Tough Love

By on Apr 7, 2008 in Finance | 3 comments

I thought I’d better warn you first – this isn’t going to make for particularly happy reading. I have, however, been doing a considerable amount of pondering about the number of clubs falling into financial difficulties this season. We continue to live in an age of comparative wealth. The Football League TV deal is dwarfed by what the Premier League gets, but it still beats what clubs used to get in the First Division in the 1980s hands down. Crowds are up, and ticket prices are, to many eyes, as extortionate as they are in the Premier League. Ticket prices of £25 in League One are not uncommon. In spite of this, the number of clubs lurching into administration continues apace and, more troubling than this, two of the three clubs that have found themselves inviting the experts in to try and sort out the mess that they have got themselves into are repeat offenders- they are clubs that have been here before.

Three or four years ago, when clubs seemed to be heading in this direction on a weekly basis, there seemed to be an obvious party to blame – ITV Digital. The television station, jointly owned Carlton and Granada TV, collapsed into liquidation and was closed by its owners after putting all of its apples in the basket of the Football League. Clubs had already gone ahead and spent a sizeable chunk of the money that ITV Digital had promised them (a jaw-dropping £315m – and that “m” at the end isn’t a typo) when the company collapsed, and the Football League was heavily criticised for employing lawyers who managed to come up with a contract that wasn’t in the slightest bit watertight. When the League sued them, they won £4 in damages. The problem for the clubs was that they had been cashing cheques based on promises that ITV had no obligation to fulfil. It was a miracle that none of them went to the wall. Following Leicester City’s shenanigans (entering into administration and then spending heavily – more than any of their rivals could afford – immediately upon their exit from via a CVA), the League brought in the automatic ten point deduction for clubs entering into administration to prevent anyone else from doing it. But as this season’s events have demonstrated, the system is still far from perfect.

The biggest single problem seems to the very financial model that football clubs work to. Clubs exist in a financial bubble, in which vast amounts of money are spent on players, both in transfer fees and wages, and the Bosman ruling removed a considerable amount of the security involved in having a player on their books. In addition to this, the changing of quotas on foreign players and relaxation of rules on foreign player registration meant that big English clubs simply stopped spending money on clubs from the lower divisions. Why bother risking £2m on an untried clogger from the Second Division whose first touch almost certainly wouldn’t be up to the job when they could get a player that was three times as good for a quarter of the cost from Europe or Africa? In addition to this, clubs seem to often be on a mission to give themselves a bad press. They don’t make any use of their single biggest assets – their stadium and players. The stadia of most clubs remain locked for twelve or thirteen days out of fourteen and when the players are cajoled to do their couple of days per month community service, they can barely stifle how bored they look with it all.

To this end, there is a case for saying that smaller Football League clubs are a bit like the black sheep of a family in terms of their relationships with their communities. They scarcely engage with the communities (indeed, some of them act like a proper pain in the backside), but when this lackadaisical attitude has its inevitable consequences, the collections tins are brought out, and suddenly the chairman is all over the local radio telling everyone how important the club is to its community. The same mistakes are made over and over again, and clubs end up exactly where they were before. AFC Bournemouth sold their ground in 2005 and have been leasing it back ever since, yet here we are in April 2008 and, although the latest rumours coming out of the club are more healthy than what we were hearing about last week, it is still touch and go whether they will make it beyond the end of this season. Rotherham United entered into administration in May 2006, and less than two years later they are back in the same situation that they were in before. The only main difference is that each time a club goes into administration, getting the trust of creditors and being allowed to agree a CVA becomes more difficult than it was before.

Supporters Trusts don’t necessarily offer the answer here, and that isn’t a criticism of the Supporters Trust movement. One wonders sometimes what it will take for the leopards that run our game to change their spots. I once heard someone say, “All football clubs are the same. Give them £10 and they will spend £11. Give them £10m and they will spend £11m”, and there is a lot of truth in this. With thousands of customers that literally can’t shop anywhere else, football clubs, you’d think, should at least be able to keep themselves solvent, but they seem to be incapable of even doing this. One wonders what sort of shock it would take to actually make them put their houses in order. The collapse of a Premier League club hasn’t been enough, because that is what happened with Leeds United and every other football club chairman in Britain merely stood back, wiped his brow and thought, “There but for the grace of God go I”. The example of Gretna in Scotland hasn’t stopped those that seem obsessed with a complete pyramid system in Scottish football, even though such a system may mean the end of the amateurism that has provided clubs like Queens Park with a lifeline for the last 140 years or so. The ten point deduction for entering administration clearly doesn’t work. It may have an effect on stopping clubs from entering into administration, but it often can be seen as punishing regimes that may have had nothing to do with the situation (criticise him all you like, but Leeds United’s financial woes were very little to do with the stewardship of Ken Bates), as well as putting off some investors from putting money into clubs.

Maybe it is time for us all to reassess our definition of success. It is time to stop considering those cup wins and promotions as being the best that we can manage. It strikes me that, in the current environment, it is time for us to evaluate success as being the ongoing existence of our clubs. The real danger for AFC Bournemouth and Rotherham United supporters is, considering that neither of them own their own grounds, not whether they will be watching football in the Football League next season, but whether the bulldozers will already have moved in my August. It’s a sobering thought.

Just to add a bit of perspective to this article, I would like to take the opportunity (and, being a curmudgeonly old grump, I don’t make this sort of request very often) to ask you to pay a visit to this site and make them a tiny donation. As some of you may know, my sister was diagnosed with breast cancer earlier in the year – if you can spare a few coppers for The Playtex Moonwalk with us, we’d be terribly grateful.

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    3 Comments

  1. “All football clubs are the same. Give them £10 and they will spend £11. Give them £10m and they will spend £11m”. Ian, I have two words for you: SALARY CAP!!! I think some restrictions in wages coupled with revenue sharing would help the financial situation in the Football League. These two factors have been the keystones for financial statability for American sports leagues.

    Anonymous

    April 8, 2008

  2. Thought you might be interested in this - it’s appeared on the Torquay United forum’s google ads a few times and appears to be a genuine attempt to sell a non-league club. Any idea which?

    Chris

    April 10, 2008

  3. Chris: That’s Boreham Wood, of the Ryman League Premier Division. I’d have guessed that their ground, Meadow Park, is worth more than the asking price on its own, but there’s probably a covenant slapped on it, preventing it from being used for anything other than recreational purposes.

    200percent

    April 10, 2008

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