Football Finances: it is just like a casino

 

 

 

• What will the first three matches of the new season tell us about Arsenal?
• 155 transfer reports; 44 players incoming; 22 leaving and 1 spotted at the airport

By Tony Attwood

As we have noted many times, most football clubs are in debt – often huge amounts of debt.  That debt is generally owed to other clubs, so the whole process of the debt is circular.  Club A owes club B, club B owes club C and round and round.  Much of this is due to the fact that transfer fees are not normally paid at once but generally over a period of three or four years.

At the same time clubs have incomes that often don’t cover the cost of running the club and buying and then paying these players.  So clubs are run on the basis of expected success: future income from more TV coverage, a good cup run, the discovery of a valuable young player who has come through the ranks and can be sold on…

It is in fact pure speculation.  The equivalent of a casino.

Some teams do fail financially, but normally not so much that they cannot be rescued by another owner coming along, and pumping a lot of money in.

But with smaller clubs, owners can find that the prestige and goodwill that they get from rescuing the local team can quickly evaporate if the team makes no progress on the pitch.  Abuse of the owners and managers can emerge very quickly, and owners and managers can on occasion feel they have had enough.

If we consider Arsenal and Stan Korenke for example, the was a lot of dismay about his takeover of Arsenal in 2011, even though there had been criticism of the previous owners for quite some time by one of the two major fan groups.  Now that has been set aside as Arsenal have achieved second place in the league for the first time since 2016 and won the FA Cup four times during the Kroenke reign (while Tottenham have not won anything since the League Cup in 2008).

But undoubtedly the only thing that seems to keep the whole indebted operation afloat is the thought that there is always someone else out there ready to spend ever more money on a player (Kane to Bayern perhaps) to keep the club afloat.

And there is always Apple, the largest company in the world. For MLS in the USA announced a broadcast deal with Apple in which Apple committed to pay at least $2.5billion over the next 10 years for the global rights with every MLS match broadcast by a single platform.

That now leaves the Premier League looking over its shoulder, both at Apple/MLS in the USA and the way Saudi Arabia is buying up players for its own super league.  

For in England most of the clubs are losing money while the Premier League is involved in a legal case against Manchester City (which in the financial world is reducing the value of the league until things are sorted).

In Europe there is widespread dismay over the future of football in the face of corruption charges, supporter-driven disturbances, and the appalling ineptness of Uefa to organise anything (two successive Champions League finals with negative reports, plus the Euro disaster at Wembley).

Uefa is now losing its grip on the smaller clubs as they seek to form their own association.  While Fifa’s wildness in terms of ideas (such as a world cup in a very hot very small country where football is not established and not only doesn’t have the stadia, but doesn’t have the workforce to build them) seems to know no bounds.

And that’s before we get to the ever-ongoing court cases in Switzerland against the international body and its top men.

But now there is the report from the LCP business consultancy which shows 63 league clubs have a combined annual loss of £1.2bn and almost half of England’s football revenue coming from just six clubs (of which one is Arsenal).

To show how bonkers this is the report says that the target for the amount clubs spend on wages is 70% of its income.  In the Championship it is currently 102%.  Clubs spend more on wages than their total earnings and this could be called in at any time, as an article covering this topic in the Athletic recently pointed out.

Part of the problem is the reliance some clubs have on finance from their owners.  Whether it is Manchester City or Brighton and Hove Albion, if the owners were removed for any reason, there’s a very big problem.  On a smaller scale Reading have a winding-up order in front of them, and lots of lower-league clubs don’t even submit detailed accounts so we have no idea what is going on.

But will anything change to avoid a crash?  Apple seem happy to have tied up the United States.  Saudi Arabia is doing its own thing.  In fact the only hope seems to lie with the Premier League.  If it continues its fight with Manchester City and wins, then its profile would rise higher than ever.  The best football in the world, and a willingness to root out illegal doings. That could be a winning combination.