Are we going stark stadium bonkers?
Posted by John Beech on April 2, 2010
How often have clubs fallen into the ‘cargo cult’ trap of believing that a new stadium with a greater capacity is the answer to their financial problems, only to find that it has increased their financial problems and has somehow failed to deliver as ‘fan bait’? Think Darlington as the most obvious example. Think Coventry (where I’m sitting bashing away at the keyboard) or St Johnstone (where Rangers were thrashed 4-1 last week in front of 6,000 in a 10,000 capacity stadium, the first new football stadium in Britain since the old Wembley – I lived in Perth for 20 years, which is why the club is on my radar screen). Incidentally, for another classic example from Scotland have a quick look here.
To ask a related question, how often have clubs lumbered themselves with unsustainable debt by chasing the dream of a new stadium? Think Cardiff City or Forest Green as recent examples.
Or to put it a third way, how often have clubs spent and spent on a dream before a sod is even turned? Think Southend, which has been in court for two consecutive years over debts of £600,000 to HMRC, and has spent £1.2m (now there’s a spooky coincidence) on the as yet unstarted new Fossetts Farm stadium (see postings passim).
How often too have clubs faced spells in exile because selling off the old stadium happened way ahead of the new stadium being started, let alone finished? Think Brighton as a classic example.
Or have let their stadium slip out of their hands in the belief that sell-and-lease-back made sense, only to find what was intended as a short-term expediency turned sour? Think Leeds, think Rotherham.
Are you catching my drift here? Embarking on a new stadium is a very high risk strategy, and clubs seem blinded to the fact that they, their gates, and their revenues may, like investments, go down as well as up. Unless building a new stadium has a direct bearing on on-the-pitch performance, both outcomes are in fact equally likely.
Add to the heady dream of a new stadium that will somehow take you to the Champions League – well, you have to have ambition don’t you – the prospect of World Cup football in 2018 seems to be taking some clubs into even more irrational plans. Now, it’s worth pointing out that England hasn’t actually won the bid yet, and, for all the perceived belief that it’s ours for the taking, it should be remembered that we are not alone in bidding. Call me a curmudgeonly old killjoy for pointing it out, but there are actually six opposing bids, from Australia, Belgium/Netherlands, Japan, Russia, Spain/Portugal and the USA.
If we were to host the 2018 World Cup (and please note my use of the subjunctive; I believe we stand a better than average chance, but with six competitors it is hardly a foregone conclusion that we will), then of course we would want to deliver with the best and biggest stadiums possible. (Don’t start me off on Scottish question – why a bid that did not include the only city in the world with three 50,000+ seater stadiums was not considered I’ll never know). But should that mean building new stadiums that just don’t make sense in the longer term, stadiums that run a high risk of ending up as Darlington-style white elephants, with parts closed off as they are too expensive to even maintain?
Imagine you are a club in the Championship. In 2005 you managed to buy out the lease of your stadium, which has a capacity of almost 21,000, from the local council at a cost of £2.7m. In 2007/08 you managed to make a pre-tax profit of £1.4m, but in recent years you have more typically made a profit or a loss of less than £1m. Your wages/turnover ratio has however crept up to almost 75% (1 but resist looking to see which club I am referring to just for the moment). Gates peaked at an average of 16,500 in 2004/05, but have declined since, this season averaging at just below 10,500, in other words, your stadium is typically half empty. You are currently sitting in the relegation zone. You faced an HMRC winding-up order earlier this season and have recently been under a transfer embargo, all of which led you to borrow £1.5m from a company owned by foreign board members in order to ‘stabilise’ the club. Last Friday the Chairman of the club said “Off the pitch, our wage bill for 2009 was the highest in our history as we increased our player squad and brought in loan signings. Coupled with a further fall in average match attendance, this generated a disappointing financial performance – a £2.9million loss. Included in the loss is a write-off of over £600,000 of costs associated with the previously proposed stadium redevelopment as we reviewed our plans and made the decision to start the redevelopment afresh.” What strategy would you now pursue in redeveloping the stadium you have only recently purchased?
If you haven’t guessed which club I am referring to it might come as a shock to learn the actual strategy which the particular club has chosen to pursue is, on the strength of England’s as yet uncertain 2018 World Cup bid, to plan a 44,000 seater stadium (2)! To back themselves into a corner, the club, or specifically the shareholders, has just voted to “sell Home Park to a newly formed property company for £7.5 million … It means the football team will become a ‘priority’ tenant of the new company, a wholly owned subsidiary of Argyle’s holding company, and pay it a ‘market rent’” (3). Yes, it is Plymouth that I am writing about. This newspaper report also quotes a figure of 46,000 for the capacity of the proposed stadium.
So, the good stakeholders of the club have voted to move from owning their stadium to paying a market rent on a stadium that would currently by 75% empty. I despair.
Not that this 2018 madness is confined to Plymouth. Bristol City (average attendance this season 14,500; capacity of Ashton Gate 21,500) are planning a new stadium with seats for 44,000 at a cost of £92m. No doubt this has caused ructions across the city, with Rovers (average attendance this season 7,000; capacity of the Memorial Stadium 12,000) pressing on with a £35m redevelopment plan (4) which will increase capacity to 18,000. That’s an increase in capacity at the two clubs of almost 30,000, clubs which are currently averaging 12,000 empty places between them, at a cost £127m – that’s over £4000 per extra empty place.
As I said in the title of the posting, bonkers. It’s not as if there aren’t warning signs elsewhere – from yesterday’s press: “Ukrainian President Viktor Yanukovych on Thursday said his cash-strapped country must by January spend at least 3.8 billion dollars on preparations to host its share of the Euro 2012 football championship“. (5)