The operating loss to end all operating losses. How Chelsea totally lost it


The finances of the Premier League by Phil Gregory

Part 2:  Chelsea


This is part of a growing series of articles on the economics and finances of clubs in the Premier League.  If you haven’t already, I’d recommend you read the financial review I did of Arsenal here as in that I explained all of the terms and measures I’ll be talking about here.

And so, without further ado:

The playing staff

Since the departure of Mourinho, the club have consistently come in with around 83-85 points with a slight improvement in 09-10 to 86 points netting them the title this year. Chelsea have an old side, but they haven’t been getting any younger over the last few years, so unless the free-transfer departures hit them hard (unlikely, they were bit-part players) they will weigh in with around the same number of points for the coming season.


The first thing that strikes me when I look at Chelsea’s accounts is the lack of breakdown of turnover from Matchday, Commercial or TV money.

This lack of transparency cannot be a good thing, and only limits analysis of the club. Turnover however has risen substantially, up to £190million in the 07-08 season, the most recent available from the club. This is an impressive figure, the third highest in the Premier League after Arsenal and Manchester United, especially impressive if you consider  the size of Stamford Bridge is only 42,000.

Undoubtedly this was driven by success on the pitch helping them collect fans both abroad and in England,  while pre season tours to the Far East and the USA  are not done for the sporting benefits. With the club’s TV takings fairly similar to Arsenal and Manchester United, we can see that they must be doing very well in commercial and matchday revenues, given they are keeping pace with United and us despite having a significantly smaller ground.

Reading between the lines, whether the club can expect further growth in turnover is questionable; an important question given they currently make a large loss. Without a figure in the accounts for their commercial revenue there’s not much to go on there so I can’t comment on their prospects in that regard.

Neither do I have a figure for matchday revenues, though there is some scope for analysis given we have attendance figures. The club’s  ability to boost matchday revenues is wholly dependent on to what extent the fans are willing to absorb ticket price increases.

Interestingly while season ticket prices have been frozen for the past four years, they have increased the prices this year by on average 8.5%. Their chief executive Ron Gourlay said in a statement that it was related to the UEFA proposals for financial fair play, so he’s either looking for a scapegoat for the fans to blame or the club are genuinely having to work hard to meet the criteria.

With attendances over 98% of capacity, it’s easy to see why the club are raising prices: anyone who doesn’t want to pay the extra will likely be replaced by someone who will. As long as attendances don’t fall by more than the 8.5% average price increase, matchday revenues will rise overall.

Plans for a new stadium are just talk at this moment in time so apart from further ticket price rises, the only real scope for boosting revenues would be through selling the naming rights for Stamford Bridge. This is unlikely to be a popular move and despite being another good revenue stream it won’t be enough on it’s own to change the current loss-making state of Chelsea.


The wage figures certainly make interesting reading. Wages grew by almost 30% between 06-07 and 08-09, a massive increase considering the relative low-key player acquisitions.

This led to them spending an enormous £1.89million on wages per league point gained in the 07-08 season. A partial explanation for this massive increase is the £23million pay-off to various coaches and staff that were dismissed during their  managerial turmoil in the period. Giving them the benefit of the doubt, the wage bill (assuming nobody is sacked  in the future) (stop laughing) would have been £137million, or a still-significant increase of 12%. In the accounts, they referred to these wage severance packages as “exceptional items”, but looking at the trend since Mourinho’s departure, they seem to be the rule rather than the exception.

The club may point to rising turnover (up from £165million to £190million) as a reason not to be worried by wage growth but we know better. Wages as a percentage of turnover rose from 73.9% to 84.5%, so wage growth is greater than revenue growth. That’s certainly a reason to worry: a figure of around 60% is generally perceived to be the upper limit beyond which a club is being reckless, so Chelsea have successfully moved into the realm of total insanity.

And that’s to say nothing of the fact that wages  could  rise a lot more than turnover in both the short and long terms. Given the age of the squad and what I perceive to be a lack of depth in a few positions since their free transfer departures, they are likely to need to strengthen in order to challenge next season which will only increase the wage bill, while there are the previously highlighted difficulties in regards to susbtantial long-term turnover growth.

Amortisation (writing down transfer fees over time)

Chelsea’s amortisation figure is on the decrease, falling from £65million to £57million which makes sense given their recent frugality in the transfer market with the total profit (you read that right) from player sales during the period 06-08 coming to around £30million.

If Chelsea want to be competitive in the coming years, expect this trend to be reversed. Given the release of in particular Ballack and Cole on frees,  the clubs first team is a little lighter, and is not getting any younger. Perhaps the highly expensive youth time set-up will start to reap some dividends, but this too seems unlikely with Slovakian Miroslav Stoch sold off despite an impressive loan spell with Steve McClaren’s FC Twente.

Call me old-fashioned, but if one wideman leaves on a free, and a younger player in the same position has an impressive spell in a title-winning side, you surely give the prospect a chance?

Bringing this back to amortisation, if Chelsea  want to raise the bar, they are going to have to spend and reverse much of the good work they have done in cutting expenditure recently. Can they manage it with the Financial Fair Play measures looming on he horizon? Over to you Chelsea FC.

The Operating Loss to end all operating losses

Finally, the operating loss was an eye-watering £58million or 40% of their entire turnover which should underline nicely the sheer size of that deficit. What was Greece’s budget deficit as a percentage of GDP (which is the country equivalent of turnover), 12-14%? I rest my case!

Fundamentally, the issue with Chelsea is financial doping. A club has money pumped into it to improve the squad at the cost of financial stability. The fans love it as long as the owner doesn’t walk away, but can an institution as old and improtant to the community as a football club be allowed to be the plaything of a billionaire? I’m undecided of what the solution is here, and hope to see some food for thought in the comments below.

Next up: Manchester United

Untold Arsenal, an Emperor among pro-Wengerian philosophical debating centres, with cool showers, and glowing after-glow

Woolwich Arsenal, an Emperor among football blogs dealing with football clubs that no longer play in Kent.  In fact the only football blog dealing with clubs that no longer play in Kent.

Making the Arsenal: the 2nd edition is about to be published. A billion thanks to everyone who helped sell out the first edition.  I love you all, you are all my friends, I’ll never forget you… (disappears into a computer keyboard while continuing to write “Kill the bankers” – the new Arsenal novel, accompanied by men in off white coats).

64 Replies to “The operating loss to end all operating losses. How Chelsea totally lost it”

  1. I dont think there is any reason why chelsea cant be financially stable in the long run. They might have a few hiccups for few years but they’re building something big over there. They already attracting attention of big players and they’re winnin trophies as well and in the long run they’ll run smoothly. Its just 7 years when they have started winning trophies consistently, In another 15-20 years, they’ll become financially stable and be as good as we are now.

  2. Check the operating loss figures again, Dark Prince. Short of a brand new stadium (and the associated debt) they are going to struggle. The new TV deal will help, but the rapid growth in TV money over the last 20 years seems to be over as a trend, too.

  3. Chelsea is a recent phenomenon. I think it would be great if someone can come up with an in-depth analysis of what chelsea’s accounts looks like 10 years ago and compare it with how it looks now. Even though they are running at a loss now, they can make profits in the long run. Many factors should be taken into consideration. Chelsea’s popularity is growing considerably since last ten years. There might be a time when Chelsea can have a greater T.V broadcasting revenue or a greater matchday revenue than any other EPL club. So maybe there not lookin that stable now but in the long run it might be completely different from now.

  4. The biggest TV revenue can only be earned via going the furthest in Europe and coming top of the PL, so that’s defined by sporting factors.
    How do you anticipate them increasing matchday revenues more than any other club short of a new stadium?

  5. Dark Prince, what a positive post about Chelsea. Wish you employed the same optimism when speaking about your own club. Drogba, Lampard, Anelka, Ashley Cole, John Terry, Ricardo Carvalho, Essien and Peter Cech will probably serve Chelski for another 2-3 years atleast which means their wage bill wont come down beyond a point for that time.

    After that it will be time for most of the above names to move on – either because they will be past their best or because of some long term football related injury making them ineffective.

    How will Chelsea replenish their playing squad with similar quality players without falling foul of the UEFA financial fair play rules which will be effective by then? The current core squad cost something like 250 million pounds. With no academy players graduating to the first team yet its going to be an uphill task. Abramovich cant simply solve this problem by writing another oligarch cheque now like 2004.

  6. Phil – I disagree when you say that the growth of T.V broadcasting revenues are over. There are still many countries where the EPL has not yet introduced on t.v. Plus there may be many other types of media that will become increasingly popular in future. So there will be different sources of income in future.

  7. Phil – Matchday revenue can be increased either by creating a new stadium or increasing the capacity of their current stadium. I think they can do the latter. Plus the new fifa financial regulations have not put any restrictions on any investment in building stadiums or youth academy. So Roman Abromovich can build a new stadium if he pleases. Afterall, chelsea is like his very own child for him. He spent a fortune to build this team, he can build a fortune to athlet new stadium as well. Plus he is very much financially stable, so he can do it.

  8. And regarding going farthest in europe and winning the EPL, we can see that they have the team to win it next year as well. And the champions league too is within their reach. I can see that in the next 4-5 years, Chelsea and Arsenal are d teams which will dominate EPL. United have some financial problems that they need to sort out now, so they’ll be fighting for the 3rd or 4th for the coming years. Man City is another team which we have to look out for. They seem to be goin in the same direction as Chelsea. And they too can be very attractive to big players in the future.

  9. DP, you think Abramovich has not considered the Stadium expansion idea before? Planning permits for such a move are not easy to procure as any London resident would confirm. The residents of the Fulham, Hammersmith and Kensington have disapproved of such a move in the past and one would think they will not change their POV overnight.

    Besides that, architecturally the Stamford Bridge stadium has inherent weaknesses when it comes to executing a stadium expansion plan. For these two reasons I cant see an expansion in the stadium in the near future.

  10. While I agree with the article by Phil I’m also inclined to see some truth in dark prince’s argument. Surely we can find some positives in chelsea’s position? I mean I hate what they’ve become as a club and prior to the arrival of ancelotti as a team too, but they have set a platform.

    If there’s any justice in the world they will go bankrupt and slide down the table and the leagues, but the world doesn’t work like that does it?

    I think the article while informative is slightly too blinkered in that it seems to assume the outcome of chelsea’s demise.

  11. What I’d like to know I guess is..can they turn it around? How likely is it and what steps would they have to take. The article hints at it but doesn’t build on it.. for that reason i think its pre judging the outcome (lovely though that scenario is)

  12. Dark Prince how can Chelsea be or stay attractive to big players in the future if they cannot play in the CL anymore because the new rules from Uefa?

  13. They need to lower their ambitions to become a financially sound club. It will be difficult in a short period of time to cut the expenses and still remain competitive. Arsenal did it but I can’t see Chelsea being very successfull with it. Since most of the squad is 30+, they have a lot of work to to in the comming seasons.

  14. I don’t think the question is if Abramovich CAN build a new stadium but more a question if he WANT to build it and spend again so much money on Chelsea. And also the question will be if they can fill the ground after that. If I remember it right I heard last season that they did not sold out all their home games. So what is the use of building a 60.000 or 80.000 seater if it stays half empty.

  15. Walter- You’re assuming that chelsea wont be able to play in the champions league. There is still time for those rules to be implemented. And chelsea are already started to make the necessary changes to look financially better. For eg. They too have started buying young players for their youth academy. They are releasing players which are demanding heavy wages like ballack and cole. This will effectively bring down their expenses. Plus they’re winning trophies and this will bring them more income through prize money and increased broadcasting revenues.

  16. And why wouldn’t Abramovich spend for a new stadium?….Chelsea has won 3 league titles in last 6 years. Thats a 50% title success since Abramovich spent a fortune for chelsea. Dont you think he is happy with this success? This will only encourage him to build a new stadium if required. And regarding seats not getting sold out, if you hav just heard it somewhere then its better not to argue over it (we hav a heard many stupid stories of arsenal too). But even if that is a fact, dont you think the popularity of chelsea will increase if they win trophies consistently over a period of time? And eventually their stadium will get full?

  17. Chelseas squad remind me of Ac milans aging squad, I think they will hold on to players way past their sell by date, I can imagine Drogba with a walking stick and senderos at fulham saying ” im not frightened of you anymore”

    but seriously I think the russian mobster has fallen out of love with his Toy`. I think if they are going to survive they are going to have to cut wages, you cut wages and some of the mercenaries wont play for you anymore.

    In the long term the only sensible thing is to have an arsenal factory of producing homegrown players mixed with a few select acquisitions clubs need to start making profits

  18. I suppose it will be interesting to see what Abramovich’s strategy is going forward. It seems to me that with the investment in youth + their decrease in spending on the transfer market that they are looking for stability but as you say Phil, they’re doing very well on commercial revenue and that’s due to the team they’ve built with very expansive players and these guys are getting old. So they’ll probably need to keep spending big on players if they want to increase or even maitain that. I think the next 2 or 3 years will tell us how well Chelsea is managed as a club.

  19. I am just thinking… could they look at playing in Wembley while they work on long term plans for a new or renovated stadium? Would that not give them an immediate return and bigger match day revenue with limited financial liability?

  20. Dark Prince: most what you are saying is your own assertions, whereas I’ve provided evidence in my article for my counter-beliefs, so I feel it’s a bit pointless discussing further with you. I’ll just say this – look at Abramovich’s investment in the playing squad since he took over. His commitment is own the slide, why would he invest in a brand new stadium? There are also no plans even provisionally established, so a new stadium for Chelsea is years away, if it even happens.

    Gooner: It’s a good comparison that you draw. They are clearly looking to cut wages, with the recent departure of various bit-part players who were earning too much for their roles. That said, with players nearing the end of contracts, they have a readily available option to slash wages. The issue will be how they replace the departing players – nobody is going to want to come in on 50k a week if most of the longer-serving players are on over 100k.

    The Swiss Rambler: I take it you have a copy of Chelsea’s 08-09 accounts? Any chance you could provide a link to them if they are publicly available?

  21. Thanks for the link, some of the numbers there make very interesting reading. I’ll grab the latest figures from Companies House and have a look, didn’t realise they were out.

  22. Swiss Rambler your blog is simply awesome. Thanks for taking the time and trouble.

  23. Dark Prince, firstly because of a paucity of large land parcels that are available in West London, Chelsea would probably have to move out of West London altogether if they are to build a new stadium. Find a large and available land parcel with the correct land use in West London and you can make a fortune by broking the same to Chelsea. Moving out of West London would make them lose the little identity that they have. Cant see it happening.

    Moreover, as Phil as pointed out, Abramovich’s investment in Chelski has its limits – his resources are not limitless. A new stadium would cost Chelsea anywhere from 400-500 million. Banks wont lend to a loss making club like them so the funds will have to come from Abramovich. Am sure he can find a better use of his money in this current difficult financial climate than spunk it all on some stadium in South London.

  24. Phil- what you provided in this article is just the facts and figures how they stand at present. And you have taken a bit pessimistic approach towards how chelsea will deal with it. Have you ever considered what are the solutions they have? Are you tryin to prove by your article that chelsea have no chance in any way to regain financial stability in the long run? Its not always the worst case scenario for every club. There can be better ways to bring normalcy to the situation at Stamford bridge.

  25. Alex- Are you tryin to convince me that there is absolutely no land in west london that Chelsea can buy? And even if it looks like 400-500 million pounds, cant they just go d arsenal way of makin apartments in stamford bridge and sell it. Also selling the naming rights. Arsenal easily are payin off their debt by these methods, then who is going to stop chelsea using these same methods?

  26. Alex- Also their current squad has enough strength to win titles for another 2 years without any additional players. They can easily attract younger players now and make them ready to replace the current squad in few years. And they hav started buyin younger players, so it might work for them.

  27. DP, what I’ve tried to do is present the facts and then analysed. From my analysis, which I think is fair and unbiased, Chelsea re going to struggle. Yes, in the long run, any club can become sustainable, given a long enough timeframe. But for Chelsea to do so would require a big cutting of the wage bill, seeing as there is only so much revenue growth they can do short of moving homes. They can’t cut wages and remain competitive, ergo I don’t think they will cut wages at all.

  28. Dark Prince, am sure Chelsea’s commercial team could do with someone of your calibre because they are not able to do ANY of the things you just mentioned. You can take them to the next level and the rewards from Abramovich will be great – a new luxury yacht and a bachelor pad on Kings road at the very least. Besides, I never questioned that their current squad cant win anything in the next 2 years. Its the scenario after the next 2-3 years that I was talking about. Their academy is molten crud and they cant go on signing 20 million players forever.

  29. Phil- Maybe they wont cut wages, but they can increase their revenue. Winning consistent trophies will earn them a large world fan base. And having a large world fan base is a good way to attract better sponsers, better broadcasting rights, better merchandise sales, etc. So unfortunatety in the long run they seem to be winning.

  30. Dark Prince: they’ve already done the whole “increase fan base” thing. Look at their turnover growth since Abramovich. When I wrote this article, I didn’t realise there was a more recent set of accounts in which their turnover FELL. In other words, they made less money than the previous year. Revenue growth? Quite the opposite!

    I agree with what you are saying, but you’ve missed the boat – most of this has already happened to Chelsea. I may put together an article before the end of the summer plotting their path since the arrival of Abramovich which I think you would find interesting.

  31. Alex- hahaha….thanx for your compliment. But i’m a die hard supporter of Arsenal. I’m not tryin to take chelsea’s side here, thats why i’m lookin for a concrete way that will spell doom for chelsea. This article does show some of the negative sides of chelsea’s accounts. But what we see is something that is just temporary problem.

  32. Phil- but we hav to take into account that since last 3 years united have been winning the league. And now i doubt they’ll be winning anything for few years. Liverpool too have lost their ambitions. So what we are left is Chelsea and Arsenal. And united and liverpool falling down, Chelsea and Arsenal can pick up what their loosing, i.e on their global revenues. I reckon that chelsea and arsenal will see increase in their revenues and popularity in comin few years. That is what i said earlier, chelsea and arsenal will dominate for few years. So they might have lost some revenue last year, but there will be an increase again if they start winning trophies again. Lookin forward to your article!

  33. I think come start of premiership and the players the top four sign is a pretty clear indicator of how their finances lie and their intent of whether they are going to be reckless or are they really going to tighten their belts

    Liverpool clearly need strengthening same with Man U and if Chelsea dont sign a 30 million player they are going to be weaker releasing a few key players

  34. Dark Prince: commercial revenues just don’t fluctuate as you seem to think. Winning trophies establishes a fan base, and the vast majority of that is fixed for life. Yes, if United and Liverpool decline substantially (I only think Liverpool will do so) then there will be a new generation, but we are talking the ultra long term, maybe twenty years plus, so for me its a non-issue.

    The facts are these: Chelsea make a substantial operating loss. Chelsea can’t slash wages and expect to remain competitive so they need to find £30-50million of revenue growth assumign costs stay constant. From my studying of sports finance, that sort of growth in excess of costs just doesn’t happen short of a massive event such as moving stadium. Commercial and matchday revenues grow gradually, even with bigger deals being signed the improvement won’t be above 10% a year (I’m not plucking that figure out of thin air, but from the actual data for the league I have).

    I can see Chelsea reducing their operating loss, but given the constraints I cannot see them breaking even for a good while.

    Trust me, I’ve no agenda to make Arsenal look good by making Chelsea look bad, I go by the facts and analyse. Frankly if I was talking nonsense there’d likely be many more dissenters as we have a fairly switched-on readership here.

  35. Gooner80 – pretty much agree with you there. United are short of cash, and are buying young players with future sell on value. They’ll end up with a lower points total for certain if they get any sort of injury crisis up front.

    Liverpool are a non-entity when it comes to title challenging. No squad, no quality first eleven, no money to rectify the situation.

    Chelsea could spend on a whole new time, but are trying to cut losses. They’ll be slightly weaker next season, but not much. No depth up front is a big weakness.

  36. Phil- If Chelsea need to increase their revenue by £30-50 million, then i think they are already made half of that increase for next season already. They are having a new sponsorship deal with samsung from next season which is expected to be £10 million more than their current deal of £11 million. Also the prize money of winning the EPL is also about £10 million. So they hav increased it till the half way mark. Plus a slight increase in T.V rights and sales in merchandise can bring extra £5-6 million. So in another 2-3 years that target is achieveable.

  37. Phil- Also regarding the fan base, if you are talkin about the fans in england then its true that fan base remains fixed for life and might take 20 plus years for a new generation. But for fans in other countries its a totally different story. In other countries, fan base can easily change in 5-6 years time. I have witnessed this. I’m not from england, and since last 6-7 years, i’ve seen how almost 75% of my friends have changed their loyalties. And believe me, in other countries, loyalties often depends on success. And this change in number can be huge bcoz there are many times more supporters in other countries than in england. So a few successful years can earn a large fan base throughout the world. So with the demise of liverpool, there will be a large influx of fan base to other clubs. Even United might have the same fate if they follow liverpool. So even in a period of 5-6 years, there can be a huge change in loyalties and fan base around the world.

  38. @Dark Prince,

    While I agree with you that Chelsea have plenty of scope to improve their revenue, some of your figures are inaccurate.

    In 2009 they extended their shirt sponsorship deal with Samsung for a further three years until the 2012/13 season. The previous deal was worth £11m a year, while the new one has only been slightly increased to £12.5m a year, so a growth of just £1.5m a year.

    You are right about the increase in money from the Premier League central funds, but your logic is flawed. Next season marks the first year of the new 3 year cycle of TV rights, which have substantially increased, mainly for the overseas rights. This indeed means that all clubs can expect an additional £10m from central funds. However, the prize money is not that big a factor. Indeed, last season every place was worth £800k, so the difference between coming 1st and 4th was only £2.4m. In fact, a club coming 2nd can actually earn more Premier League money than the winners, if they have been shown in more live TV matches – as happened last season when Man Utd received more than Chelsea.

    Where Chelsea could certainly earn more money is via naming rights for Stamford Bridge. They have been looking for a stadium sponsor since at least last year, hoping to earn between £100m and £150m for a ten year deal.

  39. Swiss Rambler- If the figures you have provided are accurate then sponsoring the stadium seems to be the next best possible solution for chelsea. Maybe an off-season tournament like arsenal too might help. They can even sell one or two of their players and earn enough to reach the required break even every year. I believe that they should had extended ballack and joe cole’s contract few years ago so that today they could have earned something from their departure today. Surely if they still had a couple of years left in their contract, ballack and cole would be worth £10 million each atleast. A bad business decision by chelsea perhaps.

  40. @Dark Prince,

    Yes, Chelsea could possibly have got some money for Ballack and Cole, but the problem is if they extended their contracts, then they could have also potentially opted to remain at Chelsea, keeping their very high salaries on the payroll.

    As far as I can see, Chelsea have already adopted a policy of making money on transfers. For example, last year they earned £29m profit on player sales and their loss was still £44m.

  41. After reading the comments I think I’m leaning more towards a happy scenario (not for Chelsea though)Hopefully their spending will be curbed. Oh and about liverpool. Did anyone read benitez’s statement?

    “It’s strange. This year everything changed from the beginning.People in the club changed and the approach to everything was different. Clearly it was a question in the beginning of controlling the money we could spend or not, and everything was different to the past.”

    Did they not have any control on spending before?? Apparently not..

  42. Swiss Rambler- I’m still not sure about the way the amortisation expenses are treated in the books. And most of Chelsea amortisation expenses will tend to go down with the reduction in purchase of players. If you remove the amortisation part, we almost get a break-even scenario at chelsea. And these amortisation expenses will be nil for each player once their initial contract ends. Also in your article, you have shown how on a average chelsea have paid roughly £20 million yearly for cancelling contracts with managers. But that expense too seems to be goin to be negligible now as Carlo Ancelloti seems to be stayin in Chelsea for a while. So these expenses does seem to be reducing. In 2-3 years time, with the reduction in both of these expenses, they can easily make profit. Plus they’ll have a good load of experienced players which they can sell off for good prices.

  43. Shard- Liverpool are going to have a very tough decade with all the problems they have. United too seem to be following in their footsteps. They too would be struggle to win the title this decade. Chelsea seem to be little unstable, but not in as bad position as united or liverpool. Arsenal are comfortably ahead. This could very well be the decade where Arsenal dominates the EPL.

  44. Dark Prince – Your argument seems to state that Chelsea will reach a break even point by spending less on players and winning more. Where are the World class players who are going to achieve this going to come from? They have spent a lot on their youth system but it can take years before young players start to make a breakthrough. Over the next 3 or 4 years they are going to have to replace Terry, Lampard, Drogba etc and your talking about selling other players for a profit? We are also coming out of the worst recession for 70 years, this could seriously kerb commercial revenues. I’ve heard the glass is half full argument but you are the most optimistic person I’ve ever come across.

  45. Dark Prince – a new sponsorship deal is all well and good, but what abotu wage and otther cost growth? I’d bet my house that they more than account for the rise in commercial.

    Every position in the EPL is worth around £750000, so that’s all the difference between say first and second is.

    Amortisation is explained in the Arsenal article, it’s dead siimple. Have a look there. If you think Chelsea will continue a downward trend of amortisation given their current squad… they will certainly invest over the next couple of years, or lose competitiveness.

    Marc: hits the nail on the head.

  46. Swiss Rambler, I find myself deferring to you in virtually all financial matters, but here’s one that I feel slightly at odds with you over – naming rights to stadia.

    The position seems to be that if you name a stadium from scratch then everyone uses that name – the Emirates is a perfect example. It has nothing to do with Arsenal or Highbury, but everyone uses it. Many old timers like me don’t say it’s “At Arsenal” any more, but say, “at the Emirates” or in my case (to be difficult) “at the Ems”.

    But this is because it was new – if you name a ground that has not moved, then the difficult mob (which is roughly 80% of the season ticket holders) always call it the old name. Plus the difficult broadcasting mob (Alan Greene etc on Radio 5) call it by the old name. It is much harder to get a new name established.

    I think most in big time marketing recognise this (can’t prove it because my work in marketing is with smaller firms, but when I chat to colleagues on big company accounts they agree with this analysis) and so they won’t pay big money for the name of a stadium that hasn’t moved.

    Even with the move, think of what is happening at the Ems – we are about to go back to the North Bank, Clock End etc – the fans are the ones who hold onto tradition, no matter what the club try to do.

    So, for me, Huddersfield play at the McAlpine – and I can’t remember the old name. But Newcastle play at St James, even though their dickhead owner renamed it last season.

  47. Very good points there Tony. I’ll be interested to see how much Chelsea would get for their naming rights, but as you say, it may be a tough sell and that will be reflected in the price

  48. it took me two years to call it the emirates I kept referring to it as Highbury.

    I think it is possible but I think a lot of firms wont take the risk and certainly wont pay big money

    as Tony says traditions die hard.

    I noticed in a rugby game they had advertisements on the pitch I dont know if it was astro turf or being beamed onto their, but I would like to see arsenal do more,Istill think Us is a untappped market 17 million watched the usa game from America compared to the 100 million who watched the super bowl so times are changing I hope silent stan gets his finger out

  49. it took me two years to call it the emirates I kept referring to it as Highbury.

    I think it is possible but I think a lot of firms wont take the risk and certainly wont pay big money

    as Tony says traditions die hard.

    I noticed in a rugby game they had advertisements on the pitch I dont know if it was astro turf or being beamed onto their, but I would like to see arsenal do more,Istill think Us is a untappped market 17 million watched the usa game from America compared to the 100 million who watched the super bowl so times are changing I hope silent stan gets his finger out

  50. @Tony,

    Very fair point. Just because Chelsea hope to earn £100-150m for the naming rights does not mean it will happen. As I hinted in my comment, my suspicion is that they’ve been trying to secure a deal for some time with no success. One of the reasons is almost certainly the one you’ve given, namely that the marketing opportunity really lies with a brand new stadium (with the emphasis on brand).

  51. The other point to consider with naming rights is while the deal is a huge amount of money the amount of time it is spread over takes it down to £10 – £15 million a year. Not a bad amount of money but if your losing £50 million a year it doesn’t really make much of a difference.

  52. Marc – When you say that we’re coming out of the worst economic recession, just try lookin at real madrid. Last year they bought a player for £80 million. Doesn’t actually go well with the recession trend, does it? And when you say where they’ll get the world class players to win the title, i’ll say that players like john terry and frank lampard have become world class by playin for chelsea. They can produce more players like that in the future. And by next 3-4 years, even their youth academy will show results.

  53. Swiss Rambler- Neither am I sayin that Chelsea will get out of this very easily. But its not impossible for them. They will definately have to sacrifice their non-sense spending methods. And their recent trends have suggested that they are atleast tryin. Coming down from £200 million of losses to just £45 million loss in 5 years is a big achievement and shows their going in the right direction. Maybe another 3-4 years, and then they’ll be better off.

  54. Also Chelsea can probably build a new stadium. Havin a stadium of just 45000 capacity is not that profitable. Totenham are building a new 60000 capacity stadium, arsenal have a 60000 capacity stadium, united have a 75000 capacity stadium. And they know what is the importance of matchday revenue. So a new stadium isn’t an impossible dream for them.

  55. Good question gooner80. I’d imagine like most businesses they’ll just increases prices so that the consumer pays the increase, so no change to the bottom line.

  56. Dark Prince – That was sort of my point. We are just coming out of the worst recession for 70 years, Spain’s economy is in a real mess and Real Madrid spend £80 million on a player. The difference is that the Spanish Government will bail out Madrid. I will guarantee you that this will not happen in the UK. As for World class players well I agree good players improve by playing with better players and playing at the top level but you still need to get good players and this costs money. The fact is for Chelsea to move to a break even position is going to take either a huge increase in revenue or a huge drop in spending.

  57. Madrid can also pay 80million for a player like Ronaldo because their “brand” prominence means they will almost certainly cover that cost again in merchandising. No other club in the world, even Utd and Barca, could hope do offset transfer fees in that way. There is the story about when Madrid bought Beckham for 25million and the Madrid folks laughed about the price, saying they would have paid up to 60million for Beckham due to his merchandising appeal alone.

    When you have a brand like Madrid, you can do things other clubs could not even contemplate.

    By the way, Dark Prince, Chelsea’s reduction in losses from 200million to 50million is due entirely to reductions in transfer spending. In recent years Chelsea have hardly spent anything yet they continue to lose 50million a year.

  58. Real Mad claim the brand buys the players but it doesn’t work how they’d wish, it just did for the one off which is Becks.

    Especially last season as people didn’t buy a shirt for each superstar bought! Kaka and Ronaldo split each others shirt sales, Benzema probably paid back 250p

    Also, the fact that their debts rise will point to them losing out on big expenditure.

  59. Paul C- You’re forgetting that even though they have stopped buying to bring down their losses, they are still competent and have won the league last year. And without adding anymore players, they can still win the league next season.

  60. Marc- thats what i’m tryin to tell. Even in this economic recession, there are clubs like real madrid that can buy players for a good price. So chelsea can sell their superstar players whenever they need the required money.

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