18th February 2018

Blog – 11 July 2017

11th July 2017

It’s been a busy few days with the launch of the second edition of ‘We’re So Rich It’s Unbelievable! – The Illusion of Wealth Within Football’ and the Football Profitability Index data. So far, the media reaction to our work has been highly encouraging and at the time of writing, it is still developing.

In addition, the other heartening factor is the reaction from football fans. The vysyble twitter feed has been populated with comments and questions from fans regarding their respective clubs alongside supportive observations that we have indeed touched upon something that directly affects them – the financial health of the game. After all, it is money from the fans that pays the media subscriptions and the ticket fees.

We’ve also had a few negative comments and observations regarding the basis of our work and the results outcome. This is to be expected but as we make very clear to everyone, how we go about our research and analysis is outlined in detail on the website (www.vysyble.com/methodology). The other thing to remember is that finance is not the precise science that many people tend to think it is and furthermore profit and cash are two very different bedfellows. Numbers can be arbitrary and value and definitions can be vague. However, we take published accounts from the clubs and work through their own numbers to arrive at the economic profit value. We are not financial alchemists!

Our remit is to unpick the underlying financial dynamics at play using economic principles that have been around for longer than Notts County FC and have also been successful in Europe i.e. a Nobel prize or two. In many cases, the results fly in the face of accepted wisdom and the accompanying disbelief factor can be very concentrated indeed. We see this in our client work and football is no different. It is a highly emotive sport laden with cultural overtones; when the narrative is challenged, the feathers start flying – as much as anything because people care so much about the game.

Yesterday evening we were the guests of the very genial and hospitable Mark Saggers and his production team on TalkSPORT Kick Off. The debate was lively, considered and hugely enjoyable. What struck us most of all is that there appears to be a collective nervousness within the game’s fanbase about the future of the Premier League and the possible permutations arising from future media deals.

As was pointed out, the Premier League as a product is a very successful and watchable export and we agree that there is much potential out there for additional revenues from foreign media rights.

However, our research points to the problem of financial inefficiency at club-level. The average fan must be doing a lot of head-scratching to try and work out why, after 25 years of seemingly unstoppable growth in turnover, the clubs still have not mastered the very basic equation of spending slightly less than revenue generated. This is value creation. As we have demonstrated, the reverse is happening on an all-too-constant basis. It therefore becomes almost irrelevant as to where and how the ‘new’ revenue is achieved because the incurred expenditure is, based on past experience, always going to be greater. In any financial context, this makes no sense whatsoever.

We have no issue with the Premier League administrators. Commercially, they have achieved much that is to be commended, if not admired. We do want to engage with them so that they can understand our perspective and analysis. After all, it is difficult to manage something if it is not visible or apparent. And yes, we are aware that the Premier League is almost a self-regulating body that has 20 shareholders ie the clubs. In that respect, we may get short shrift. But it is in everyone’s interests to view the numbers and the pathways involved.

We are also convinced that change is coming whether it be from how audience consumption habits evolve, how the game’s reliance on media revenues are realised or even the structure of competitions and their accompanying rules. Club owners have enjoyed a long run of rising revenue but the source of income may be shifting in ways that may have a detrimental impact on club finances if the model is predicated on a ‘jam tomorrow’ basis.

Will there be pain? Yes. Player contracts are fixed-term assets. Transfer values are moveable numbers. A revenue contraction means player sales. However, if a number of clubs have to sell at the same time then asset/player values will undoubtedly drop significantly. The financial pain is thus magnified. Team performance suffers and well…you know the rest if you are a Portsmouth fan et al.

Hopefully, our research is a wake-up call to some. Our Football Profitability Index points to an increase in economic losses for the 2016-17 season, the financials of which won’t be available until April/May of 2018. If so, it could be a record season for all the wrong reasons.