Football Finance: A different ball game

IN the final part of our series on Football Finance, TheBusinessDesk.com, in association with law firm Hammonds, looks at the financial pressures on football clubs and the ways they are looking to boost revenues.

TO the casual observer, top flight English football has often appeared to be a license to print money over the last 15 years,  the one industry impervious to the stresses and strains of the economic cycle.

The spectacle of more televised matches, larger sponsorship deals and bigger stadia filled with fans apparently willing to stomach increased ticket prices and spend on merchandise too has drawn envious glances from those in more mainstream businesses.

However, Portsmouth’s administration demonstrated vividly that leading clubs are not beyond the normal rules of business and in reality most clubs further down football’s pyramid have seen the FA Premier League as increasingly distant from the rest of the English game.

Clubs such as Doncaster Rovers, currently lying 11th in the Npower Championship, face the double challenge of trying to run a viable business and compete with the wealth of the Premier League.

Cheshire-based John Ryan, founder of the Transform cosmetic surgery group and now chairman of Doncaster Rovers says: “The big challenge at the moment is making ends meet, it’s as simple as that.Players’ wages and agents fees are getting more and more expensive. It’s getting more and more difficult to compete.

“Parachute payments for coming down to the Championship are now £48m which is making it very, very difficult for the have-not clubs in the Championship and Leagues One and Two.

“There is a major problem with debt. We run a very tight ship but there are a lot of teams carrying £15m, £20m or £25m of debt. It is not a good business model, it is a crazy situation.”

Balancing the books means extracting as much income as possible through revenue streams such as ticket sales and corporate sponsorship, but the recession has taken its toll.

Mr Ryan says: “Sponsorship is down at most clubs although we do quite well,  and of course gates are down. We got just over 9,000 for our first game of the season but two years ago we were getting 12,000 and last year 11,000. That’s a concern to say the least.

“At the end of the day there is a limit to what people can pay and when I first started here we were a non-league side so we are still trying to build our fan base.

“Television money is very important, very important indeed, but it can have a negative impact. You can watch a Premier League match at home or watch Doncaster Rovers live and a lot of people prefer to sit in front of their TV and that is a problem. It is very much a double-edged sword.”

Even within the Football League, there is a hierarchy when it comes to the division of that important TV revenue lifeline.

Mark Lawn, joint chairman of Npower League Two side Bradford City, believes the distribution of television broadcast money throughout the Football League is unfair with Championship clubs receiving 80% of the share, League One 12% and League Two 8%.

“For me this spending breakdown is going to create another Premier League problem within the Championship. Let’s face it, any money that comes down will go to the players.”

It is a concern echoed by Sean Jarvis, commercial director at fellow League One side Huddersfield Town, who contrasted the millions received by sides relegated from the Premier League to the £250,000 in revenue his club receives from television rights.

“Huddersfield Town TV has been on our agenda for quite some time but we are not at a level where we would see a return but we would never say never. You can understand how football clubs can look to control their TV rights to try and generate more income.”

Mr Jarvis admitted the recession had posed a challenge for Huddersfield Town but said the club had responded creatively to try and buoy sponsorship revenues.

“We are basically an entertainment business and with the climate as it is advertising, marketing and sponsorship tend to be the first things to go. We have to work harder in our offering with potential sponsors.

“What we are trying to do here at Huddersfield Town is create an environment where people who support the club, from putting their name on the shirt to taking an advert in the programme we give them value for money from that investment.

To see the other articles in our focus on Football Finance, click here 

“The people who are fans of a club so they will sponsor the club – those people are diminishing rapidly.”

By contrast, money follows money. Manchester City, now the world’s richest football club has become more attractive to sponsors now it is dining at football’s top table.

New deals in the last month with luxury car brand Jaguar and hotel company Malmaison emphasise the point.

Manchester United and Liverpool are such global power brands that they have been able to woo leading financial services groups AON and Standard Chartered, who are paying millions of pounds a year to adorn the clubs’ famous red shirts.

Stephen Sampson, head of the sports law group at Hammonds, said, “Clubs, leagues and associations are all working to generate additional revenues from new sources and then protect those sources from unauthorised exploitation in a situation in which match day revenues are likely to be suffering. 

“Broadcasting revenues remain the bedrock of football finances in this country but alongside the massive growth in revenues has been the problem of illegal streaming of broadcasts and the distribution of foreign decoder cards. 

“The licensing of data to bookmakers and media organisations has also been challenged.  The sponsorship market has been very competitive but brands still see tremendous value in partnering with those in the football industry, especially at the highest levels.”