Post by QPR Report on Feb 24, 2009 7:37:25 GMT
Scotsman/Stuart Bathgate
Cash crisis affecting even the wealthiest of football's clubs
24 February 2009
Manchester, September 2008. The shirt sponsor of one of the most famous clubs in the world, the current holders of the Champions League, suffers an acute liquidity crisis and is only kept alive by a multi-billion-dollar bail-out from the US Federal Reserve Bank. Across the city, the owners of another, less famous club, one without a major honour since 1976, throw more than £30million of cash at Real Madrid and sign Robinho, one of the best players in the world.
The state of world football may be far more complicated, far more a matter of light and shade, than that. But the contrasting fortunes of United and City last autumn are still indicative of what is happening.
Even the biggest names in the sport, sADVERTISEMENTuch as United, cannot presume themselves immune from the effects of the credit crunch. Only those clubs like City who have an independent fortune to call on can do that.
Of course, City are utterly dependent on their owners, the Abu Dhabi United Group. But they can sleep easy for as long as Sheikh Mansour bin Zayed Al Nahyan, the group's owner who bought the club last year, maintains his enthusiasm.
And, while United's fame means they should always have would-be new sponsors lining up to take over from AIG, the American group which ran into that little bit of cash difficulty five months ago, not every club is so lucky. West Bromwich Albion, for example, began the Premier League season without a sponsor; West Ham United kicked off with the support of XL Airways UK, but their shirts then went blank when the company sank.
Everywhere, with that sole exception of the City of Manchester Stadium, belts are being tightened. The rich may still be obscenely well off compared to those who really suffer when food prices rise, but when their holdings decline in value, they become a little more frugal. Non-essentials such as their hobbies are usually the first items on their budgets to be slashed, and no matter how obsessed some people can become with the sport, football is definitely a non-essential.
Chelsea, for example, are not down to their last used fiver just yet, but even they have begun to cut their cloth to fit their reduced circumstances. Roman Abramovich, the London club's owner, is estimated to have lost as much as £3billion of his fortune as a result of the collapse of stock markets world wide.
But, to put that paper loss into perspective, even that figure would still leave the Russian tycoon with more than £8bn. Billionaires elsewhere are in similar positions: they may not be able to keep feeding their pet teams as extravagantly as was their wont, but they will not sever their ties completely if they can help it.
As the most popular sport on the planet, football has far greater resources to draw on than any other. The word "efficiencies" is often used euphemistically by employers when they are actually making cuts, but in many cases in football it could be the correct word to use. Some clubs have had so much money they have been unable to use it wisely: when forced to think more carefully about how to distribute their budgets, they are likely to come to more reasonable conclusions.
The key to maintaining football as a going concern, as it is where the financial sector is concerned, is having a lender of last resort in place. In the banking sector in this country, the government has fulfilled that function, stepping in to prevent the whole economic system from imploding: in football, that role is played by television companies.
In the UK – or, more specifically, for the English Premier League – that means BSkyB. Gate receipts are welcome, all the more so if the punters who turn up to watch a live match stop in at the club shop beforehand and buy the odd replica shirt. But TV money is what drives the game.
So far at least, that money has not been shrunk as a result of the downturn. Earlier this month, for example, the Premier League agreed a three-season deal with Sky for live TV rights: the sum involved is understood to have been £1.3billion.
If that seems a huge sum, it is one which the satellite company is well able to make. In rough figures, around five million viewers pay around £500 per year for Sky Sports' packages, with football being far and away the major reason they subscribe.
That equates to £2.5billion. And that is before the subscriptions from pubs and clubs are taken into account.
With unemployment rising, and many of those who remain in work cutting back on expenditure, it may seem logical that Sky's subscriptions would fall. But logic does not always translate to the real world, and in this case, if anything, it appears likely that the reverse will happen, and that in future more people, not fewer, will pay to watch live football at home.
That is, at least, if, as is widely forecast, Sky benefits from what has become known as the Domino's effect. The pizza chain has seen its income rise in recent times, as people stay in and order food rather than going out.
Although pubs may suffer in the downturn as people go out less – and while that could in the longer term have a detrimental effect on that side of Sky's business – domestic subscriptions to satellite TV packages are expected at least to bear up.
Provided that happens – or even if the market for satellite TV shrinks, but not by too much – English football will be safe. Other leagues in other territories will have similar experiences. And, however long the recession lasts, football will emerge perhaps leaner, but still recognisable, and still very much the world's favourite sport.
World's biggest clubs by revenue (previous year in brackets)
1 (1) Real Madrid 365.8m (£289.6m)
2 (2) Manchester United 324.8m (£257.1m)
3 (3) Barcelona 308.8m (£244.4m)
4 (7) Bayern Munich 295.3m (£233.8m)
5 (4) Chelsea 268.9m (£212.9m)
6 (5) Arsenal 264.4m (£209.3m)
7 (8) Liverpool 210.9m (£167.0m)
8 (6) AC Milan 209.5m (£165.8m)
9 (11) AS Roma 175.4m (£138.9m)
10 (9) Internazionale 172.9m (£136.9m)
11 (12) Juventus 167.5m (£132.6m)
12 (13) Olympique Lyonnais 155.7m (£123.3m)
13 (16) Schalke 148.4m (£117.5m)
14 (10) Tottenham Hotspur 145.0m (£114.8m)
15 (15) Hamburger SV 127.9m (£101.3m)
16 (19) Olympique Marseille 126.8m (£100.4m)
17 (14) Newcastle United 125.6m (£99.4m)
18 (n/a) VfB Stuttgart 111.5m (£88.3m)
19 (n/a) Fenerbahce 111.3m (£88.1m)
20 (n/a) Manchester City 104.0m (£82.3m)
Source: Deloitte: 2009
sport.scotsman.com/football/Cash-crisis-affecting-even-the.5008355.jp
Cash crisis affecting even the wealthiest of football's clubs
24 February 2009
Manchester, September 2008. The shirt sponsor of one of the most famous clubs in the world, the current holders of the Champions League, suffers an acute liquidity crisis and is only kept alive by a multi-billion-dollar bail-out from the US Federal Reserve Bank. Across the city, the owners of another, less famous club, one without a major honour since 1976, throw more than £30million of cash at Real Madrid and sign Robinho, one of the best players in the world.
The state of world football may be far more complicated, far more a matter of light and shade, than that. But the contrasting fortunes of United and City last autumn are still indicative of what is happening.
Even the biggest names in the sport, sADVERTISEMENTuch as United, cannot presume themselves immune from the effects of the credit crunch. Only those clubs like City who have an independent fortune to call on can do that.
Of course, City are utterly dependent on their owners, the Abu Dhabi United Group. But they can sleep easy for as long as Sheikh Mansour bin Zayed Al Nahyan, the group's owner who bought the club last year, maintains his enthusiasm.
And, while United's fame means they should always have would-be new sponsors lining up to take over from AIG, the American group which ran into that little bit of cash difficulty five months ago, not every club is so lucky. West Bromwich Albion, for example, began the Premier League season without a sponsor; West Ham United kicked off with the support of XL Airways UK, but their shirts then went blank when the company sank.
Everywhere, with that sole exception of the City of Manchester Stadium, belts are being tightened. The rich may still be obscenely well off compared to those who really suffer when food prices rise, but when their holdings decline in value, they become a little more frugal. Non-essentials such as their hobbies are usually the first items on their budgets to be slashed, and no matter how obsessed some people can become with the sport, football is definitely a non-essential.
Chelsea, for example, are not down to their last used fiver just yet, but even they have begun to cut their cloth to fit their reduced circumstances. Roman Abramovich, the London club's owner, is estimated to have lost as much as £3billion of his fortune as a result of the collapse of stock markets world wide.
But, to put that paper loss into perspective, even that figure would still leave the Russian tycoon with more than £8bn. Billionaires elsewhere are in similar positions: they may not be able to keep feeding their pet teams as extravagantly as was their wont, but they will not sever their ties completely if they can help it.
As the most popular sport on the planet, football has far greater resources to draw on than any other. The word "efficiencies" is often used euphemistically by employers when they are actually making cuts, but in many cases in football it could be the correct word to use. Some clubs have had so much money they have been unable to use it wisely: when forced to think more carefully about how to distribute their budgets, they are likely to come to more reasonable conclusions.
The key to maintaining football as a going concern, as it is where the financial sector is concerned, is having a lender of last resort in place. In the banking sector in this country, the government has fulfilled that function, stepping in to prevent the whole economic system from imploding: in football, that role is played by television companies.
In the UK – or, more specifically, for the English Premier League – that means BSkyB. Gate receipts are welcome, all the more so if the punters who turn up to watch a live match stop in at the club shop beforehand and buy the odd replica shirt. But TV money is what drives the game.
So far at least, that money has not been shrunk as a result of the downturn. Earlier this month, for example, the Premier League agreed a three-season deal with Sky for live TV rights: the sum involved is understood to have been £1.3billion.
If that seems a huge sum, it is one which the satellite company is well able to make. In rough figures, around five million viewers pay around £500 per year for Sky Sports' packages, with football being far and away the major reason they subscribe.
That equates to £2.5billion. And that is before the subscriptions from pubs and clubs are taken into account.
With unemployment rising, and many of those who remain in work cutting back on expenditure, it may seem logical that Sky's subscriptions would fall. But logic does not always translate to the real world, and in this case, if anything, it appears likely that the reverse will happen, and that in future more people, not fewer, will pay to watch live football at home.
That is, at least, if, as is widely forecast, Sky benefits from what has become known as the Domino's effect. The pizza chain has seen its income rise in recent times, as people stay in and order food rather than going out.
Although pubs may suffer in the downturn as people go out less – and while that could in the longer term have a detrimental effect on that side of Sky's business – domestic subscriptions to satellite TV packages are expected at least to bear up.
Provided that happens – or even if the market for satellite TV shrinks, but not by too much – English football will be safe. Other leagues in other territories will have similar experiences. And, however long the recession lasts, football will emerge perhaps leaner, but still recognisable, and still very much the world's favourite sport.
World's biggest clubs by revenue (previous year in brackets)
1 (1) Real Madrid 365.8m (£289.6m)
2 (2) Manchester United 324.8m (£257.1m)
3 (3) Barcelona 308.8m (£244.4m)
4 (7) Bayern Munich 295.3m (£233.8m)
5 (4) Chelsea 268.9m (£212.9m)
6 (5) Arsenal 264.4m (£209.3m)
7 (8) Liverpool 210.9m (£167.0m)
8 (6) AC Milan 209.5m (£165.8m)
9 (11) AS Roma 175.4m (£138.9m)
10 (9) Internazionale 172.9m (£136.9m)
11 (12) Juventus 167.5m (£132.6m)
12 (13) Olympique Lyonnais 155.7m (£123.3m)
13 (16) Schalke 148.4m (£117.5m)
14 (10) Tottenham Hotspur 145.0m (£114.8m)
15 (15) Hamburger SV 127.9m (£101.3m)
16 (19) Olympique Marseille 126.8m (£100.4m)
17 (14) Newcastle United 125.6m (£99.4m)
18 (n/a) VfB Stuttgart 111.5m (£88.3m)
19 (n/a) Fenerbahce 111.3m (£88.1m)
20 (n/a) Manchester City 104.0m (£82.3m)
Source: Deloitte: 2009
sport.scotsman.com/football/Cash-crisis-affecting-even-the.5008355.jp