The Political Economy of Football V2

Writing in The Times, Michael Mortitz argues: 'What would you pay for a £583 million business with few growth prospects and £81 million of ebitda, the slippery benchmark used by buyout firms to value prospective investments? In most industries it would be between ten and fifteen times or, in this case, £800 million to £1.2 billion.' 'If, however, you are putting a football team on the block and you are a group of absentee owners, as is the case with Manchester United and its dividend-rich Glazer siblings, you would encourage rumours that the business is worth £6 billion.' One of his key arguments is that the club 'is operating in a market where television coverage is saturated and where the era of bidding frenzies is over.'   This overlooks the global revenues that could be obtained from streaming.  There is also capacity for further growth in the US. Then there is the revenue to be derived from non fungible tokens and the like.   One day fans will wake u...

Peter Varney thinks that the Big Six are going to become a Big Four of Liverpool, Manchester City, Manchester United and Newcastle.   Liverpool and Manchester United will be Saudi Arabian or Qatari owned by the end of the season:  https://www.petervarney.com/post/six-becomes-four I wouldn't write off the London clubs so easily.   The capital, a world city, has a special appeal for players. Chelsea have new owners with deep pockets; Tottenham Hotspur have the best stadium in the land with great revenue potential; and Arsenal look like succeeding on the pitch.

 The authoritative and thorough Swiss Ramble provides a forensic analysis of the finances of Bristol City:  https://swissramble.substack.com/p/bristol-city-finances-202122?utm_source=substack&publication_id=1203438&post_id=87343314&utm_medium=email&utm_content=share&triggerShare=true&isFreemail=true He notes, 'Losses are nothing new for Bristol City, who have only posted a profit once in the last decade (£11m in 2019, thanks to £38m profit from player sales). In that period, the club has lost a hefty £146m, including £77m in the last three (COVID-impacted) seasons. Bristol City’s revenue is one of the highest in the Championship – if you exclude the clubs that benefit from Premier League parachute payments, whose revenue is normally twice as much.  For many years Bristol City have been dependent on funding from owner Steve   Lansdown, which the club described as “critical”. I estimate that the owner has put in around £232m to date, which i...

The entire board of directors at Juventus has resigned, including president Andrea Agnelli and vice-president Pavel Nedved. The Italian Serie A club’s board stepped down en masse “having considered the centrality and relevance of pending legal and accounting issues”, it said in a reference to an ongoing police investigation. Prosecutors in Turin have since last year been exploring allegations of false accounting and irregularities in the transfer and loans of players. They are investigating the possibility that Juve, who are listed on the Italian stock exchange, presented false accounting information to investors and produced invoices for non-existent transactions  Juventus have already made a huge €254m loss in 2021/22, the highest ever reported in Italy.  They have lost half a billion euros over the last three years. Shares in the club fell 6 per cent in early trading in Milan.

Paris Saint-Germain are targeting a valuation of €4bn as they hold talks with investors on a 15 per cent minority stake, including two US-based funds:  https://www.ft.com/content/5fc68e1a-769f-4b55-b6f7-ffceb31f23e9?shareType=nongift This would exceed the price at which Chelsea was sold and could boost sale prices for Liverpool and Manchester United.

The authoritative Swiss Ramble reviews the latest accounts of Rangers:  https://swissramble.substack.com/p/rangers-finances-202122?utm_source=substack&publication_id=1203438&post_id=87157076&utm_medium=email&utm_content=share&triggerShare=true&isFreemail=true He comments: ' It is worth noting that Rangers small loss is one of the best performances of the leading European clubs that have reported 2021/22 figures to date. In stark contrast, large losses have been posted almost everywhere else, e.g. PSG £327m, Juventus £225m and Barcelona £157m (excluding their famous economic levers).' 'Rangers’ strategy of investing in the squad has had “clear effects on our financial statements” in recent years, with their pre-tax losses adding up to nearly £100m in the last decade. Obviously, the huge deficits in 2020 and 2021 were exacerbated by the pandemic. That said, the £2m loss in 2021/22 is the club’s smallest in the last 9 years, as the club has pushed for ...

Claims that Manchester United could be worth $7bn have been greeted with scepticism by analysts.  United's shares rose sharply last week and were trading at around $21.50, valuing its equity at $3.5bn or over $4bn including debt. However, a valuation of $4bn to $5bn for a business that is losing money and in need of capital investment looks hard to justify.  Modernising Old Trafford might cost as much as $1.5bn.  Competition has got fiercer in the Premier League with Saudi backing for Newcastle United and the rise of Manchester City. Nevertheless, competition could drive up the price.  The Saudi government has given the green light to its investors to bid.  There will be plenty of interest from the United States. The Ineos owner, Sir Jim Ratcliffe, has repeatedly stated his interest in buying the club and has already explored the possibility of a takeover with two of the Glazer family, describing them last month as the “nicest people” and “proper gentlemen”, bef...

Lincoln City have submitted plans for a £1.8m redevelopment of their West Stand which will increase capacity by 700.  The plans are in line with the club's strategy of prudent growth:  https://www.lincolnshirelive.co.uk/news/lincoln-news/lincoln-city-submit-plans-council-7852308

The Financial Times interviews Plymouth Argyle owner Simon Hallett and assesses the club's prospects:  https://www.ft.com/content/60937411-a825-4ccb-b16a-3a15463c831e?shareType=nongift

Fans at cash strapped Southend United have raised £20k to help to pay outstanding wages for October.  However, it will not be enough to cover all the wages:  https://www.echo-news.co.uk/sport/23148438.southend-united-supporter-groups-transfer-20k-cash-strapped-club/

Manchester United’s front-of-shirt sponsor, TeamViewer, is under pressure to walk away from its deal with the club.  TeamViewer signed a five-year contract worth £235million ($283m today) — £47m ($57m) per year — with United in 2021 to be their front-of-shirt sponsor But there are now fears it could attempt to leave the contract after being accused of “bleeding millions” and showing “appalling judgement” by investors. When TeamViewer completed the deal 20 months ago, it had emerged from the COVID-19 pandemic with significant revenue due to the rapid growth in the technology sector. Since then, however, the bubble has somewhat burst post-pandemic and that growth has stagnated. It became evident that any financial forecasts the firm had made were perhaps overly optimistic and, in hindsight, you wonder whether the deal with United would have been completed if TeamViewer knew then what they know now. There is no escaping the fact that if TeamViewer were to attempt to end its co...

After 17 years of ownership, the Glazers have made it known that they are willing to sell Manchester United.  The price obtained for Chelsea may have pushed them towards a sale.  Also, money needs to be spent on Old Trafford and the training ground. Football finance guru Kieran Maguire reckons the club could for £4 to £4.5 billion, a nice profit on the original debt funded £790m.  Although a minority stake is available, he reckons a new owner would want to be in charge of the decision-making. An American owner seems most likely. The club's share price went up by 15 per cent after news of the sale.  Market capitalisation is only $2.5bn, but Forbes values the club at $4.5bn. The Times says the Glazers want £6 to £8 billion because of the club's global digital appeal.

Coventry City has been through many difficult years and the collapse of Wasps threatened the loss of their stadium.  But there is good news at last.  Local businessman Doug King is to take a 85 per cent stake in the club from hedge fund Sisu.  The club are also considering making a bid for the stadium:  https://www.coventrytelegraph.net/sport/football/football-news/coventry-city-takeover-live-sisu-25535116 However, former Newcastle owner Mike Ashley is regarded as the preferred bidder for the CBS Arena:  https://www.bbc.co.uk/sport/football/63656013   His group have now completed the purchase.

Do they have a future?   This article is free to view for a fortnight:  https://onlinelibrary.wiley.com/doi/epdf/10.1111/1467-923X.13205

The authoritative Swiss Ramble reviews the finances of Celtic.   He concludes that they are in good shape financially, despite the pandemic, thanks to their sustainable approach, though this owes a lot to their player trading model. Champions League qualification is also important, so the expanded format should help future prospects. Comparing their cash flow with Rangers in the last 10 years, we can see a big difference in approach. Celtic have made much more money from operations and player sales, which Rangers nearly matched via £78m loans and £38m share capital. The £2.5m debt is small, even by Scottish standards, and is a long way below Rangers £16.9m, which would have been even higher without them converting £66m of loans into shares in the last four seasons. Note: Celtic’s figure excludes £4.2m convertible preference shares. Celtic spent £38m on player purchases in 2021/22 after Postecoglou’s arrival, easily a club record, including Jota, Carter-Vickers, Furuhashi...

The authoritative Swiss Ramble has had a few questions on the revenue impact of Barcelona’s exit elimination from this season’s Champions League after the group stage. As is often the case, the answer depends on how you look at it. As per his model, Barcelona have earned €70.2m from this season’s Champions League, comprising participation fee €15.6m, prize money €7.0m, UEFA coefficient €34.1m and TV pool €15.9m less €2.5m COVID rebate to broadcasters. As we can see, Barcelona have benefited from their previous good record in Europe with their UEFA coefficient €34.1m payment accounting for nearly half their total €70.2m distribution. This is currently the third highest in Europe. In addition, Barcelona will receive some money after dropping down to the Europa League, though only an additional €1.4m as it stands: knockout round prize money €0.5m plus estimated TV pool €0.9m. The club advised that Barcelona had budgeted to reach the quarter-finals of the Champions League. Assuming...

The authoritative Swiss Ramble reviews the accounts of Manchester City where  pre-tax profit improved from £5m to £42m, as revenue rose £43m (8%) from £570m to £613m, thanks to recovery from COVID and the return of fans to the stadium, while operating expenses only increased £11m (2%). Profit from player sales was almost unchanged at £68m. City have had a few issues with FFP in the past, but were not among the clubs recently fined by UEFA. The SR's model suggests that they were fine over the latest monitoring period even before allowable deductions for “good” expenditure and COVID impact. They benefited from the highest owner funding in the Premier League in the 10 years up to until 2021 with £684m, followed by Chelsea £516m. However, it’s a very different story for the five years up to 2021, when City’s £81m was much lower than Everton £448m and Aston Vila £400m. City have become largely self-sufficient in recent years (excluding the impact of COVID), but the club did receive £23...

Fenway Sports Group is considering a sale of Liverpool FC which it bought in 2010 for £300m.   Forbes values Liverpool at $4.45bn, making it the world's fourth most valuable football club. Fenway has been approached by at least one potential buyer. Conrad Wiacek, head of sport analysis at GlobalData, a leading data and analytics company, said: “Given the sale of Chelsea  in the summer of 2022 reached $4.15billion (£2.5bn at the time of the sale), the sale of Liverpool could reach in excess of $5bn (£4.36bn), with the club generating over $160million (£140m) from its sponsorship deals for the 2022-23 season alone.”

Manchester City's accounts are out.    Revenue £613m (2nd highest in PL history). Wages £354m, same as previous year. Operating loss £23m, although overall profit of £42m. Player sale profits £68m. Squad cost £1,076m...first ever £1bn squad. More details here: https://www.mancity.com/news/club/manchester-city-2021-22-annual-report-63803405

The authoritative Swiss Ramble reviews Benfica’s finances.  Benfica’s ability to punch above their weight (given their relatively low revenue) is impressive, but it should be acknowledged that their business model is very reliant on two factors: (a) qualification for the Champions League; (b) large gains from player sales. Benfica pre-tax loss in 2021/22 widened from €34m to €42m (€35m after tax), despite revenue rising €75m (80%) from €94m to club record €169m, as profit from player sales fell €46m from €88m to €42m and expenses increased €37m (17%). Benfica normally run a sustainable business model, but they have posted losses amounting to €76m in the past two years, partly due to the pandemic. In the previous 7 years, they had accumulated €187m profit, averaging €27m a season, with their last loss coming in 2013. Benfica €42m pre-tax loss was in stark contrast to their principal Portuguese rivals, who both posted good profits: Sporting €25m and Porto €22m. This was largely...

It has become to cool to support Wrexham since the Hollywood takeover.  In depth article:  https://talksport.com/football/1233064/welcome-to-wrexham-reynolds-mcelhenney-takeover/

The authoritative Swiss Ramble looks at the money to be earned from the Champions League. Champions League overall prize money is 3.6 times the Europa League and 5.5 times the Europa Conference, but this varies by round. In general, the difference becomes smaller the further a club progresses, e.g. last 16 it’s 8x and 16x, while for the winners it’s only 2.3x and 4x. In 2022/23 each of the 32 clubs qualifying for Champions League group stage gets €15.64m plus €2.8m for a win and €930k for a draw. Additional prize money for each further stage reached: last 16 €9.6m, quarter-final €10.6m, semi-final €12.5m, final €15.5m and winners €20m. Each club in the Europa League group stage get €3.63m plus €630k for a win and €210k for a draw. Additional prize money: win group €1.1m (runners-up €550k), knockout round €500k, last 16 €1.2m, quarter-final €1.8m, semi-final €2.8m, final €4.6m and winners €8.6m. Each club in the Europa Conference group stage get €2.94m plus €500k for a win and €16...