Post by QPR Report on May 24, 2009 7:08:25 GMT
The Observer/Dr. Hohn Beech The meaning of life after the Premier League
Dr John Beech, a football finance expert from Coventry University's Centre for the International Business of Sport, assesses the potential implications of relegation for the four teams in peril.
Newcastle United2006/7 wage bill £62.475m (5th highest)
Relegation contract clause? No
Well, they are up for sale but it's hardly the best time to be selling a football club; it's a buyers market and there are no buyers. How would they bounce back, would they survive financially? Let's say they are more likely than others to survive. I don't see them getting into further trouble.
They will certainly take a hit, but they will get parachute payments [worth around £11m]. Newcastle are probably in the strongest position in terms of having a very large, loyal fan base, and a large-capacity stadium. This is good news.
I'm not convinced about how relevant the apparent tension between the owner, Mike Ashley, and the fans is. In many ways if he's got broad shoulders financially, it becomes irrelevant. And I suspect that all the talk from supporters of not buying merchandise because they don't like the owner won't materialise into a boycott.
Sunderland£23.722m (1st in Championship)
Relegation contract clause? Yes
Realistically in a weaker position than Newcastle. Again a very loyal fan base but not as big in terms of bums-on-seats, which is crucial, though there are parallels with Newcastle in terms of loyalty, so are in a reasonable position to bounce back. In fact there's probably a bit more commitment from Sunderland's current owners [effectively American Ellis Short] than at Newcastle.
For Sunderland, as with all clubs, the amount of debt is a relevant factor with regard to convincing whoever you've borrowed the money from that you can pay it back – again, having loyal fans gives you a stronger case for saying you have a sustainable business model. That's how Manchester United and Liverpool are operating currently.
Middlesbrough£32.270m (10th)
Relegation contract clause? Unknown
This is a club in an odd little geographical hot-spot. It's different because of the support from the owner, Steve Gibson, which has been solid over the years, so I would be surprised if there is any change there. I haven't seen the accounts of [his businesses] but that's the only variable.
Generally speaking, the benefactor model, which I don't strongly believe in, has two conditions. One is the money to carry on subsidising.
Secondly, you must be prepared to carrying on paying it. In Steve Gibson's case, I think there's no question he would want to continue and, as far as I'm aware, there is no cause for concern about his ability to pay. But ultimately it is not a sustainable model – at some point a benefactor will run out of money.
So I would see not a lot of change in the financial model at Middlesbrough if they are relegated. They'll carry on in much the same way with some adjustments, some shuffling around.
Hull City£6.94m (21st in Championship)
Relegation contract clause? Yes
A real oddity. I have some belief there are natural levels, and I suspect Hull City are not a Premier League team. This is because of fan-base and geographical restrictions. This year they've been punching a bit above their weight. So emotionally, it will be a disaster for them – as with all clubs – but in terms of what will actually happen, it really comes down to how well the team and the finances adjust to the new situation. That depends on whether they buy or sell the right people at the right price and whether they've got the negative performance-related pay clauses in the players' wage structure.
That's where clubs have gone wrong in the past. Bradford City is the classic example with Benito Carbone, where they had to carry on paying him his ludicrous salary [£40,00 per week when he left
www.guardian.co.uk/football/2009/may/23/premier-league-newcastle-united-sunderland-middlesbrough-hull-city-relegation
Dr John Beech, a football finance expert from Coventry University's Centre for the International Business of Sport, assesses the potential implications of relegation for the four teams in peril.
Newcastle United2006/7 wage bill £62.475m (5th highest)
Relegation contract clause? No
Well, they are up for sale but it's hardly the best time to be selling a football club; it's a buyers market and there are no buyers. How would they bounce back, would they survive financially? Let's say they are more likely than others to survive. I don't see them getting into further trouble.
They will certainly take a hit, but they will get parachute payments [worth around £11m]. Newcastle are probably in the strongest position in terms of having a very large, loyal fan base, and a large-capacity stadium. This is good news.
I'm not convinced about how relevant the apparent tension between the owner, Mike Ashley, and the fans is. In many ways if he's got broad shoulders financially, it becomes irrelevant. And I suspect that all the talk from supporters of not buying merchandise because they don't like the owner won't materialise into a boycott.
Sunderland£23.722m (1st in Championship)
Relegation contract clause? Yes
Realistically in a weaker position than Newcastle. Again a very loyal fan base but not as big in terms of bums-on-seats, which is crucial, though there are parallels with Newcastle in terms of loyalty, so are in a reasonable position to bounce back. In fact there's probably a bit more commitment from Sunderland's current owners [effectively American Ellis Short] than at Newcastle.
For Sunderland, as with all clubs, the amount of debt is a relevant factor with regard to convincing whoever you've borrowed the money from that you can pay it back – again, having loyal fans gives you a stronger case for saying you have a sustainable business model. That's how Manchester United and Liverpool are operating currently.
Middlesbrough£32.270m (10th)
Relegation contract clause? Unknown
This is a club in an odd little geographical hot-spot. It's different because of the support from the owner, Steve Gibson, which has been solid over the years, so I would be surprised if there is any change there. I haven't seen the accounts of [his businesses] but that's the only variable.
Generally speaking, the benefactor model, which I don't strongly believe in, has two conditions. One is the money to carry on subsidising.
Secondly, you must be prepared to carrying on paying it. In Steve Gibson's case, I think there's no question he would want to continue and, as far as I'm aware, there is no cause for concern about his ability to pay. But ultimately it is not a sustainable model – at some point a benefactor will run out of money.
So I would see not a lot of change in the financial model at Middlesbrough if they are relegated. They'll carry on in much the same way with some adjustments, some shuffling around.
Hull City£6.94m (21st in Championship)
Relegation contract clause? Yes
A real oddity. I have some belief there are natural levels, and I suspect Hull City are not a Premier League team. This is because of fan-base and geographical restrictions. This year they've been punching a bit above their weight. So emotionally, it will be a disaster for them – as with all clubs – but in terms of what will actually happen, it really comes down to how well the team and the finances adjust to the new situation. That depends on whether they buy or sell the right people at the right price and whether they've got the negative performance-related pay clauses in the players' wage structure.
That's where clubs have gone wrong in the past. Bradford City is the classic example with Benito Carbone, where they had to carry on paying him his ludicrous salary [£40,00 per week when he left
www.guardian.co.uk/football/2009/may/23/premier-league-newcastle-united-sunderland-middlesbrough-hull-city-relegation