How can Tottenham make a profit?

It is one of the more bemusing things about the EPL, that each year it seems, the Tiny Totts sack a manager, pay him off, off load some of the players the last manager bought (D Bentley anyone?) and still make a profit.

To put this in context here is a list of the profitable clubs from the last financial year (that’s the one that ended in the summer of 2008)

Arsenal £36.7m
Blackburn Rotational Fouling £3m
Everton Anti Gravity £26,000
Mohamed Al Fulham £3.2m
Tottingham £3m
West Bromwich Wobbleyou £11.3m (in Championship)

That’s it. Everyone else made a loss.

In looking at the EPL figures, the turnover show just how far apart different clubs are. Turnover of course isn’t everything – you can have a massive turnover and make a massive loss (as the examples show), but it reflects the size of the operation

Here’s a few selected turnovers

Arsenal £222.5m
Aston Villa £75.5m
Blackburn £56.4m
Chelsea £213.6m
Manchester U £256.2m
Stoke City £11.2m (while in Championship)
Liverpool £159m
Tottenham £114.7m
West Brom £27.2m

It is obvious that profit and turnover don’t go together in this league. Tottenham are half the size of the top four clubs by turnover, but are double the size of Blackburn. Top of the second league, if you like. A similar size to Newcastle (£100.8m)

So profit and turnover don’t link. But still, Tottenham always have these funny managers and their squads and that must drain money out. How do they make a profit?

The clue – or at least one clue – comes in player salaries…

Arsenal: £101.3m
Manchester U: £121.1m
Chelsea: £149m
Tottenham: £52.9m
Newcastle: £74.6m
Blackburn: £39.6m

The picture that emerges is that Tottenham are in every sense a much smaller club than Arsenal. Their wage bill as a percentage of turnover is about the same as Arsenal (around 46%) – as opposed to Newcastle where it is at 74% – which explains why Newcastle made a loss of £34m.

I think what we can see with Tottenham is that profit always comes first. If we recall the transfers of last summer, they held back on the deal with Manchester U in order to maximise their income from Barbietoff – irrespective of the fact that this left them without time to buy another striker.

It is also interesting that the Tinies pay dividends The dividend a year ago gave £2.5m to Enic – the organisation mostly owned by Mr Lewis in his tax haven.

So the strategy is clear – raise the income up to the big league level in order to get into the big league itself in order to pay more divis.

There are two problems with this strategy however

First, there seems to be a doubt about whether Tottenham will get 58,000 for each home game. Arsenal entered the Ems with a 10 year season ticket waiting list, which was quite separate from the silver membership and the waiting list for silver membership.

Tottenham’s silver membership automatically puts you on the season ticket waiting list – and the club has been counting both its silver membership and its season ticket waiting list as two separate items. Of course we won’t know until we see Tottenham v Wigan in February, but there is a doubt as to how full the stadium will be. In reality they might well settle down to having 45,000 for regular games.

Second there is the problem of getting into the Champs League. It is being shown year on year that to get into the Champs you need one of the current top four to slip up (as Liverpool did when Everton sneaked in) and you also need to spend more and more on players in preparation to get in.

We saw this year how Aston Villa really thought that they could do it – and so they took a reserve side to Russia for a UEFA Cup game, and got knocked out, so they could focus on ending up in 4th in the League. But they simply did not have the playing resources to make it happen.

Building a new stadium soaks up a lot of the money available to you. To try and do it with a debt in place before you start, makes it harder still. To then increase your wages bill to Champs League levels makes it harder again. Especially if in the meanwhile the stadium is not full for each game.

If we add all that together we get

Existing debt £65m plus Training Ground bill £20m plus Stadium bill of £350 = total debt of £435m – similar to Arsenal in fact, although not on such good terms because of the problem of raising money now.

Plus an increase of say £50m a year in wages to try and get into the Champs League.

Against that the extra income from the stadium – if it really is there. It is quite a gamble. And I am not sure it is a gamble they are going to take.

I believe they will build the new stadium (although the seats won’t be quite as close to the pitch as they are currently suggesting) but it will only be full for the biggest matches. They won’t dramatically increase their player salary level, and they won’t seriously expect to get into the top four for a prolonged period. They will stay top of the second economic division – nothing more.

In short, the aim is not long-term football success in the Arsenal fashion, but rather long term profit in the Arsenal fashion. They won’t get both profit and success because to do that you need a manager of far greater ability than the type of guys that Tottenham employ. And you need stability.

(c) Tony Attwood 2009

18 Replies to “How can Tottenham make a profit?”

  1. Ronaldo to Madrid. Bad news for us IMO- rather face the overrated cheat then Ribery… Hope they go with Valencia instead…

  2. Tony – Insightful as usual. One interesting angle you may pursue is the differenced between the Real Madrid ansd Arsenal models. Yesterday there was a mini discussion on this subject on the ACLF board prompted by a report in the Times ^^It seems RM’s the new President Florentino Perez has exhorted the virtues of his “galacticos” model. Apparently Mr Perez believes he can sell enough Kaka and Ronaldo replica shirts to make a profit on his very expensive acquisitions. I am pretty sure there will be more in the press and blogs advocating this model for AFC. Thanks to the press, most football fans are unaware that Spanish banks have been severely weakened by the unwinding of the great financial bubble, just as they are ignorant of the fact that football in general was a part of this bubble that has come apart. SPLAT anyone?
    PS: Only after reading your blog and becoming knowledgeable of ManU’s near insolvency, can one understand why they are so willing to to part with Ronaldo, their most valuable asset, in return for that filthy amount of money.

  3. shotta-gunna, interesting observation, and I actually believe they might well cover a good percentage on replica shirts.
    Spain has the highest unemployment rate Europe, pro rata to population, and it is rising fast.I live in Spain, and I wouldn’t agree that most Spanish banks have been hit by the recession, but undoubtedly some,like in other European countries will be hit, especially the Saving Banks.

    Off topic, this acquasition of Vermaelen,who many had never really heard of a week ago, may be due to the friendship and respect of Bergkamp to Mr.Wenger, as Dennis is now coaching at Ajax, and one could see,he more than anybody sees the value of the player.Just a thought.

  4. It will be interesting to see how much ManU spend over the summer. They will obviously spend some money, otherwise the fans will riot but their activity over the last few years has seen them spend around £30 million on one player. I have the feeling that ManU fans will be expecting ManU to spend this amount plus the cash from the Ronaldo sale = £110 million. Will the owners have the balls to stand up to Fergie and use the bulk of the income to pay down debt?

  5. shotta-gunna,
    it looks to me the rm model involves active partnership with the media, very much similar to the ac milan model. every move they make gets blown up in hyperbolic fashion. a “star” player like kaka is worth a lot more than his football skill from this point of view. there are people whose interests are in kaka’s flaunting his i-belong-to-jesus undershirt every week or so.

    at Arsenal, in contrast to rm, people work hard to convince us that they care nothing more than football – our players are meant to be home-grown heroes than megastars. however, i actually think that it’s still a fair bet that the ownership of the club can potentially “sell out” on fans, though in my heart i never believe it will happen.

    you can say that our owners don’t pay themselves dividend and don’t take out mortgages on the clubs for their financial needs as do other owners. but as david dein and to an extent fizsman have proved, all they need to to is cash in their shares to realize the astronomical gain in value in the last 10 years. that’s the ultimate test of their intention: did they invest in the club and then sell it to the highest bidder for their financial purpose or did they truly want to succeed with the club? allow me to be skeptical, i don’t think there have been enough indicators pointing to latter.

  6. santander is a spanish bank, and one of the largest and strongest in the world. they own most of the british banks, the ones the govt. doesn’t own anyway.

    as early as february this year they were rumoured to be helping real madrid with finance for the ronaldo deal.

    let him dive and cheat in spain for a living.

  7. pig,
    Santander are one of the biggest companies in Spain, let alone banks.They bought several british Building Societies such as Abbey national and alliance and Leicester.I doubt the rumour that Santander helped RM buy Ronaldo, the finance for the deal hasn’t been made public yet.

  8. It is well known that RM holds special place in the ruling classes of Spain, with a shameful fascist past, which affords it special privileges and disproportinate access to the highest echelons of govt and finance of that country. But the iron-laws of finance-capitalism cannot be waived away, just as we cannot ignore the laws of gravity. The banks who are financing Perez’s acquisitions are not in their for charity. The bubble in the Spanish real estate market has burst ,as Kelsey confirmed, so their banks need other sources of earnings. Perez is betting the farm on his galacticos policy, only 140 million so far and counting as he will need spending to strengthen his midfield and defense. The banks, up to now, it seems are only too happy to play but they will demand their pound of flesh, sooner or later.

  9. Our financial model is the most sensible, but we’re still in a big pile of debt.

    Real Madrid & Barcelona continually get bailed out by their local governments if they have any problems. Remember the Real Madrid training ground brought at an inflated amount by Madrid council? How much tax does Barca receive from Catalonia regional government? Neither are true businesses either.

  10. Perez is repeating what he did before. If it was viable long term and a garrented route to success why was he replaced as President?

  11. I remember the Anelka saga – Real Mad paid over five years I think and defaulted on year 3 or 4 (this is from memory, so I might be wrong), but when Arsenal threatened to take the matter to the FA in Spain Real Mad found the money.


  12. pig,

    I have made some inquiries about the funding of Kaka and Ronaldo to RM. 80% of the money is being lent on a 24 to 36 monthh loan by Banco Santander who not only are the biggest bank in Spain,but also the biggest company,and with the real estate business nearly being redundant at the moment the banks are more than willing to lend.The forecast that over a period of 3 years the combined purchase of the two players will be offset and tripled in replica shirt sales. I was misinformed.

  13. I dont buy this business of replica kits paying for players. If we say that Real Mad have just paid £120m for two players, then to recoup that you would need to sell, through official channels (not the rip off shirts that are everywhere) 12 million shirts.

    12 million shirts bought through official channels at full price is one hell of a lot. I am assuming here that the shirt is sold at say £25, with £12.50 going to retail costs (the usual 50%) and £2.50 to manufacture, leaving £10 profit. In reality I think that the profit is more likely to be £5 which means selling 24 million shirts.

    I know Real Mad is a world wide phenomenon, but even so…


  14. Good morning Tony,

    this is only an observation not an arguement.the following is an extract from Mihir Bose column on the BBC website.

    Back in 2003, when another United Galactico Beckham went to the Bernabeu, Real earned US$600m in sale of shirts and other merchandising, increasing profits by 137% in the four seasons Beckham was there.

    Beckham sold one million shirts in his first six months, at a time when Real was full of Galacticos like Zidane, Raul and the original Ronaldo.

    Professor Simon Chadwick, sports business expert at Coventry University, says: “Ronaldo can be viewed in the same bracket at Beckham when it comes to global marketing impact.”

    “Even if Real sign one or two of the other stars, there would be a real focus on Ronaldo and Kaka’s talents on the pitch, and also their brand off it. That will pay for the transfers many times over, even with the bumper salary package.”

  15. Tony – 24 million shirts @ 25 pounds or US$40.00. I don’t buy it. Not in a recession, plus there are hundreds of rip-off artists world-wide who have an incentive to sell knock-offs because the margins are so huge. I haven’t read Professor Chadwick’s analysis but I think he fails to understand that Beckham was an English phenomenom which means guaranteed sales in one of the richest football markets in the world. IMO, Perez’s “galacticos” project is conveniently aligned with the interests of Banco Santander who hope to make a mint from financing this deal, whether it fails or succeeds on the field of play. The credit bubble has shown that the mega Bank’s are willing to make huge bets on a “questionable” project so longst they can extract interest from an unsuspecting public aided and abetted by sponsors who are using Other People Money. Perez, the sponsor, is much like the Glazers, Hicks and Gilette.

    PS: As I write this in the Americas, National Public Radio had a news item cheering the Glazers of NFL fame for making the deal of the century with the sale of Ronaldo. Amazing coincidence?

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