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Premier League Betting and Odds

The new game for the billionaires: buying a multiplicity of football clubs

By Tony Attwood

Given that Arsenal have not graced the second tier of English football since the 1914/15 season* it might seem that worrying about the level of debt in the Championship is hardly relevant to an Arsenal blog.

But actually the state of affairs in the Championship is relevant to all of us, both because the largest source of income for the Championship comes from solidarity payments from the Premier League, and because there is a movement afoot for the buying up a second and third tier clubs around Europe by businessmen interested in developing an empire.  And as a result it is possible that over time the whole of the essence of the pyramid could change.

In one sense everything looks rosy: Championship revenues have of late been the highest they have ever been.   But balanced against that is the fact that the debt within such clubs is also the highest it has ever been.

So let’s take a step back.  Premier League revenues for 2019/20 were £4.5 billion, down 13% from 2018/19.  The reason is one we all know.  There was (and is) a pandemic afoot.

The Championship revenues were £785m – or 17% of the Premier League revenue.  Which shows just how small the Championship is when compared to the Premier League.

Now of late we have been occupied by the fate of clubs in the Premier League, not least with the takeover of Newcastle by a country not known for its respect of human rights.  But the Premier League needs the Championship if it is not to become the Super League that everyone protested against.

So it is worth noting that the Championship has debts of £1.1billion.   It’s largest single source of income is parachute payments from the Premier League. which contribute almost a third of the Championship’s entire income with the money currently being split among seven clubs.

To see the insanity of the Championship’s financial model, we might note that wages were 107% of revenue for the last set of figures available.  Put another way, the clubs spend more on wages than they earn from all sources.  Reading, the supreme basket cases spent twice as much on wages than they earned.

Only two of the 24 clubs in the league had operating and pre-tax profits – the rest are losing money.  And the debt of the Championship’s members tends to rise year by year.  Four clubs have a net debt in excess of £100m.

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So here’s a question: where is this money coming from?

And the answer is pretty worrying because most of it is in the form of loans from shareholders (which generally means owners).  Which raises the question: how does anyone come out of this alive?

For the clubs which are losing money like it is going out of style (which is most of them), there are two possible salvations on the horizon.  One is promotion to the Premier League, the other is a buy out from an even richer rich person than the current very rich person who is funding the club.

Promotion to the Premier League brings sudden wealth of course, and even if followed by relegation after one season, brings three years of solidarity payments.  And if the club can achieve the yoyo effect that has been utilised by Norwich, Fulham and West Bromwich Albion of late they can keep on getting these payments even though they regularly get relegated.

This is because parachute payments means the relegated club gets 55% of the broadcast revenue it would have received in the first year, 45% in year two and, if the club was in the Premier League for more than one season before relegation, 20% in the third year.  

Clubs not getting parachute payments get Solidarity Payments which is a percentage of the third year Parachute Payment a relegated club would receive.

So getting up to the Premier League just for one year is considered a “jolly good thing”, even if followed by relegation for it generally allows the club to pay off many of its debts – as long as it doesn’t spend everything on new players.

What’s more, this whole system of parachute payments is unique to the English game, which is why foreign owners are interested in English clubs – not least because the Premier League is the richest league in the world.

Meanwhile, in Europe….  Here we see the arrival of people such as Robert Platek, a businessman from Washington D.C. whose fortune is estimated at around £1.6bn who owns La Spezia, currently in Serie A.

Platek is a partner of multi-billionaire computer entrepreneur Michel Dell, and Platek also owns Sönderjysk, in the Danish first division, and Casa Pia, in the Portuguese second division.

When asked if he might buy more clubs he is reported as saying recently, “If we can find a complement to our current commitments, the answer is: yes.”  And the talk is that next up is Young Boys of Bern.

But one can imagine that Platek would also like an English club, and given the way he and others are now operating, it would not be a Premier League club but rather a Championship, or maybe even League One club.

So a club in every country for the football playboys.  It is in fact simply a variation on the Kroenke model which has bought a club in each major sport in the USA.

And of course if a group buys enough clubs, then they get an awfully large influence over the way the game is played in Europe.

—————-

*If you are tempted to make an allegation to the effect that Arsenal bought its way into the First Division in 1919 you might care to look at “100 Years in the First Division: the absolute complete story of Arsenal’s promotion in 1919,” before going any further.

3 comments to The new game for the billionaires: buying a multiplicity of football clubs

  • Chris

    Young Boys would not be the first swiss club to be bought by a multinational ‘actor’.

    Ineos, which if I am not mistaken is owned by a british billionnaire, has bought OGC Nice in the french 1 tier division and Lausanne Sports in the Swiss equivalent. Ineos has other interests in sports, I just don’t remember which ones.

    But there is a trend, and if there is one it means some people with money but not ‘THE’ money, have figured they can earn money with a specific strategy even not being in the top 4, the PL or a 1st tier league. Guess finances are taking over the beautiful game and running it on a spreadsheet.

  • Michael Ram

    I would say these money are coming in from a more nefarious way. All billionaires have great and creative accountants. The type of politicians we have all around the world, questionable accounts from unavoidable illegal incomes is the base for all unrelated outside investments from these billionaires. These dark money needs to be spent on something otherwise they do get screwed by the very politicians that prompted them to do so. That’s why the sudden purchase of football clubs are a shock to the common person because their lives are screwed nationally by the same politicians. Another factor would be of course the geo-political reasons. The Arabs and the Chinese take football clubs as a way to spread their influence and in active, a soft colonisation of the respective countries.

  • Michael Ram

    And on the other hand, I still believe Arsenal owners are neither that because they already have other sporting brands and more importantly they tend to treat the club as a proper business model and practise responsible financial obligations. In that way, even if they are no longer around, Arsenal FC will continue to run and succeed properly.

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