Tuesday, July 10, 2007

For The Final Time...

Football exists within a bubble. It is, in many respects, something that permeates every aspect of our life and our culture. However, it also exists in a state of hyper-reality in which triumph and failure are raised to exalted levels, and in which the normal measures of success are somehow suspended. As time goes on, this has started to be reflected more and more in the financial management of our clubs. I've said on here before that clubs are, when it suits them, very enthusiastic about the application of free market rules within the game, but only up to a point. A truly free market can never exist in football. Only the illusion of it can. Importantly, if football supporters actually did act in the way that normal consumers did, ninety per cent of clubs would probably be bankrupt in a matter of months.

A good example of the perversity inherent within the economics of football is one of the clubs which has taken up a number of column inches this summer - Manchester City. They moved to the City of Manchester Stadium in 2004, having paid £35m for it to be converted from an athletics stadium to a football stadium. This sounds like an enormous sum, but it's a pretty small amount of money for a new 48,000 capacity stadium. The increased capacity will also have raised revenues from higher ticket sales - the average attendance rose from 35,000 in 2003 to 39,000 last season. Last season, though, City's support was tested to the extreme. An average season ticket there cost £460 and in return for it City managed a paltry twelve goals - their lowest total of home goals in living memory. In spite of this, City have confirmed that over 22,000 people have signed up for next season already.

Despite all this money, coming from so many different sources, City are still over £60m in debt. Small wonder then, that they welcomed Thaksin Shinawatra to take them over in the summer. What was curious, though, was the way that this was announced. There was no great talk of the club stabilising its financial situation, and still less of using a sudden influx of cash to make it more affordable for their long suffering supporters. The talk was all about bringing in new players and a new manager. In other words, signing City up for even greater long term financial commitments. Shinawatra may well have a £30m transfer kitty, but does this include the ongoing financial commitment of the wage budget? As Leeds found to their cost, the cost of signing a player doesn't end when he puts pen to paper. In an age when the most average Premier League journeyman can be taking home £20,000 per week, each new signing is a significant long term commitment.

To the extent that it exists at all, the financial model on which English football is built is at best shaky, and at worst utterly unsustainable. Clubs cannot continue to raise season ticket prices (and City are the exceptions to the rule in not doing this) at levels like 10-15% per season. People will reach a tipping point, at which they can no longer afford to go. If clubs force someone to choose between their mortgage and their season ticket, the season ticket will eventually go. Fifteen years ago, there was much talk of football clubs pricing out the working class. Now we're at the point at which they're risking doing something that I find incredible - pricing out the middle class. When I visited Spurs last season, I found myself repeatedly asking the question, "who are these thousands of people that can afford to pay £50 per match for a ticket at White Hart Lane?". The answer is that, for the moment, Spurs (and many other Premier League clubs) have got just enough affluent supporters to be able to manage it, but those days could be numbered. Increasing numbers of supporters now feel like they are little more than wallets which the clubs prise open whenever they need some money.

The absurdity of football economics doesn't just exist in the Premier League, of course. Some of you may remember that I commented last month on Nottingham Forest's tentative plans for a new stadium. Never mind that The City Ground is perfectly good enough for their needs (one of its stands could do with renovating - the rest of it is less than thirty years old). Never mind that Forest will never have any ongoing need for a 50,000-seater stadium. Never mind that it will be a massive inconvenience for tens of thousands of people to have to trek out to the outskirts of the city to watch the football rather than go to one which is right in the city centre. Never mind that, you know, most Forest fans are probably pretty attached to their current home ground. They seem happy to want to spend tens of millions of pounds on a project that will, ultimately, land them with an absolute minimum of 10,000 empty seats every week. It makes no sense on any level.

Within the economics of football, there is no need for these bastions of the free market to actually turn a profit. This is a good job, because only a handful of them do. The economics of football are happy for a company to spend 100% of its annual turnover on wages, and considers "only" spending 70% of your annual income on wages as being a paragon of financial prudence and rectitude. The only financial consideration for the vast majority of professional football clubs is to minimise debt and try to stay out of administration. They're not even very good at this - 38 clubs have had spells in administration over the last fifteen years. It's largely down to the goodwill of councils, administrators, creditors and fans that no Football League club has been liquidated since Aldershot in 1991. At Leeds right now, there is a power struggle in which Ken Bates is trying to paint the Inland Revenue as the "bad guy" for basically wanting Leeds to pay what they owe. They're owed £7.7m. It's our money! It would be great if I could not pay hardly income tax for four or five years and tell the Inland Revenue to go and whistle for the rest when they knocked on my door, but I don't have that option, and nor do you.

The thing about football's version of free market is this - they reap all the advantages of the free market, suffer very few of the pressures of it, yet still manage, somehow, to make a complete hash of being economically successful. Each club has a captive market. The most loyal consumer group that there is anywhere. We know this beyond any doubt because of what they've put up with for as long as most people can remember. They put up with being treated little better than animals for decades. They put up with their stadia being turned into fortresses, into which (as Hillsborough tragically demonstrated) no thought whatsoever had been put into their safety. They then put up with their kick-off times being messed around, their prices being increased year on year, and being told to sit down and shut up by stewards. On the other hand, the clubs don't have to turn a profit, are largely accountable to no-one but themselves and, if they do get into financial trouble, can rely on enormous amounts of goodwill and their customers to do as much as they possibly can to dig them out of the hole that they've dug themselves into.

Football's "economic model" needs a reality check. If it doesn't get one soon, it will learn a very harsh lesson. The people currently flocking to the very top end of the English game probably don't remember that, twenty years ago, English football was (what looked like) in terminal decline. Crowds had fallen through the floor, and it seemed entirely possible that there would simply be no professional football if things didn't change. They did change, but this was really doing little more than giving spectators the level of safety and comfort that they deserved. They're still paying through the nose for it a decade and a half later. The current crop of swashbuckling millionaires have flocked to the Premier League because they think that they can make money out of it. They can probably see how badly run it is at the moment. Just be careful, though - if they're going to profiteer from it, it'll be you that ends up paying for it. They're not charities, you know.


Ahmed Bilal said...

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linda said...

Brilliant article, especially for those of us who aren't as familiar with the lower division leagues in England.

One thing I was really shocked by, though: Man City's season ticket is ten times more expensive than Barcelona's cheapest season ticket option and around the same price as our most expensive option. Wow. Are they especially bad or do all Premiership clubs do this?

Kevin said...

Good article but Man City have not increased season ticket prices and have in fact frozen them for 4 years in a row.

Article by David Conn in the Guardian Feb 28 2007.

City have slashed next year's under-16s season card by 56% to £95. Prices for 16- to 17-year-olds have been reduced by 31% to £220 and 18 to 21-year-olds will pay £330. Adult prices have been frozen for the fourth season in a row, at between £385 and £560.

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