The All Party Parliamentary Football Group (APFG) has spoken in its strong eunuch voice again, this time on the subject of financial instability of English football. In May 2008 APFG launched a inquiry into 'English Football and its Governance' and the report from this work was Launched to the House of Commons on the 20th and is know for all to READ HERE. APFG have, according to the Independent , among other things called for rule changes to prevent clubs from being burdened with a big debt following a sale i.e. being bought with their own money (lex Glazer?), calling the behavior “financial doping”.
If someone wants to indebt him or herself to buy a football club, and is trusted by the bankers to do so, there is the problem of an instability of the owner structure, but if the debt is then transferred to the club as happened with ManUre there is a problem of a different order. According to the articles in the Independent, the profit ManU makes is completely erased by the interest of the debt. As far as I understand, the club is not self sustainable and have to pay Glazers debt at Glazers mercy. One could argue that this is not a unique situation, that this also applies to many other football clubs but, as I see it, this just emphasizes the problem.
The indebtedness of clubs in top football has been an issue for quite a while, Italian clubs were in deep trouble already back in 2004 and Spanish clubs Real Madrid and FC Barcelona has been in deep debt for some time (Real Crisis), so it is by no means a PL problem.
Last July UEFA president Michel Platini talked about the debt of top European clubs being unacceptable and wanted to install some “behavioral rules” for clubs that were to play in European Cups saying “I believe it wouldn't be right not to allow clubs entry due to debt… ...I think that clubs should be allowed to participate as long as they demonstrate sustainability”.
The first time I saw this brought up in the UK was in the famous statement by FA chairman Lord Triesman last October followed (for example) in a Guardian blog entry by Richard Williams where he starts out with “The current indebtedness of England's leading football clubs ought to be filling everyone involved with profound unease”.
The message of the APFG report seem to be that the football clubs are in no way immune to the financial crisis.
Whenever I see the PL clubs financial situation is discussed the TV money always appears. As West Ham fans we know that it is not the only thing important, as all kinds of thing can go belly up. However, the cut from the TV deal is depicted as a guarantee that there will be no economic meltdown in the PL as the contract is long (?) term. In February BSkyB agreed to a contract believed to be in the excess of an astonishing £1 billion for the live TV rights until 2013. All media rights sold by the PL amounted to £2.7bn. This is an increase of 70% on the previous deals, despite the present financial situation – bubble anyone?
I doubt that there are any really certain money nowadays, XL and AIG should remind us of this. This uncertainty is underlined by the fact that several media companies are presently sweating over declines in advertisement sales (e.g. ITV).
Nick Denton, dubbed one of the most pessimistic men in the media but ruler of the Gawker empire predicts a 40% decline in advertisement spending .
A 40% decline is far more pessimistic than any other major forecasts, but maybe not totally unjustified. His assessment is based on a Morgan Stanley analysis of how economic slowdowns affect advertising and the experiences of other countries like Japan and Indonesia who experienced banking crises. According to Denton, if using their numbers, a 40% drop in advertising spending is not unreasonable. I have a hard time believing that BSkyB and the companies that they re-sell the rights to are immune if the significant reduction in ad spending will continue.
So what was this post about then?
Beats me, but it’s a blog so does it really need to be about anything?…
But maybe there is a west Ham angle in there somewhere - several clubs in the PL are not self sustainable and are dependent on the owners to pour in additional money to sustain life as they know it. This was pretty much our situation in West Ham when BG’s economy failed. Our economy had to be “streamlined” by selling some players and sending some out on loan. As far as I can see, we are better off than some other clubs in the sense that we seem to have already adjusted to a life without extra cash injections. We are however not yet adjusted to a life with a decreased income. I think it may be a good idea for the next owners not to base the expenses on an increased income also after 2013.
The 4 year contract with “Mister” Zola make me very hopeful. He must be pretty convinced that there will not be an economic disaster, at least not this summer.