exchange firm — a platform to buy and sell digital currency — and a blockchain platform (a decentralised computer network that underpins cryptocurrencies). Many English top-flight sides have signed deals with cryptocurrency firms over the past few years but displaying such companies on the front of their shirts would be a Premier League first. It is likely to be controversial but Liverpool are desperate to financially compete with other elite clubs and maximise their commercial deals. There are a lot of environmental concerns about blockchains, whi...

When a football club goes into administration, the administrators and lawyers are among those who benefit.  That certainly appears to be the case at Derby County. Data from Companies House reveals that fees paid to administrators Quantuma and lawyers amount to £3.8m, no doubt reflecting the length and complexity of the administration. Investment group MSD Holdings lent the administrators a total of £24m and will be paid in full including interest as a secured creditor. Commercial agents Twenty First Group are to be paid £15,000 plus VAT for valuing the playing squad.

Epitaphs have been written for globalisation in the wake of the war in Ukraine, but it is still a force in football, even if there are no longer Russian and Chinese bidders. If the Chelsea takeover story has told us anything it is that British football’s move to more contemporary North American ownership structures, backed by North American money, is the way things are going. The three finalists in the auction for Chelsea are all partnerships of plutocrats, as was the Chicago-based bid led by the Ricketts family and billionaire investor Ken Griffin that pulled out of the race before last week’s deadline for final bids. Each of these bids includes advisors and potential directors from the UK but the vast majority of the partners, and almost all of the money, is from the US and Canada. Not as British as it looks The bid led by former British Airways and British American Tobacco boss Sir Martin Broughton.   It may appear to be wrapped in the union jack. British busin...

Sheffield United are the latest club to be reported to have been bought by an American tycoon for £115m who made a failed bid for Newcastle United.  This represents a considerable profit for the current owner:  https://www.mirror.co.uk/sport/football/news/sheffield-united-takeover-newcastle-ashley-26768663

Kieran Maguire of the PriceofFootball has produced some interesting figures on infrastructure spend by Premier League clubs over the last ten years.   In essence this relates to stadiums and training grounds. Not surprisingly Tottenham Hotspur has spent the most, a total of £1,502m which has got them a new stadium. Manchester City have spent £379m, probably a lot of that on adjacent facilities.   Brighton are the club outside the top six that have spent the most (£159m).   Upgrading Anfield has cost Liverpool £153m. Arsenal have spent £116m.  What is noticeable is that relatively little has been spent at Old Trafford (£94m) where a stadium upgrade is overview and the training ground is looking tired.  Chelsea have spent £92m, probably most of that on the training ground.

The tireless and authoritative Swiss Ramble examines Cardiff City’s 2020/21 financial results, when they reduced their loss from £12m to £11m. Revenue rose £9m to £55m, as TV i the club’s owners. Losses In the 11 years since Vincent Tan bought the club in May 2010, they have accumulated £154m of losses, £81m in the last five years. In that period the club has only had two (small) profits, £4m in 2015 and £3m in 2019. They even contrived to lose £12m in the Premier League in 2014. Furthermore, the 2015 £4m profit was entirely due to once-off factors (£13m debt-write-off and £13m interest adjustment). If the club is correct that they will not need to pay a transfer fee for Sala, then future financials will be boosted by reversal of £20m provision. The £11m loss is clearly not great, it was nowhere near as much as some others in 2020/21 Championship, e.g. Bristol City £38m, Reading £36m and Boro £31m. Highest profits from two clubs relegated from the Premier League the prior seaso...

Fulham are poised to return to the Premier League and the tireless Swiss Ramble spent the Easter holiday analysing their accounts. Their pre-tax loss widened from £48m to £93m, despite revenue doubling from £58m to £116m following promotion to the Premier League, as profit on player sales fell £25m to zero, while expenses increased by £78m (60%) in the top flight . Operating loss (i.e. excluding player sales and interest) increased from £73m to £94m, which was one of the worst in the Premier League, only better than Chelsea £159m and Everton £118m. This was significantly higher than the £23m loss the last time they were in the top flight. A full year of the pandemic meant some very large losses in the Premier League, though Fulham at £93m was one of the highest, only surpassed by Chelsea £156m, Arsenal £127m and Everton £121m. Losses are nothing new for Fulham, as the last time they made a profit was in 2011. Since Shahid Khan bought the club in July 2013, they have posted £301...

Barcelona's head coach Xavi was shell shocked by the 2-3 defeat at home to Eintracht Frankfurt to lose out on a place in a European semi-final.  He was still waiting for an explanation three days after the defeat of how 35,000 Eintracht fans, nearly half the crowd, got into the Nou Camp and proceeded to make more noise than the home support. The answer seems to rest with attempts to deal with the club's €1 billion plus debt by bringing in fresh revenues.   The club lost out when Covid-19 kept the 98,000-seater stadium empty.   Covid also hit revenues from the club museum which is normally popular with international tourists. No show season ticket holders were encouraged to make their seats available.   Recent adjustments to Barcelona membership, giving preferential access to tickets, seems to have been exploited by visiting German fans. As a consequence the Barcelona bus couldn't get into the stadium at the first attempt.  Off the pitch fund raisi...

This is a shortened version of an article that originally appeared in the Charlton fanzine, Voice of the Valley. We are constantly told that football is all about opinions, although in practice modern recruitment and coaching is increasingly driven by in depth data analysis.   However, some of the debate surrounding football uses terminology in a rather loose way, perhaps once again demonstrating that it is a unique part of society and the economy. One example which is the theme of this article is the use of the term ‘big’ club.   It is unclear what qualifies a club to be described as ‘big’, other than in the eyes of its supporters who are always ready to claim the title.    Some supporters say their club is 'massive'. The top six In reality the only clubs that are truly massive are the ‘top’ or ‘big’ six that dominate the Premier League and English entry to the Champions League (Arsenal, Tottenham Hotspur, Liverpool, Chelsea and the two Manchester clubs). ...

Asset manager Investcorp is in exclusive talks to acquire AC Milan from US hedge fund Elliott Management, reports the Financial Times.    The deal could value the Serie A team at more than €1 billion. Elliott took control of AC Milan in 2012 at a fraction of that sum after the previous Chinese owner failed to pay back debt to the hedge fund's credit arm.   Before that it had been owned by former Italian prime minister and media tycoon Silvio Berlusconi AC Milan is back in the Champions League and is currently top of Serie A.  It has not won the title since 2011 and repeatedly failed to qualify for the Champions League. Investcorp is a Gulf-based private equity investor with a wide range of assets including real estate, hedge funds and private debt.   It has stakes in luxury brands Gucci and Tiffany.   The group intends to consolidate its position in the top level of European football. Globalisation is far from over in football, even if China ...

It's a cliché that football is a results business, but I and many others were surprised by the sacking of Sean Dyche at Burnley.  Is a new manager, when appointed, really going to be able to turn things round and avoid relegation given the number of matches left? Burnley are very dependent on the broadcasting money from the Premier League and parachute payments would not compensate as this interview before the sacking was announced makes clear:  https://www.lancs.live/sport/football/football-news/alan-pace-burnley-sean-dyche-23706980 If they are relegated, it looks like there would be a fire sale of players. In my view Dyche helped Burnley to punch above their weight.   I have a good friend who is a Clarets supporter and I have been in the home seats at Turf Moor.   I would be sorry to see this traditional club with its long history relegated.

The Ricketts family, the owner of the Chicago Cubs baseball team, have withdrawn their bid for Chelsea. Some Chelsea fans had opposed the bid because of leaked Islamophobic comments made by Joe Ricketts. Sources close to the Ricketts insist that fan protests had nothing to do with their decision.  It was because of a failure to agree the structure of the deal with American investors Ken Griffin and Dan Gilbert. The Ricketts bid was seen as a strong one if only because of the amount of money behind it. Football finance guru Kieran Maguire says that as time goes on it is an increasing concern how the wage bill will be paid:  https://www.forbes.com/sites/daviddawkins/2022/04/15/inside-the-last-days-of-abramovichs-reign-at-chelsea-fc/?sh=4a8daf8072f0

How much are Chelsea worth?  Well, like selling a house, it depends on what a purchaser is prepared to pay and that may not be the same thing as fair market value.  This article attempts to make a valuation, but admits that a competitive bidding process may drive the price up:  https://www.footballbenchmark.com/library/whats_the_value_of_chelsea_fc

Financial Times columnist Chris Cook has launched an onslaught on the bromance of football clubs with crypto, saying that it is time they stopped playing with it. Football author Martin Callandine told the Pink 'Un: 'fans outsource some of their judgement to their team's commercial department.  And that's dangerous when clubs are endorsing unregulated products with no consumer protection.'   Terms like 'investment' and 'trading' are used in relation to crypto, but with none of the normally safeguards that apply to them. Last November Manchester City signed a marketing partnership with crypto company 3Key.  This was justified by the usual marketing patter, but a week later City said that the partnership was suspended while they conducted further inquiries (which they should surely have made in the first place). Southampton has been promoting learn-crypto.com, a site aimed at beginners.   My general view is that if sounds too good to be true it probabl...

National Basketball Association chair Larry Tannebaum has been revealed as one of the backers of Stephen Pagliuca's bid for Chelsea.  Pagliuca is a private equity billionaire and co-owner of the Boston Celtics basketball team. Other backers include former Disney chief executive Bob Iger and his journalist wife Willow Ray along with Facebook co-founder Eduardo Saverin and his wife Elaine Saverin. In February Pagaliuca led the acquisition of a majority stake in Atalanta.  Tannebaum  chairs Maple Leaf Sports and Entertainment ice hockey team and the Toronto Raptors basketball outfit. Whatever the outcome American investors will soon own four of the six top six clubs.

From his Zurich base the tireless Swiss Ramble analyses another set of club accounts, this time Watford. Despite impact of relegation and COVID, the pre-tax loss reduced from £36m to £22m, even though revenue fell £63m (52%) from £120m to £57m, as profit on player sales shot up from £18m to £56m and expenses were cut £35m (21%). Other income included £2.5m insurance claim. Poor record on losses Even though the Hornets narrowed their loss to £22m, it was still one of the worst in the Championship, only “beaten” in 2021 by Bristol City £38m, Reading £36m and Boro £31m. Also worth noting that the other clubs relegated from PL in 2020 posted profits: Norwich £21m and Bornemouth £17m. Watford have now reported losses in three out of the last four seasons, even though they spent all but the last one in the Premier League. Their total loss over this period amounted to £79m. Overall, they had broken-even in the preceding 6-year period. The operating loss (i.e. excluding player sales ...

$1,000 invested in Manchester United on 12 August 2012 when the club debuted on the NYSE would today be worth $992. The same invested in the overall Dow Jones would be worth $2,614, Apple $7,035, Amazon $12,201 Tesla $173,149, reports Kieran Maguire of the PriceofFootball. The Glazers have done well out of dividends from their leveraged buyout. Some United fans are planning to protest against 17 years of the Glazers this weekend, only entering the stadium in the 17 th minute.

Only the sale of Jude Bellingham kept Birmingham City's losses down says football finance guru Kieran Maguire:  https://www.birminghammail.co.uk/sport/football/football-news/birmingham-city-accounts-finances-maguire-23674429 Judging by a recent article in The Football League Paper it is difficult to work out who actually owns the club.

Delia Smith talks about the 'pain' of Norwich City constantly being in debt and the emotional chaos of running a Premier League club:  https://www.pinkun.com/sport/norwich-city/ncfc-canaries-delia-smith-new-statesman-interview-8893580 She refers to her 'sustainable' approach to running the club, but how sustainable is it being a yo-yo club, too good for the Championship and not good enough for the Premier League? I have a couple of friends who are Norwich supporters, and I have always enjoyed holidays there, so I would like to see them succeed.   Their strength is that they are a 'stand alone' club with no rivals in the county, but their weakness is that it is not densely populated and some parts of it are relatively poor. Smith says that she would put any credible bid for the club to a vote of supporters which is to be commended.   Let's be having you.

All four of the bidders for Chelsea would pass government checks and be granted a special licence to run the club.  Abramovich and the Chelsea board will decide on the preferred bidder and it will not necessarily be the one that puts in the highest bid. Downing Street is reported to be satisfied with the four bidders in principle.   This includes the Ricketts group that has attracted some opposition from fans. Final offers must be submitted by Thursday.   Raine Group will then present a preferred bidder to Abramovich and the Chelsea board next week.

Steve Gibson has been one of the most generous benefactor owners in football and has got scant return for it on the pitch.   However, it appears that some fans are unhappy even with him, claiming that he has secured tax advantages.   That's possible, but it wouldn't offset the sums he has put in. Football finance guru Kieran Maguire casts some light on the topic here:  https://www.gazettelive.co.uk/sport/football/football-news/steve-gibson-generosity-middlesbrough-finances-23652480

Three US bidders are reported to be interested in Everton, although the club is not formally on the market. Farhad Moshiri is looking for investment to fund the new stadium which is crucial to the club's future prospects:  https://www.dailymail.co.uk/sport/football/article-10701319/US-tycoons-circle-Everton-Farhad-Moshiri-looks-outside-investment.html All bets would be off if the club was relegated, but I think they had done enough to be safe.   The three bottom clubs look stuck in the mire, not that I have anything against any of them (indeed I have friends who support all three and also Everton).    Relegation is not just a psychological blow, it is a big financial one as well.  For clubs like Norwich and Watford, the challenge is to escape yo-yo status.  Burnley have stayed up through shrewd management, but at the end of the day money to spend on the squad tells.

What does the Swiss Ramble do at the weekends?   Does he leave Zurich to ski or walk in the mountains?   Does he go for yodelling lessons?   No, he tirelessly works away at interpreting a club’s latest accounts and this week it is the turn of Leeds United.   He tweets his findings rather than putting them in a blog format, so I consolidate them so that more can benefit from his insights. I have argued that for many years a vibrant regional capital like Leeds deserved to be represented in the top flight.   The Swiss Ramble states: ‘ Promotion to the Premier League has clearly transformed Leeds finances, even when impacted by COVID (though the loan write-off also helped). Leeds enjoy a structural competitive advantage from being the only club in UK’s third biggest city, leading to good commercial prospects.’ 2 nd highest profit in Premier League Leeds swung from a £62m pre-tax loss in the Championship to £26m profit in the Premier League...