Financial Implications and the future of Top Flight?

[JK]

OK, I'm no expert on this, but was having a chat with a mate this morning regarding the implications on the continual increase of the almighty dollar/pound in football.

Looking at the EPL, Man U obviously have a structure that allows them to generate massive amounts of revenue to reduce/remove a reliance on wealthy benefactors, the likes of which we see at Chelsea and now Man City, and most likely other clubs in the future as it's the only way to either survive or remain competitive.

With spending and costs escalating at such a high rate, what does this mean for the future of other competitions globally, in particular the SPL?

Im lead to believe Celtic and Rangers just keep racking up exorbitant debt, and being based in a smaller comp, have a ceiling in place as to the $$ they can earn and the value they could be purchased for.

Naturally you would think the SPL will always veto any move by the two clubs to join a bigger league as it would effectively kill their competition, but eventually you would think the debt has to catch up with both of the two powerhouses?

Where and how does this end?

[johntheclaret]

I think if you look a bit more closely at thier books, United are doing it with smoke and mirrors. Agree 100% that they have the ability to generate more cash than anyone else, worldwide shirt sales are penomi pheno, huge, but they are debt ridden as the Glaziers bought tem with borrowed money. I think they made about £109m last year but after interest on their debts, they came out with only about £8m or so. I can't remember exactly what it was buyt it was a tiny profit compared to the turn over.

Chevski made a huge loss but they have old Ruski moneyavich to bail them out, howver, make no mistake, he didn't get that wealthy by giving dosh away, and at some point will be looking to make a profit.

Liverpool just don't have the wealth behind them to compare atm.

One thing to consider in all of this is Sky. Sluts they maybe, but they pump huge amounts of cash into the EPL. Each EPL club rakes in from £45m to £85m per year from TV rights. How can Sky do this. Simple, they charge gumballs like me a fortune for their services. Now things might be on the change and I'm not talking about Setanta, as they are just the poor little brother to Sky sports.

Sky uses huge amounts of subsription fees to pump into EPL. That is subscription fees par 'se and not just the add on fees for the Sports Channels. Now that BBC / ITV are about to launch a new satellite service that is freeview, you pay a one off installatoin fee (I'm not talking about the digital set top box stuff that is already on the market), that will offer basically the same stations as the Sky package but without the sky sports of course, then it will be interesting to see how many subscribers that sky lose. there are an awful lot of subscribers out there just paying £20+ per month for the thinned doewn packages, and when the new sat service comes on line, with FOC programming, there is no way sky will be able to continue to pump so much into the EPL. And who is going to shell out $150 per month for the sky package when 75% of it will be avaialble free.

The only way forward for sky will be to reduce their fees and ergo reduce the amount they put ino the EPL.

Now heres a question C_P, how will that affect the EPL giong forward, and all the other spotrs that now rely on Sky money ??

[devilsadvocate]

Both very interesting posts fellas. I think we can expect some or all of the following:

1. The already financially established 'top 4' will continue on their merry way winning everything year in year out.
2. Clubs that are taken over by the worlds richest men will have a crack at gatecrashing the party, but this won't be sustainable if the novelty of the rich boys new toys wears off.
3. Second tier clubs will fall further and further off the pace as the gap grows due to an inability to compete in the transfer market.
4. 'Yo-yo' clubs moving up and down from the EPL will face serious financial challenges given the wages they'll be required to pay while in the EPL, which won't be sustainable when they fall back, meaning they'll either 'do a Leeds' or just lose all their players and have to start from scratch again. (This is already happening to an extent)
5. More lower league clubs will fall into administration. Could a whole League drop off the radar due to lack of funds/interest?

IMO one of the simplest solutions (which probably won't work going forward, but is worth a crack) is to invest 90% of your time and effort (and money) into developing kids in your own back yard. Take a player like Ledley King - one of the best CB's in the EPL grew up in East London supporting Spurs, came through the junior program and he's a 10 year player. Having said this, the power of the $ rules the roost these days. I guess it must be tempting when some moneybags magoo comes along and offers you the GDP of Mexico to play at his crappy club.

[devilsadvocate]

Following on from your post JTC regarding revenues, here's some info I've blatantly stolen from Spurscommunity.co.uk: (Apologies in advance for the omission of Liverpool stats. Fellow Yids are still pissed big time at the bin-dippers)

Business is business and as soon as these teams stop making money for their owners (and they will) you can't throw money about the way they are and will continue to do so without raking it back in through gate receipts and other revenue and to keep making the money they will have to put up prices and outprice the average supporter from going to a game, and then they are gonna be ******.
Did anyone tell them there is a recession coming?

Growth in match day revenue, such as tickets and food, and commercial income pushed total revenue for the 20 Premier League clubs to $.3.03 billion, but wages grew by 13 percent to more than $2.77 billion -- more than twice that in Spain, Germany, France or Italy.

"It is arguable that the new owners' strategies have been at the forefront of the trend," Jones said. "It may be the case that owners see their clubs delivering only minimal regular returns, with a real return only emerging when the club changes hands."

So they just gonna keep on selling and selling and selling and what happens when we run out of multizillionaires to fund all this? KAPUT! thats what.

"A normal business culture of maximizing profitability does not appear to be happening at most Premier League clubs," Jones said.
"A shared will and action individually by all the clubs to limit wages growth would deliver increased profitability for all, but the pursuit of on-pitch success and the intense competitive desire to gain an edge means clubs continue to invest heavily in their playing squads and bid the market up, to the detriment of all clubs' finances and the benefit of players and their agents."

As of for Man Shitty whats it going to take for them to come tumbling down - one great big dirty wayward bomb and they are royally screwed.


Manchester United
Owned by: Glazer family (since 2005).
Value: £936m.
Turnover: £210m (to 30 June 2007).
Profit/loss: £79.1m operating profit.
Debts: £666m. (last annual interest payment, £42m).
Prem TV cash 07-08: £49.35m.


Chelsea
Owned by: R Abramovich (since 2003).
Value: £381m.
Turnover: £190.5m (to June 2007).
Profit/loss:-£75.8m loss.
Debt: £578m (interest-free loans from Abramovich).
Prem TV cash 07-08: £45.58m.


Arsenal
Owned by: Major shareholders - D Fiszman (24.1%), A Usmanov (24%), N Bracewell Smith (15.9%); S Kroenke (12.2%).
Value: £612m.
Turnover: £200.8m (to May 2007).
Profit/loss: £51.2m operating profit.
Debt: £268.2m.
Prem TV cash 07-08: £47.04m.


Tottenham Hotspur
Owned by: ENIC (J Lewis).
Value: c.£200m.
Turnover: £103.1m (to June 2007).
Profit/loss: £29.7m operating profit.
Debt: £29.1m in loan notes.
Prem TV cash 07-08: £36.05m.


As can be seen Chelski are royally up the creek should Roman take his Rubles and bugger off home.
Man U are at the beck and call of the bank and are in the second worst position financially of this group. They can thank their lucky stars their global brand is so valuable as Strip sales and the desire by the prawn sandwich brigade to see the Red Devils play each week will keep the dollars coming in. So too will the players desiring to play for the 'biggest club in the world' making their pull greater in the transfer market.
Le Arse are in a decent position financially, particularly now their new stadium is built, which turned out to be great timing just before the credit crunch.......Liverpool, Everton, Spurs....anyone else for a new stadium? Not going to happen any time soon!
I won't crap on about Spurs as we're not in the same league, but it's a good comparison for the nearest challengers as I'd imagine Villa and Everton's financials would be similar, as would Shitteh's and the Toon's before the recent money wasting.

[human blanket #3]

man u will b able to make a big profit if they sell ronaldo for $220mil to man city. IMO man city can rival the big 4 if they can get money chasers to the club. on the last day of the transfer window they put bids on van nisterooy, villa and a few other world class players

[JK]

Hey Johnnyboy ... With the American market in freefall has there been any discussion over there as to whether it might affect the ownerships of those clubs belonging to the Yanks? (and yes lol, Im obviously keen to see ours gone)

[Bully]

OK, I'm no expert on this, but was having a chat with a mate this morning regarding the implications on the continual increase of the almighty dollar/pound in football.

Looking at the EPL, Man U obviously have a structure that allows them to generate massive amounts of revenue to reduce/remove a reliance on wealthy benefactors, the likes of which we see at Chelsea and now Man City, and most likely other clubs in the future as it's the only way to either survive or remain competitive.

With spending and costs escalating at such a high rate, what does this mean for the future of other competitions globally, in particular the SPL?

Im lead to believe Celtic and Rangers just keep racking up exorbitant debt, and being based in a smaller comp, have a ceiling in place as to the $$ they can earn and the value they could be purchased for.

Naturally you would think the SPL will always veto any move by the two clubs to join a bigger league as it would effectively kill their competition, but eventually you would think the debt has to catch up with both of the two powerhouses?

Where and how does this end?

i would have thought that if rangers and celtic did move to the EPL or what ever then the SPL would not care either way as two other teams would im sure fill there places at the top of the SPL and then eventually become good sides . then we would see more then two teams at the top year in year out

[johntheclaret]

Hey Johnnyboy ... With the American market in freefall has there been any discussion over there as to whether it might affect the ownerships of those clubs belonging to the Yanks? (and yes lol, Im obviously keen to see ours gone)

Nothing that I've seen C_P. Will keep you posted though.

[JK]

i would have thought that if rangers and celtic did move to the EPL or what ever then the SPL would not care either way as two other teams would im sure fill there places at the top of the SPL and then eventually become good sides . then we would see more then two teams at the top year in year out

Rangers and Celtic have already tried to move but were resoundingly denied by the SPL ... Lose those two and you would kiss the SPL goodbye, would be like the SANFL post Crows which I know is still alive (as the 2nd best league around), but their game is dominated by much bigger funds so the SPL wouldn't be in the same position.

[johntheclaret]

Absolutely spot on C_P.

Rangers and Celtic have a huge fan base, not just in Scotland, and take those two sides away and the fans would follow along with the cash.

The only way I could ever see it happening is if there is some sort of payment to the SPL from the big two, to subsidise the league. something I couldn't see them doing, and even if they did, the SPL would be gone as a league. Just a peronal thought..

[johntheclaret]

Here's a club by club breakdown of the financial status of each EPL club.

Thanks to The Guardian

Arsenal

Profit before tax £36.7m
Debts £416m
Interest payable £26m

Ownership Arsenal Holdings PLC

Major shareholders
Danny Fiszman, Swiss resident 24.1%
Lady Nina Bracewell-Smith 15.9%
Richard Carr 4.3%
Kroenke Sports Enterprises, UK 12.4%, owned by US resident Stan Kroenke
Red and White Holdings 24.0%, owned by Russian resident Alisher Usmanov and Farhad Moshiri

The state it's in Huge loans, but mostly at low rate, 5.3%, and seen as responsible because the loans financed building the Emirates Stadium (£260m borrowed), and property development (£133.5m to convert Highbury into flats). Club has agreed contracts to sell 598 of the 680 flats; 90 have completed, for £39m. Arsenal acknowledge "difficult conditions", but insist sales are progressing "very well" and deny purchasers are pulling out. Interest is covered by increased earnings at Emirates.

Verdict The property development may be affected but the downturn highlights how well the club did to get the stadium built while conditions were favourable.

Aston Villa

Loss before tax £2.8m
Debts £63.8m
Interest payable £2.7m

Ownership Reform Acquisitions LLC, an American company owned ultimately by US resident Randy Lerner

The state it's in Full houses enjoying muscular football thanks to Martin O'Neill's coaching and Randy Lerner's ownership mean happy days at Villa Park. Unlike the North American owners of Manchester United and Liverpool, Lerner has not loaded his own borrowings on to the club, and has put real cash in. While Lerner, a billionaire and now Villa's chairman, stands behind the club, Villa look sound.

Verdict Villa's debts are not huge, particularly given Lerner's support, and ticket prices among the lowest in the Premier League maintain crowds.

Blackburn Rovers

Loss before tax £3.4m
Debts £17m
Interest payable £1m

Ownership Trustees of the Jack Walker Settlement, a trust registered in Jersey (a tax haven)

The state it's in Shrewdly run club in a poor town, but up where they are only because of £97m spent by Jack Walker - and, since his death, by the trustees of his estate. They want to stop funding the club and last year instructed Rothschild, the bank, to find a buyer. None has come forward and recently the Walker trustees have resumed giving Rovers £3m a year to stay competitive.

Verdict Blackburn can argue they have been managing admirably in a recession for years, given economic difficulties in east Lancashire.

Bolton Wanderers

Loss before tax £2m
Debts £40m
Interest payable £3m

Ownership Edwin Davies 95%, resident in the Isle of Man (a tax haven)

The state it's in Struggling to keep up. Apart from a useful hotel business, the club relies on cash from the owner, Davies. Falling crowds at the Reebok in 2007 were described as "a real concern" then they fell again last season and corporate hospitality was down. The chairman, Phil Gartside, stated plainly that Bolton is "a trading club" - it has to sell players - and could buy only because of "the ongoing support of Edwin Davies and parties connected to him".

Verdict Came very close to relegation last season and are likely to face a battle, financially and on the field, to stay up again this time.

Chelsea

Loss before tax £76m
Debts £578m Owed to Roman Abramovich

Interest payable nil

Ownership Roman Abramovich, registered at Companies House as a Russian resident

The state it's in Chelsea owe it all to Roman Abramovich: two Premier League championships, a star-studded squad - and £578m. The oligarch decided to put money into his "trophy asset" in loans (interest free) not cash, and his contribution increased meatily in 2007 to take in a £76m loss. Turnover hugely up, and the chief executive, Peter Kenyon, has talked about Chelsea becoming self-sufficient by 2010, but the club is sure to be living off Abramovich beyond that.

Verdict Despite the eye-watering prices, Chelsea do not expect rows of empty seats and the club is safe as long as their oligarch's fortune stays safe too.

Everton

Loss before tax -£9m
Debts £59m
Interest payable £3m 2007 only

Ownership Everton Football Club Company Ltd

Major shareholders

Bill Kenwright, 25.0%
Jon Woods, 19.0%
Robert Early, Florida resident, 23.0%

The state it's in Overstretching, despite solid crowds at Goodison Park. Everton aspire to keep up with the big clubs, on a fraction of the income. Last month mortgaged their Premier League TV money to Barclays in return for a £30m overdraft facility. No rich backer. Chairman Kenwright admits he cannot keep borrowing. A planned move to a new stadium in Kirkby to be built by Tesco is deeply unpopular with many supporters, and backed by Kenwright only because the club has no money for a more appealing option

Verdict More affordable prices have maintained the loyal crowd at Goodison, but the club will fall behind if a buyer is not found.

Fulham

Loss before tax £16m
Debts £183m
Interest payable £2m

Ownership Fulham Leisure Holdings Ltd, a Virgin Islands company owned by Mohamed Al Fayed

The state it's in Playing way above its station thanks to Al Fayed's money. Those who suspected he bought Fulham to make a quick profit have been confounded by £165m spent to pay for a team capable of playing in the Premier League. Al Fayed has put the money in from his BVI holding company as interest-free loans. Last year he wrote off £9.5m, so Fulham owed him £155.5m.

Verdict Al Fayed is said to be still full of enthusiasm, but his fortune is not without limit like that of Abramovich or Sheikh Mansour

Hull City

Loss before tax £2m
Debts £1m
Interest payable £52k

Ownership Isis Nominees ,a Jersey company whose issued share capital is owned by Hull directors Paul Duffen, Russell Bartlett and Martin Walker

The state it's in Like most Championship clubs challenging for promotion, Hull overspent, making a £2m loss in 2007. The club had very little debt. Shortly after winning promotion, in June, the club mortgaged all its forthcoming Premier League TV money to a bank, Investec. That, presumably, provided money upfront, so that Hull could sign players of Premier League quality, which so far looks a clever move.

Verdict Low debt, first season of Premier League TV money and sellouts at the KC Stadium give Hull tigerish prospects.

Liverpool

Loss before tax -£22m
Debts £350m
Interest payable £30m estimated

Ownership Kop Investment LLC

Ultimately owned (via the tax haven of Grand Cayman) by Kop Investment LLC, registered in Delaware, a low-tax US state. Tom Hicks and George Gillett are equal owners of Kop Investment LLC.

The state it's in Don't mention the owners. With a team of comeback kings riding high in the Premier League, the rain on Liverpool's parade comes from £185m which Hicks and Gillett borrowed to buy the club and will make the club service. The pair have since borrowed a further £165m to fund the club, but are nowhere near building the new stadium they promised when they took over. Face refinancing the whole £350m, in unfavourable circumstances, in January or July next year.

Verdict Anfield likely to remain full and oversubscribed because of Liverpool's huge appeal, but the debts cloud the horizon.

Manchester City

Loss before tax -£11m
Debts £154m Pre-takeover
Interest payable £6.3m To May 2007 only

Ownership Sheikh Mansour bin Zayed Al Nahyan

Now owned outright by a member of the Abu Dhabi royal family.

The state it's in Were seriously overstretched, now find themselves suddenly loaded. Took out a £25m mortgage against this season's TV money in July, City's debts were £154m and Thaksin Shinawatra was on the run. Then Sheikh Mansour arrived and City's spending power dwarfs that of Chelsea. Remains to be seen how Sheikh Mansour will fund City, whether outright or with loans.

Verdict City's crowd is not the wealthiest so the Abu Dhabi owners may have to reduce prices if they want full houses at Eastlands.

Manchester United

Loss before tax £58m
Debts £667m
Interest payable £82m

Ownership Red Football Limited and Red Football General Partner Inc, both registered in the low-tax US state of Nevada. Malcolm Glazer and his family own Red Football

The state it's in The world's richest club and the most punitively in debt. The Glazers are no benefactors. They loaded their borrowings from buying United on to the club, which has to pay the interest. Borrowings of £667m at June 2007 included £515m bank loans at between 2.125% and 5% above inter-bank lending rates. The remaining £152m is owed to hedge funds at 14.25%. The club argues it can service its debts from booming income, and still afford a glittering squad including the £30.75m signing Dimitar Berbatov.

Verdict United are confident the team's appeal and success will keep the money pouring in and the debts serviced; the club cannot afford to slip up.

Middlesbrough

Loss before tax £13m
Debts £84m
Interest payable £5m

Ownership Steve Gibson, 75%, via his company, Gibson O'Neill

The state it's in High borrowings and losses compared to other clubs of a similar size, Middlesbrough are supported financially by Steve Gibson. The club owes £84m to its bankers, £25m of which is guaranteed by the assets of Gibson's holding company, Gibson O'Neill. That company owns his main business, the container company, Bulkhaul, which actually makes a profit.

Verdict Always a struggle to maintain crowds at the Riverside and a team which can compete; Gibson's support will remain vital.

Newcastle United

Loss before tax £33m
Debts £79m - £59m paid off by Ashley
Interest payable £6m

Ownership Mike Ashley,via his company, St James' Holdings Limited.

The state it's in The tragic half of Mike Ashley's tragi-farce is that he can justly claim to be a financial benefactor. In September 2007 he paid off £59m loans taken out while Freddy Shepherd was the chairman and major shareholder. Ashley apparently paid real money, rather than make loans of his own. But financial responsibility counts for sadly little while Newcastle are scuffling at the bottom of the table and Dennis Wise is director of football.

Verdict Even if crowds fall further, they are unlikely to struggle financially because of Ashley's backing, until he manages to sell the club.

Portsmouth

Loss before tax £23m
Debts £32m
Interest payable £2.2m

OwnershipMiland Development (2004) Limited

Owned by a British Virgin Islands company. The Premier League is satisfied that Alexandre Gaydamak is the ultimate owner.

The state it's in Overspending. Fratton Park's capacity is still only 20,700, so Pompey have been spending beyond their means to provide Harry Redknapp with a team capable of winning FA Cups. Alexandre Gaydamak is apparently not funding the club's losses, and is now actively seeking a buyer.

Verdict Portsmouth have announced they are looking for a buyer and without additional money their status will be difficult to maintain.

Stoke City

Loss before tax -£3m
Debts £3m
Interest payable £27,000

Ownership bet365 Group

The online gambling company is owned by the chairman, Peter Coates, and his family

The state it's in Financially supported with cash by the Coates family. Having made his second fortune in online gambling (his first was in stadium catering), Peter Coates returned in May 2006 to buy the club back from the Icelandic consortium which previously bought him out. Coates has put real money in, writing off over £8m of debt.

Verdict Coates pledged sensible investment to have a go at Premier League survival; Stoke should be safe financially either way.

Sunderland

Loss before tax £15m
Debts £45m
Interest payable £3m

Ownership Drumaville Ltd

Incorporated in Jersey, a tax haven. The chairman, Niall Quinn, and shareholders understood to include nine other businessmen including most recent arrival Ellis Short, who is based in Dallas.

The state it's in Spending on players since Roy Keane arrived as the manager reported to be £70m, a high price for Premier League survival. Good crowds at the Stadium of Light because, in an economically depressed area, ticket prices are among the lowest in the Premier League. Short reported to have provided further money to enable Sunderland to compete.

Verdict Finances likely to become tighter as fans struggle in a recession and Sunderland will rely further on their owners.

Tottenham Hotspur

Profit before tax £28m
Debts £45m
Interest payable £2m

Ownership Enic International Ltd

Enic, 82% owners, registered in the Bahamas, a tax haven. The chairman, Daniel Levy, and family own 29.41% of Enic. Controlling owner is Joe Lewis, resident in the Bahamas.

The state it's in Financially booming, bottom of the league. Turnover in 2007 was up £29m, with London prices and corporate boxes swelling income to just below the big four. At next month's AGM Spurs are expected to show further financial growth. In the summer they made mountainous profits from selling Jermain Defoe, Dimitar Berbatov and Robbie Keane. But fans are in uproar about, er, selling Jermain Defoe, Dimitar Berbatov and Robbie Keane, along with other on-field disasters.

Verdict Club with a rich London fanbase, it would be a surprise if Spurs greatly suffer, unless the unthinkable - relegation - befalls them.

West Bromwich Albion

Profit before tax £5m
Debts £4m
Interest payable £222,000

Ownership Jeremy Peace

Over 50% owned by chairman Peace

The state it's in Sound management of a yo-yo existence. West Brom have very little debt. Club would argue its fans have been suffering a recession for several years already, given the downturn in engineering and manufacturing in the midlands. West Brom have cut ticket prices by a third in two seasons and play to full houses at the Hawthorns. Just need to secure a sponsor.

Verdict Look healthy, partly because as a club they know their limitations very well, and understand who their fans are and what they can afford.

West Ham United

Loss before tax £22m
Debts £36m
Interest payable £2m

Ownership Hansa ehf and Olafstell ehf

Icelandic companies through which the chairman, Bjorgolfur Gudmundsson, owns the club

The state it's in Most obvious hit of the banking crisis. Bjorgolfur Gudmundsson's Icelandic bank, Landsbanki, has gone bust. West Ham insist they are safe: that the club was not exposed to Landsbanki, that Gudmundsson and his son have other fortunes in sound investments, that the club is not over-borrowed. Last year's figures show Gudmundsson was a generous owner, paying £85m cash, not loans, to buy West Ham, injecting £26.6m cash into the club, and personally guaranteeing its borrowings.

Verdict Not the meltdown some have predicted, but fanbase is likely to feel the pinch and the club will need Gudmundsson's fortune to stay intact.

Wigan Athletic

Loss before tax £8m
Debts £54m
Interest payable £1m

Ownership Whelco Holdings Ltd, company through which the chairman, Dave Whelan, owns the club.

The state it's in Not even a Football League club until 1978, Wigan Athletic are the creation of the former JJB Sports owner Dave Whelan, who has funded the building of the JJB Stadium and the club's rise. Figures to May last year show Whelan's backing came in an interest-free loan of £30.6m, an increase of £11m on 2006. Whelan was reported recently saying he would consider selling to bring new investment in. Barclays increased its loans by £13m to £23m, following assurances of continued support by Whelan.

Verdict Whelan's support is everything and although he has talked of bringing in another investor, he shows no sign of reducing his contribution.

[devilsadvocate]

This is a fascinating read on the financial health of each premier leage club:

http://www.guardian.co.uk/football/2010/may/19/premier-league-finances

I'm pretty happy with where Spurs are sitting and providing it's delivered on time and on budget, the addition of our stadium will provide a great boost to match day revenue.

There are some damning stats for the 'big 4', plus the likes of Portsmouth, West Ham, Hull etc.

The introduction of new rules including the home grown rule from next season, plus financial regulations from 2013 will have massive implications for the likes of chelski and Man Citeh.