The On-rushing Recession and Football

132 posts
User avatar
Royal Rother
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 21243
Joined: 13 Apr 2004 23:22
Location: The handsome bald fella with the blue eyes

The On-rushing Recession and Football

by Royal Rother » 15 Aug 2008 16:26

I think there are going to be a lot more stories surfacing in the next year or 2 about money troubles in football.

So far it's generally been smaller clubs but it's going to start filtering up the leagues, with Derby, Portsmouth, Hull and Stoke likely to be candidates if things don't go exceptionally well for them in the next year.

Portsmouth have already sent out warning signs in the last 2 weeks that things are not all rosy with 2 separate articles (see below).

Thought it would be useful to have a single thread observing these stories as they unfold.

Harry Redknapp has criticised some of his Portsmouth squad for refusing to accept moves away from Fratton Park.

The Pompey chief has accused certain individuals of going through the motions without the ambition of playing first-team football.

Redknapp's blast comes in the wake of the decision to sell Pedro Mendes to Rangers, even though the Portuguese midfielder has been part of his plans.

"I had some opportunities to sell players but they wouldn't go!" declared the Portsmouth boss.

"Pedro was way up my list of players I wanted to sell. The ones who could've been sold suddenly had good opportunities to move to good clubs but didn't want to move.

"They're probably in the comfort zone here and are quite happy not to be in the team but to do their little bit and plod along really.

"For Pedro, it is a move he fancied when it was put to him, Glasgow Rangers, and we had to do it financially so we move on."


Portsmouth, for example, are largely funded by a wealthy foreign owner, but have admitted they cannot invest further in the squad this year. "I did say we intended to bring in three top players but that was before the credit crunch," said their chief executive Peter Storrie. "We cannot keep spending the amount we have spent since the summer of 2007 – in excess of £60 million on players. On top of that you have agents' fees while the wage bill has gone up substantially."


The fact that a good number of football clubs are backed by hugely wealthy individuals does not mean they are immune - recessions tend to hit multi m/billionaires' investment projects as hard, if not harder, than the individuals of less substantial wealth.

User avatar
Huntley & Palmer
Hob Nob Moderator
Posts: 4424
Joined: 14 Apr 2004 11:02
Location: Back by dope demand

Re: The On-rushing Recession and Football

by Huntley & Palmer » 15 Aug 2008 16:35

Good

User avatar
Baines
Hob Nob Regular
Posts: 1310
Joined: 23 Mar 2007 19:26

Re: The On-rushing Recession and Football

by Baines » 15 Aug 2008 16:37

I expect to see a lot more chairman using the credit-crunch as an excuse for not spending money that they were never going to spend in the first instance.

TheMaraudingDog

Re: The On-rushing Recession and Football

by TheMaraudingDog » 15 Aug 2008 16:43

I'm looking forward to Dirk 'yes man' Gently pasting something over from the FSF forum.

papereyes
Hob Nob Addict
Posts: 6027
Joined: 14 Apr 2004 18:41
Location: “The mother of idiots is always pregnant”- Italian proverb

Re: The On-rushing Recession and Football

by papereyes » 15 Aug 2008 16:53

Baines I expect to see a lot more chairman using the credit-crunch as an excuse for not spending money that they were never going to spend in the first instance.


Imagine if you sold nearly £10 million of talent and all that money got eaten up in the credit crunch. God, that would be awful.


User avatar
Arch
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 4082
Joined: 14 Apr 2004 23:35
Location: USA! USA! USA!

Re: The On-rushing Recession and Football

by Arch » 15 Aug 2008 20:43

papereyes
Baines I expect to see a lot more chairman using the credit-crunch as an excuse for not spending money that they were never going to spend in the first instance.


Imagine if you sold nearly £10 million of talent and all that money got eaten up in the credit crunch. God, that would be awful.

Imagine if there was a collapse in the value of players and you were sitting there solvent with £10 million to spend.

papereyes
Hob Nob Addict
Posts: 6027
Joined: 14 Apr 2004 18:41
Location: “The mother of idiots is always pregnant”- Italian proverb

Re: The On-rushing Recession and Football

by papereyes » 18 Aug 2008 09:06

Oh dear.

:|

User avatar
Royal Rother
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 21243
Joined: 13 Apr 2004 23:22
Location: The handsome bald fella with the blue eyes

Re: The On-rushing Recession and Football

by Royal Rother » 18 Aug 2008 11:24

Oh dear, what?

User avatar
Royal Rother
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 21243
Joined: 13 Apr 2004 23:22
Location: The handsome bald fella with the blue eyes

Re: The On-rushing Recession and Football

by Royal Rother » 18 Aug 2008 17:05

I posted this on the Mr Madejski on BBCRB thread, but it probably sits better here...

Royal Rother
Royal Rother "there has been a dramatic rise – from 46 per cent in 2007 to 89 per cent this year – in the number of clubs intending to use more than 90 per cent of their overdraft."

Begs the question "what happens next year"? There will be less borrowings available than this year, with banks squeezing further to reduce their exposure on relatively high-risk facilities to football clubs.

All those clubs making a loss this year, and there will be loads, will find they have less cash available as a result of those losses, and then even less cash available as the banks reduce their facilities -

WTF are they going to do?

Sell their players? Yes, but who is going to buy them when most other clubs will be in the same predicament?

The Administrators are going to have a field day.

RFC, as one of the only prudently run clubs around may get promoted by virtual default as half the teams in the league start of with points deductions....

I am no economist so don't pretend to have an expert's view of all this at all - but it is worthy of debate in the context of the thread.


User avatar
Streets
Member
Posts: 824
Joined: 22 May 2008 16:40
Location: HNA? Prediction League Winner 07/08

Re: The On-rushing Recession and Football

by Streets » 18 Aug 2008 17:08

Money ruining the game I love.

User avatar
Huntley & Palmer
Hob Nob Moderator
Posts: 4424
Joined: 14 Apr 2004 11:02
Location: Back by dope demand

Re: The On-rushing Recession and Football

by Huntley & Palmer » 18 Aug 2008 17:17

Royal Rother I posted this on the Mr Madejski on BBCRB thread, but it probably sits better here...

Royal Rother
Royal Rother "there has been a dramatic rise – from 46 per cent in 2007 to 89 per cent this year – in the number of clubs intending to use more than 90 per cent of their overdraft."

Begs the question "what happens next year"? There will be less borrowings available than this year, with banks squeezing further to reduce their exposure on relatively high-risk facilities to football clubs.

All those clubs making a loss this year, and there will be loads, will find they have less cash available as a result of those losses, and then even less cash available as the banks reduce their facilities -

WTF are they going to do?

Sell their players? Yes, but who is going to buy them when most other clubs will be in the same predicament?

The Administrators are going to have a field day.

RFC, as one of the only prudently run clubs around may get promoted by virtual default as half the teams in the league start of with points deductions....

I am no economist so don't pretend to have an expert's view of all this at all - but it is worthy of debate in the context of the thread.

Isn't there a world of difference between an enormous overdraft that gets paid every month/year and an overdraft that doesn't? Point being that the revenues clear it out most of the time so the club keep living in it for a longer period which suits the banks even more? Any club staying in the Premiership shouldn't have a problem, their revenue stream is guaranteed unless something goes drastically wrong with the TV money. It's clubs getting relegated that will be in trouble repayment wise. The staggering of transfer fees between clubs is the real danger at the moment IMHO. It was touched on by Ashley and Keegan in the press this weekend, they have something ridiculous like 70% of transfer fees outstanding from the last three seasons due to how the payments were spread

papereyes
Hob Nob Addict
Posts: 6027
Joined: 14 Apr 2004 18:41
Location: “The mother of idiots is always pregnant”- Italian proverb

Re: The On-rushing Recession and Football

by papereyes » 18 Aug 2008 17:19

I think it depends, on a large extent, on whether owners are prepared to bankroll the clubs while they readjust.

The clubs at most threat are those with ...

a) owners not willing to do this for whatever reason

b) clubs with debts that are not secure.

I'm not an expert but my understanding is that, as an example, Chelsea spend a lot of Abramovich's money so are not in any real danger until he goes yet a club with owners who have taken out a large loan will be at a greater risk (such as the Glazers). On top of that, clubs that have "done a Leeds" and funded now on the revenues of the future will be, to use the terminology, proper fecked.

I don't think we're going to be all that special as teams that run at a loss but have owners prepared to cover any losses will simply see that happen. I also think football has a lot of very creative accountancy going on making sure teams appear to run at a small loss. We won't go bust while a handful of clubs might but I really, really wouldn't rely on it to see us going anywhere. The clubs that are going to be worst hit are, as ever, the smaller clubs where a few thousand pounds can make all the difference.

User avatar
Royal Rother
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 21243
Joined: 13 Apr 2004 23:22
Location: The handsome bald fella with the blue eyes

Re: The On-rushing Recession and Football

by Royal Rother » 18 Aug 2008 17:38

Huntley & Palmer Isn't there a world of difference between an enormous overdraft that gets paid every month/year and an overdraft that doesn't? Point being that the revenues clear it out most of the time so the club keep living in it for a longer period which suits the banks even more? Any club staying in the Premiership shouldn't have a problem, their revenue stream is guaranteed unless something goes drastically wrong with the TV money. It's clubs getting relegated that will be in trouble repayment wise. The staggering of transfer fees between clubs is the real danger at the moment IMHO. It was touched on by Ashley and Keegan in the press this weekend, they have something ridiculous like 70% of transfer fees outstanding from the last three seasons due to how the payments were spread


Banks really don't want high-risk borrowings on their books - they have to reduce their risk strategy during tough times. I suspect that football clubs (outside the Top 4 clubs) represent pretty high risk at the moment.

The point re overdrafts and clearing them / use of the facility, is that, as quoted earlier, a survery indicates that 89% of clubs expect to use 90% of their o/d this year, whereas only 46% did last year. That's massively significant; especially so in a climate where the amount of cash rolling around the football economy in transfer fees has reduced from nearly £600m last year, to little more than 50% of that this year.

Pretty soon these clubs are going to have nowhere to turn. One suspects that even the Big 4 are being effected (their transfer activity is down) so the amount of money dribbling down to the lower leagues via UK transfers is going to reduce, thus increasing the pressure all through the 88 other clubs. As you (papereyes) say, those very small clubs who rely on the occasional player sale of £20,000 and less to survive, just aren't going to be generating that level of income, as every club is reliant on the initial lead in spending coming from the biggest clubs. And they have no way of replacing it with such a small support-base.

Even very wealthy benefactors get twitchy during recession. Whilst all is rosy in the economy and their other investments continue to grow the injection of capital to keep clubs going doesn't hurt too much. I'd suggest that when their overall portfolio is reducing in value their appetite to dump cash into an ailing business of a football club beomes somewhat reduced.

Anyway, interesting stuff...
Last edited by Royal Rother on 18 Aug 2008 17:40, edited 1 time in total.


papereyes
Hob Nob Addict
Posts: 6027
Joined: 14 Apr 2004 18:41
Location: “The mother of idiots is always pregnant”- Italian proverb

Re: The On-rushing Recession and Football

by papereyes » 18 Aug 2008 17:39

their revenue stream is guaranteed unless something goes drastically wrong with the TV money.


That's what could most severely impede the Premiership teams, I think.

Whenever I can get my hands on it again, I'll dig out the last Deloitte list and it shows the relative incomes from various income streams. I think its Germany that have had to maximise their non-TV income.

As to my last point, I thought I'd add some meat to the bones: of the last few years, how many Premiership clubs have gone into administration while in the Premiership? I think its a nice, round 0. How many have within a few years of relegation? 2? - Leicester, Leeds although several had severe financial issues. But Leicester found new owners and Leeds only when they went down another level. Bradford? Maybe?

How many were small clubs that have never really threatened the top flight in recent years?

Rotherham, Luton, Bournemouth ...

Maybe the new situation will be different? Who knows.

User avatar
Royal Rother
Hob Nob Subscriber
Hob Nob Subscriber
Posts: 21243
Joined: 13 Apr 2004 23:22
Location: The handsome bald fella with the blue eyes

Re: The On-rushing Recession and Football

by Royal Rother » 18 Aug 2008 17:47

I think the pressures are bound to filter up the leagues. Football has had its own boom economy but if, as I am suggesting, banks are "forced" to reduce their facilities (and increase interest charges of course) to manage their risks, then it has to doesn't it?

Plus, as I further suggest, reductions in transfer activity / fees will impact all clubs; sure the ones it will hurt most are probably at the bottom of the chain, but that too, will shift up through the leagues.

Simplistically - inevitable reduction in income + likely reduction in borrowings given = major fecking crisis for many (maybe even most) football clubs.

TheMaraudingDog

Re: The On-rushing Recession and Football

by TheMaraudingDog » 18 Aug 2008 17:56

I a strange kind of way I'd love United to go bust, have to sell the best players and then the fans come in, rescue the club via a couple of relegations then rebuild. The 70's division 2 season was loved by all who were there. Can you imagine United away at Blackpool away. The young scrotes and the old heads would be there for the biggest mob turn out since United away at Rangers. My word there would be some serious aggro. That's what I'm talking about.

papereyes
Hob Nob Addict
Posts: 6027
Joined: 14 Apr 2004 18:41
Location: “The mother of idiots is always pregnant”- Italian proverb

Re: The On-rushing Recession and Football

by papereyes » 18 Aug 2008 17:59

The first line, I was all prepared to agree with you.

But now I don't.

:cry:

Victor Meldrew
Hob Nob Addict
Posts: 6716
Joined: 12 Apr 2005 19:22
Location: South Coast

Re: The On-rushing Recession and Football

by Victor Meldrew » 18 Aug 2008 22:04

The trouble is RR( in your Doomesday scenario) that as Reading is the only well run club in England there won't be anybody left for us to play. :wink:
Shame that the madman would then not even get £1 for our club-if he were the shrewd businessman that so many like to call him he could have got about £60 million a year ago but now ?£20million maybe.

User avatar
Dirk Gently
Hob Nob Super-Addict
Posts: 10780
Joined: 08 Sep 2005 13:54

Re: The On-rushing Recession and Football

by Dirk Gently » 18 Aug 2008 22:25

The whole Premier League economy is built on the premise that TV money will increase with every new broadcast deal. So far it has - and the overseas portion increased beyond their wildest dreams in the last deal, but I don't think anyone can see the same happening again.

As an example, the selling of the PL in China via subscription TV has been a flop - which proves that people want to see it but don't want to pay for it, so it may go back to free-to-air next time out and need to be funded by advertising again there, and, of course, a global recession means that subscription and PPV TV will be an expensive luxury for many which will reduce TV revenues.

So the real problems come when the money doesn't increase every 3 years - I can't see some of the top players relaxing the salaries "arms race" easily, or many clubs standing up to them, so problems will ensue. As a side line, of course, this is what's behind the PL games abroad - it's not really "building the brand" - its more about adding an extra TV revenue stream than anything else.

User avatar
Whore Jackie
Hob Nob Regular
Posts: 2523
Joined: 09 Feb 2006 13:48
Location: Over 'ere

Re: The On-rushing Recession and Football

by Whore Jackie » 18 Aug 2008 22:30

their revenue stream is guaranteed unless something goes drastically wrong with the TV money.


Interesting article in Sunday's Observer on the number of pubs scrapping their Sky Sports subscriptions:

Football fans hoping to catch this season's Premier League matches at their neighbourhood pub should check that their local is still showing the game. The soaring cost of Sky subscriptions has resulted in 20 per cent of bars abandoning the service over the past five years, according to pub trade group ALMR, the Association of Licensed Multiple Retailers.

The group claims Sky's premium package price - around £13,000 per annum - combined with the credit crunch effect of higher utility bills and fewer customers is forcing pubs to ditch the service.

'Watching a big game in the local with a group of friends is as close to being there as you can get,' said Nick Bish, chief executive of the ALMR. 'It's also the only place fans can watch live Premiership action for free. This pleasure is being threatened by Sky's relentless price rises.'

Vince Healy, the managing director of Ascot Inns, a small chain of five pubs, has cancelled his Sky subscription in some bars because of the cost. 'If the price of lager since 1996 had risen at the same rate as pub Sky subscriptions, we would be paying more than £9 for a pint,' he said.

The pub trade group claims that the percentage of pubs in the country ditching Sky almost exactly mirrors the percentage price increases imposed by the satellite TV giant. It believes thousands more pubs will have abandoned the service in the past two weeks as August is the only month in which Sky's commercial customers can leave their contracts before being tied in for another year of subscriptions.

Even in pubs still showing Sky, punters could be worse off than before as some bars have put up the cost of beer to cover the cost of the subscription, claims the ALMR. 'You have to sell a lot of beer to cover this extra cost so in these difficult economic times businesses are having to pass this on,' said Bish.

A Sky spokesman insisted the company's service for pubs had not gone up since September. He said: 'Trading conditions are difficult for landlords, with rising utility bills and drinks prices and the credit crunch and smoking ban reducing customer demand. To assist publicans, we've kept our prices frozen at the September 2007 level.


There was a similar article last week about Setanta being warned by the City that this season is 'make or break' for its bid to end Sky's domination of the sports television market.

The Irish broadcaster, which has shelled out hundreds of millions of pounds on top-flight sports rights, faces an uphill struggle to boost its subscriber figures to profitable levels and there could be a knock-on effect for the Premier League's next rights auction.

132 posts

Who is online

Users browsing this forum: 6ft Kerplunk and 135 guests

It is currently 29 Mar 2024 13:09