Football sees red
THE FOOTBALL industry faces a serious crisis. In the close season around 800 players were laid off – 650 are still out of contract. The collapse of the television company, ITV Digital, has widened the gulf between the Nationwide League and the Premiership. Nationwide clubs lost £178m as a result, with first division clubs each £1m worse off a year. Between 30 and 40 clubs could go into receivership or even out of business.
A new deal for the Nationwide League with Rupert Murdoch’s Sky Sport is worth £95m over four years, compared to the £315m which ITV Digital agreed to pay. The Premiership will face a cut of at least £400m when it renegotiates its deal with Sky in two years’ time. This will put a number of clubs in jeopardy. On top of that, US company NTL, which had an internet deal with League clubs, is going into the equivalent of receivership.
While hundreds of players face redundancy or hugely reduced wages, the recent World Cup showed the big-business nature of football. World superstars now earn in excess of £100,000 per week. Manchester United and England star, David Beckham, will ‘earn’ an estimated £10m from sponsorship deals. Just as Michael Jordan was worth £1bn in sponsorship to the basketball industry in the 1990s, Beckham is worth around £1bn to the Premiership.
The average Premiership player earns £400,000 a year and many receive in excess of £1m. But then they are playing in an industry that is worth £1.7bn pounds annually. Directors of clubs have made millions out of the game on the basis of relatively small investments. The players have sought a share of this wealth.
The whole of Europe is battling with a sudden drop of TV revenue and ever increasing wages and transfer deals. The crisis kicked off with the insolvency of German media group Kirch, which lost huge amounts after buying the rights to the 2002 World Cup and the German football league, the Bundesliga, and failing to recoup the money in subscriptions. ITV Digital similarly went bust when it failed to recoup its outlay on rights for the Nationwide League. Football is no longer a sure-fire guarantee of high viewing figures.
The Daily Telegraph commented: "Premiership clubs have spent ‘just’ £157m on transfers, a three-year low. That figure was inflated by the British record £29.1m move of Rio Ferdinand from Leeds to Manchester United that accounted for almost a fifth of all spending in the four-month close season. The economic downturn has similarly affected income… the 20 Premiership clubs turnover is down by more than £130m". (16 August)
Clubs also vastly increased bank borrowing. Leeds United saw its gearing (total debt as a percentage of shareholders’ funds) rise from 66% to 125% within a year. It is now close to 400%, hence the sale of Ferdinand.
Brian Sturgess, director of London–based analysts, Soccer Investor, states: "European football is facing slowdown in rates of growth of its television income or, for some leagues, a few years of negative growth. This will inevitably necessitate a painful restructuring. The deflation in transfer fees and wages resulting from an economic crunch will impact severely on player values and on the balance sheets of highly geared clubs. The larger clubs with strong franchises will survive in one form or another but many of their smaller brethren could well disappear".
In 1996, ten British clubs floated on the stock exchange. Since then there has been a freefall in values, with half now trading at less than 25% of their issue price. More than £500m has been wiped off the value of the listed clubs. Manchester United is down 42.7% and Celtic 60%. Chelsea Village, the owners of Chelsea Football Club, has outstanding debts of £96.9m.
In Italy, the share value of Lazio fell by 70% and Juventus 45.9%. Serie A clubs reported a collective loss of £438.7m for the 2000/2001 season. Currently, there is no TV deal in place and the clubs have been offered almost 50% less than previously. One of Italy’s top clubs, Fiorentina, was relegated two divisions after it failed to meet financial guarantees, causing riots in Florence. Parma wants a 42.5% reduction in wages, Lazio a third and AC Milan 10%. In Germany, the cash shortage has led to a year-on-year drop of 33% in summer transfer deals. Borussia Dortmund (a club that has seen its share value plummet by 50%) is cutting costs by 10%.
Olympique de Marseille is cutting playing staff by a third and Real Madrid was technically bankrupt last year until land sales balanced its books. Galatasaray Sportif AS in Turkey posted profits down 16.8%. Greek clubs AEK Athens and FC PAOK Thessaloniki face sanctions if they fail to pay outstanding transfer fees. In Scotland, Airdrieonians and Clydebank have folded, with a new club, Airdrie United, taking their place. Ferencvaros and Honved in Hungary have failed to meet financial guarantees for next season.
For the smaller clubs the future is bleak. Enfield fans formed their own club when the chairman sold the ground and proposed sharing facilities outside the borough. Wimbledon supporters who oppose the attempted move to Milton Keynes have set up a new club, AFC Wimbledon. Almost 5,000 watched the first match and the club sold more season tickets than Wimbledon FC. If AFC Wimbledon proves to be successful, however, businessmen will undoubtedly attempt to take it over. The fans will have no say unless they adopt the measures needed to reclaim the game.
A democratic membership scheme should be initiated. For a nominal fee, fans could then enrol in the club of their choice and would elect representatives onto the board. The players and staff would also elect representatives. Fans, along with players, staff and local community representatives, would own and control the clubs. Football would no longer be about passively watching your club. For the first time in over a century, fans would be involved in the day-to-day running of their clubs. Fans, regardless of age, sex, or physical disabilities, would be enabled to play for their club in various leagues based on ability. The facilities could be opened up to other sports and activities.
Under socialism the profit motive would be taken out of the game. As a vast majority of clubs are running at a loss this would be an improvement for most! Players would not receive the exorbitant income that they receive at the moment. They would be well paid, nonetheless, with wages tied to the average for a skilled worker.
A fight must be waged to rid football and other sports of big business control. The fans must reclaim the game.
John Reid