Football debt

With the demise of Rangers a football institution with over a 100 years of history has been lost. Mountains of debt were built up by a rich sugar Daddy that eventually became unservicable and eventually unstainable. Is there a lesson for English teams and teams across the globe to learn from this fall from grace. Look at Leeds who have struggled to over come debt problems and a quick glance at the top English flight shows teams struggling to over come the same obstacles. Debt piling up players demanding wages that do not relate to footballing ability or relate to any thing considered a normal wage. Is there a chance that Man Utd, Chelsea, City even Barcelona who have struggled with debts finally collapsing under the same burdens?

Looking at ourselves we have tried to follow an often criticised model of football that treats Arsenal as any other business - profits must be made - and this model ensures that the club we support will be around for another 100 years. Or are we deluding ourselves as the English footballing bubble, especially with this latest TV deal, is going to keep growing and mountaining debt is not going to be an issue?

Any opinions?

I think if a club as big as Rangers can get themselves in a position like this, then we could see a team from the EPL go the same way.

If a club is totally reliant on supporters and T.V. for their revenue, then they cannot afford to spend more than they earn in order to get a top four place for instance.

It happened to Leeds, and it could easily happen to clubs like Liverpool, who have spent massively and haven't improved that much.

The two biggest spenders, Chelsea and Man city could easily go the same way as Leeds if their" sugar daddy's" get bored and move on to another hobby.

Chelsea have spent around one billion pounds on players transfers and wages and they have an average gate of around 40,000.
That works out at about £25,000 per supporter they get through the gates.

I know this is an estimate and I know there are other factors, but my point is, if Abramovitch walked out they would go broke and have to sell all their best players and would no longer be able to attract the worlds top talent.

Chelsea and Man city, before the rich owners took over, were no bigger than clubs like Everton, spuds, Aston Villa, Newcastle, Sunderland etc. and would go out of business if they had to survive on the revenue that only comes from supporters.

The two biggest spenders, Chelsea and Man city could easily go the same way as Leeds if their" sugar daddy's" get bored and move on to another hobby.

The key point here is "if their sugar daddy gets bored". In time, these clubs would eventually learn about the importance of being able to sustain themselves without their sugar daddy. Chelsea has already started looking for a new stadium for example. Then it would be a race between getting their club "self sufficient" before their sugar daddy gets bored. In this case, the FFP rule might spur the clubs to prepare their own self sustaining model even faster.

Truth be told, I'll always be inclined to our model of business because it seems to be the "right" way to do it. That being said however, the problem with running things this way is that it treats our football club as a business organization rather than a football club, meaning the priorities of making profit versus getting trophies often conflicts one another. The board and Wenger needs to compromise a little profit so that a little more spending could bring home some trophies. This is where I feel the former has a problem with.

"Chelsea have already started to look for a new stadium" is a bit generous to be honest.......they've had Roman's cash for nearly a decade now, and only just started to look for a new ground.

The leeway so such clubs have/had in the past in those regards, is ridiculous.

Bristol city went bust completely in the 1930s due to paying players huge wages on long contract while they slid down division, but they are still going today after being re-started as a new company. Clubs never really go out of business but just change certain legal terms such as who owns the ground. The history is the same no fan will say "well now its Rangers Football Club not THE Rangers Football Club then the league titles don't count anymore".

Clubs will keep going bust as they are too big and important to completely implode and never exist in the same form again.

That's what i meant by FFP might speed up their effort though. But generally speaking, these kinds of clubs are indirectly protected by FIFA so they tend to get some breathing space. Imagine FIFA suddenly implementing rules which craps on all the big spenders, these clubs would implode and that won't be good for FIFA's image. So they take their time in going through with such rule, as seen with FFP.

FFP is like the bank of england raising interest rates it is only to try and put a brake on the inflation that is going on in football especially in terms of player wages. However it won't stop them increasing and with TV deals increasing by 20-30% agents will argue that those who generate the "product" should see the extra grease that is coming into the clubs to pay to show their team.

Proactive agents like Hazard's have got big deals in now but when he negotiates his contract £170k a wekk for a 21yo top talent will be standard.

Also regarding the debt issue.

The actual debt owed by club in relative terms for a business is ******* tiny, however you want to look at it £200 million isn't that much money to a bank with turnovers in the £50-60 billion range. Bringing in the debts is pointless as generally the club will stay around and be able to service the interest and having link with great football clubs is kudos for these characters.

The real issue is the percentage of wages to turnover with clubs like Citeh mashing the **** out of the idea so much that they will have to double their revenue to make the playing staff they have now let alone in the future reach a sensible level liek 50-60% of turnover.

The real issue is the percentage of wages to turnover with clubs like Citeh mashing the **** out of the idea so much that they will have to double their revenue to make the playing staff they have now let alone in the future reach a sensible level liek 50-60% of turnover.

Spot on and that is the reason that I doubt that FFP will change the financial climate a lot. If Uefa really wanted to do something about the financial situation, then it would have been better to introduce a salary cap. This is really worrying:

Team | Wages as a percentage of turnover (%)
Arsenal 48
Aston Villa 90
Birmingham 68
Blackburn 86
Blackpool 48
Bolton 82
Chelsea 86
Everton 71
Fulham 75
Liverpool 73
Manchester City 114
Manchester United 46
Newcastle 60
Stoke 70
Sunderland 77
Tottenham 56
WBA 63
West Ham 69
Wigan 78
Wolverhampton 59

http://www.guardian.co.uk/football/2012 ... rofit-debt" onclick="window.open(this.href);return false;

In reality, all these clubs (except Arsenal who report their real wage bill) also have to pay players for image rights, an expense the clubs have chosen to not include in the wage bill to make it look better on paper. Some of the player bonuses are not included in the offical wage bill as well. The conclusion is that the wages as percentage of turnover is even higher in reality.

If you look at the table above, you realise that there are a lot of clubs in the danger zone unless they either increase their revenue or sort their wage bill.

I think the level of clubs' ability to service their debt is more important than the Amount of debt in gross numbers.



Swiss Ramble put together an interesting piece on just this point a few months back and though I don't remember the specifics there are calculations that can be done to ascertain any given clubs ability to do so and many of these PL clubs and even Spanish clubs are dangerously close to or are unable to service their debts as things stand.

By and large though, its not the big clubs and teams in the top 4 that you need to worry about but the minnows and midtable clubs that will bear the brunt of any debt crisis.

When one considers that the NFL with less viewers, less market and less mass appeal than the CL makes 5 times the amount of money wage caps or no, it shows why the clubs at the top aren't overly worried.

Impressive that we're only at 69%. We were in deep **** not even 2 years ago but Gold and Sullivan have really saved our asses, brilliant business men.

Well, Parma FC made a comeback after their sugar daddy Parmalat goes bankrupt.
However, I have to say they weren't the team they once before.

So the general consensus is it doesnt matter as football clubs, like banks, are to big to fail and that the turnover most clubs get from the TV deal means they have enough income to service their debt?

What happens if hypothetically people begin to really struggle and pull the plug on their 40pm Skysports package. That has to be a huge danger because if the Sky money dries up servicing debt becomes exceptionally difficult. I'm glad to see our wage % to turnover is as low as it is because it means in that nightmare scenario we are somewhat isolated from that shock at least compared to the likes of Aston Villa, City etc.

Look at it this way, the domestic rights just went up by 64% in total do you thik that there isn't a market there and that people love football as much as ever now and are willing to pay to watch it. I can't see enough people cancelling their sky package in droves, and yes most of these clubs are too big to fail in the sense that they are wiped from history. Some may get relegated or drop down the league but they will re-adjust. Unlike say Woolworths which when it went into administrator and was liquidated couldn't try and start up a few shops and re-build a football club can just drop down a few levels and compete there.

Impressive that we're only at 69%. We were in deep **** not even 2 years ago but Gold and Sullivan have really saved our asses, brilliant business men.

Complete and utter fuckheads though

The TV money is a false economy.

It doesn't benefit anyone, in fact it hinders people really.

Everyone gets the same thing, so all it means is players get paid more, which pushes wage bills up as players seek parity more than the increase in TV money. Then the only way clubs can make this money up is by passing the costs onto, yep, you guessed it, the fans. Increased ticket prices being the main result.

It's the equivalent of being at the theatre and the person in front of you standing up. So you stand up so you can see, the person behind you stands up as a result, the person behind them etc etc until everyone's standing up, with the same view as they had before but now nobody's got a seat.

TV money looks good for clubs on paper, but it doesn't help.

Incidentally, our wage to income ratio will have significantly decreased since those figures were published (or rather, in terms of when those figures are based on, as I think they're based on the 2010-11 season)

Impressive that we're only at 69%. We were in deep **** not even 2 years ago but Gold and Sullivan have really saved our asses, brilliant business men.

Complete and utter fuckheads though

How? They've been nothing but brilliant for us. The answer questions on Twitter, listen to the fans (refused to sign Diouf because of the outrage it sparked), they're willing to invest into the team which they've done heavily and still do and they do everything in their power to help our cause.

No idea where their horrible reputation comes from. I'm assuming you have something against them with them being ex-Birmingham owners?

That might have something to do with it

They're also extremely bitter about us. No surprise Gold was on Sky SPorts News only hours after the fixtures had been announced saying he was relishing getting revenge on Villa.

****

Nothing against you though, I quite like West Ham. Not a fan of your club colours though :p

That might have something to do with it

They're also extremely bitter about us. No surprise Gold was on Sky SPorts News only hours after the fixtures had been announced saying he was relishing getting revenge on Villa.

****

Nothing against you though, I quite like West Ham. Not a fan of your club colours though :p

Ah, didn't know they had a grudge against Villa

That's funny, I quite like your colours! My 2nd favourite kit in the Prem..

That might have something to do with it

They're also extremely bitter about us. No surprise Gold was on Sky SPorts News only hours after the fixtures had been announced saying he was relishing getting revenge on Villa.

****

Nothing against you though, I quite like West Ham. Not a fan of your club colours though :p

Ah, didn't know they had a grudge against Villa

That's funny, I quite like your colours! My 2nd favourite kit in the Prem.. :D

After Arsenal's, of course

[quote="DJ_Markstar"

After Arsenal's, of course [/quote]

Those sleeves..

The TV money is a false economy.

It doesn't benefit anyone, in fact it hinders people really.

Everyone gets the same thing, so all it means is players get paid more, which pushes wage bills up as players seek parity more than the increase in TV money. Then the only way clubs can make this money up is by passing the costs onto, yep, you guessed it, the fans. Increased ticket prices being the main result.

It's the equivalent of being at the theatre and the person in front of you standing up. So you stand up so you can see, the person behind you stands up as a result, the person behind them etc etc until everyone's standing up, with the same view as they had before but now nobody's got a seat.

TV money looks good for clubs on paper, but it doesn't help.

Not really you think of it as a english only market but the players that come to play here are foreign and the market for football is global. In that sense we have a grreat chance for ALL clubs in the EPL to be better than their european equivilants and should draw the best players in the world to clubs here. It should also increase the quality of players at the clubs lower down the league as well for the same reasons, it should be a good thing for everyone involved and I don't see the link between jumps in ticket prices alongside these increases.

We may see increases but at teh end of the day the amount you pay for a season ticket for the Premier League (apart from fulham) is retarded and I don't think we will see it going up when there are such pressure on peoples money.

All that is true.

But FINANCIALLY that's not really a good thing. The best players require the best wages. TV money goes up, clubs offer more wages because they can "afford" them. That forces other clubs to offer more to compete and outdo the others. It's a spiral.

For a handful of clubs that's ok because they generate such huge revenues or, in Man City's case, are so heavily backed they can cover the increase in costs.

But for most, the increase in wages can't be covered. It's no coincidence that football debt is going up and up along with wages.
It's also no coincidence that as costs (i.e. wages) go up, so do ticket prices. The overwhelming costs that Football Clubs have is player wages. Everything else dwarfs in comparison.

You say you can't see the link between ticket prices and TV money? I@ll try and draw you a flow chart

TV money goes up, clubs offer players more wages, other players moving between clubs want parity, increase in wages is greater than increase in TV money, additional wages needs to be covered by additional revenue, easiest way to generate additional revenue is to increase ticket prices, less people go to games because of expensive tickets and the fact they can watch it all on TV, less seats sold mean seats get more expensive to generate the same income (this in itself is a vicious cycle), more people are watching on TV soooooo...

...TV rights are more expensive and so TV money goes up again, you repeat the whole process.

In simpler terms, increase in ticket prices are to cover increased costs. Increased costs are due to higher wages. Higher wages are, in part, due to an increase in TV money.

I'm not saying TV money is entirely to blame. Player wages would increase regardless. But TV money is a big catalyst

That's true to a certain extent but its up to the clubs to manage their wages and budget for it properly. TV money going up is a good thing and will help some of the more in debt clubs to start over by reducing the repayment periods or the time it will take to cover existing shorfalls. Its up to the individual clubs to find their own equilibrium and make do accordingly. Prudent financial mananagement is a necessity in most industries and football is no exception.

[quote="DJ_Markstar"

After Arsenal's, of course

Those sleeves..[/quote]

Red, white and blue! There's nothing better

Well, perhaps we could remove the blue, for more reasons than one...

LFC CEO has already admitted they were about half a day's business from going into receivership as Rangers did if they hadn't been bought by FSG.
As a result of the buyout they are now essentially debt free & have improved commercial deals providing increased sustainable funding.

City's owners want to model our self funding model & have been spending a LOT off the pitch to offset their on pitch spending. They already generate more commerical & marketing revenues than us not counting their Etihad deal re their stadium & shirt name for the proposed academy & commercial centre, let alone their new deal with Nike for their kit.

The increased domestic TV revenues will see the bottom PL club earn as much revenue as City will this coming season as Champions in the current deal. Under current distribution this should put the top2-4 pretty close to the sort of TV revenues currently recieved by the Spanish Giants. Further to this if the rest of the PL are smart & DON'T increase current expenditure significntly, then these improved revenues are essentially a get out of jail free card re FFP & debt as a % of income.

The Premier League should try to agree some kind of rule that say, 30% of this new TV deal be invested in infastructure, youth or ticket price cuts.

The Premier League should try to agree some kind of rule that say, 30% of this new TV deal be invested in infastructure, youth or ticket price cuts.

Would be excellent, especially youth. It'd benefit everyone; English football in general, the future and all clubs as smaller clubs profit from selling big talents or even rise up if they can keep them.

That's true to a certain extent but its up to the clubs to manage their wages and budget for it properly. TV money going up is a good thing and will help some of the more in debt clubs to start over by reducing the repayment periods or the time it will take to cover existing shorfalls. Its up to the individual clubs to find their own equilibrium and make do accordingly. Prudent financial mananagement is a necessity in most industries and football is no exception.

If that were true, then clubs wouldn't be falling further and further into debt.

In theory, you're right. The increase in money should help. But it doesn't, because clubs are forced to pay more and more in an effor to compete.

The TV money is a false economy.

It doesn't benefit anyone, in fact it hinders people really.

Everyone gets the same thing, so all it means is players get paid more, which pushes wage bills up as players seek parity more than the increase in TV money. Then the only way clubs can make this money up is by passing the costs onto, yep, you guessed it, the fans. Increased ticket prices being the main result.

It's the equivalent of being at the theatre and the person in front of you standing up. So you stand up so you can see, the person behind you stands up as a result, the person behind them etc etc until everyone's standing up, with the same view as they had before but now nobody's got a seat.

TV money looks good for clubs on paper, but it doesn't help.

Top post. The increase in TV money is like pouring oil into a fire, hoping it won't burn out. The whole so-called football "economy", especially in the EPL, is just a race to the bottom.

Would say the main consequence for clubs isn't just a rise in ticket prices though, but an ever increasing debt. Most clubs act like they are countries or big banks in that they are too big to fail, will need a bigger case of Leeds/Portsmouth to have clubs realise that it won't work like this, FFP is a joke.