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

Posts Tagged ‘Broadcasting rights’

The devil’s work

Posted by John Beech on September 29, 2011

For someone who has no great love of the media, Sir Alex certainly knows how to get himself in the headlines.  His latest claim is that football has sold its soul to the TV ‘devil’ (1).  Attractive though his choice of metaphor is, with the vision it generates of a BSkyB ‘evil empire’, it just doesn’t really work when his other complaints he makes are vectored in.

He complains that the broadcasters have too much power, especially with regard to their influence on fixture lists.  But isn’t that inevitable when you sell your soul to the devil?  It’s exactly that power that the ‘devil’ broadcasters have bought.  And I don’t recall that the standard ‘devil buys soul’ contract allows for renegotiation of the terms.

He complains too that the broadcasters haven’t paid enough for the rights.  That may or may not be the case, and Sir Alex is not being unreasonable in making the suggestion as it is the Premier League who ‘sold their soul’ rather than Manchester United, Sir Alex’s club.

The Premier League though do not of course distribute broadcasting rights to clubs equally, and Manchester United does rather nicely thank you compared with the weaker clubs in the league (who, to maintain competitive balance, should if anything get more than Manchester United, rather than less).

On the whole, I’m not unsympathetic to some of the points he makes, but, in his case, methinks he doth protest too much

Posted in Broadcasting rights, Governance, Premier League | Tagged: , , | 5 Comments »

The battle of football’s ‘global brands’ – in Morocco

Posted by John Beech on August 31, 2011

Last year I blogged on the case of merchandising in Kenya, noting that while clubs such as Arsenal undoubtedly had a presence there, there was little sign of any commercial activity which they were benefiting from.  This summer’s trip to Morocco revealed a significantly different situation.

The overall impression of the top European clubs’ ‘presence’ is summed up in this graffito from Agadir:

And not necessarily in that order!  What of course was not clear was whether the author was a Moroccan or a Spanish tourist.  One suspects naturally the former as presumably a Spanish tourist is unlikely to have promoted both teams.

Certainly the sale of shirts and other merchandising was aimed at both residents and tourists.

[You can click on each of the images for an enlargement;
these four photos are from the souk in Marrakesh]

Observation would suggest that these items are largely aimed at tourists.  For Moroccans there was really only one shirt of choice – a Barca shirt, with in particular a skew towards Lionel Messi, and indeed all items Barca, official or otherwise.

Moroccan national team shirts were popular (but significantly less so than Barcelona shirts).  Although I spotted a couple of Arsenal shirts, and a single Rooney Manchester United shirt, the English Premier League was notable by its near absence.  Which raises the interesting question of ‘why?’.

Sadly I was unable to obtain a Moroccan equivalent of the Radio Times, but it seems likely that Moroccans have better access to La Liga matches than to Premier League ones.  It strikes me that Morocco is now a lost cause in the Premier League’s attempts at global merchandising hegemony.  Could it be that pushing up the price of broadcasting rights to their perceived maximum is actually going to prevent any Premier League clubs becoming truly ‘global brands’?  Once La Liga, Serie A or the Bundesliga has established itself as the league of choice in a particular country, I suspect it will be very hard to supplant.

And finally a promised mention of someone I met – Ken, a Welshman who lives in North London and is more than willing to spread the word:

Posted in Broadcasting rights, Merchandising, Sponsorship | Tagged: , , | 3 Comments »

A day of reckoning

Posted by John Beech on May 23, 2011

I managed to follow the great play-off between AFC Wimbledon (to whom, many congratulations) and Luton Town (to whom, commiserations) at least live online.  Football at its most exciting.  I wonder if Andy Burnham chose quite the right words though when he tweeted “Wimbledon back in Football League. Brilliant. A great victory for all football supporters over the money men. Well done to all at AFC.”  I’m sure he wasn’t referring to Luton as ‘the money men‘, although his comment would have been entirely appropriate if Wimbledon had beaten Crawley Town.

Yesterday, with the final day of Premier League games, unfortunately found me in the Tirol in a hotel room, arriving and logging on just after the games had started.  Heady stuff, and probably the most exciting afternoon in the PL all season.  As Alan Hansen was moved to write (1), “The big winner has been the Premier League itself, because this season has shown it to be the most exciting of the lot. ”  I’m not sure that I would enirely agree with his argument.

It struck me, particularly as I was feeling somewhat removed from the action, that it was distinctly odd that all the excitement was over who would or wouldn’t be relegated.  Aston Villa v. Liverpool, Everton v. Chelsea, and Fulham v. Arsenal were attracting very little attention from the twitterati.  Is this the grand scheme of things that the greedy breakaway Chairman of the old First Division envisioned some twenty years ago?  I came to the conclusion that in fact, yes, it was, had they bothered to think their plans through.  To me it is yet another symptom of what is wrong with the governance of English football.  Who is or isn’t relegated is clearly an important part of the general excitment of football, but it surely shoudn’t be the major focus.

The sacking of Ancelotti (2) because “this season’s performances have fallen short of expectations and the club feels the time is right to make this change ahead of next season’s preparations” to me provides yet more evidence of just how dysfunctional the Premier League has become.

Relegation from the Premier League undoubtedly puts serious financial pressure on a club.  When the drop in broadcasting revenues is netted off against the parachute payment, one is looking at a drop of £30m-£25m in revenues.  To this must be added a drop in matchday revenues (reduced attendance and lowered ticket prices) and a drop in merchandising sales, although these will vary from club to club, depending on the loyalty of their fans, in particular how large the core of ’till I die’ fans is.  Clubs may face a contractual drop in sponsorship fees, and may or may not have had the wisdom to include relegation clauses in their players’ contracts.  In other words, any club relegated faces a financial problem, but some may face significantly harder problems than those who had planned for the eventuality.  Clubs will also be in different states of financial health to start with.

Last week I was asked by BBC West Midlands to review the prospects for Wolves and Birmingham City should they be relegated.  On virtually every financial measure Wolves looked far more resilient to facing the drop than Birmingham City.  West Ham will undoubtedly face serious difficulties too, and only Blackppol look reasonably equipped to face the drop.

The Football League season is not quite finished, but further down the pyramid things are clearer with respect to next season.  AFC Wimbledon and Crawley Town are joining the Football league, the epitome of fan ownership and ‘benefactor’-induced financial doping respectively.  At the other end of the Conference National, it’s goodbye to Southport, Altincham (whose luck in benefitting from other clubs’ financial problems finally ran out, Eastbourne Borough, and Histon.  I’m sorry to see Eastbourne Borough go down as they were the most senior English club which is a Community Interest Company (CIC).  As an interesting aside, the Scottish Premier League may well have a CIC as a menber in the coming season – St Mirren (3).  This is a case that is well worth following, as the current owners are seeking to sell the club in a way that was  “making sure it remained sustainable and debt-free” (4).

Lower down the pyramid, the upcoming movements are plotted here.  Good to see resurrection clubs AFC Telford and Farsely on the way up.  It’s interesting to note that Ilkeston are listed as ‘reinstated’, good news for their fans following their resurrection (5), but I wonder what, for example, King’s Lynn fans or Grays Athletic fans will make of the reinstatement decision.

Finally I turn to a football story that is relevant to me in my immediate circumstances, but which does not seem to have well covered by the English-speaking  media, although due credit to Yahoo! Sport (6) for being an exception.  The story quite simply is that a major derby match between Rapid Vienna and Austria Vienna was abandoned after 26 minutes following a major pitch invasion – see here and  here.  Disturbing images that we hope we will not see moving further northwards and westwards.  After thirty minutes of disruption, the police felt unable to guarantee the safety of the players in a resumed match.  We seem to have moved onward from such dark days in England, and it was good to note the Birmingham City fans staying on at White Hart Lane to show what they had in common with Spurs fans (7).

Mind you, I suspect that “Thursday night, Channel Five” is not really going to catch on on the terraces.

Posted in Broadcasting rights, Costs, Economic impact, Fans, Football Conference, Governance, Merchandising, Premier League, Promotion, Pyramid movement, Relegation, Revenues, Sponsorship | Tagged: , , , , , , , , , , , , | 2 Comments »

The scarf your mum knitted and competitive balance

Posted by John Beech on February 22, 2011

I haven’t been enjoying lunch lately.  Nothing to do with the food in the university canteen; it’s my daily read of The Guardian I blame.  That Matt Scott in particular had me choking today (1) over my vegetarian shepherds pie, although the oxymoron itself hadn’t put me in the best of moods.  I was so bothered that I’ve created a new tag (‘financial doping’) as a result, and will apply it retrospectively as time permits.

To be fair, Matt is an excellent writer, and its was the implications of what he wrote that vexed me, rather than the content per se.  His lead story was about a new Sport+Markt report on European Football Merchandising (2), a snip, I would imagine at 5,831 euros (no, I kid you not, such is the price of valuable market research in the football sector these days).

Matt reported:

The key finding of the European Football Merchandising Report, a survey of 182 clubs and 10,000 fans, was that United’s global revenues (excluding television income) have fallen by 10% in 12 months. The report’s author, Dr Peter Rohlmann, told Digger this was attributable to the “green-and-gold” campaign against the club’s owners.

“Our data show the club has lost retail revenue from the year 2009 to 2010 by around 10%,” Rohlmann said. “This is due to the fact that all the circumstances about the ownership and the behaviour of the Glazer family were not positive in the minds of Manchester United fans. This has had a direct impact on their merchandising spend.”

Rohlmann did not disclose the figures relating to United’s merchandising income because all disclosures made to Sport+Markt by clubs are on a confidential basis. However, he stated that the report analyses all of United’s self-generated merchandising revenues, along with those of their licensing partners such as Nike.

As United reportedly seek a 50% improvement on their £302.9m, 13-year Nike shirt deal, which expires in 2015, the demonstration of a decline in revenues comes at a bad time for the club. The Premier League leaders’ share of the merchandising market, which is worth €1.2bn for the 10 highest-earning clubs across Europe, has also slipped. They are now ranked sixth, down one place from 2008.

A spokesman for the club disputed Sport+Markt’s findings, saying royalties from the profit-share arrangement with Nike had risen in each of the past four years.

Now let’s just stop and put that into its real perspective.  That’s €1.2bn, or a smidgen over £1bn, or a £100m per club, that the fans of just ten clubs have spent in one year on merchandising.  Rather a far cry from the days when you got your mum to knit you a scarf in your club’s colours, and perhaps splashed out on a rosette on Cup day.

As I said, it’s the implications of this that bother.  Such enormous sums spent on the merchandising of a few clubs results in ensuring that the rich and strong clubs just get richer and stronger.  In other words, it distorts the competitive balance in the respective leagues.  It’s not a million miles from financial doping – the attempt to buy success by distorting the balance of competition.  This is normally in the form of ‘benefactors’ pouring money into clubs à la Manchester City or Chelsea, or, at a different level, Crawley Town.  What’s particularly insidious here is that it’s the fans who are being drawn in to pay for the club’s habit.

There is at least one up-side to this though – the Green and Gold campaign is having the desired impact.  As for me, I’ll stick to wearing my favourite footie T-shirt (available from WSC – who still won’t reciprocate a link on their links page, incidentally).

As this was The Digger column that was provoking this reaction, I should have guessed there would be more to incense me.  Matt also reported:

Any defence whose last line consists of Sébastien Squillaci and Manuel Almunia is vulnerable to the attentions of a journeyman striker picked up from the French fourth division. And Jonathan Téhoué, left, proved it in the FA Cup fifth round against Arsenal. Now Digger can reveal just how valuable the Frenchman’s equaliser is expected to be for Leyton Orient. Arsenal turn over £3m for every home game and under the terms of the FA Cup revenue-sharing agreement Orient will be due 42.5% of the net gate receipts that the Emirates Stadium replay generates.

Although the Gunners have yet to announce ticket prices for the 2 March match, the profit is expected to be in the region of £1.6m, raising £700,000 for the League One club. If the match is televised, it will make close to £1m for Barry Hearn’s club – not bad for one game, considering Orient’s total turnover of £3.3m in the 2008-9 season.

Here there is at least an income to the club related to their performance on the pitch.  Orient certainly deserve some good news after their shabby treatment by the Premier League.  My gripe is not with Orient but rather with the fact that in general the distribution of broadcasting rights has the same result – making the rich clubs even richer and distorting the balance of competition.  And who’s feeding the habit?  It’s the fans again.

Have we really lost all sense of the sporting ethic?  Sadly I think I know the answer to that one.

Posted in Benefactors, Broadcasting rights, Ethics, Financial doping, Merchandising, Revenues | Tagged: , , , , , | 1 Comment »

Are our biggest clubs really global brands?

Posted by John Beech on December 9, 2010

You certainly notice the presence of Premier League clubs in Kenya (where I’ve just been on a somewhat delayed ‘summer’ holiday).

Can any Manchester United fan supply the vintage?

Curio seller in the middle of nowhere, Kenya. Can any Manchester United fan supply the vintage?

Well, of the predictable few.  Arsenal are, on the basis of an entirely unsystematic and unscientific survey of shirts and baseball caps and a pretty small sample, the clear number one English club of choice for Kenyan fans, followed not so far behind by Manchester United, with Chelsea a poor and third. That was it really. I did see Liverpool mentioned on a sandwich board outside a bookies, but no shirts. In fact the only other shirts were either local Kenyan clubs or Brazil.

The presence manifested itself not only through shirts, but also by slightly crudely painted club crests on cafés, and, in one case, the rather unexpected ‘Gunners Hairdressers’.  Presumably their Boro Primorac isn’t that popular with customers.

Apart from the fact that I found in yet another country only the famous few were present, two things struck me.

First, what did the clubs actually gain from their presence?  I would suspect that those wearing shirts had not contributed to direct sales, and that few Kenyans were avidly using the online club shops.  They certainly weren’t buying tickets for the games.  And how did a baseball cap with ‘Fly Emirates’ as the obvious feature do anything for Arsenal (as we passed, I didn’t even spot an Arsenal logo)?  Again only a suspicion, but I doubt that Arsenal have been leveraging up their price to Emirates on the basis of this particular exposure.  If there was any return, it was for the sponsor but not for the club.

Secondly, the presence of so many hand-painted logos might be seen as some sort of compliment to Arsenal, but the unlicensed use of logos said something about the nature of the clubs’ presence and the weakness of any commercial basis.  It was a kind of artificial presence.  The Arsenal or whichever brand did not have a presence on a par with that of a truly global logo such as Coca Cola.  And that’s probably the point – Coca Cola has an enormous presence in Kenya through their products and the infrastructure to support and develop the sale of their products.  Any unlicensed use of their logos would stamped on by locally-based Coca Cola staff,with the zeal of the IOC spotting that I had mentioned that event which is taking place between 2011 and 2013 in the UK capital by its conventional name.

Because of the lack of product presence, other than, that is, the intangible product presence through broadcasting, it’s hard to justify even the biggest Premier League clubs as global brands in any conventional sense.  The sale of official merchandising at the café (or hairdresser) can only be a dream.  The opening of Manchester United shops in the Far East, for example, is the first steps in becoming a truly global brand, but it is frankly just scratching the surface of an enormous potential market.  To be successful, these clubs will have to produce a radically different marketing mix with new 4Ps (product, price, place and promotion).

Posted in Broadcasting rights, Marketing, Merchandising, Sponsorship | Tagged: , , , | 3 Comments »

La Liga broadcasts at risk

Posted by John Beech on June 18, 2010

With all the column inches being given over vuvuzelas, injuries and the choice of goalkeeper, the English media’s preoccupation with the World Cup is at the expense of other, perhaps more important, football stories.  This particular one I would probably have missed had it not been for Supporters Direct Europe‘s eagle-eyed polyglot, Antonia Hagemann, who kindly alerted me to this Spanish (language) URL.

The report she passed me, together with some US ones I’ve managed to find (1, 2, 3), says that Mediapro is seeking ‘bankruptcy protection’, which, in my ignorance of Spanish financial law, I take to be more or less the equivalent of Voluntary Administration.  The situation with football broadcasting is different from England, and more like that in the Netherlands – rights are not bargained collectively by the appropriate league, but are negotiated individually by clubs.  In the case of Mediapro they held the rights of all La Liga clubs except Teneriffe, and those of most of the second tier clubs.

The decision is part of an ongoing battle with rival broadcaster Sogecable, so may not be as simple as it at first appears.  Whatever the reasons though, Spanish viewers may not be able to see La Liga on their televisions next season.  In fact, they have just announced the extension of their contract with Barcelona (4).

We have seen problems with broadcasters folding in the shape of ITV Digital (2002) and more recently with Setanta.  It would seem likely that this Spanish situation will not be resolved by a quick resale of rights.

To come back to home with a jolt, Sky have announced that their Sports News service is to be pulled from the Freeview bundle, and will become a pay-TV channel.  I for one will no longer be joining Jeff Stelling; nor am I dancing in the streets at the news.

Posted in Broadcasting rights, Insolvency | Tagged: , | Leave a Comment »

Northwich Victoria: A cautionary tale

Posted by John Beech on November 8, 2009

To apply the term ‘troubled’ to transfer-embargoed and ‘in Administration but without a CVA yet’ Northwich Victoria would be something of an understatement.  Even today’s televised win against Charlton in the first round of the FA Cup (1) will do little to help their present predicament (see postings passim).

Briefly in Football League Division 2 over a century ago, much of their subsequent life has been at the level of the Cheshire County League, before climbing back to what is now the Conference in 1979.  Financially things have regularly be tough even at this level – Customs & Excise sought a winding-up order in 1983, and the Inland Revenue (who with Customs & Excise formed HMRC) sought one in 1993.

In 2003 construction began of the new Victoria Stadium, and the Vics said farewell to the Drill Field after 125 years (at that time the Drill Field was the oldest-continuously used football ground in the world).  Before construction was complete, however, the club was forced into Administration in 2004 (2) following the serving of a winding-up order by stadium building contractors Tarmac over a debt of £17,000.  The Drill Field had been sold for £2.3m, and the cost of the new stadium had been projected as £1.8m, so a winding-up order over £17,000 was not a scenario that fans or shareholders might have expected (Liverpool Daily Post, 16 September 2004).  A grant of £500,000 towards the new stadium was made by the Football Foundation (3).  A rental of £1,000 to groundshare with Witton Albion in the interim was said to be to blame for the financial embarrassment.

Swiftly a consortium led by local businessman, and father of the Vic’s goalkeeper, Mike Connett bought the club from the Administrator (This is Cheshire, 29 September 2009). Completion of the new stadium was promised by Connett, and plans would now include bars, restaurants and all-weather facilities.  Connett ran a company called Beaconet, and has been described as owning a document-shredding business (4).  He was reported as having put £2 million into the club.

The new stadium opened in August 2005, and included an entire terrace transported form the Drill Field (5).  By then the club had just been demoted for failing to transfer their Conference membership from the old company to the new company by the deadline of 31 May (6). An appeal was unsuccessful.

By March 2007 rumours had begun to circulate that the Vics were in financial difficulty and Connett was looking for a new owner (7). These rumours were denied by Connett.  In October 2007 he announced that he was indeed looking for a new owner (8), on the day that HMRC sought a winding-up order for unpaid taxes of over £350,000 (9).

In December it was announced that a new consortium headed by Jim Rushe had completed a deal with former owner Mike Connett and agreed terms with creditors, including HMRC (10), the deal including a 25-year lease on the new ground (11).  Rushe offered “a sustainable future going forward“. Debt level, however, was reported as being at the £500,000 level, and to be paid off over an unspecified number of years (12).

At the end of July 2008 a winding-up order was sought by Belgrove Services (13), but this appears to have been settled.

Over the summer Rushe agreed a deal to buy the Victoria Ground from Connett for £3.2m (Connett had bought it in 2004 for £225, 000, and had subsequently borrowed money from three lenders using the land as surety) but had failed to find backers to fund the deal (14). Unfortunately, one of these lenders, the Clydesdale Bank (through its subsidiary the Yorkshire Bank), was now seeking recovery of their loan of £1.25m from Connett.  To add to the complicated situation that was unfolding for the Vics, HMRC was becoming restless over the remaining tax debt of £300,ooo (15), this notwithstanding the fact that Rushe and former director Nick Bone had pumped half a million pounds into the club.  Money was flowing out of the club at a worrying rate – over the summer the now full-time players had been paid £70,000.

To add to the Vics’ woes, a football creditor, AFC Telford, appeared last December (16), prompting an FA probe (17) into a sum said to be around just £3,000.

January this year saw a rapid escalation of the problems – crisis meetings with the Conference (18), a transfer embargo (19), a lock-out from the stadium, which had been dependent on a generator for electricity after the mains supply was cut off, by landlord Connett (20), and a winding-up petition from HMRC (21).  Meanwhile Connett’s company Beaconet was also facing a winding-up order (22) (his insolvency problems had led to the lock-out and hence pressure to get the club to pay its rental arrears).

Connett proceeded to start gutting the stadium, and the club had real problems be able to play fixtures, moving home games to other grounds.  Things turned to low farce; witness the following:

On a day of acrimony in Wincham, Connett:

  • Banned Rushe and club secretary Derek Nuttall from the ground
  • Fired groundsman Joe Biddle after accusing him of talking to outsiders on the phone about his plans to strip the stadium of it’s fixtures and fittings
  • Demanded £2,000 off the club in cash to pick up the first team strip, currently locked in a cupboard inside
  • Allowed workmen to play a makeshift match on the pitch, joined by his pet dog
  • Boxed up every item of safety equipment needed to host a game, from fire extinguishers and handheld radios to luminous stewards’ jackets
  • Issued a list to Cheshire Trading Standards of everything he intended to take away from the Marston’s [Victoria] Arena, including the goalposts.”

On 28 January, Connett’s Beaconet was struck off (23).  Almost a month later the club got the keys to the stadium from Beaconet’s Receiver (24) under a temporary Licence to Occupy.  No such good news with staff unfortunately; within a month manager and six players had left (25).  Connett meanwhile was declared bankrupt on 26 February (26).  For the club, there was another HMRC winding-up order on 25 March (27).

On 29 April at last came some good news – agreement was reached between Rushe and Deloittes (the Beaconet Receiver) over the purchase of the stadium (28), but on 18 May the club entered Administration again (29).

The Conference’s response?  To expel Northwich for going into Administration too late (30) – the Vics had breached that well-known regulation, Appendix E, not quite showing the support they were to show Chester City shortly!  This decision was overthrown upon appeal to the FA (31), and the Vics were allowed to start this season in the Conference North with a ten point deduction (32).  Football creditors will still need to be paid before the transfer embargo is lifted and the club can enter a CVA.

The transfer embargo was lifted in July (33), only to be reapplied on 25 October (34).  Rushe meanwhile is still optimistic over the purchase of the stadium (35), but the CVA remains problematic, with HMRC unwilling to agree to the offers being made.  Ironically today’s FA Cup fixture, and the games which led up to it should facilitate a better offer.  But there is a Catch 22 – the club will not be paid the roughly £100,000 rewards until the club exits Administration (36).  The same will apply to their 2nd Round tie at home to Lincoln City on 28 November.

So, this is a club which in five years has gone from a sure-fire way to profit from a new stadium, through two Administrations, to a situation of tragi-farce.  Plenty to reflect on there, including the weaknesses of the benefactor model, and some lessons to be drawn.

Perhaps even by a certain other club in the news with continuing plans for a new stadium in spite of insolvency issues?

Posted in Benefactors, Broadcasting rights, Debts, Football Association, Governance, HMRC, Insolvency, Ownership, Points deduction, Stadium | Tagged: , , , , , , , , , , | 1 Comment »

Three cheers for the Premier League!

Posted by John Beech on September 21, 2009

Mind you, that is three out of a possible six, for two recent developments…

Certainly two cheers are deserved for the PL’s decision to make a one-off payment to the Conference of £1 million, this being in the context of the Conference’s loss of their Setanta contract for broadcasting rights (1). As the PL’s Richard Scudamore  put it “The Conference is an integral part of the football pyramid. It was absolutely the right thing to do.”  Spot on!  So why my reluctance to give this noble attempt to reduce this financial disparity up and down the pyramid a full-blown three cheers?  Well, it represents £50,000 from each of the twenty Premier League clubs – less than one weeks wages for a star striker.  I don’t feel then that I am being curmudgeonly in holding back that third cheer – a curmudgeonly approach would be to point out they are collectively in debt to the sum of over £3 million, and shouldn’t sensibly be giving any money away.  Perhaps two and a half cheers might be fairer.

Debt, of course, brings me to the even bigger news that the PL is finally taking action to stop their members living on Debt Mountain (2).  Last Monday Scudamore announced new financial measures to restrain the wilder excesses of member clubs, the day before UEFA announced action.  These PL measures are rather light on detail regarding sanctions, and fail to re-establish HMRC as preferred creditors.  Still the PL ‘vows to fight’ UEFA’s curbs on spending powers (3).

I’m afraid I can only raise half a cheer for half-hearted measures introduced unwillingly.  In any case, they lock in the inequalities that have grown rapidly since the PL’s formation.

Posted in Broadcasting rights, Debts, Football Conference, Premier League, Sanctions | Tagged: , , , , , | Leave a Comment »

Italy’s new ‘Premier League’

Posted by John Beech on August 27, 2009

The BBC has reported under the headline Serie A to form breakaway league that “Serie A is set to copy the formation of England’s Premier League“, to be known as Lega Calcio Serie A (1). Before looking at a rather important detail that the BBC omits, it is worth looking at whether the formation of the Premier League is such a good model to choose.

There is no argument that the Premier League has negotiated enormous broadcasting rights over the year, but does those who voted for its formation benefit from this?

The original membership, it is worth noting, consisted of 22 clubs (reduced to 20 in 1995): Arsenal, Aston Villa, Blackburn Rovers, Chelsea, Coventry City, Crystal Palace, Everton, Ipswich Town, Leeds United, Liverpool, Manchester City, Manchester United, Middlesbrough, Norwich City, Nottingham Forest, Oldham Athletic, Queens Park Rangers, Sheffield United, Sheffield Wednesday, Southampton, Tottenham Hotspur, and Wimbledon – not a Premier League that we would recognise today, so it’s worth a closer (although I admit not terribly deep) look at how they have fared since the euphoric days of 1991.

  • Arsenal
    One of the few who have enjoyed continuous success, although much of that is directly attributable to Arsène Wenger’s efforts bringing results and hence revenues.
  • Aston Villa
    Have not been relegated, but financial success has eluded them.
  • Blackburn Rovers
    Have stayed up except for a blip in tier 2, but have made significant financial losses year-on-year through overspending on players.
  • Chelsea
    Certainly successful on the pitch, but their accounts tell a very different story. Staying not only up but in the Big 4 has stretched the deep pockets of Roman Abramovich. ‘Benefactor’-dependent.
  • Coventry City
    Relegation in 2001 saw them with huge debts (and within 25 minutes of Administration recently) and a stadium which they do not own.
  • Crystal Palace
    A pattern of yo-yoing, then in tier 2 since 2005. Serious financial problems and stadium ownership issues under Ron Noades and then Mark Goldberg, including a spell in Administration. Currently up for sale and under a transfer embargo.
  • Everton
    An average performance on what might have been anticipated – at least they have stayed up every season (just, on one occasion). Owner Bill Kenwright dreams of a takeover by a billionaire as he sees their debt as big and worrying (but manageable), so it’s hard to count them as a financial success.
  • Ipswich Town
    First relegated in 1995, they’ve made one short appearance since. Into Administration in 2003 with debts of £54m. Now pinning their hopes on reclusive ‘benefactor’ Marcus Evans.
  • Leeds United
    Best not to ask really. Once a European high-flyer, lately it’s been a tale of enormous debt, Administration and a drop to tier 3.
  • Liverpool
    Has certainly enjoyed on-the-pitch success, and few fans would not envy being fourth of the Big 4. Their dependency on banks is not something to envy though, and still their is no new stadium in spite of their success.
  • Manchester City
    One dip to tier 3 and a subsequent one to tier 2. Some worrying financial losses in recent years. Now ‘benefactor’-dependent.
  • Manchester United
    Highly successful on the pitch, thanks to Ferguson. Successful financially over this period, although while revenues have increased nine-fold, pre-tax profit has increased just under five-fold.
  • Middlesbrough
    A couple of instances of yo-yoing (and hoping to repeat that as they are currently in tier 2). Financially dependent on Steve Gibbons, one of the game’s few benefactors who do not need quotation marks round that soubriquet.
  • Norwich City
    Have spent more of the time in tier 2 since 1991; now in tier3. Have become Delia dependent, but know in need of a new benefactor.
  • Nottingham Forest
    The pre-PL glory days are long gone. In spit of their loyal following, a downhill path to tier 3, although now back to tier 2. Regular financial losses.
  • Oldham Athletic
    Downhill since 1994. In tier 3 since 1997. Into Administration in 2003, and almost extinction. Still seeking a new benefactor.
  • Queens Park Rangers
    It was slowly down-hill to tier 3, but back to tier 2 in 2004. In Administration in 2001.
  • Sheffield United
    All but two seasons have been spent in tier 2 since 1994. Consistent financial losses.
  • Sheffield Wednesday
    Relegated in 2000 and again in 2003, but back to tier 2 in 2008. In debt and seeking new investment.
  • Southampton
    Survived in the PL until 2005, but relegation coupled with debts incurred by building a new stadium pushed them into Administration this year, and into tier 3.
  • Tottenham Hotspur
    Have spent the whole of the time in the PL, enjoying moderate success. Made a good profit in the last available accounts, and looking with caution to build a new stadium.
  • Wimbledon
    The least successful of all the founder members, thanks to the antics of its owner. Into Administration in 2003 and Milton Keynes, and the following year relegated to tier 4. No longer exist as a team recognisible as the old Wimbledon, although AFC Wimbledon have so far made excellentprogress on the road back from oblivion.

The Premier League has hardly been an unmitigated success from the perspective of its founder members. It has managed to position itself as the most significant league in Europe, and the world, but at what price? Well, taking the aggregated debt figure for the twenty clubs in the PL last season, a tad over £3 billion. Hardly a model you would expect the Italians to want to emulate.

The BBC report it seems may have been slightly misleading however, and the new Italian ‘Premier League’ is perhaps not strictly a breakaway league in the Premier League sense. According to a sportbusiness report (2), Serie A and Serie B will be managed separately, but with a common president, Maurizio Beretta. Seria A will be able to negotiate joint broadcasting rights for their members, but a lot of important detail has yet to emerge in the English-speaking media. What are the arrangements for relegation and promotion? Will there be parachute payments, for example, or, dare I suggest, rocket payments (3)?

Much will depend on the future relationship between Serie A and Serie B, but it would appear that it has the potential to be significantly different from that between the PL and the Football League’s Championship. If any Italian-speaking blog readers can flesh out the detail of the relationship, it would be very helpful!

Posted in Broadcasting rights, Governance | Tagged: , | 5 Comments »

Cutting your cloth in the Conference

Posted by John Beech on June 26, 2009

The calling in of Administrators Deloitte by the UK arm of Setanta came as no surprise. The question had long been ‘when?’ rather than if ‘if?’. The precise implications of the collapse are less predictable however, and will only become clearer in the next few days and weeks.

The sport which will be potentially the most effected is of course football, where Setanta UK held four different bundles. The ‘jewel in the crown’ for Setanta was the set of 46 Premier League games, which Disney-backed ESPN has already bought, for, it is believed, the same sum that Setanta paid. This might suggest that the other rights packages will be picked up in a similar way, but that would be misleading. They are arguably the only part of Setanta’s rights which were bought at the right price.

In the case of its Scottish Premier League matches, it seems clear that Setanta were over-optimistic in their bid. It is likely that they will be resold at a lower price, a drop of roughly 30% being probable. The SPL is in an unusually good position to take a hit having just announced record profits of £23 million (1), and have already made moves to support their member clubs. However, their member clubs are all in individual financial positions and the impact on them will depend on their particular circumstances. Hardest hit will be the smaller clubs and the clubs which are already struggling financially – Hearts made a loss last year (2); Rangers have increased their net debt (3); Kilmarnock are not currently in a strong financial position (4); and this will hardly be good news for newly promoted St Johnstone. Aberdeen have already indicated that a direct impact is that they do not plan to participate in the summer transfer window (5).

The FA bundle is a very mixed bag. The full internationals should prove attractive and the FA should have no difficulty in selling them at a good price, and the same will apply to the FA Cup. The attractiveness begins to lessen though when it comes to the Community Shield and the under-21 matches. Alternative broadcasters will want to cherry pick and are in a position of ‘buyer power’ if they hold their nerve.

The final football bundle is for Blue Square Conference matches. Although of much lower value, they are a significant source of income to the clubs involved. For Conference National teams the income was between £75,000 and £100,000; for clubs in the lower North and South divisions, it was £15,000 a year. For these clubs it might prove a make-or-break figure. Conference clubs are highly individual in the way they are run and in their financial stability. Those that are currently struggling financially – these, in my opinion, include Northwich Victoria, Stafford Rangers, Lewes and Weymouth – will be rushing to update their Plan B, that is assuming they have one. It is at this level in the football pyramid clubs are inherently most vulnerable and we can expect to see more cases of Administration, which will no doubt be blamed on the collapse of Setanta. This will be at least a tad misleading.

Kidderminster Harriers Chairman Barry Norgrove has expressed concern on the impact the collapse will have on Conference clubs (6). He also said “The Premier League have a new deal and I think they should filter some of that down through the leagues.”

“With Setanta going into administration it’s going to be very difficult for a lot of clubs in our league because the finances won’t be there to pay the budget,” he pointed out (7).

If the collapse of Setanta UK did come as no surprise to chairmen of Conferernce clubs, they will have already had their Plan Bs prepared, and made signings, or rather not made them, as necessary. After all, the transfer window did not open until 15th May, and by then Setanta was already being reported as in trouble.

There are obvious parallels with the collapse of ITV Digital in 2002, which a number clubs held responsible for their insolvency. A scratch below the surface reveals that not only was the number of cases of clubs going into Administration already on the rise – it had been rising since 2000 (8) – but a look at the debts of those clubs shows that the loss in income from ITV Digital may have been the straw that broke the camel’s back, but it was certainly not the primary cause.

The clubs who are vulnerable are, as ever, the weaker and smaller ones. They have been hit in a time of general recession. So far the richer clubs have proved fairly resilient to the recession, but the collapse of Setanta will only serve to emphasise the ever-growing disparity of affluence across the tiers of professional football.

In the last eight weeks we have seen these eight insolvency events – Stockport County (League Division 2) into Administration, Gresley Rovers (Northern Premier League Division 1 South) wound up, Fisher Athletic (Conference South) wound up, Darwen (North West Counties League Division 1) wound up, Northwich Victoria (Conference National) into Administration again, Chester City (League Division 2) into voluntary Administration, AFC Hornchurch (Isthmian League Premier Division) fold, and Merthyr Tydfil (Southern League Premier Division) into Administration, and all of this since Southampton (Championship) called the Administrators in to their parent company. The collapse of Setanta UK can only result in additions to this pattern through back-breaking straws. Setanta will take more than its fair share of blame however.

Posted in Broadcasting rights, Insolvency | Tagged: , | 2 Comments »

Setanta struggle on

Posted by John Beech on May 5, 2009

In my posting of 20 April A bursting bubble?, I noted that Setanta were trying to renegotiate the contract for the Scottish Premier League broadcasting rights – for seasons yet to commence.

Clearly Setanta are under pressure as they are now seeking to renegotiate football broadcasting rights contracts south of the border (1). The broadcaster had been hamstrung by failing to get as many of the lucrative Premier League games as it would have liked, and instead had to opt for a shared deal with ITV for England international matches and the FA Cup (2).

Coming relatively late into the English football market, Ireland-based Setanta had picked up the crumbs which Sky was not interested in, such as a five-year contract signed in 2006 to broadcast Football Conference matches (3). Tom Lehrer famously sang “Second fiddle’s a hard part I know, when they don’t even give you a bow”. Setanta have a bow, but it is not in the same league as Sky’s.

It is worth recalling that the justification of the merger of British Satellite Broadcasting (BSB) into Sky to form BSkyB was that the UK satellite broadcasting market was too small to support two operators given the extremely high entry costs. To prevent a monopoly sports rights are now broken into smaller bundles and exclusivity is a dirty word.

Given the difficulties Setanta is facing however, it is far from clear that the issue of competition has been solved. Any collapse of Setanta would mean a reversion to a BSkyB monopoly, and serious problems for the Football Conference’s clubs.

Posted in Broadcasting rights, Revenues | Tagged: | Leave a Comment »

A bursting bubble?

Posted by John Beech on April 20, 2009

Almost since the Premier League first sold its broadcasting rights and started on a seemingly unstoppable upward spiral, sports management academics have debated when the bubble was going to burst. Over the years the debate has become less fruitful, and less frequently aired.

North of the border it could just be that the bubble is about to burst. Setanta took over SPL broadcasting rights in 2004 and have not only the current contract but also a contract worth £125m for exclusive coverage for four seasons beginning in 2010 (1). It is that future contract that they are currently seeking to renegotiate. Any renegotiation downwards would hit the smaller clubs in the SPL disproportionately, and will doubtless be strongly resisted. Adding to the uncertainty are events south of the border.

Phil Gartside, Chairman of Bolton Wanderers, has been drumming up support for a revised Premier League. In October he called for a two tier Premier League with two divisions consisting of 18 clubs each (2). His motivation was clear – to get more from broadcasting rights so that British benefactors could compete with foreign benefactors in feeding the habit (financial, that is) of the clubs’ players. Suddenly he was a convert to salary caps too. He floated the idea of no relegation from (and hence no promotion to) this new 36 club elite in English football (3) – a patently absurd idea that goes against the whole grain of the English league ethos.

The latest version of his plan is to be debated this week by his fellow Premier League Chairman (4). This version now envisages one club moving each way to and from the revised and reduced Football League between seasons (5), and, in a radical move, the 36 clubs would include Celtic and Rangers. That would require the approval of UEFA, who ostensibly do not allow cross-border league competition, although one only has to look at the examples of Cardiff, Swansea, Wrexham, Berwick and Gretna in the UK, and Monaco and Vaduz in continental Europe, to see that this policy is not always applied. The timing of a request for UEFA approval would not be helped by the controversial issue of a home team for London 2012.

Initial reaction from Celtic is reported as luke warm (6). Support from south of the border is not universal. Crystal Palace chairman Simon Jordan argues that the Old Firm should pay £100m to join such a new two-tier Premier League (7). Is his position on this issue in any way shaped by Crystal Palace’s current position in the Championship – 13th (and hence 33rd among a notional top 34, if Celtic and Rangers were to be included, or 36 if they were not)? There is thus no certainty that Crystal Palace would ‘make the cut’.

It is this ‘cut’ that would create the biggest challenge. Any cut based on current league positions would be arbitrary. Take the situation today, for example, a day chosen as arbitrarily as any other. The ‘good old boys’ of the Ribble Valley would be well represented in the elite, as would Greater Manchester, but over the Pennines in Yorkshire there would be anomalies – two Sheffield clubs in, but none from Leeds/Bradford.

Gartside is certainly right for calling for debate on league structure. But what is needed is not some tweaking based on potential broadcasting revenues, but rather a boldness to start with a blank sheet of paper. One parameter that should be considered is surely average gate. Leeds United are still averaging over 23,000 this season despite the fact that they are in League 1; only four clubs in the Championship are exceeding them; Doncaster, who would make the cut, are averaging less than half the Leeds attendance.

Boldness from Premier League Chairmen? I’m not holding my breath.

Posted in Broadcasting rights, Governance, Revenues | Tagged: , | 3 Comments »

 
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