Arsenal News
Arsenal News & Transfers
As featured on NewsNow: Arsenal newsArsenal News 24/7

Arsenal News, Only Arsenal, Blogs, Transfer News

Archives

November 2017
M T W T F S S
« Oct    
 12345
6789101112
13141516171819
20212223242526
27282930  

Why is English football in such a total utter mess?

I ended my last piece by saying, “So, if the system works as it has for 100 years, is there any reason for thinking it is different today from what people saw in 1910?”

As I have written my answer to that question, it has grown and grown, and I can’t put it all in one piece – there is just too much.   So the theme continues, and there is more to come.  But don’t worry, as soon as there is something to say about Arsenal which is not being reprinted in every other web site, we’ll change direction.

But meanwhile on the financial side, here’s my point…

Clubs are running up huge debts, clubs are being hounded by the Revenue with winding up orders, clubs say they have millions behind them, and then suddenly there is nothing.  Clubs are owned by people who wont say who they are.  Clubs like Man U and Liverpool are in total denial that they even have a crisis (I refer to Mr Gill on Radio 5 on Sunday).  Clubs are owned by billionaires who fund everything – which is hardly the basis of stability.  Clubs are funded by owners who then charge rather tasty levels of interest on the “loans” – and the fans think that’s a great way to run a club.

Why is it all such a total mess?

1.  TV money is what made English football big. But it comes with problems.  TV audiences don’t stay the same forever and can collapse in a trice.  No one in the EPL seems to realise that.   Worse TV money leads to risks of such magnitude being taken they can spell disaster, amazingly for both the clubs and the TV companies.

We may have forgotten it already but two TV companies have failed because of football in the last 10 years – ITV Digital and Setanta.

If Sky suddenly found that the audience ratings were declining then they would probably see out the contract and then offer a fraction of what they offered before.  But the clubs would all be tied into long term deals with players (who make up so much of their outgoings) that they would have no escape.

Football is now dependent not on football but on a totally different industry – television.  Football doesn’t call the shots any more, TV does, and when the TV audience gets fed up, that’s it.

2.  In the old days clubs were financed by regular middle class people. Arsenal were funded until 1910 by a gentleman’s outfitter, and from then to the 1930s by a property developer.   This is the model that continued in most clubs until the 1950s and 1960s, and is still commonplace in the lower leagues.  It is Football 1.0.

But now at the top of the tree, benefactors are harder to find, not least because of upheaval in the market place and the fact that to play with the big boys you need not thousands, but billions of pounds.

This is a key point.  In 1910 Arsenal were funded by a man who ran a shop.  In 1919 with the move to Highbury, Highbury was built by a property developer at his own expense – but who then said to the managers that the transfer budget was strictly limited.

But now football is run by the billionaires, not the middle classes.  I don’t hold up the middle classes as the saviours of civilisation.  I only parade them at this moment because there’s a lot of them, and very few billionaires.

My point is the pool of investors is seriously limited, whereas before it was fairly widespread.

3.  The divisions within and between the divisions.

We all know about Top 4.  Stay in it for a number of years and you get an extra income, more players want to come and play for you, you get more TV money, your fame rises as a club, and so on.

Drop into mid table and the money declines dramatically.  Drop into the next division and you can’t afford the wages you were paying in the top league – but all your players are still under contract and no one really wants them because they have proved themselves to be overpaid failures (once more by definition).

As a result many clubs go into administration the year after getting relegated.

100 years ago – even 40 years ago the effect was far less.  What affected your income was the size of your ground and your ability to fill it.   Nothing else.  If you slipped into division 2, crowds would go down, if you were playing your local neighbours crowds would go up, it was all fairly simple.

A drop down the league could easily be rectified within the next couple of years without any problem, because there was fluidity in the league.

4.  Now football mobility is less

It is all very well the Tiny Totts saying each year that they will break into the top four this season, but the fact is that to do this you need someone else to slip back to let them in.   And with the top four clubs getting extra money, then such chances are rare.

There have been periods before when clubs have dominated the landscape – Arsenal in the 1930s, Liverpool in the 1980s, Man U in the EPL period are obvious examples.  But there has never been a period before where a handful of clubs virtually shut out everyone else.

Everyone is so scared of slipping that they will pay anything to stay in their current position.  But eventually, whether you look at Villa, Hull, Man U, Bolton or Liverpool, you hit the buffers, either because there is no more money in the pot or because you can’t pay back what you have had already.

5.  The local feeling

When Woolwich Arsenal went bust 100 years ago the local bank, the architect who designed their stand, and many other local creditors stated that they were not pushing for money.   They would sooner support the club than be seen  to be the people who would bring it down.

Now it is not like that – indeed it is hard to imagine any bank giving special support to a club.  When RBS renewed the debt contract with Liverpool it did so on the toughest of terms.  Likewise Revenue and Customs are getting tough, outraged by the insistence of the League that football debts be paid first.  According to the FT this week there’s around half a dozen clubs just at this moment facing winding up procedures from the Revenue.

If we expand the scene and look at the “threat of winding up orders” then in December 2008 half of the Conference clubs were in that grouping.

Worse, the size of the debts are getting bigger.  In the past people gave credit to football clubs because they liked being part of the scene.  Now it goes the other way.  “You represent a football club?  Cash up front mate.”

Conclusion thus far…

We are in a mess because football has been, for a little while, the sexy thing to be in.

Remember the dot com revolution, when bank managers said to each other, “quick, we are not lending enough to dot coms, we need to lend more or we’ll be out of the new order of things.”   TV revenue went through the roof because the dot coms were spending 80% of their turnover or more on advertising.

Does that have a ring to it?   Compare with 80% of revenue on salaries.

It was just as unsustainable.

But if you want other examples then there’s giving mortgages to people who can  never pay you back.    Or if you want to go right back in history the South Sea Bubble (look it up on Wiki if you don’t know).  Same stupidity.

South Sea, Dot com, Football… they are just fads, not thought through, the sexy exciting place to be… until sanity is resumed.

(c) Tony Attwood 2010.

The first part of this series on the finance of football appeared earlier – click on the link at the top.   More in the series soon.

22 comments to Why is English football in such a total utter mess?

  • Flint McCullough

    I have been expecting the bubble to burst for years now, Tony.

    It just gets bigger & bigger & at some time there is going to be a huge explosion. Dangerous territory indeed.

  • walter

    I just saw on the Dutch TV a short item upon the transfer market or better said upon the very, very quiet transfer market this January.
    The general opinion was that there have been very few real transfer as the money has gone and many clubs face bankrupcy. In Holland last week also a professional club stopped its activity.
    Therefore a lot of loaning deals but very few real transfer deals.
    Even a manager said that the market now was trying to adapt itself to the financial reality and the normal world.

    Things we have heard before over here and by some manager in the PL. You can have half a guess who.

    On your point 1: could anyone tell me how much money this means for Arsenal and how this is related to the total budget ?

  • matthew

    great question. i would really like to know whether AW has this £30/40 Million to spend and is not spending it. or whether this in fact a myth, preported by the board and backed up by AW, until such time as we deal with the debot on the ground. my understanding is that we have circa £75 million in the bank. but that we have to keep £35 million in the bank at all times, as interest cover on the loan on the ground. if we are assuming that the remaining is available capital, could that all be spent on players? and if so, would that have to cover the fee to the selling club as well as the wages>? if thats the case, then we dont really have a lot of money and are not able to compete with teh big spenders in the market. if anyone can shed any light on this it would be greatly appreciated

  • AGS

    Hi Walter,
    EPL clubs will receive in the region of £50-£60 million per season in money from the Sky TV deal. So to a club like Arsenal that has turnover of £200m +, its not the be all and end all, but still very significant. However, to clubs like Bolton, Hull, Wolves, Wigan, Portsmouth etc, it is everything because the size of their fan base means that gate receipt money will be relatively low. So even if these clubs have wages bills at £30-£40m (low when compared with Arsenal, ManIOU, Chelski) then they are still at big risk.
    But the Champions league will also bring in massive revenues for those that qualify. See the link below which is a very good breakdown of all the revenue clubs can receive.
    http://www.theoffside.com/tournaments/champions-league/uefa-champions-league-200910-prize-money.html
    So adding CL revenue to EPL money means that it accounts for probably around 40-50% of Arsenals yearly turnover.

  • tim

    Tony, excellent posting.

    Looking at the evidence you provide, one conclusion I have is that the big, established clubs will try to break off and form a super league once they stop getting results.

    I mean, if I were a director of Man U or Liverpool, and see signs that the day of reckoning will come, why wouldn’t I try to prevent that risk by breaking off to form a super league? Why rely on Champions League or Sky Sports revenue when my club (along with a few other mis-managed, big name clubs) would never have to worry about dropping out of the Champions League or Premier League again? Why worry about clubs nipping at your boots when you can just shut the door? It’s instant, guaranteed revenue. (This, I think, is Wenger’s point about the super league…though I can’t remember what his reasoning was.)

    I think a forerunner to this would be clubs trying to form their own cable channels like Real Madrid has…

  • Abhishek

    Hey Tim

    Nice analysis. I also find it possible because of the history of premier league clubs.

    Just today I read that premier league was formed was due to TV viewership and not due to footballing reasons. The reason being people would love to see the top clubs play togethar and this might lead to a new super european league. I also read that UEFA want all the top leagues to reduce the number of teams from 20 to 18. So if it happens it can be another pain for smaller teams. It has already reduced from 22 to 20.

    Well the teams are in deep s*** can be gauged from the fact that Fernandes got 7 offers from PL teams to buy them after he failed to buy West Ham. So we can safely say that a majority of PL teams are in deep danger and willing to sell themselves to anyone who has money like a **********(you guess it).

  • walter

    Thanks AGS for the information. So in fact they are all dancing on thin ice with the TV money. One year without the money and you could be almost finished.
    And for the big 4 the CL money is also almost irreplacable.
    Walking on a high wire with no safety net…

  • Cape Gooner

    Thanks for this Tony. I can grasp what is going on at most of the clubs, but Chelsea and Man City are beyond my understanding. This from Too Much online……..

    Almost all billionaires, at one time or another, grouse about the paparazzi. But Russian billionaire Roman Abramovich doesn’t just grouse. His new super yacht, Bloomberg News is reporting, features an “anti-paparazzi laser shield that fires bolts of light at cameras to obliterate photographs.” Roman won’t be doing any firing until later this year when his new yacht, the 560-foot Eclipse, actually gets delivered. The Eclipse will sport a full-time crew 70 strong, two helicopter pads, and a mini-submarine. To keep Abramovich safe at sea, the Eclipse also boasts armor plating – and a missile defense system. The yacht has so far taken four years to build. The final bill? That may run $1.2 billion. Abramovich, incidentally, already owns three other super yachts . . .

    (me again) If Abromovich can spend $1.2b (about 700m quid) on his 4th yacht, then there is no end to the money he can spend on Chelsea. And what are the implications of “no end”?

  • well-endowed gooner

    The one recurring theme from that article is the fixed, long-term contracts given to players. In what other industry is an employee given a 4-5 year contract, irrespective of performance? It should be mandatory that wages are linked to league position, or club income, or something that allows wages to be pegged back in case of regulation.

    And Tony, your silence on the Man Utd game is deafening.

  • critic

    what deafening, everyone knows it was humiliating, then why discuss it??what’s the point in discussing the defeat, when u know only person who can change these humiliating result against big team doesn’t read this blog(may be he does and takes the tip what not to do).that stubborn person will not let anyone’s opinion to change his….he will stop at nothing until he prove his point right….

    nice article tony…now give some light on arsenal finances and the truth behind wenger’s quote “” our finances don’t depend upon CL””…

  • Pete The First

    Tony, good job at ‘swerving’ the game on Sunday. Straight out of the Alistair Campbell book of burying bad news.

    I see Spurs have been active in the transfer window. Harry rotating some of his old favourites between clubs. Main players in these deals Harry Redknapp & Peter (I don’t hold the purse strings) Storrie. Brown paper bag anyone?

  • Sean

    Money has made the Premiership predictable.
    Don’t believe me…..see my comment on the ‘Rooney’ thread about games at Arsenal and Chelsea this season.

    Bought a wonderful book in Cornwall before Christmas.
    A gambler’s guide to the upcoming season (1956-1957).
    Man. U. had a strong side then but, even so, there were any number of teams who were in with a chance of winning the League and Cup.
    Newcastle, Villa, Burnley. Arsenal, Chelsea, Spurs, Man. C., Man. U., Wolves, Bolton………..all had a chance.

    In 2010 either Man. U. or Chelsea will win the league or, if you like, Chelsea or Man. U.

  • christianjimmy

    Great article Tony. I’m not sure you’re right though!
    While its true that thanks to the leadership of Lord Wenger Arsenal are much better equipped than any other club to ride out the storm following any potential collapse in the tv money flooding the game, I’m not sure that the collapse which would seem to predicate the demise of the football 2.0 model will ever come.
    I think the best model to look at as to how the game will develop may (sadly?) be the USA; Huge player salaries were the norm there long before they crept into football. Massive reliance on tv audience. Local supporters increasingly less important (eg the movement of so-called franchises to different cities). The marketing emphasis of customers rather than fans. that kind of thing…
    Now without being an expert on the US model of sports franchises (shudder) it seems to me that it is such an entrenched way of operating that it simply wont disapear even in the most adverse of economic conditions. And that this model which certainly the US investors (Glazers, Hicks and Gillett) seem to be keen on developing here will also never be allowed to completely collapse.
    Can you imagine any government allowing Liverpool or Man Utd go under on their watch? Much more likely that they’d arrange some kind of bailing out, a la banking, which would effectively allow the model to continue as is, despite the public opinion and government pressure!
    I think the combination of money, success, and american sports franchise modelled influence will lead to a super elite emerging from the pack and dominating (in the way Real M and Barca do in spain for example)
    I hope this isnt the case, but I fear that it will be our future!

  • walter

    I don’t think the governement could come between bankrupcy of MU or Liverpool.
    Bacause this will open the door to every football club to ask the same treatment and thus opening the door to every club spending like mad as they know the governement will bail them out.

    This never can be done by governement. They did for the banks but the banks are a vital part of the (global) economy of a country. A football club is not a vital part in the economy of a country.

    The ones that are gambling on this scenario could have a hard awakening. I really hope so.

  • Colonel Mustard

    no article about the match..eh Tony….yeahhh I did;nt think you would.

  • isaic

    the match was a humiliating one… but by any chance, we always got written off and bounce back again…we won at the bridge before… we can win again… nice article tony by the way…

    I have one question, if all clubs except Arsenal of course, go bust what will happen to the PL? Man Utd, Liverpool, Bolton, Hull and a lot others are facing debts and what about Chelsea? After turning those debts into bonds and selling it as shares, can this be repeated if they ever face this kind of situation again?

  • Hartwick89

    Funny all bloggers are thinking one dimensional and predictable. The notion that there is a real problem in the EPL I don’t think has sunk in. It seems real especially in regards to lower table teams, MAn & LiverPool. Question is if impending doom is near what will we do Sat. afternoons? And, what does a new league look like after that? Is there still time to fix it?

    The test of a team of willingness to be sustainable is being offered vast amounts of money and actually investing it or saving it. It seems based on the article and the current footballing climate that model has escaped the teams for a number of reasons as Tony points out. Man IOU fall into the billionaire schemes while lower table teams just lack the vision of success. Even Arsenal to a degree have lost some focus in regards to true sustainibility.

    So what’s the point? Well imagine if you were given 1mill sterling. What would you do with it? Would you save it and still live within your means? Would you save some, invest some, & live within your means? Or would you spend more than you make and take out loans to support more spending.

    It is simple the EPL had a great opportunity for the league and the teams with the suprising in flow of vast sums of money. But, they lacked the integrity and knowledge of what to do with it….So it’s on them and on owners and on fans who lack understanding of basic budgeting. “Pay what is due”, and never take out loans because that means you can’t afford it. If you follow that you have know problems. And, as I see it even Arsenal have some problems if the TV money doesn’t come through.

    To Arsene,

    You have done a great job all things considered. Do we have enough money to deal with finances if TV revenues fail to be payed? If not you still have some work to do!

    Caring Arsenal Fan

  • Finsbury

    Tony,

    Any thoughts on what happened in Argentinean domestic football and what happened with the TV rights over there? OF course, politically, that could never happen under the auspicious & impeccable guidance of the City of London, but it is interesting.

    Brilliant analogy between the housing bubble and the football/TV rights bubble.

  • Sean

    Finsbury
    That’s tongue-in-cheek about the City of London, yes?!

  • Finsbury

    Yes!

  • walter

    For those who wanted an article on the match it is there but sometimes it is better to hold your breath a while before you say anything. A virtue some do not know I think. 😉

  • Marc

    Nice piece Tony.

    I’ve watched a lot of the documentaries on the recent economic problems and the comparisons with previous bad times. The one thing they all seem to have in common is an excess of leveraged debt. The “experts” spent most of the noughties telling us why we were immune to a repeat, the same “experts” are now telling us that football is immune to what has affected almost every other aspects of the economy.

    Not so much a case of doomed to repeat histories mistakes as determined to repeat them.