Football Management

Commentary on the management of over 160 English football clubs by Dr John Beech, winner of the FSF Writer of the Year Award 2009/10 Twitter: @JohnBeech Curator of Scoop.it! Football Finance

The trouble with new stadiums 4 (and final)

Posted by John Beech on August 10, 2010

[See also The trouble with new stadiums 1, which looked at the argument that "We’re a club with ambition and we need more seats to reflect that ambition", The trouble with new stadiums 2, which looked at the argument that "We’ve got the wrong sort of stadium.  We need one better suited to maximising our revenue streams.", and The trouble with new stadiums 3 which looked at the argument "There’s this amazing property deal we can do. We’ll sell the old stadium for redevelopment and there’ll be loads of money to build the new one.".]

This final posting in the series looks at whether there are cases where a new stadium can be justified, and begins with a look at Premier League clubs, for it is at this level one might expect to find any evidence that a new stadium has been a successful strategy – it is these clubs which have the highest revenues and which should thus be in the strongest financial position to finance a new stadium.

First, the big 4.  Of these, only Arsenal have opted for a new stadium, Chelsea and Manchester United having opted for stadium redevelopment, and in Manchester United’s case considerable expansion of seating capacity.  Arsenal have made a reasonable success of the new stadium, the only significant qualification being the downturn in the property market which has hindered the redevelopment of the old Highbury site.  Liverpool have opted for a new stadium policy – they could certainly justify an expansion of capacity – but their financial situation, with debts of £350m, doesn’t augur well for the timing of such a strategy.

Three of the big 4 have particular local rivals.  Manchester City are a rare example of “If it seems too good to be true, it may actually still be true“.  The financial deal that Manchester Council offered them was definitely a very attractive one, and they would have been fools not to have accepted.  Everton are in a similar situation to Liverpool – the sound business case for a new stadium is rather weakened by the debt level they try to go forward from.  Tottenham’s plans for a new stadium next door to the current one have got bogged down in the planning process – the government’s advisor on architecture, urban design and public space, the Commission for Architecture and the Built Environment, have objected that “an overall masterplan for the site is not evident: the three components – the stadium, supermarket, and housing – feel like very separate projects without convincing spatial relationships between them” (2).

Overall the situation in the Premier League

  • The clubs with new stadiums: Arsenal, Bolton Wanderers, Manchester City, Stoke City, Sunderland and Wigan Athletic, a total of six.  Of these, only Wigan has ‘shown ambition’, built a new stadium, and risen up the pyramid.  Notwithstanding the professed objection of their Chairman, Dave Whelan, to a ‘debt culture’ (3), the club has only once turned a profit in the last eleven years, and in its most recent accounts has long-term liabilities of just under £48m – it’s dependent on its benefactor for its continued existence.
  • Those with new stadium plans of varying seriousness and immediacy: Birmingham City, Everton, Liverpool, Tottenham Hotspur and West Ham United, a total of five.  West Ham would have fallen into the next group but for the exceptional possibility of ‘doing a Manchester City’ at the 2012 stadium.
  • The rest, who have in varying degrees redeveloped or plan to redevelop their existing stadiums: Aston Villa, Blackburn Rovers,  Blackpool, Chelsea, Everton, Manchester United, Newcastle United, West Bromwich Albion and Wolverhampton Wanderers, a total of nine.

    The evidence that building a new stadium is a sensible strategy is thus not strong even where you might expect to find it.

    In the Championship, Cardiff City, Coventry City, Hull and Preston North End have all paid a high price in opting for a new stadium.  Middlesbrough and Reading have survived a new stadium through the benefaction of Steve Gibson and John Madejski respectively.

    The decision to opt for a new stadium rather than redevelopment is of course a leap, with no in-between option.  The scale of cost does however vary.  From my own data, I estimate that the cost per seat can vary by a factor of over 10, so there may be some scope for restraint at the planning stage in order to make a planned new stadium more viable.

    Now, most fans will be tempted to put a case that their club is an exception.  “The current stadium is particularly awful/inappropriate/decrepit” (remember, I’m a Pompey fan) is a frequent lament.  I would argue that only in one group of clubs are there exceptional circumstances – clubs in exile or with a lease which cannot be renewed – but even in this case the danger is that optimism overrides realism.  It would be mean-spirited to do other than wish, for example, Brighton and Hove Albion well in the new Falmer Stadium when it opens next year, but the project does carry with it the assumption that Tony Bloom’s benefaction and committment are long-term.  I’m certainly not suggesting that there is any reason to think otherwise, merely pointing out that there is a risk associated with the development.

    There may even be a case for a very small group of clubs who may reasonably expect to be on a longer-term ascendancy through the pyramid AFC Wimbledon and FC United of Manchester are the obvious ones that spring to mind.  Even at the lower levels of the pyramid there is no reason in principle why a club on the ascendancy should not develop a realistic model to develop a new stadium.  A club to watch in this context is Runcorn Linnets, who offer a different approach to building a stadium by virtue of the fact that they are owned and operated by a Supporters Trust.  Perhaps it is the case that fans are only really realistic when they have chosen not to follow the broken benefactor model of ownership.

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    13 Responses to “The trouble with new stadiums 4 (and final)”

    1. [...] This post was mentioned on Twitter by Tom Dunmore, John Beech. John Beech said: #footballfinance http://wp.me/ptz7W-LO The trouble with new stadiums 4 (and final) – do they ever work? Well, very occasionally, yes [...]

    2. Its cary to think that the Sunderland Stadium of light only cost 15m ten years back

      Sunderland

    3. Whilst I am sure your analysis and conclusions are scientifically sound they are also counter-intuative to mass racks of supporters. Put another way, if supporters of a club (any club) are content to have a staduim that backs on to rows of terrace houses, holds (or in the case put forward by the Pompay Trust this week actually encourages) unroofed temporary stands, is served only by a small out of centre station, is not accessable to be used 24/7/365 and generally looks 50 years out of date then basically you can assume that you won’t be seeing the top division soon.

      Another thing to consider is this, when (and it is when) the TV money bubble bursts most clubs will be relient on attendence figures for income, I suspect their will then be a colleration between modernity and income.

      • John Beech said

        On your first point, to state the obvious, most clubs won’t be seeing the top division soon, with or without a new stadium.

        On your second, I agree about the bursting of the TV money bubble. But with a drop in that income, a club would really struggle to pay off the debts incurred by building a new stadium. I don’t agree that a new stadium (in general) will bring in enough extra income to compensate, and let’s not forget the cost of maintaining the new stadium.

        My argument may sound counter-intuitive to many fans, but that’s because they want to dream the dream, but tend to ignore the financial implications.

        When in doubt, think Darlington!

    4. Wise words as ever. Would be interested in your take on Barnet’s current predicament. Undoubtedly punching above their weight in the Football League, but surely hamstrung from future progression by Underhill’s size and location. The development of the training facilities across the borough at Harrow are indicative of ambition, but it would surely be churlish to admonish the Chairman and board of having anything other than the interests of BFC at heart should they ever get permission to relocate the club? Especially in light of the travails they have undergone in pursuit of this over the last decade and a half?

      • John Beech said

        Barnet are a very specific case. You say ‘undoubtedly punching above their weight in the Football League’, but I think I’d be more generous (?) and say ‘unsure whether they are a Football League or Conference club’. Either way, I would have thought that upgrading Underhill seems to make more sense. If your view is right, then relocating is a dangerous gamble – betting that you are wrong!

        A useful overview of their pursuit of both strategies can be found here

        Incidentally, I had forgotten till looking through my Barnet file that Barnet just failed to gain promotion from the old Division 4 in 1992, losing out to … Blackpool, whose not quite upgraded stadium I was standing outside early this morning, commenting on BBC Breakfast on their arrival in the Premier League. How different Barnet’s history might have been!

    5. Upgrading makes more sense, yes, but is impractical. The slope precludes any great ground improvements, coupled with a highly antagonistic residents association and a duplicitous council (aren’t they all?) The situation has been rumbling on for over 15 years now, and I honestly believe that were a solution available in-house, then it would have been found.

      I completely appreciate and agree with your scepticism over relocation on preference to ground development. But I think it is too simplistic to argue that “only in one group of clubs are there exceptional circumstances”. That Barnet are not in exile is due solely to the persistence of Chairman Kleanthous. It is unfair therefore, in my view, to lump them in with want-away clubs, for want of a better term. Nothing would give Barnet council greater pleasure than to see BFC up-sticks out of the borough. Whether they would ever get back is another argument all together.

      The Blackpool irony is not lost on those who were privy to events 18 years ago, believe me!

      • John Beech said

        I think you are right. ‘Clubs in exile or with a lease which cannot be renewed’ should have ‘or have not-do-uppable stadiums’ added to it. Again though, I suspect fans at too many clubs would claim to be in this group, in this case pessimism over-riding realism! Certainly the slope at Underhill would be enough in my book to put it into this category.

        The problems with local councils is a very interesting variable. They seem to range from those who are sensible enough to constrain planning applications which do not include a ‘guaranteed football somewhere’ provision, or, as in the case of Farsley Celtic’s resurrection, actually facilitate a stadium carrying on with football, to the downright obstructive.

        A ‘highly antagonistic residents association’ is always a problem. The Federation of Stadium Communities has a pretty good at stab at trying to build bridges and develop compromises. (Their website is worth exploring)

    6. alan said

      John,

      I’m glad I found your blog/website after following a link mentioned on the forum’s of the Portsmouth News. I’ve read back through lots of the Pompey stuff and found it most uplifting for straight forward ‘reporting’ with the academic twist and vision based around someone is is obviously passionate about sport, particularly football and [for me], Pompey. Far to many rants and selfish comments in the pompey pages for me but sometimes there is some elongated elegant discussion across the day and evening. The matchday text service provided by The News is good but sadly lacking these last couple of matches.

      Anyway, onwards… The stadia pieces. Very interseting and I see where you are coming from. I certainly agree about the football bubble, it has got to burst [one would think] at some point. We are now past the point of owners doing this as a business and moving back to the Benefactor model except that they will always mostly be from overseas at the PL level. I think there is big trouble ahead for Liverpool. RBS seem to have taken a leaf out of BC’s book and are going to seize the club and no doubt HMRC will pop up somewhere for their pound of flesh.

      Back to Stadia; The clubs are going to need to increase revenue to be able to increase cash flow…. or get their costs right down, which basically means wages. I can’t see this happening unless FIFA step in or the bubble does more than burst. Of ourse, you are perfectly right that the cost of re-developing the grounds or building a new one costs too much, hence the Benefactor model starts to look more attractive again.
      It’s a real puzzler!!

    7. TheGreatGunnerB said

      Regarding your somewhat absurd claim that Hull “paid a high price in opting for a new stadium”

      Upon what evidence do you base that claim?

      It seems to me that a case-study of Hull City would undermine several of your pre-conceived objections to new stadia.

      A bit of simple research might, instead, lend credence to the theory that Hull City’s recent success and vastly increased attendances are due in no small way to the new stadium – which, for your information, is owned by the local council, not the club.

      Just before the stadium-building commenced, Hull City A.F.C. was actually in receivership [2001], and didn’t even own their old ground [Boothferry Park] – from which, incidentally, they had been locked-out twice by the owner.

      After moving to the KC Stadium in the 2002-03 season, Hull’s gates rocketed to an amazing level, especially given that they were then in the bottom division.

      Arguably, the stadium was the springboard for their comparatively meteoric rise up the divisions and in to the Premier League – at which point their troubles really began.

      Hull City’s current problems are absolutely nothing to do with the stadium.
      But why let facts get in the way of your prejudice?

      • John Beech said

        Of the four Championship clubs I cited – Cardiff City, Coventry City, Hull and Preston North End – I would concede that Hull have so far paid the ‘least high’ price, and certainly accept that Hull’s current problems have arisen from a range of causes.

        As for your ‘cargo cult’ theory that seats in a new stadium fill themselves, I would beg to differ. The evidence from a multitude of clubs is that performance on the pitch and league position are the main drivers of attendance. If Hull had stayed up, things would have been rather different. Certainly there are exceptions to this, but I see no historical evidence that suggest that Hull has the kind of bedrock support of a Nottingham Forest for example.

    8. urzz1871 said

      John – it’s taken me a while, but I’ve referenced these articles in a series of blogs about the financial situation at Reading FC.

      And whilst I agree with the general thrust of your articles, I think there was a unique set of circumstances at Reading, and a unique approach by John Madejski, which make them the exception that proves your rule ….

      These are at http://wp.me/p1s6kc-6Y

    9. [...] Part 4 [...]

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