Financial State of the Game in England

[doombear]

Independent regulator report says English football finances are 'dangerously exposed'

English football's finances are "dangerously exposed, with the majority of clubs living on the edge of financial disaster", a new report says.

www.bbc.co.uk

It doesn't make happy reading (or listening if you listen the excerpt from the interview). Interesting that all 116 clubs will have to be licensed by the Independent Football Regulator and they'll be starting this next month. Could be some interesting stories coming out of this over the coming months.

 

[ASCPFC]

The more I think about it, I think a different model of company is required for football clubs but I've no idea how they'd do it.
Currently, a Director/owner wants loads of players so he loans the club money. The club is more indebted the whole time. Clearly, not run sustainably. I believe we need jeapordy for the owners. They could have to inject money but not loans if they want to do that. Then the club does not owe them, it's their risk.
The whole of football would be crazily different then.
If you think the richest owner would just win, then limit how much they can put in but make it much higher than now. Which I think is maybe 15mil.

 

[Teddy Eagle]

Make all transfer fees payable up front. If a club want to buy a player for £100 m and they haven't got it in ready cash then they can't have him. The current system is just smoke and mirrors where clubs in the PL owe each other untold amounts.

 

[Mark B]

I'm just curious, who didn't already know everything that was put out? The financial information has been publicly available for a while through other mediums. Football loses money with very few clubs actually being profitable. And even the Premier League is a gigantic Ponzi scheme of foreigners buying and selling clubs to make money on the sale while accepting losses until they do sell.

There is one simple way to save it, salary cap. Set a hard salary cap like the NFL does based off of actual revenue brought into the league and ruthless accounting of that percentage since the league is the one who authorizes the contracts for the players they can guarantee that teams are in compliance. Clubs can spend a set amount in the PL and that amount lowers as the club lowers in the EFL tiers.

The biggest downside is that the PL wouldn't be the level of competition as it is now as a fair amount would take off for better paying leagues somewhere else. But not all would and it would give fans more control over the game and make it more competitive for all 20 clubs instead of a few having an actual chance to win the league.

 

[ASCPFC]

I'm just curious, who didn't already know everything that was put out? The financial information has been publicly available for a while through other mediums. Football loses money with very few clubs actually being profitable. And even the Premier League is a gigantic Ponzi scheme of foreigners buying and selling clubs to make money on the sale while accepting losses until they do sell.

There is one simple way to save it, salary cap. Set a hard salary cap like the NFL does based off of actual revenue brought into the league and ruthless accounting of that percentage since the league is the one who authorizes the contracts for the players they can guarantee that teams are in compliance. Clubs can spend a set amount in the PL and that amount lowers as the club lowers in the EFL tiers.

The biggest downside is that the PL wouldn't be the level of competition as it is now as a fair amount would take off for better paying leagues somewhere else. But not all would and it would give fans more control over the game and make it more competitive for all 20 clubs instead of a few having an actual chance to win the league.

Gradually introduce fan ownership of a certain percentage.

 

[Mark B]

Gradually introduce fan ownership of a certain percentage.

I think that is a way as long as it is tied to some kind of cost cutting; the issue that comes up with that is that fan owned teams often don't have the financial resources to be successful.

I also follow the Finn Harps in League of Ireland and they are currently in the process of trying to go from a fan owned club to selling it to a single owner who can try and make it sustainable. The math is brutal i most areas of club ownership when it requires fans to make it work financially. Most fan clubs just aren't designed to succeed because there are too many competitors in an area to allow for extensive support. Spain and Germany seemed to have solved it so there is surely a way to do it. As far as English football goes, I think AFC Wimbledon is the highest ranked fan owned club.

 

[Joseph Paxton]

Shocking/not surprising report.

This must be a strong red flag that the era of Player & Agent power needs to end and if not a salary cap, then some ratio of profit to salary outlay that is part of FFP structure. If we lead the way then others should follow. Yes the days of casino accounting need to end and players need to stop believing their own hype.

 

[chris123]

The more I think about it, I think a different model of company is required for football clubs but I've no idea how they'd do it.
Currently, a Director/owner wants loads of players so he loans the club money. The club is more indebted the whole time. Clearly, not run sustainably. I believe we need jeapordy for the owners. They could have to inject money but not loans if they want to do that. Then the club does not owe them, it's their risk.
The whole of football would be crazily different then.
If you think the richest owner would just win, then limit how much they can put in but make it much higher than now. Which I think is maybe 15mil.

Clubs should required to provide a bond like bank guarantee

 

[palace99]

Shocking/not surprising report.

This must be a strong red flag that the era of Player & Agent power needs to end and if not a salary cap, then some ratio of profit to salary outlay that is part of FFP structure. If we lead the way then others should follow. Yes the days of casino accounting need to end and players need to stop believing their own hype.

Yes, football finance is a joke really.
How can a loss making club like Chelsea sell for £2.5bn when it incurred £1.5bn of owner debt over the previous 15 years (so £100m a year - £2m a week!). Not only did it sell it had loads of buyers queuing up.

Further down the leagues almost every Championship club operates at a loss as they are so desperate to get into the Prem, however, the wage increases in Div 1 and Div 2 were a shock. They have risen at double prem levels. This must be the Salford, Wrexham, Stockport effect where ambitious owners have pushed up wages to unsustainable levels

 

[Badger11]

I have little sympathy for football clubs, they are entirely at fault. They all agreed that wages and transfer fees are too high and that there should be restrictions, just as long as it is not on their club.

This could be sorted out tomorrow especially in the EFL if they really wanted to. Instead they are demanding more money from the PL which does not address the issue, as costs will simply go up in line with any extra funding.

Outside of football, businesses would either fix the financial problems or go under with little sympathy from anyone else. Why should football clubs be any different?

60% of EFL and National league teams are technically insolvent according to the regulator. That is a big enough number to vote through caps on wages and transfers. It won't happen because too many will say yes to thee but not for me.

 

[TheBigToePunt]

I have a simple proposal for addressing escalating football club debt levels: Start by making it worse.

I'm serious. Put a strict cap on ticket prices at about half current levels. Also place a one-off wealth tax on English champions league clubs to pay for a hugely long overdue revamp of grass roots facilities across the UK. Then restrict income from TV, then take a f***ing sledgehammer to those (now ubiquitous) flashing, moving, highly irritating and distracting TV screens they pass off as advertising hoardings.

The end result will be far less money in the game. This will make foreign states and investment hedge funds and other general bellends far less interested in owning football clubs for reasons that have nothing to do with lifelong love for that club. It will prevent tourists from the other side of the world paying silly money for tickets whilst locals can't afford to take their kids to watch the team play. It will prevent championship clubs taking mad risks to get to the land of milk and honey. It will prevent the bigger, and even the medium sized premier league clubs having swollen squads of mercenaries with no connection to the country, let alone the club.

They'd all scweam and scweam and scweam but I'd live without all those players getting six figure sums a week, big clubs hoovering up talent without thinking twice, and academies being full of kids from the other side of the world at the expense of those from the town or city the club takes it's name from.

In other words, it will burn off a lot of the entourage, the hangers on, the chancers, leaving the key positions to responsible stewards. In other words , people who care more about making sure the club is there for the next generation than thier own vanity.

We would have more than enough money in the game for good facilities and high standards, we'd just lose most of the deeply unpleasant excess.

I'm very far from a mad lefty, but football is one area where I'd be happy to see anti capitalist policies let loose for a bit.

 

[cryrst]

I have a simple proposal for addressing escalating football club debt levels: Start by making it worse.

I'm serious. Put a strict cap on ticket prices at about half current levels. Also place a one-off wealth tax on English champions league clubs to pay for a hugely long overdue revamp of grass roots facilities across the UK. Then restrict income from TV, then take a f***ing sledgehammer to those (now ubiquitous) flashing, moving, highly irritating and distracting TV screens they pass off as advertising hoardings.

The end result will be far less money in the game. This will make foreign states and investment hedge funds and other general bellends far less interested in owning football clubs for reasons that have nothing to do with lifelong love for that club. It will prevent tourists from the other side of the world paying silly money for tickets whilst locals can't afford to take their kids to watch the team play. It will prevent championship clubs taking mad risks to get to the land of milk and honey. It will prevent the bigger, and even the medium sized premier league clubs having swollen squads of mercenaries with no connection to the country, let alone the club.

They'd all scweam and scweam and scweam but I'd live without all those players getting six figure sums a week, big clubs hoovering up talent without thinking twice, and academies being full of kids from the other side of the world at the expense of those from the town or city the club takes it's name from.

In other words, it will burn off a lot of the entourage, the hangers on, the chancers, leaving the key positions to responsible stewards. In other words , people who care more about making sure the club is there for the next generation than thier own vanity.

We would have more than enough money in the game for good facilities and high standards, we'd just lose most of the deeply unpleasant excess.

I'm very far from a mad lefty, but football is one area where I'd be happy to see anti capitalist policies let loose for a bit.

How would this impact all the ancillary employees and businesses though?

 

[TheBigToePunt]

How would this impact all the ancillary employees and businesses though?

Well, if you were a mad lefty anti capitalist (which is the role I would adopt for this one purpose only) you could ring fence all that and protect it.

In reality, all those things are coming under increasing pressure in the hyper-capitalist premier league anyway. Arsenal announced wide ranging cut backs affecting 'normal folk' last week, around the same time they announced a new contract worth up to £25m a year for Arteta. Cutbacks at Man U have also been in the news, not that their players are going without.

Based on the state of the industry its not like leaving things as they are is likely to ensure the financial well-being of the lower orders.

 

[Stirlingsays]

Well, if you were a mad lefty anti capitalist (which is the role I would adopt for this one purpose only) you could ring fence all that and protect it.

In reality, all those things are coming under increasing pressure in the hyper-capitalist premier league anyway. Arsenal announced wide ranging cut backs affecting 'normal folk' last week, around the same time they announced a new contract worth up to £25m a year for Arteta. Cutbacks at Man U have also been in the news, not that their players are going without.

Based on the state of the industry its not like leaving things as they are is likely to ensure the financial well-being of the lower orders.

I agree.

Normally a free market (it's never been completely free) is better with light touch rather than low regulation, however abuses will always occur if the system is allowed to regulate itself or influence outcomes and bend rules....as big money will always find a way unless kept in check.

However, it's how its dealt with that's important.

Marx wasn't wrong with his criticisms of capitalism, where he was a disaster was in suggesting alternative solutions.....which he kept light on detail and which resulted in countless dead from those who expanded on it.

Capitalism left alone within guard-rails is the ideal.

 

[TheBigToePunt]

I agree.

Normally a free market (it's never been completely free) is better with light touch rather than low regulation, however abuses will always occur if the system is allowed to regulate itself or influence outcomes and bend rules....as big money will always find a way unless kept in check.

However, it's how its dealt with that's important.

Marx wasn't wrong with his criticisms of capitalism, where he was a disaster was in suggesting alternative solutions.....which he kept light on detail and which resulted in countless dead from those who expanded on it.

Capitalism left alone within guard-rails is the ideal.

Yeah, that seems the least-worst way to me, always has.

That said, there is a strange relationship between the social historical significance of football clubs on one hand, and their being fundamentally capitalist from the very outset on the other.

It makes me laugh when supporters chant 'Get out of our club' at the owners. It's the owners club. The clue is in the word 'owner'. Clubs are private companies and we are customers. All the emotion is projected onto that basic business model, but doesn't ever change it.

Companies don't last forever, generally. They serve a purpose in the market until they don't. As much as we sigh about the demise of Woolworths or whatever, we just shop in Tesco or on Amazon instead, and the purpose gets served. Even if we were long time customers, we wouldn't try to keep those firms alive if they had reached the end, or insist they be run in such a way that they be prevented from normal commercial speculation just in case they should fail. But we do want that with football clubs. It's at odds with their nature to regulate them to the extent that is required.

Desperately needs doing, though. They need saving from themselves, but for our sake rather than theirs.

I can't think of anything to compare it to.

 

[Stirlingsays]

Yeah, that seems the least-worst way to me, always has.

That said, there is a strange relationship between the social historical significance of football clubs on one hand, and their being fundamentally capitalist from the very outset on the other.

It makes me laugh when supporters chant 'Get out of our club' at the owners. It's the owners club. The clue is in the word 'owner'. Clubs are private companies and we are customers. All the emotion is projected onto that basic business model, but doesn't ever change it.

Companies don't last forever, generally. They serve a purpose in the market until they don't. As much as we sigh about the demise of Woolworths or whatever, we just shop in Tesco or on Amazon instead, and the purpose gets served. Even if we were long time customers, we wouldn't try to keep those firms alive if they had reached the end, or insist they be run in such a way that they be prevented from normal commercial speculation just in case they should fail. But we do want that with football clubs. It's at odds with their nature to regulate them to the extent that is required.

Desperately needs doing, though. They need saving from themselves, but for our sake rather than theirs.

I can't think of anything to compare it to.

Excellent post.

At some point the sheer insanity of the economics will do what a lack of common sense and firmness from regulators wouldn't.

 

[TheBigToePunt]

Excellent post.

At some point the sheer insanity of the economics will do what common sense and firmness from regulators wouldn't.

Probably. You can't swerve economic reality forever, it'll have it's pound of flesh.

But what would that entail, I wonder? Maybe twenty or thirty 'phoenix' clubs starting again in non league? Perhaps these premier league and championship companies fold left, right, and centre in coming years, their fuckwit owners and administrators nowhere to be found, but yet the customer base still there, just waiting to be cashed-in on.

So Aston Villa, or whoever, fly too close to the sun and go bust. Villa Park still exists. There are still 50,000 people who want to watch them. In other words, the market dictates that a company be formed to meet the demand. They go up through the leagues and get back to where they were, except nobody has a different mindset. They all just want to chase the glory. Until one day, they go bust again. Like Glasgow Rangers, only over and over again?

 

[dreamwaverider]

It is totally f**ked.
Unsustainable unless they let the billionaires finally ruin it.

 

[Stirlingsays]

Probably. You can't swerve economic reality forever, it'll have it's pound of flesh.

But what would that entail, I wonder? Maybe twenty or thirty 'phoenix' clubs starting again in non league? Perhaps these premier league and championship companies fold left, right, and centre in coming years, their fuckwit owners and administrators nowhere to be found, but yet the customer base still there, just waiting to be cashed-in on.

So Aston Villa, or whoever, fly too close to the sun and go bust. Villa Park still exists. There are still 50,000 people who want to watch them. In other words, the market dictates that a company be formed to meet the demand. They go up through the leagues and get back to where they were, except nobody has a different mindset. They all just want to chase the glory. Until one day, they go bust again. Like Glasgow Rangers, only over and over again?

I like your solutions but we all know that the system will suck on a cash cow until all the milky cash is gone and it falls over.....and that's what's going to happen in some form.....as has been correctly summerised, it's unsustainable.

In a sane time, this wouldn't happen, but it's all part of the modern decline.

 

[TheBigToePunt]

I like your solutions but we all know that the system will suck on a cash cow until all the milky cash is gone and it falls over.....and that's what's going to happen in some form.....as has been correctly summerised, it's unsustainable.

In a sane time, this wouldn't happen, but it's all part of the modern decline.

Totally. Either the clubs reign themselves in, or they get reigned in, or economic reality does the rest.

Still though, I think the point stands. Economic rules perhaps don't apply to football, at least not fully.

To return to my example, when Woolworths went bust there were however many hundred thousand punters who still wanted to buy tat. They didn't, however, campaign to keep Woolworths alive, or shop at AFC Woolworths who had just started up again at a market stall. They just shopped elsewhere.

If Sunderland, or whoever, go bust there's however many tens of thousands of Mackems who still want to watch a team. Except they won't shop elsewhere. They'll only pay to watch Sunderland. Whichever chancer gets his hands on whatever is left of the bones of the original club company has an open goal commercially so long as they keep the new thing as close to the old thing as possible. Reincarnation!

I'm not saying it's ok for clubs to go bust, or that reforming is guaranteed, much less climbing back up the leagues.

Still, feels like the consequences are different.