The Political Economy of Football V2

My large family displays no interest in football, the one exception being a son-in-law who is a Southampton season ticket holder.   I have not intruded into private grief but his wife tells me he will not discuss Spygate. The following material extracts highlights from the Swiss Ramble’s latest review of the club.   Much more in depth analysis is available on his Substack page. Southampton had long been held up as an example of a club punching above its weight, finishing in the top eight four seasons in a row during their 11-year stay in the top flight, but went down in 2022/23, finishing in 20th place. The relegation in 2022/23 took place in the first full season under the control of Serbian media mogul Dragan Solak, who bought 80% of the club for £100m in January 2022 via his investment vehicle Sport Republic Limited.   However, the rot had already started to set in after Chinese businessman Gao Jisheng acquired a majority stake in 2017, with Katharina Liebhe...

Football finance guru Kieran Maguire has warned that Southampton need to be very careful with their debts and finances.  With sports lawyers on the prowl for business, there is also the risk of legal action:  https://www.bbc.co.uk/sport/football/articles/c8d82zn563vo  

I confidently predicted that the real beneficiaries from Spygate would be sports lawyers and that looks like being the case.  Given the reputational damage they have already suffered, the club has wisely decided not to take the matter to judicial review, even though they might have grounds for doing so.  It would have been better if they had made a full admission more quickly. Southampton players are exploring their options regarding legal action against the club. Tonda Eckert’s squad had largely been kept away from the affair and only had the basic details communicated to them by the club. The players were furious at the EFL verdict, having only found out at the same time as everyone else, with members of the squad who had taken 40 per cent pay cuts after suffering relegation from the top flight year were due to have that reinstated in the event of promotion to the Premier League. They are due to meet with the club on Wednesday, and sources with knowledge of the players...

Southampton have been kicked out of the Championship play-off final, known as the richest game in football due to the financial rewards from winning it, after the club was found to have broken league rules by spying on opponents’ training sessions.  The English Football League, which runs the second, third and fourth tiers of professional men’s football, said on Tuesday that an independent disciplinary commission had decided to expel Southampton from the play-off final, due to take place on Saturday. It added Southampton had “admitted to multiple breaches of EFL Regulations related to the unauthorised filming of other clubs’ training”. Southampton will also receive a four-point deduction for next season. Southampton had been hoping to bounce back to the Premier League after being relegated last year. The south coast club is majority owned by its chair, Serbian billionaire Dragan Šolak. The club still has tickets for the Championship play-off final advertised for sale on its web...

Hull City could be the losers from the 'Spygate' crisis and the lawyers could be the winners. If the EFL decides that Southampton can stay in the play off final, Boro are likely to sue given the sums that are at stake.  And if the EFL removes them, the Saints will call in their lawyers. Meanwhile Hull City do not know who they are going to face and when they will face them.   This makes it particularly difficult for their disabled supporters who need to book transport and accommodation. One thing that surprised me is how open Boro's training ground is.   I live near Coventry City's training ground and once they started to be a serious club again, big screens were erected.

Southampton's latest accounts are not as good news as their victory over Arsenal.   The 2024/25 accounts cover a season when they finished 20th in the Premier League. Revenue was up 86 per cent at £115m.   Wages were up 43 per cent at £116m.   Wages constituted 73 per cent of revenue, an acceptable ratio just above the recommended level of 70 per cent. The underlying loss was 29 per cent down at £62m.  This reduction was due in part to player sale profits of £29m. The pre-tax loss was £54m, compared with a profit of £17m in the the preceding season.

Alexander Isak’s £125million move from Newcastle United to Liverpool was a fitting final act that helped add a juicy full stop to the most spectacular summer of trading that English football has known. Deadline day alone saw £375m change hands, nudging the totalizer up to a figure that already ensures this coming January is not needed to make this the most lavish season on record. Never before have the Premier League’s 20 clubs spent nearly as much on players, both in gross and net figures. The total spend, in fact, was a remarkable £1.1bn more than last summer once the final agreements were struck by 7pm, representing a 55 per cent year-on-year increase. The fact a record number of deal sheets were lodged ahead of the deadline, a figure that ran into double figures for the desperate, illustrated the frenetic nature of business from start to finish. No club has ever had a higher gross spend than Liverpool, either. The £420m they committed on the deals to land Isak, Florian Wirtz, H...

Before they went down in 2022/23, Southampton had long been held up as an example of a club punching above its weight, spending 11 years in the top flight, which included finishing in the top eight four seasons in a row between 2013/14 and 2016/17. The relegation in 2022/23 took place in the first full season under the control of Serbian media mogul Dragan Solak, who bought 80% of the club for £100m in January 2022 via his investment vehicle Sport Republic Limited.    However, the rot had already started to set in after Chinese businessman Gao Jisheng acquired a majority stake in 2017, with Katharina Liebherr retaining the remaining 20%. There has been a huge amount of change since Solak’s arrival, as the club is now on its sixth manager in just over three years, having previously dismissed Ralph Hasenhüttl in November 2022, Nathan Jones in February 2023 and Ruben Selles in May 2023, before this season’s trio. The accounts for that 2023/24 season are obviously now a year...

In less than a year, Southampton went from the highs of a champagne-filled Championship play-off win celebration to walking off the pitch on Sunday as the first Premier League team relegated with seven games still left to play. One of my sons in law is a season ticket holder and is so fed up that he has stopped going to games. But with all three promoted teams probably relegated, is the gap between the Championship and the Premier League just getting wider?    Soon we will hear calls from American owners for less relegation to protect their investment in their franchises. During those 316 days, more than £100million ($128m) was spent on new signings, Russell Martin, their promotion-winning manager, was sacked, Sport Republic’s Henrik Kraft stepped down as chairman and resigned from the board, Ivan Juric was hired, and Johannes Spors became the technical director. If you add an extra day to the total, then you can include that Juric, who replaced Martin in December, was s...

Rooted at the bottom of the Premier League, and having just sacked their latest manager, Southampton made a £87m loss in 2022/23:  https://www.dailyecho.co.uk/sport/24159702.southampton-post-87m-loss-2022-23-financial-accounts/ The auditors have certified that they are 'a going concern', but recovery in the Championship against such a backdrop is going to be challenging.

In 2022/23 Southampton’s pre-tax loss shot up from £15m to £87m, as revenue fell £5m (3%) from £151m to £146m and profit from player sales dropped £24m from £31m to £7m. Operating expenses rose £36m (19%) to £224m, while net interest payable was up 76% from £9m to £17m. The loss after tax was even higher at £94m, due to a £7m tax charge. Southampton have now reported losses five years in a row, adding up to nearly quarter of a billion pounds, which has completely wiped out the preceding five years of profits.   The decline in Southampton’s profitability is partly due to making less money from player trading, which had been a key part of the club’s strategy. Southampton’s £77m operating loss was one of the worst in 2022/23, only better than three clubs, though they were much higher: Aston Villa £139m, Everton £120m and Wolves £101m. Importance of broadcasting revenue The main reason for the reduction in Southampton’s revenue was broadcasting, which fell £7m (6%) from £115m t...

Majority stakeholder Sport Republic has an office at Southampton’s training ground, Staplewood.  Despite being relegated from the Premier League last season, the club remain the jewel in its multi-club model, and getting Southampton’s affairs in order is imperative to the broader operation. The owner has two other clubs — Turkish second-tier side Goztepe, purchased in August 2022, and Ligue 2 outfit Valenciennes, acquired in July this year. Lead investor Dragan Solak, a Serbian telecoms billionaire, took out a £110million ($133.4m by today’s rates) loan to buy Southampton in December 2021. The loan was from Luxembourg-registered company Summer Invest Sarl, which is owned by Solak and is a majority shareholder in his telecom company United Group. This was unrelated to Southampton’s cash flow and the loan was not to be repaid out of club accounts. Since then, however, Solak has regularly provided Southampton with cash injections, covering “general running...

Southampton have found relegation challenging on and off the pitch.   Revenue has been halved, they still have one of the biggest wage budgets in the league and they are paying off a £80m loan:  https://www.dailyecho.co.uk/sport/23818733.southampton-ceo-parsons-explains-keeping-finances-control/

Chelsea’s £408m gross transfer spend this summer was almost twice as much as the next highest club in the Premier League, which was Tottenham with £216m. Two other clubs spent more than £200m, namely Manchester City £210m and Arsenal £204m. In fact, half of the clubs in the Premier League had gross spend above £100m, including Bournemouth £111m and Nottingham Forest £107m. Some of the smallest outlays were at two of the promoted clubs (Luton Town £20m and Sheffield United £56m), while Everton and Crystal Palace also spent a relatively low amount with £35m and £34m respectively. Chelsea also led the way in terms of player sales with £232m, followed by Brighton £165m, Wolves £149m, Manchester City £139m and West Ham £136m. In contrast, five Premier League clubs made less than £10m from player sales: Brentford £9m, Burnley £3m, Bournemouth £1m, Crystal Palace £1m and Luton Town, who sold nobody for money (according to Transfermarkt). The big spenders Chelsea also had the highest...

Looking at the most recent accounts from the 2021/22, on the face of it Leicester City have the most to fear from relegation, because they had by far the largest operating loss of £83m, the highest wage bill of £182m, the highest wages to turnover ratio of 85%, the highest debt of £346m and the highest interest payable of £19m.  If we look at net profitability over the last five years, it is clear that Leicester have posted the highest losses of the relegated clubs. However, the picture was not exactly rosy at the other two relegated clubs with Southampton and Leeds United posting large operating losses of £37m and £34m respectively. Obviously, the most significant revenue decrease following relegation is broadcasting, even though the blow is softened by parachute payments. Basically, a club will earn at least £100m TV money in the Premier League, which will be halved to around £50m in the first season in the Championship. The fall in broadcasting will be steeper for Leiceste...

Southampton’s pre-tax loss in 2021/22 narrowed from £23m to £15m, despite revenue dropping £6m (4%) from £157m to £151m, mainly because profit from player sales nearly doubled from £16m to £31m. Although losing money is rarely good news, Southampton’s £15m loss was actually one of the better financial performances in the 2021/22 Premier League. Many clubs reported much higher losses last season, including Manchester United £150m, Chelsea £121m, Leicester City £92m, Newcastle United £73m and Tottenham £61m. Southampton have now reported losses four years in a row, adding up to £155m, which has completely wiped out the preceding five years of profits. This profitable period was worth £126m in total, including £42m in 2017 and £35m in 2018.   More encouragingly, losses have reduced from the £76m COVID-impacted peak two years ago. The decline in Southampton’s profitability is partly due to making less money from player trading, as profit in the past four years has averaged only £...

Between 2013-14 and 2016-17, Southampton not only finished eighth, seventh, sixth and eighth in the Premier League but also demonstrated a remarkable knack for developing or recruiting players to sell on to bigger clubs at substantial profits. A certain mystique was credited to Southampton’s “black box”, a huge scouting database and video suite based in a windowless room at the club’s Staplewood training ground. They even launched their new kit in 2017 with a video that cast their players as superheroes trying to stop a group of villains — and one of them looked and sounded an awful lot like Ronald Koeman, who had just left them to take over at Everton — stealing a device that “holds the secrets behind Southampton’s famous academy, tactics, transfers, all their future plans”. But that approach — though usually described as self-sustaining — is unlikely to work indefinitely. You can’t outsmart the market indefinitely. Southampton soon found other clubs, with bigger budgets, lookin...

One year after Sport Republic took over, Southampton face a real threat of relegation. Southampton is Sport Republic’s flagship club within its multi-team model. The only other club they currently own are Turkish second-division side Goztepe. The Athletic  has revealed that, before Sport Republic arrived, Southampton were looking at potential investment from ownership models that involved a multi-team strategy. Chief executive Martin Semmens actively sought buyers with these credentials and expressed the benefits of utilising a multi-team approach. Southampton accept their summer investment at the end of last season — where they signed 10 players and recorded a net spend of £76million ($91.2m) which was the eighth highest in the Premier League — resulted in a larger turnover of players than they would have wanted. Though it was deemed necessary in order to drive through a new-found vision, Southampton’s squad had grown stale and major surgery was required. Southampt...

When the Premier League was launched in 1992, Manchester United and Liverpool had payrolls of £8million each. As the intervening 30 years have passed, the large sums of money spent by broadcasters to secure TV deals to broadcast the competition has transformed England's top flight and played a key role in player wages skyrocketing. Then came greater overseas investment into English clubs, as Premier League owners shifted away from the local-boy-done-good businessman of old to Russian oligarchs, United States-based consortiums and companies linked to nation states, and took footballers' salaries to a new stratosphere. According to recent figures, Manchester City are the Premier League's highest-paying club, spending around £355m ($430m) a year on player wages, with Chelsea’s the second-biggest total at £343m. Manchester United’s annual wage bill is now £323m, and Liverpool’s sits at £314m. The two north London arch-rivals Arsenal (£244m) and Tottenham Hotspur (£205m) are...

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...