25th April 2021
It is often said that a week is in a long time in politics. Given the course of events since the afternoon of Sunday 18th April 2021, it would seem that the term is also applicable to football.
The European Super League (ESL) was announced with all the fanfare of a hastily convened last-minute stag night just before a shotgun wedding with a dozen seemingly willing participants determined to misbehave. And the citizens of football’s bailiwick did not like the intended disruption one little bit.
One week later and there is talk of recrimination, reprisals, fines, bans and other punitive measures designed to teach the miscreant clubs a lesson. The spectacular failure of the project just 48 hours after its ‘reveal’ has hardened attitudes among the fanbase. As any sensible business owner will tell you, alienating your customers/fans is commercial suicide. Just ask Gerald Ratner if you remain unconvinced.
However, vengeance aside, the underlying reasons why we all arrived here in the first place have not disappeared. If anything, the next few weeks will magnify them even further when all the Premier League clubs will have released their annual accounts for 2019-20 and our own interpretation of the numbers begin to hit the media.
Back in 2016 when we first reported on football, our ability to spot the reasons why a European Super League was such an obvious route for the bigger and, in particular, the US-owned clubs was down to the data. It was that simple. No fantastic algorithmically-charged models were used in the evolution of our predictions. Just the application of a very transparent financial measure (economic profit) which accounts for all the cost of conducting business and our consultative experience derived from working in other industries.
As the seasons have rolled on, the financial performance of football has markedly deteriorated even though football’s auditor of choice announced ‘a new era of profitability’ following the end of the 2016-17 season. Unfortunately, this is what happens when you pin your shirt to the wrong measure.
Granted, the Premier League’s clubs had indeed achieved record economic profits that year (£224m in economic profits vs £537m in pre-tax profits). Indeed, the auditors viewed it as transformational, yet we viewed it as an aberration given the historical record of poor financial performance exhibited by the clubs in previous years.
In the following year of 2017-18, the clubs barely scraped an economic profit (£31m) but pre-tax profits remained buoyant at £449m. The auditors extolled football’s ‘continuing financial success’. We thought otherwise and so it proved in 2018-19. This was the last year of the cyclical Premier League’s 3-yearly TV deal. The clubs achieved a collective and record economic loss of £599m despite a record revenue of £5.15bn in a year well before the first vestiges of a SARS-type virus started to percolate in the Pangolins of Southern Asia.
Now that we are another year down the road, the effects of the first months of virus-based lockdowns and the cessation of football in 2020 are being reflected in club accounts. When compared to previous years, 2019-20 will be marked as financially catastrophic. But it is part of a longer-term trend rather than the exception. The virus has accelerated what was already present, which is a refusal to control costs as a symptom of weak and ineffective governance.
The 12 ESL clubs are part of the problem but are not THE problem. FIFA, UEFA and the local regulatory bodies are just as culpable in pandering to the wishes of the select few whilst ignoring the collective demands of the game as a whole. The inconsistent application of a set of rules which uses financial measures that obscure the true performance of the clubs is not particularly helpful either. To some extent, the bigger clubs had little choice once the folly of their overspend started to hit home. How else were they going to safeguard their excesses and protect their money supply at the same time?
But the seismic shift in attempting to gain more control over revenues, outgoings and risk was to eliminate the very essence of sporting endeavour in favour of the route to profit. The wrong stuff indeed.
And when looking closer to home, the financial imbalance is not just confined to the Big 6 clubs.
From 2009 to date, we have seen that 83 Premier League club balance sheets have achieved an economic profit from a total of 236. That’s a success rate of 35%. This is a poor rate of return for any industry, let alone football.
When we look at club economic performance over the most recent 5 years of accounts, the Big 6 do occupy four of the top 10 positions in terms of overall economic losses. However, in amongst the potential ‘escapees’ resides a collection of clubs with seemingly ambitious owners who were either keen to preserve Premier League status or who had coveted it so much as to spend whatever it took to attain it.
The exception, perhaps, is Everton. Following the emergence of the ESL last weekend, the club’s hierarchy became one of the most vocal opponents of the elitist scheme. But when you look at the level of losses achieved by a club that is just about to embark on the construction of a new stadium, it is difficult not to be sympathetic to their protests bearing in mind the club’s potential and additional financial exposure if the ESL had actually gone ahead.
When we do look at the 2020-21 Premier League chort of clubs, just 3 of the 20 in the division have managed to achieve an overall economic profit in the most recent 5 years of released accounts. This is a damning lack of returns .
This financial imbalance is not confined to a select group of clubs. It is an endemic issue across the spectrum of professional football whereby clubs find that the objective of generating profits, even before the costs of any owner-sourced capital injection have been factored into the equation, is a near-impossible task. Indeed, the economic conditions that have spawned the ESL have not gone away. They are still there. In fact, they are about to get a lot worse.
And in amongst all the vocality surrounding the events of the week, Ben Wright’s superb piece in The Telegraph articulates our work in regard to football’s finances and points to one clear truth; the ESL will be a recurring theme until football’s financial mélange is resolved.
Sadly, for the fans and for the clubs alike, we do not think that this will happen anytime soon.
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30th March 2021 – $hooting B£ank$ – Arsenal’s commercial performance analysed.
22nd February 2021 – Measure for Measure – Take two financial measures, add pandemic and stir.
18th January 2021 – The Football Factory – If football was an industrial entity…
10th December 2020 – Pump Up The Volume – ExxonMobil comes under fire from an agitated investor.
16th November 2020 – The Pain Game – Manchester United’s Q1 2021 financial release opens the lid on a Covid-19-affected financial can of worms.
11th November 2020 – A Tight Squeeze – Football’s Elephant in the Room leaving little space for financial relief.
29th October 2020 – Form and Function – Proposals-a-plenty for football’s structural reform.
13th October 2020 – Project Big Profit – Americans come bearing a proposal for football’s structural reform, just as we predicted in 2016.
8th October 2020 – Game Aid – Football is caught in the crossfire of indecision and financial necessity.
24th September 2020 – Crisis? What Crisis? – We look back 12 months at the demise of Thomas Cook and its relevance to more recent events.
11th September 2020 – Distance Learning – New rules and new values as Covid-19 challenges traditional mindsets and misconceptions.
19th August 2020 – Socked! Marks & Spencer’s Shrinking Value – Retail giant is fast becoming a shadow of its former self.
22nd May 2020 – You’re Gonna Need a Bigger Boat – An assessment of the double financial whammy of potential relegation from the Premier League and Covid-19.
30th April 2020 – Home, Alone – Initial indicators from the wider economy point towards economic and financial downsizing in sport.
6th April 2020 – Board Games – Government, football clubs and players adopt separate ‘brace’ positions as Covid-19 crashes the sports economy.
27th March 2020 – Markets, Mayhem and Manchester United – A look at the questions posed by the share prices of publicly listed businesses.
15th March 2020 – When Saturday Goes – Football has come to a halt. We take stock of the game’s position and ponder its return.
10th March 2020 – Futureworld – The potential economic effects of the COVID-19 outbreak.
12th December 2019 – The Cost of Chasing Gold– In collaboration with the BBC, we look at the high price being paid by clubs to gain promotion into the Premier League.
7th November 2019 – Where to Next for M&S? – November 2019 results suggests the retailer is losing its way
10th October 2019 – Red Mist – Manchester United’s 2019 FY numbers and the stagnation of England’s biggest revenue-earning club.
13th March 2019 – Financial Fair Play – Guilty as Charged? – Our thoughts on FFP schemes and their key weakness.
18th December 2018 – Long Division – The Post-Ferguson years at Old Trafford have come at the expense of declining economic and on-pitch performance.
20th November 2018 – The Relegation Game – Tales of woe and economic performance at the wrong end of the Premier League table.
9th October 2018 – A Different View – Why fans ought to be acutely aware of football’s financial dynamics.
17th August 2018 – The End of the Beginning – La Liga heads west to conquer new worlds.
9th August 2018 – Reaching for Sky – the sequel – Latest offer price for satellite TV company is good for shareholders, less so for prospective owners.
8th August 2018 – American Dreams – English Premier League economic dynamics and American money – is a Euro Super League the next step?
3rd August 2018 – Mall Administration – Retail Property Co. bonus payouts at odds with increasing shareholder value.
20th April 2018 – Goonernomics Part Deux – The departure of Arsene Wenger…
18th April 2018 – The Price of Everything – Tesco’s latest numbers offer little in value.
12th April 2018 – Say What? – WPP’s very mixed message.
14th February 2018 – In Case of Emergency – Premier League’s UK TV rights auction comes up short.
4th December 2017 – A Billion here, a Billion there… – The Premier League reaches a major milestone, quietly…
25th November 2017 – Getting out of Toon. – Is Mike Ashley pitching the sale price of Newcastle United at the right level?
16th October 2017 – Goonernomics. How the ‘Bank of England’ club falls short of its North London neighbour.
25th September 2017 – Highlights. More record-breaking numbers from the biggest football club in the land, but no economic profit…
23rd September 2017 – Football’s Economic Back Pass. A guest blog for the Soccernomics website.
12th September 2017 – Crystal Balls-up. Changing strategic direction is not a good idea when you haven’t looked at the economics.
27th July 2017 – Football’s Summer of Money and the £65 pint of beer. The sport that just can’t spend enough.
11th July 2017 – Football Special. Observations following the launch of ‘We’re So Rich…’
9th May 2017 – Illuminating, non? Political energy lacks vision and power.
2nd March 2017 – Claudio’s Burden. The price of failure outweighs the price of success.
12th January 2017 – Shopping for Godot. A never-ending quest for value in Retail.
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6th December 2016 – Auld Lang Syne. A reminder from history of the damage that poor financial planning can cause.
1st December 2016 – Fork Handles? Four Candles? Tesco’s blurred strategic vision.
27th November 2016 – Football’s Instant Replay. Financial warning signals for the top English Premier League clubs.