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Football stumbles towards financial insanity

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By Tony Attwood

I have bored you stiff many times before saying that this is the moment when football collapses under the weight of its own financial stupidity.

Yes, I hear you shout, but when?  And who?   “Where’s the evidence?” you call (and I know you do because I can hear these voices in my head).

But truth be told, talk of Sheffield Wednesday tottering to administration is hardly earth shaking, and we have heard so much about Liverpoodle and Man IOU of late that it seems as if the old timers can go on forever.

Except, except… the defeat of the Russian Oil Fund in west London by our old chum Steve Bruce did cause a little upset.  The talk has been that Chelsea (for it is they to whom I refer) have cut their “25” squad so very thin – in fact the thinnest in the league (I reprint the list at the end).  And for all the talk of their brilliant youth squad, there is no equivalent to Theo, Vela, Ramsey, Wilshere, and the rest sitting around on the subs bench – nor even JET and Lansbury (now apparently an England goal keeper) waiting for a chance to move on up from the reserves.

It is not a shortage of money, but a real and genuine concern about the new regulations – plus a final recognition that while money can buy most stuff, it still can’t guarantee the league.  (Ask Sheikh Yermoney’s team).

It’s not just in England that the problem is shaking its way through the game.  Take AC Milan, the subject of a detailed investigation by Swiss Ramble in a recent edition of his exquisite blog.

Milan’s did actual manage to get their financials into what Uefa now likes to call “acceptable deviation”, but they did this by selling Kaka – not something they can do every year.

WC Milan have in fact been in a headbasket league with Real Mad and Barca-loan-us.  According to Swiss Ramble between 1999 and 2003 they spent  €260 million net.  In the following eight years , “the net spend was effectively zero.  Even when they paid big money for someone like Ronaldinho in 2008, this was recouped (and more) with the sale of Kaka the following season.”  Meanwhile Inter have actually started to make money from transfers (€50 million in the last two years).

Of course WC Milan suffer from having an income that is only about 65% of Arsenal’s, and they are desperately trying to cut their wages bill by 30% to be able to enter the Champs league in the future (given that there are no more Kaka’s to sell).    The debt has risen in four years from €151 million to €301 million.

Meanwhile of course in England we have uncertainty.  Manchester IOU’s owners are paying off the notorious PIK loans (which are charged at about the same level as the Gone West bank want to charge my company for an overdraft.)

But how, we all scream.  Anders Red, the best thing ever to come out of Manchester IOU as always gives us the latest.   Refinancing is the most obviously with a little saving on the 16.25% currently being paid.  My guess is they found a credit card dropped in the directors’ box and are using that.

The Glazers have told the BBC that they haven’t sold any of the club to anyone (who the hell would want such a debt ridden organisation?) and the notion of selling other assets seems utterly unlikely as Anders Red points out.  They are also saying they haven’t borrowed more from the club.

In fact the money has to come from somewhere, and maybe the Glazers have found another source of borrowing at a lower rate of interest.  But consider this comment from Anders Red (and do remember, this guy is an honourable Man U supporter, who wants the best for his club – his data invariably makes a lot of sense).  Reviewing the latest quarterly accounts he says…

“On the cost side, I have to say the rise in salaries at 14.8% is totally staggering. Last year wages rose 7% so this doubling reflects a huge acceleration in wage increases. Note, these figures do not include Rooney’s pay rise! Salary inflation shows no sign of slowing down in the run up to UEFA’s Financial Fair Play rules coming in. Other costs rose 5% year on year. In total, costs rose 12%, ahead of the rate of growth in revenue.”

So even if the Glazers have cut their interest rate a little the club’s finances are running away with themselves.

The latest figures also show that matchday revenues are just about static (actually increasing just 0.5%) and we know they can’t sell all their season tickets, while they are also advertising in the nationals to sell tickets.  (This compares with Arsenal who as was pointed out in correspondence in the last article, look to sell out for the league cup quarter final – a match which is not covered by season ticket allocations).

But what of Liverpoodle – the Americans’ favourite lapdog?

Mr Henry, who owns the show has said there will be no “quick-fix” to the multiplicity of problems the club has including lack of depth in the squad, poor results, mediocre youth set up, continuing debt over the new stadium plans, and no serious end in site to the stadium issue.

Their solution of course, as with every club with problems, is to “do an Arsenal” by which they mean build up a production line of youth players signed aged 9 or 11, alongside the best overseas players signed aged 16 or 17 (we’re back to JET, Lansbury, Wilshere, Vela, Theo, Gibbs, Clichy etc etc).

Frank McParland is now academy director and he’s signed up two Barcelona youth coaches, José Segura and Rodolfo Borrell.  “We need ‘top four’ young players,” Henry said. “They will not produce a quick fix but our philosophy in football will be based on the long-term. That is what has made Arsenal and Manchester United so strong. They understand something we understand in Boston – to be consistently strong on the field you must have a consistent flow of young talent that has been nurtured and developed the right way. We will focus on that. That is also the philosophy of Damien Comolli.”

As for the Oil Men, well who knows, either at Sheikh Yerbooty’s den or at the home of Mr Abramovich.   The former are struggling to maintain their top four spot and don’t care a toss about breaking even, while the latter just doesn’t seem to have the right sort of players in depth to stay at the top and get the financials right.

Here’s the The oil men (South) “25” although there are not “25”.

Homegrown players: Ashley Cole, John Terry, Frank Lampard, Ross Turnbull
Non homegrown players, Petr Cech, Branislav Ivanovic, Michael Essien,
Ramires, Yossi Benayoun, Didier Drogba, John Mikel Obi, Florent Malouda,
Jose Bosingwa, Yury Zhirkov, Paulo Ferreira, Salomon Kalou, Alex, Henrique Hilario, Nicolas Anelka

Makes you think.

Don’t say we didn’t warn you

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Untold Untold and then again

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20 comments to Football stumbles towards financial insanity

  • roger b

    you missed sturridge another home grown?? decent article though

  • Filip

    From this season onwards, we will be the number 1 team in London again.

  • Superfly gunner

    I dont think we are any where near our full potential yet but I do think chelsea and manu are weaker we were better then manu last year and we should have finnished second but the injuries cost us.

    Injuries have less of an impact on us these days(yay).

    Chelsea cant go a whole season like this so they will just get weaker.

    I dont know what will happen for the rest of the year but we really look like taking it the only thing that can stop us is us.

  • Ian Trevett

    Looking at Chelsea’s squad they have a big problem until the January window if the reports on Terry’s injury is correct and Alex is out for six weeks.
    They played Ferreira and Ivanovich in central defence against Sunderland and the result was clear for all to see. They may get their act together (they hope), bring in a youth player or Essien could drop back (though he still has two games on his suspension). Whatever happens that defensive brick wall which has worked so well for them now looks like it could crumble.
    Let’s hope so.

  • ArsenalDubai

    The wheels are starting for come off for Chelsea, and ManC is having great engine trouble. ManU have a flat tyre and can only draw. Time is right for the red & white army. Go Gunners!

  • Nick

    Another great post from the by far the best Arsenal blog around. I enjoy reading up about financial madness that goes on as it’s shows just how disciplined Arsenal have been on spending and what they have achived. Annoys me greaty people talking about how we haven’t won anything in 5 years blah blah, well I’m sure Portsmouth would swap their FA cup win for infrastructure any where near like what we have eh? Keep the faith Gooners this year just could be the one!!!

  • Steve Palmer

    A good piece again, but i have said many times the football authorities both English and European,and World, are bent, theres no doubt in my mind that bungs in the right places will secure teams in any league and any competitions.
    It has become clearer and clearer that skullduggery is rampant, Managers are calling for a Referee league with our own Mr Wenger in agreement, they say the Referees are not of the standard that we expect in the Premier League, thats a nice way of saying there bent.And after Sundays game between Chelsea and Sunderland, with a man clean through to score, a Chelsea defender hacks him down, every body in the world expects the only result possible a straight Red but no just a yellow, with no big complaints in the press next day, and that happens in games all the time.
    so big Teams who suposedly are struggling will never be ommited from anything, they also very rarely moan about bad decisions because they dont have to many,With Chelsea having problems at the back dont expect any suspensions for a while.

  • Archimedes

    Chelski has 9 players who have started in 11 or more league fixures so far, which well above Arsenal and ManU, at 5 and 6 respectively, an indication that the former has had a shorter injury list so far. Chelsea only named a 19 man squad, and it looks like they gambled on the starting XI to be fit or not in suspension until the January window. There are 7 more fixtures this year in the league (of which 4 are away) and realistically no transfer will be able to play on 1st January round, or maybe even the round of the 4th/5th. If so 9 games to go. Their top scorers are Malouda 7 and Drogba 6, anything happening to them or to Cole or Ivanovic in defence and they could look really shaky. There are two more games in Europe as well and given that a team on average get one player with a minor injury every week, requiring 2-3 weeks absence, and one player with a more serious injury every month, requiring 2-3 months absence, Carlo is more than likely to continue to experiment with players playing out of position or use green players.

  • Aussie Jack

    When the bubble does finally burst I do hope Arsenal have someone to play against, but of course they will, the game will survive even after all the oil has dried up.

  • Wrenny

    The Chelsea situation is very interesting. With the amount of players they released to cut the wage bill, and the sudden youth of their bench, I wonder whether they might be settling for a top 4 finish for a few years while their team is in transition. The FFP regulations no longer allow them to buy their way out of this transition from one generation to the next with a quick-fix, and falling foul of the FFP and being banned from the Champions League is not an option as Chelsea depend on that money.

    If they do take that route, it would be a mirror image of what happened to Arsenal as the Invincible side disbanded.

    Coming back to the here and now, the injuries of Alex and Terry are a huge blow to their chances (and a huge boon for ours, potentially). Ivanovic is now their only fit CB, but even he has been employed at RB for a long period so it might take him a little while to adapt back into the central position. They are suddenly incredibly thin on the ground for defenders as the most hectic period of fixtures in the season arrives.

  • Richard B

    The principle of mutually assured destruction on which the Premiership is built may well be entering a new phase. Bolton’s relative success in the league (one that, if maintained, would see them qualify for Europe) has led them to announce that they’re going to have to sell players to reduce their debt (c£90m)- presumably in order to fall into line with the FFP regs. Liverpool seem to be saying that they won’t buy in January, not least because they won’t have enough money to do so. Chelsea’s summer clear-out is looking like it’s going to come back to haunt them. Spurs are making themselves even more unpopular with just about everyone by trying to avoid paying for a new stadium through a move onto West Hams patch in Stratford. Again money, or the absence of it, is the at the root of the dilemma. The stories just go on and on.
    Even when so called good news happens with the Glazers ‘paying down debt’ it’s met with suspicion by even the most rabid of Man Utd. fans.
    Meanwhile the Arsenal go serenely on, run by people who (according to some) can’t see beyong the end of their noses and have no idea as to what is needed to run a football club. And everyone declares they want to adopt ‘the Arsenal model’i.e. common sense.
    Speaking of the Spurs debacle – is it a coincidence that, out of the blue, Arsenal are running a two part video on their website about the history of the move to Emirates? I think they may be having a dig!

  • IndianGooner

    Richard B,

    The club maybe having a dig.. Or maybe the club wants to show everyone that the move was done at the perfect time.

  • Richard B

    IndianGooner – the perfect time would have been one or two years earlier! But I think you’re right it’s certainly emphasising the point that Spurs, Liverpool etc. are trying to emulate Arsenal under very different (and less advantageous) circumstances. And it’s costing them dear.

  • IndianGooner

    Richard B,
    You’re right.. If we’d moved during the unbeaten season or the 01/02 double season, we could have reduced the debt burden even more and wouldn’t have had to rely on the youth so much.

    But I guess we can’t have everywhere.. I’m just happy that we’d settled into the new home before the Economic crisis hit the world.. I’m a firm believer of ‘Everything happen at the right time’ and maybe a move earlier would have put lot more pressure on the players on delivering rather than the current scenario where we patiently allowed the young ones to grow into the players they are now..

  • Hi Tony, good article as always. Just wondering where you get all this financial information from?

  • Charlie

    The situation mirrors to some extent what was happenning in the NHL (ice hockey) about 5 years ago. None of the teams were making money and many struggled to survive because wages were out of control. The governing body took the extreme measure of putting a wage cap of $54M on all teams. The players went on strike for a year but the ruling stood. In football the income generated by each club varies a lot but it would be possible to introduce financial controls and veto contract offers or transfers even when a club is not in administration.

  • Mark – I try to credit most of the sources, but primarily I use the ones that I find over time to be reliable.

    Swiss Ramble is stunning in depth and coverage. I disagree on some interpretations such as their view of how Man City can get out of jail, but bow to the guy’s knowledge

    Anders Red is a Man U blogger with deep insight into his club’s financial mess. When we exchange the very occasional email there is a bit of joshing – he pointing to five years of no trophy, me pointing to profit but it is light hearted. This guy is a genuine supporter of his club, and fears for where they are going.

    The Guardian has its occasional lapses, but it is the only newspaper web site I read and the only newspaper I buy. Not 100% but so far ahead of the rest as to make it no contest.

    That’s the starter – after that I google and search for the info I need.

  • Rhys Jaggar

    Possible sources of Glazer cash:

    1. Proceeds of gambling on sport – a few clear cases which FIFA will not be considering come to mind….
    2. Killing 1000 crocodiles in the Everglades and selling their hide to make ridiculously expensive handbags for the world’s richest men’s wives, mistresses and hangers-on….
    3. Getting a bail out from Jeb Bush on the understanding they back him to the hilt if he runs for US President.
    4. The Chinese agreed to pay it off so long as they don’t need to reflate the renmimbi.
    5. They shorted some currency or other two years ago on the advice of George Soros.
    6. They had £250m in cash which they stashed safe from the US taxman in the Caymans.
    7. A prepayment on a 20 year baby Glazer naming rights deal.

    Who knows. I’m sure they lodge their accounts in Delaware, which will mean they merely need to say: ‘we traded last year, we are the owners, the rest is none of your business!’

  • Paul C.

    You’ve got to think that some bank has agreed to refinance the PIK’s at lower rates of interest, but insisting on a higher principal amount. Say taking their 250m at 16.25% and refinancing 325m at 75 or something like that. The bank makes a profit and the Glazers get out from under that crippling interest.

    Othwerwise I go for Rhys’s suggestion that they are “Killing 1000 crocodiles in the Everglades and selling their hide to make ridiculously expensive handbags for the world’s richest men’s wives, mistresses and hangers-on”. LOL.

  • Tone

    Why are we now all saying that we are going to be the dominant force in the years to come. It’s because of AW financial intelligence, management and foresight.

    So all those people who have been calling for his head need to shut up now and learn to look beyond the end of their dicks.