The Political Economy of Football V2

How did Charlton go from being fourth in the Premier League twenty years ago this week to a relegation threatened League One club.   The Evening Standard looks for answers:  https://www.standard.co.uk/sport/football/charlton-woes-worsen-fans-wonder-magic-ever-return-b1135138.html

2022/23 was Roma’s third season under the ownership of The Friedkin Group, who purchased the club from fellow American James Pallotta in August 2020. The good news is that Roma’s pre-tax loss more than halved, narrowing from €219m to €99m, which is a significant improvement, but this was still a sizeable deficit. The greatly reduced loss was needed to comply with the settlement agreement signed with UEFA. Roma are no strangers to losing money, as they have suffered losses 14 years in a row, adding up to nearly a billion Euros (specifically €992m). The last time that they posted a pre-tax profit was back in 2009 – and that was only €3m. To place last season’s €99m loss into perspective, while it was much better than the past three years, it was still way higher than the losses before the pandemic struck. In the previous 10 years, the average loss was much lower at €29m. Revenue rose €28m (14%) from €196m to €224m, while profit from player sales shot up from €5m to €47m, while costs were...

The latest edition of the Deloitte Money League is available:  https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/deloitte-football-money-league.html Tottenham Hotspur have overtaken Chelsea to become the richest club in London thanks to the earning power of their new stadium, according to Deloitte’s latest Football Money League. The rankings, which cover revenues earned by clubs during the 2022-23 season, also show that Manchester City have been knocked off top spot by Real Madrid, despite Pep Guardiola’s side’s Treble-winning season. Spurs have leapfrogged Chelsea to become the eighth richest club in the world, with annual revenues of £549.2 million — the Stamford Bridge club’s revenues have been reported as £512.5 million. Arsenal are tenth in the Money League on £463.1 million. Both Arsenal and Chelsea’s income was hit by not being in the Champions League, so Tottenham’s north London rivals should return significantly improved revenues for this season...

 In the eight seasons since Preston were promoted to the Championship they have finished between 7th and 14th, so they have become the very definition of a mid-table club. This has to be considered a decent achievement, as they have to compete with far fewer resources than most of their rivals.  Their fans might find it frustrating, though. Preston’s pre-tax loss in 2022/23 reduced by £5.8m from £20.2m to £14.4m, which the club described as “a significant financial stride in the right direction.”   Revenue rose £1.8m (12%) from £13.8m to a club record £15.6m, while profit from player sales was up from £0.3m to £0.8m. In addition, the club cut costs by £3.6m (10%) to £30.7m. There were substantial improvements in all three revenue streams, but the star of the show was match day, which rose £0.9m (28%) from £3.0m to £3.9m. In addition, broadcasting increased £0.6m (8%) from £8.1m to £8.7m, while commercial was up £0.2m (9%) from £2.8m to £3.0m. Only five Championship ...

Manchester United’s pre-tax loss in Q1 was more or less unchanged at £33m, even though revenue increased by £13m (9%) from £144m to a first quarter record of £157m and profit on player sales rose £12m (78%) from £17m to £29m. All three revenue streams increased, especially match day, which rose £6m (29%) from £21m to £27m. There was also good growth in broadcasting, up £4m (12%) from £35m to £39m, and commercial, up £3m (3%) from £87m to £90m. The impact of interest payable on United’s accounts is evident, amounting to more than £30m in the first quarter in each of the last two years, which represents a significant increase over the previous periods. This is largely because the majority of the club’s debt is denominated in USD and unhedged. Therefore, the weakening in the Pound against the Dollar has led to higher interest charges in the club’s accounts, which are reported in Sterling. United’s profit from player sales increased from £17m to £29m, mainly thanks to the departure...

Two other clubs have gone bust in recent years under the stewardship of Reading owner Dai Yongge and his associates. KSV Roeselare, members of the Belgian top flight as recently as 2010, and Beijing Renhe, a Chinese Super League club who competed in the Asian Champions League, both fell into financial trouble on his watch. Both no longer exist.  Dai’s takeover, which arrived during a fleeting drive by China to invest in European football, came a fortnight before Reading lost on penalties against Huddersfield Town in the 2017 Championship play-off final. Since then, the Chinese businessman, whose family fortune was amassed through the construction of shopping centres, has run up a wage bill of historic proportions. In April, after failing to comply with a business plan imposed for breaching EFL spending rules, a six-point deduction ultimately doomed Reading to relegation to the third tier. In total, Reading have been docked 16 points under the elusive Dai — hence the 16th-minu...

United fans breathed a sigh of relief when Sir Jim Ratclliffe acquired a minority stake in the club from the Glazers, but the process was agonisingly long. New documents posted this week with the Securities and Exchange Commission in the US shed some light over how the Manchester United deal eventually got done, and why it took so long. The Glazers entrusted Raine Group with United’s future after the US investment bank led the sale in May 2022 of Chelsea FC, achieving a price of £2.5bn in an accelerated process due to the sanctions imposed on billionaire oligarch Roman Abramovich. It didn’t take long for the Glazers to act — they began talks with Raine the following month, according to those new stock exchange filings. It took until November 2022 for the Glazers to confirm that they would consider selling a stake in the club, in part or in full, raising expectations of another highly competitive auction. More than 170 interested parties made contact but predictions of bids fr...

Milan’s 22/23 accounts were the first accounts reported under the ownership of US investment company RedBird Capital Partners, who purchased the club from Elliott Management in August 2022 in a €1.2bln deal that included a minority stake for Major League Baseball club, the New York Yankees. RedBird already had some experience in the world of football via their controlling interest in French club Toulouse and an 11% stake in Fenway Sports Group, Liverpool’s owners. Milan’s success on the pitch helped them return to profit for the first time in 17 years, as they swung from a €60m pre-tax loss to a €14m profit, which chairman Paolo Scaroni described as an “important step”. Revenue rose €126m (46%) from €274m to a club record €400m, slightly offset by profit from player sales falling from €3m to almost nothing.    All of Milan’s revenue streams experienced significant growth under the new ownership with each of them setting new club highs. Match day more than doubled from €...

Manchester United has cut its annual profit forecast after its early exit from Europe’s premier football tournament, underlining the challenge facing billionaire Sir Jim Ratcliffe as he tries to restore the club’s fortunes. Following its failure to progress in this season’s Uefa Champions League, United said on Wednesday that it expected to make £125mn to £150mn of adjusted ebitda in the year to June 30, down from a previous range of 140mn to £165mn. Revenues will now be between £635mn and £665mn, lower than an earlier forecast of £650mn to £680mn.   Its early ejection from the tournament, which it has won three times, means the club, which is listed on the New York stock exchange, will earn less from broadcast rights. The deal with Ratcliffe valued United at around $6.3bn, including debt, and marks the biggest shake-up in ownership since the Glazer family acquired the club for around £790mn in a leveraged buyout in 2005. United’s shares fell by almost 4 per cent on Wedn...

Middlesbrough's 2022.23 accounts show revenue at  £28.6 m, up 6%  Wages £29,6m up 4%. Operating loss pre player sales £29m up 40%.  Player sale profits of £22.3m offset operating losses . Total losses over years of £250m.   Player signings were £12m. Player sales £23m Boro bought players for over £12m as investment helped take club to playoffs, resulting in squad costing £40m by 30 June 2023. Sale of Spence and Tavernier may be contributor to sales of £23m. £148m owed to Steve Gibson   at year end then converted into shares and effectively written off.   Football finance guru Kieran Maguire comments: 'F ans criticising Gibson should give their heads a wobble as he’s also put in £90m via shares.' Football finance guru Kieran Maguire notes: ' In last 48 hours three Championship clubs. Preston, Middlesbrough and Luton published accounts. Between them they made an operating loss of £178k a day and none are profligate.'

Preston North End have reported their annual results to June 2023 with increased turnover and reduced losses:  https://www.pnefc.net/news/2024/january/club-comment-on-202223-accounts/ Not unreasonably, the chairman draws attention to the lack of a level playing field in the Championship because of parachute payments. Preston due to receive £484k in transfer fee instalments from other club & they owe £400k. Main creditor is the alomost £88m due to IOM parent Wordle. Since the year end owners have put in almost £7m more in interest free loans.

On the face of it, things look pretty bad for Forest in terms of the Premier League charges, as they have consistently lost money. In fact, have only reported a profit once since 2005 – and that was entirely due to a £40m loan write-off in 2017. In the four years covered by PSR up to 2021/22, their losses were over £100m, including a hefty £46m deficit in the season they were promoted. Not only was this the largest loss in Forest’s history, but it was also the 10th highest ever in the Championship. Since promotion, Forest have really splashed the cash, spending around £163m to bring a vast number of players to the City Ground. It is estimated that there were 30 players in total, though it’s easy to lose count, including six purchases above £10m. This was actually the sixth highest gross spend in the Premier League, according to Transfermarkt, ahead of the likes of Liverpool, Tottenham Hotspur and Newcastle United. It was also more than the two other promoted clubs combined (Bourn...

Newcastle’s pre-tax loss in 2022/23 was much the same as the previous year at £73m, as the “continued investment” in the squad was offset by strong revenue growth. Revenue shot up £70m (39%) from £180m to a new club record £250m, but this was nearly matched by £62m (24%) growth in operating expenses to £320m. In addition, profit from player sales halved from £6m to £3m, while net interest payable rose £6m from £1m to £7m. All three revenue streams saw significant growth, so much so that new club records were established in each of them. Commercial was up by nearly two-thirds (£19m) from £28m to £47m, while match day rose £10m (38%) from £28m to £38m.   The smallest percentage growth was in broadcasting, but even that was 33% higher, increasing £41m from £124m to £165m. Newcastle’s revenue growth has been very impressive, higher in percentage terms than the Big Six clubs. In absolute terms, their £74m increase since 2019 has only been outpaced by Manchester City, though many c...

Everton and Nottingham Forest are expecting to be referred to an independent commission over breaches of the Premier League’s profitability and sustainability regulations (PSR). Clubs will learn on Monday whether they have fallen foul of the league’s financial rules under new guidelines introduced to ensure any basic breaches are dealt with in time for punishments to be levied in the same season as a charge is brought. Under the league’s PSR, clubs are allowed to lose a maximum of £105million ($134m) or £35m per season over a rolling three-year reporting cycle. Everton are already appealing against a 10-point deduction relating to the 2021-22 season while Forest would join Manchester City as the only top-flight clubs to be charged with breaking these regulations. Under the guidelines both clubs are now at risk of a fine or a points deduction with formal notification of any charges set to come on Monday.    Both clubs have prepared mit...

Aston Villa has been owned since 2018 by V Sports, a joint venture between billionaire US hedge funder Wes Edens and Nassef Sawiris, an Egyptian billionaire investor who is one of Adidas’s largest individual shareholders. Last month, Atairos, a US investment group run by former Comcast executive Michael Angelakis, agreed to buy a minority stake in V Sports. In the year to May 2022, Aston Villa generated revenues of £178 million and a profit of £400,000. Last year, the league’s biggest club, Manchester City, reported revenues of £713 million and a profit of £80 million. Not very long ago, a club with an ambitious or carefree owner could force their way up the league by spending big. Nowadays, Financial Fair Play rules — introduced to stop clubs from over-investing and running up large annual losses — mean that this is not possible. And for Villa, lower revenues mean less money to pay for top players who might help their continued on-field success. Chris Heck is head of the busines...

Already deducted four points by the EFL this season for the late payment of wages and a failure to meet the subsequent obligations, Reading’s abundant off-field problems show no sign of abating. Staff, HMRC and suppliers have all been made to wait for money owed this season, while the hopes of a long-awaited takeover that would end Dai’s disastrous six-year reign have faded. All the while, as Ruben Selles and his players attempt to keep Reading afloat, budgets and staffing numbers continue to be cut through measures orchestrated by Dai and chief executive Dayong Pang. The January transfer window will likely see their greatest assets sold, such as England Under-20s defender Nelson Abbey and club captain Tom Holmes. Others, including Tyler Bindon and Charlie Savage, will be allowed to leave if valuations are met with upfront payments. The extent of Reading’s financial problems have been detailed to  The Athletic  and include: The November payroll for players bei...

When Farhad Moshiri announced he had agreed to sell his 94.1 per cent stake in Everton to 777 Partners on September 15, it was hoped the deal would be wrapped up by Christmas, with the Florida-based investment firm properly in charge in time for the winter transfer window. The club’s official statement said the “closing of the transaction is expected in the fourth quarter of 2023” and the briefing was that regulatory approval from the Financial Conduct Authority, English Football Association (FA) and Premier League would take “10 to 12 weeks”. So, what are we to make of the news that kicked off week 17 of this process when it was revealed on Monday that 777 has loaned the club another £40million ($51m), taking Everton’s total IOU to its prospective new custodians to £142m? The unofficial statement, issued through the usual “sources close to the deal” channels, was that this represented further proof of 777’s commitment and evidence that Premier League...

Football finance guru Kieran Maguire reports that West Bromwich Albion are ' in advanced talks with Florida businessman Shilen Patel over potential takeover. Patel understood to be the preferred bidder at this stage. No timescale on a deal, but this is ongoing/moving forward.' A Chinese consortium led by businessman Guochuan Lai bought a majority stake in Albion, then a Premier League side, for £175million in 2016. It was a price tag that seemed steep at the time but now looks like the high-water mark of English football’s Chinese investment boom, a period of irrational exuberance . Under his ownership, Lai’s lads have been relegated to the Championship, promoted out of it and then relegated to it again. They have also consistently lost money, a situation not helped by his unfortunate habit of borrowing money from the club on terms that are very friendly to him but not so sensible for West Brom. Anyway, with Albion no longer in receipt of parachute payments (the money clu...

Football finance guru Keiran Maguire reviews Newcastle United's finances after they made a £73m loss in the year to Juine 2023:  https://www.themag.co.uk/2024/01/football-finance-expert-points-to-stand-out-figures-newcastle-united-2022-23-accounts-released/ Maguire added: ' Newcastle's losses announced yesterday mean the club goes into the top ten of loss making clubs in PL history.' Newcastle’s turnover has jumped from £140 million to £250 million since they were taken over and their next accounts will show that playing in this season’s Champions League, after last year’s top-four finish, has earned the club a further £37 million. The club’s chief executive officer, Darren Eales, has revealed that to be compliant with the Premier League’s profit and sustainability rules (PSR), Newcastle will have to consider selling players, including the stars Alexander Isak, Sven Botman and Bruno Guimarães. Those rules means teams cannot record a loss greater than £105 million a...

Stoke City have made a loss of £12m but the underlying financial position is better than it looks:  https://www.stokesentinel.co.uk/sport/football/football-news/stoke-city-financial-fair-play-9024918

Scottish clubs generally aim to break even but Dundee United have reported a loss of £2.8m and an even bigger operating loss following relegation:  https://www.footballscotland.co.uk/spfl/dundee-united-announce-28m-loss-28421655

Charlton fan website editor Rick Everitt has attempted to dissect the malaise at the mid-table League One club as directors prepare to answer fans' questions online tonight:  https://www.votvonline.com/home/the-2023-24-blogs/9-1-24-questions-to-be-asked-about-charlton-s-future/ You need to read the article for yourself but here are some key points: 'The lack of any clarity about who is steering the ship and how they intend to get it to its destination, whether that is the Championship or above. Nobody in their right mind could imagine that the club can ever be financially sustainable in League One. Now we can probably agree that competence has been in very short supply at The Valley for many years, but the idea the club can limit its operating losses in this way short of a revolution in wider football funding is pure fantasy. One of the key drivers in Charlton’s extraordinary rise in the 1990s and 2000s was the connection between the fans and the club, up to and including the b...

Despite the advantage that comes with lucrative Premier League TV rights, English clubs are not immune from the need to update facilities. Manchester City, ranked by Deloitte as the club with the highest revenue in football, is feeling the pressure to keep up with Europe’s top clubs.   It is planning to add about 7,000 seats to the Etihad, its home ground, but is also building a hotel, a museum and a new 23,500-capacity music space — the Co-op Live arena — on its campus in east Manchester that will host the likes of Nicki Minaj, Eric Clapton and Barry Manilow when it opens in April. Roel De Vries, chief operating officer of the group that owns Manchester City, says the club needs to increase stadium revenue “if we want to stay competitive in the world of football and be in the top group when it comes to performance”. “We cannot easily expand the stadium beyond 60,000,” he says. “So then we have to figure out, ‘How can we squeeze a lot more out of the stadium?’”

With most TV deals negotiated at league level and new regulations that link spending to income, top clubs across European football are raising billions of euros, dollars and pounds for stadium redevelopment with the aim of creating a more diverse pool of cash flow. In Italy, the problems with infrastructure are acute. Serie A was the top league in the world in the 1990s, but has since seen its position slip, in large part due to a lack of investment. It now generates less broadcast income than top leagues in England, Spain and Germany, and recently concluded a domestic TV deal at a lower price than its last contract. Club executives and owners, including a growing band of professional investors, see new stadiums as key to getting the league back on track.  “Italy is super interesting because the infrastructure has held back huge clubs with massive fanbases and international appeal, which is why we’re seeing international capital move in,” says Christopher Lee, managing director...

Real Madrid’s €1.2bn renovation project, which includes restaurants that can serve thousands of people, a skywalk with views across Madrid and a newly expanded museum that is expected to increase visitors from 1.5mn a year to 2mn. Museum revenue is projected to hit €50mn as a result, similar to the amount some clubs in Spain’s top tier earn from their broadcast rights.  In Barcelona, the club’s redevelopment project, which has been almost a decade in the making, is finally under way. Once finished, the total capacity at Camp Nou will only rise slightly to 105,000, but an extra ring of VIP seats will be added, as will a roof, a new third tier of general admission seats, and a 360-degree screen. More work will take place outside the stadium, where a new building will house the museum and club shop, alongside a revamped Palau Blaugrana, a space that will hold 15,000 people for concerts and other sport, such as basketball.   Spanish clubs will also need to invest heavily ...

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000.  The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts.  Money brought in from football has gone up too. Match day ...

One of the most important trends in the world of football is multi-club ownership. According to UEFA’s latest benchmarking report, at the end of 2022 there were more than 180 clubs worldwide that were part of a multi-club investment structure, involving 6,500 players. This is nearly twice as many as four years before, while the number has increased fivefold since 2012. Even that rapid growth is almost certainly understating the reality, as CIES Sports Intelligence identified more than 250 teams involved in multi-club ownership in March 2023. The growth has been driven by a combination of macroeconomic factors and global investment trends. Financial weaknesses and inequalities in the game, exacerbated by the impact of the COVID pandemic, have resulted in buying opportunities. The perceived under-valuation of the assets, i.e. football clubs, has attracted the attention of US-based investors, with 27 multi-club investment groups (a third of UEFA’s total number) originating in Americ...

Dagenham & Redbridge’s American owners, a group which includes former USMNT goalkeeper Tim Howard, are putting their shares in the National League club up for sale. Led by New York Yankees minority shareholder Peter B. Freund, the seven-strong consortium effectively rescued the east London-based side in 2018 after their previous majority owner pulled his financial support. Freund, who also co-owns United Soccer League outfit Memphis 901 and several minor league baseball teams, had previously been linked with a move for Aston Villa, then in the Championship. While that story was incorrect, it was true that the U.S. businessman was looking for an affordable English football team in the Greater London area. The group, named Victoria Road Football LLC after the club’s stadium, will exit Dagenham & Redbridge having failed to achieve their goal of returning the club to the English Football League but they did deliver on their promise to upgrade Victoria Road. They also brought ...

Nottingham Forest have been reported as a club at risk of breaching the Premier League’s rules on profit and sustainability. The PSR guidelines see clubs permitted to lose a maximum of £105million ($132.6m) over a three-year period. But Forest have only been in the Premier League for a year of the last three-year period, which means their permissible losses are even smaller. Forest’s losses would be capped at £61million, which breaks down as £13m for the 2020-21 and 2021-22 seasons when they were in the Championship, plus £35m for last season, their first back in the top-flight. Football finance guru Kieran Maguire states: ‘Based on figures from final Championship season I estimate that Forest sneaked in just under the £39 million limit for the three seasons (as averaged out for 2019/20 and 20/21). Lot will depend on wages and amortisation for 22/23 as to whether they are below the £61m max.’ Selling Brendan Johnson was always a key part of the plan for Forest. Because...

Despite winning some silverware, West Ham swung in 2022/23 from a £12m pre-tax profit to an £18m loss, as revenue fell £16m (6%) from club record £253m to £237m, partly offset by profit from player sales rising from less than £1m to £17m. West Ham have only reported a net profit once in the last five years, losing an aggregate £126m in this period. This was very different from the preceding 5-year period, when they were profitable on four occasions, adding up to £70m. A game of two halves, if you will. The main reason for the revenue decrease was broadcasting, which fell £16m (10%) from £164m to £148m, due to less money in the Europa Conference compared to the Europa League, exacerbated by the lower Premier League finish. West Ham’s £18m loss is not too bad. Although a few clubs have managed to generate a profit, most notably Manchester City with £80m, many clubs posted much larger losses in 2021/22, e.g. Chelsea £121m, Leicester City £92m and Newcastle United £73m. Player sale...