The Political Economy of Football V2

Clubs' need for financing has never been greater than since the start of the pandemic, resulting in an influx of new players on football's discreet loan market.  Despite never commenting publicly, few have made as much noise as MSD Capital that has provided loans to clubs such as Southampton and Burnley in relation to ALK Capital's takeover, but there are others who have gone more under the radar.  One of them is Oldenburgische Landesbank (OLB), a more than 150-year-old German bank who launched a football finance unit in April last year, providing receivable financing and traditional lending solutions focusing on the top five European leagues, according to its CFO, Dr Rainer Polster. "Football finance requires very specific know-how and good networking in the community. That's exactly what we brought on board last year with our new team of football finance experts," he told offthepitch.com. The company targets a business volume of €500 million in the c...

Deloitte Sports Business have produced an update of their 2020 Money League to take account of the impact of Covid-19 on the football industry.   I will attempt to summarise some of the main insights, but the whole document repays reading:  https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/covid-19-football-and-digital-2020-21-season-and-beyond.html The main take home lesson is that the impact of Covid-19 is potentially destructive, but it is up to each club to be agile and develop strategies that will enable them to cope.   Deloitte estimate the total revenue loss for the 20 richest clubs at €2bn by the end of the season. Bayern Munich overtook Manchester United to become the third highest earner behind Barcelona and Real Madrid.  The German club's revenues were €634m compared with €580m at Manchester United.  The Bundesliga's quicker resumption of play in 2019/20 was a factor for Bayern Munich.   The Bundesliga was also a...

Fifa has produced its annual transfer report which considers the impact of Covid-19:  https://img.fifa.com/image/upload/ijiz9rtpkfnbhxwbqr70.pdf The report notes: 'In January 2020, the number of international transfers was up 9.2% compared to the same period in the previous year, and this increase would probably have been even more significant in the second transfer window.' 'But after the pandemic started spreading across the globe, the usual peak in July did not happen, with a large number of competitions not being completed and many member associations shifting their registration periods. Instead, there was a longer and more extensive period of transfer activity, beginning in early July and reaching its peak in September and even continuing into October.'

Kieran Maguire's The Price of Football is one of the most significant books on football finance to come out in 2020.  It is now out of print with Agenda, although copies are still available on Amazon. Kieran is much in demand as a media commentator and also has his own podcast. It was therefore with some uncertainty that I approached Kieran to write something on Covid-19 and football for Political Quarterly of which I am reports and surveys editor. The full article will be available free online for a while in due course.   In the meantime, Kieran has produced a 'digested read' of his key points:  https://politicalquarterly.blog/2021/01/14/how-covid-19-highlights-existing-weaknesses-in-english-football/

Scottish football below the Championship has been suspended for three weeks following talks between the football authorities and the Scottish Government:  https://www.skysports.com/football/news/11095/12184974/lower-leagues-in-scotland-suspended-for-three-weeks   Of itself this is not a major decision given that a large part of the non-league system south of the border is suspended and increasingly unlikely to be completed.  Attendances in the two lower divisions of the Scottish league system are generally on a par with the non-league system in England below 'elite' level.  The Scottish Government always likes to show that it is tougher and quicker than Westminster in imposing restrictions designed to suppress Covid-19. If the English Premier League was suspended, the financial consequences would be far reaching.  One school of thought, represented by Steve Bruce at Newcastle, is that it is 'morally, it's probably wrong' for football to continue. This plays into...

The chief executive of Rochdale FC has asked for the EFL to be suspended:  https://www.inyourarea.co.uk/news/rochdale-afc-chief-executive-calls-for-season-suspension-amid-match-cancellations/   I doubt whether the EFL will take their instructions from him. However, there is no doubt that the pandemic has already ravaged matches as players succumb to the virus and the number called off will undoubtedly increase with a more frequent EFL testing regime. On The Football League Show at the weekend, the pundits speculated that the Championship would be finished but Leagues One and Two could be decided on a points per game basis.  This caused a lot of angst last year, not least on the part of Tranmere Rovers who felt they were hard done by when they relegated. They threatened a legal challenge, but this never happened as I suspect that there were no good grounds in law that would be recognised by a court.  Just because something is unfair doesn't mean it is illegal, provid...

The authoritative Swiss Ramble reviews the latest financial results for 2019/20 for Tottenham Hotspur. Tottenham Hotspur’s 2019/20 financial results covered a season that was disrupted by the COVID-19 pandemic, but they still benefited from the new stadium. The club swung from £87m profit before tax to £68m loss, a deterioration of £155m. Revenue dropped £69m (15%) from club record £461m to £392m (including exceptional £11m TV rebate), while profit on player sales rose £4m to £15m and expenses increased £85m. After tax loss was £64m. This is the first year that Spurs have reported a loss since way back in 2012 – and that was only £7m. In the intervening 7 seasons, they have generated an impressive £412m of profits, averaging £59m a year. In 2018 and 2019 alone they delivered a hefty £226m. Main driver of revenue fall is broadcasting, down £108m (44%) to £136m, due to Premier League deferral/rebate and reaching Champions League final prior season. However, new stadium led to growth in m...

Billionaire Stephen Lansdown has sought to end Bristol City's reliance on his fortune, but the Covid-19 pandemic has pushed back these ambitions by several years.  Bristol City has been hit hard by the loss of matchday revenue. The presence of rich owners like Mr Lansdown was one reason the Premier League was reluctant to share revenues with the Championship.   However, he told the Financial Times, 'you just can't keep throwing good money after bad.  There comes a point in time where you have to start making some very difficult decisions.' Lansdown lives in Guernsey for reasons of tax efficiency, but says a lot of his money goes back to his sporting ventures in the UK which also include rugby and basketball.   He rejects the argument that billionaire owners of sports team should cover all the losses.   He told the Pink 'Un: 'I can't run my business because the government isn't allowing me to run it.' Mr Lansdown praised the controversial Project B...

The House of Commons Petitions Committee has provided an interesting summary of responses it received from 13,254 fans on how not attending matches during Covid-19 was affecting them:  https://committees.parliament.uk/writtenevidence/14361/default/ Many respondents told the Committee that they attend matches not simply for ‘mere entertainment’ but for the benefit of their emotional and mental health, highlighting the sense of ‘escapism’ and ‘togetherness’ that football can provide. 

The authoritative Swiss Ramble has been looking at the impact of the Covid-19 pandemic on European clubs.  He comments: ' Although it’s early days in the reporting period for football club accounts from the extended 2019/20 season, we can already see the significant impact of the COVID-19 pandemic in a few selected announcements from some European clubs.' 'Clearly, football clubs are suffering from the impact of the pandemic. This is only a small sample, but it is a sign of things to come at every club, namely large revenue reductions, partly mitigated by cost savings, covered by taking on more debt or capital put in by owners.' Barcelona have estimated a further €65m reduction in revenue in 2020/21 from €856m to €791m, partly mitigated by including TV money for 2019/20 competitions completed in July and August. That would mean a total revenue loss of nearly half a billion (€471m) over two years. Barcelona were keen to emphasise that without COVID they would have achiev...

According to The Times this morning, the Premier League is prepared to offer the English Football League just £50m in bailout money.  Another £100m would be available as loans with interest rates similar to those charged by banks. The EFL says it needs up to £250m to cover losses arising from the coronavirus pandemic.  Some clubs in League One and League Two doubt whether they will be able to pay their wage bills at the end of the month. Some top flight clubs are questioning why they should have to subsidise EFL clubs.   Crystal Palace Steve Parish says that he knows of no other industry that has been asked to bail out its competitors.  Of course, in football without competitors the sector would not be viable. However, as Parish points out, supermarkets are not asked to bail out corner shops.

Barcelona has reported a €100m loss last season while seeing a doubling of debt to €488m.  Revenues fell by 14 per cent to €855m.   There was a coronavirus induced income fall of just over €200m. Commercial revenues were down 9 per cent to €297m.   Some commercial deals which were at advanced stage of negotiation before the pandemic fell through.  Merchandise sales were also down. Match day revenues dropped 24 per cent to €162m with no spectators since March.   Broadcasting income fell 17 per cent to €249m, partly due to fewer European matches.   Barcelona said that it expected revenues to fall to €791m this season, although that assumes a partial return of spectators to the Nou Camp. The club made €74m of savings, including agreed wage cuts with players. Barcelona has announced a new financing to plan to raise €815m for the redevelopment of its stadium.  Goldman Sachs will manage a new vehicle that will pay investors a portion of t...

The authoritative Swiss Rambles reviews the accounts of Juventus.  2019/20 accounts cover a COVID impacted season when they won the league (for the 9th year in a row), but were eliminated in the Champions League last 16 by Lyon. The loss before tax widened from €27m to €82m (€90m after tax), as revenue fell €88m (18%) from €494m to €407m, partly offset by €43m (13%) wages cut from €328m to €284m and profit on player sales rising €40m to €167m, though non cash flow expenses were up €48m. So after four years of profits, the club have now reported losses three years in a row, aggregating a €119m deficit over that period. However, the club is no stranger to losses, having racked up €151m between 2011 and 2013. They forecast that 2020/21 will end in another loss. The €234m is the worst operating loss in Italy. It is true that their accounts are the only ones impacted by COVID to date, but this had already been on a steady downward trend from €(1)m in 2015. The €142m loss in 2019 was th...