Premier League wealth masks football league poverty

(Article first published in All Sports Magazine, repubished on Play the Game with kind permission of the author)

Reality for many Football League clubs is far away from the glamour of the Premier League big four. Photo (c) flickr user drinksmachine, "Away team dressing room", uploaded under a Creative Commons 2.0 licence

The new TV deal with Rupert Murdoch’s satellite television company BSkyB means that the 20 clubs in the English Premier League pocket £40 million each every season yet outside of the top flight the future has never looked worse.

Under the Premier League are 72 Football league clubs in three tiers but barely a week seems to go by without a club collapsing.

Luton Town, AFC Bournemouth and Mansfield Town are in trouble, while Coventry City and Swindon Town - both in the Premier League not so long ago – only just recently averted administration with last-minute deals.

English football boasts the largest number of professional teams in world football but is that number sustainable?

Many Football League clubs have struggled to cope with losing money from the collapse of a £315 million TV deal with broadcaster ITV Digital, which ended in 2002.

There are though, says Simon Chadwick, professor of sport business strategy and marketing at the Centre for the International Business of Sport at Coventry University, broader problems.

Professor Chadwick thinks many lower league clubs have been stuck in the nineteenth century, saying: “The world has changed. [Many football league clubs are] nineteenth century amateur sports clubs needing to operate in a twenty first century business environment.

“There is now competition from other sports and leisure alternatives - games consoles, skate boarding, new cinemas, shopping – and a failure to provide goods and services that rival the appeal and quality of these alternatives.”

“Also, there are cultural problems - clubs are secretive, defensive and do not embrace change. As organizations they are very inward looking, not market-driven in same way as the NFL [in the United States] and focus solely on what happens on the pitch rather than thinking about what happens off it too. They see football as the only thing they have to sell.”

Some football clubs have attempted to embrace a more business-like approach.

Ironically, the best example of this is one of the few clubs still left on the stock exchange – Sheffield United.

Many British clubs, unlike their brethren in the rest of Europe, embraced the stock market after Tottenham Hotspur became the first club to float on the London Stock Exchange in 1983.

In total, 27 English, Scottish and Welsh clubs floated in a dash for cash that provided scarce reward for investors or fans.

Traditionally, club owners in what is now the Football League were local businessmen who invested in clubs out of patriarchal loyalty and did not expect a financial return.

Moving to the stock market left many clubs struggling to rid themselves of shareholders that were now financial institutions and wanted dividends not draws and wins.

All but a handful of clubs have since de-listed. Of those few left, Sheffield United has been the most proactive in developing a business strategy that includes operating health clubs. This may provide a stable model but on the pitch the Blades have slipped out of the Premier League and show no sign of returning this season.

Blending ambition on the field and off is difficult in an industry characterized by what Professor Christine Oughton of Football Governance Research Centre at the University of London describes as “prune juice economics.”

Money flooding into Premier League clubs floods straight out into the pockets of over-paid players. At the top end of the Football League, ambitious clubs are doing the same.

If a club cannot return to the promised land of the Premier League quickly, financial ruin descends as demonstrated by Leeds United, going from a Champions League semi-final to the third tier of English football in just a few seasons after financially over-stretching.

Leeds are not alone. Bradford City and Swindon Town both secured short-lived promotion to the Premier League then dropped down four leagues to the bottom rung of English football, division two of the championship.

Professor Chadwick adds: “There is a short-termist mentality - this season rules – and there is no real notion of planning. Look at their attitudes to debt. Debt is never really questioned or seen as being a bad thing. Until recently, there were no controls on going into administration”.

Not so long ago, clubs could easily file for administration and seemingly shake off all their bad debts with debtors forced to settle for vastly reduced sums, often just one pence for every pound owed.

The catalyst ending this came after Leicester City shamefully exploited the rules. Chasing a quick return to the Premier League in 2002 but also building a new stadium, Leicester could not balance its books and filed for administration to wipe out its debts. This left Birse, the contractor building the club’s £27.5 million 32,000 all-seat stadium, nursing a £5.5 million deficit.

The Football League then brought in a new rule that clubs filing for administration would immediately lose 10 points. This was then exploited as Leeds filed for administration before the end of last season when owner, Ken Bates, knew relegation was certain.

Leeds hoped to take the 10-point deduction last season and start afresh in League One. After widespread disgust at this cynical maneuvering, the Football League took 15 points from Leeds’ points tally this season.

Clubs now try to scramble clear from the chasm of administration but the failures continue apace.

Watching from the sidelines with some sort of solution is Supporters Direct, a state-funded quango – quasi non-governmental organization – set up to help fans gain more control of their football clubs.

Formed with the explicit backing of then sports minister Richard Caborn in 2000, Supporters Direct has set up 150 fans’ trusts in England, Scotland and Wales.

In a trust, a fan gets only one vote no matter how much money they put in. So far trusts have raised a total of £21 million, saved 21 clubs from collapse and 13 are ran by fans.

Not all trust buy-outs have been successful – one failed at Mansfield in January – but Supporters Direct deputy chief executive Dave Boyle says trusts offer a stability that other ownership structures cannot for Football League clubs.

He says: “The simple fact is that football is an unstable business and costs, i.e. player’s wages, increase above inflation every year. You can set your stall out each year, and someone can come along with money to burn that blows you away in the transfer market and can offer better wages.

“You either try and match them, and worry about finding the money later or stay where you are and maybe suffer on the pitch. To put it in the language of business, the incentives for being sustainable financially are in the wrong place as to take that approach seems to actively undermine your playing ability, which is the ultimate aim of the club.

“Add to that that each year clubs come down into the Football League from the Premier League carrying ever higher parachute payments. This gives them much bigger clout in the league to get back, so if you're Southampton or Coventry who no longer get these payments, to compete, you have to work very hard.

“In a nutshell, football is hard, the pressures [are] beyond your control and [there is] ever-increasingly inflation. Clubs make decisions to stick or twist, and if you twist, you need to get money to pay back what you’re spending over the medium term of the thing comes crashing down.”

For clubs in the Football League, succumbing to trust ownership would mean an end to crazy spending and may harm the team’s short-term prospects on the pitch but could mean more of those 72 clubs stay in existence for longer.

Football League clubs in or that have gone into administration

• AFC Bournemouth
• Barnsley
• Boston United
• Bradford City
• Brentford
• Cambridge United
• Chesterfield
• Crystal Palace
• Leicester City
• Leeds United
• Lincoln City
• Luton Town
• Notts County
• Rotherham United
• Wrexham
• York City

NB: Some of these clubs went into administration on being relegated from the Football league to non-league football.