There is an expression that
in life there are some things so precious that you cannot attribute a price to
them, seeing you child take their first steps in life for example, precious and
treasured memories that will live in our hearts and minds forever and a day.
Reality dictates that everywhere else in our lives there are costs involved and
none more so than in the game of football.
In the week that Scottish
Premier League clubs voted against allowing the Rangers newco entry in the top
tier of Scottish Football, Stenhousemuir FC of the Irn-Bru Scottish Football
League Championship Second Division outlined in a statement the impact on their
club financially and on the part of Scottish football as a whole if Rangers
were to find themselves playing in the bottom tier of Scottish football.
The following contracts
total £15.7 million per season in the Scottish Leagues and all include
termination contracts should either of the Old Firm clubs not be involved in
the SPL.
Loss of Sky broadcasting
payments of circa £10 million per season.
Loss of ESPN broadcasting payments
of circa £5 million per season.
Loss of Sportfive
broadcasting payments of £2.7 million per season (overseas broadcasters)
Loss of Sponsorship of £1
million per season.
Additional new broadcasting
deal with income of £3 million per season.
The inclusion of Rangers
into the lowest tier would see Stenhousemuir lose the SFL central payment
aligned to the SPL settlement payment which would total £50,000 per season.
Whilst that figure might pale into comparison to the sums in the leagues south
of the border, for a club of their size it will have a real detrimental effect
and as such costs would have to be cut accordingly to make savings. The demise
of one football club will it seems have as detrimental effect on the leagues as
losing the ITV contract did several season previously south of the border.
In the statement the clubs
outlines that having already made commitments to the playing staff for the
season significant savings would have to be found in other areas such as having
to scrap the youth system entirely. Some of the staff who oversee their
community programme would have to be made redundant. This won’t be an
isolated case in Scottish football either. Many clubs I am sure will have to
follow suit and scrap their youth systems to and in the very worst cases of
some small Scottish sides, the threat of administration will be a very real
threat indeed.
The loss of revenues into
the Scottish game and the culling of youth training will see the standard of
the game diminish which will in turn have a future impact on TV
contracts and sponsorship with companies not wishing to invest in a market further
reduced of quality.
In a tough worldwide economy the
supporters of other clubs are finding themselves punished for the actions of
just one club that they have never themselves ever supported. Why should the
fans of a club like Stenhousemuir FC be punished for what did they do wrong or
the sets of fans from any other teams who will equally be effected? Why should
hundreds of youngsters be denied of the chance to be able to turn professional
because of the conduct of one football club who flew too close to the sun and
got their fingers burned? The grass roots game in Scotland will be praying for
rain in the forthcoming weeks and the seasons that follow if some sense of
normality is to be resumed but how many people will be left counting the costs
of others mistakes and just how many teams will be left cometh the hour when
the decision what league the newco Rangers will be allowed to play in this
season?
Football is now more than ever a
game of the haves and the have not’s.
The irony at the demise of
one club in Scotland and it’s not impact across the board can be summed up
south of the border where the English Premier League has just tied up another
record breaking broadcasting rights package which will see Sky TV and BT pay a
joint total of £3.018 billion for the privilege. Now compare that to the
poultry sums of £15.7 million set to be lost in the Scottish game or the loss
of just £50,000 and the effect it will have on Stenhousemuir. It’s hard to
believe the land of Scotland and England joins together the two countries
Premier Leagues are so far apart.
But whilst the English
Premier League on paper seems to continue to thrive underneath the surface the
levels of debt do not dwindle as clubs spend beyond their means and above their
levels of income. Lessons are still not being learned and we remain in danger
of the threat of teams being forced into administration or out of very existence
despite record levels of money coming into the game at the very top level.
This week saw the news that
Manchester United, the largest football club anywhere in the world, were once
again seeking fresh investment to pay off some of their estimated £423 worth of
debt by filing for an initial public offering of shares in the US.
The club claims to boast a
worldwide following of a staggering 659 million fans. With another huge cash
injection from broadcasting revenue and sponsorship deals with worldwide firms
including DHL pouring into the clubs coffers how may you ask did the club see
its cash and cash equivalents on its balance sheet drop to £25.6 million as of
March 31st this year down from £150.6 on June 30th, 2011.
Since the bitter takeover
of United by Malcolm Glazer and his six sons in 2005 fans have cited that the
family has saddled the club with too much debt and left them unable to compete
against rivals or be able to compete to buy or retain the world’s top players.
The shift in financial power and the league title to city neighbours Manchester
City will only add fuel to the fire and the anger of the fans.
Further anger will be shown after
the filing in the US showed that not only has the family borrowed from the
club, something they are legally entitled to do, but that at least one of the
Glaziers son’s also brought the clubs debt which earned him a higher rate of
return on the money than the family was paying on its borrowings; All legal and
above board.
Whilst it remains unclear why the
family borrowed the money from United back in 2008 or what the funds were used
for, the filing shows that at the height of the global financial crisis in
December 2008, the six sons were given £10 million in loans for at least five
years from the club for ‘general personal purposes,’ to be repaid at an
interest of 5.5% At that time commercial banks were charging on average an
interest rate of 11.44% for a two year personal loan in comparison according to
the US Federal Reserve. Furthermore between October 2010 and January
2011 Kevin Glazier, members of his immediate family and a Glazer family company
bought $10.6 million of Manchester United senior secured notes in the open
market that they placed an 8.375% interest charge on. In April 2012 the
Glaziers were paid a dividend of £10 million which I’m sure you won’t be
surprised to read and discover was subsequently used to pay back the original
loan that had been made to the family.
What should remain paramount to
this entire network of interest rates, borrowing, lending and debt levels is
that prior to the £790 million takeover of the club by the Glazers in 2005 is
that Manchester United were entirely debt free yet the league ratified a deal
to allow the Glazers to saddle the club with the burden of debt, not themselves
but the club itself having been totally debt free. Let us not forget that the
club had seen a move by Australian media mogul Rupert Murdoch’s Sky TV to buy
the club some years before in 1998 which would have seen him pay 875p a share
for the club which has been rubber stamped by the board in September of 1998.
The deal however was rejected the following April by the Monopolies and Mergers
Commission and the DTI.
In the case of Manchester
United moves are being made to raise funding to pay off the debts however in
the case of Portsmouth FC who now find themselves in the 3rd tier of
English football having been relegated last season following a ten point
deduction the agreement in principle to a new CVA to take them out of
administration will mean that the club have legitimately been able to shed
£107.3 million worth of debts in two seasons without having to even paid a
penny on them according to the administrator from their first administration
Andrew Andronikou with up to £40.1 million being owed to the HMRC. The club
found itself back in administration after the arrest of club owner Vladimir
Antonov on charges of fraud and embezzlement lead to the clubs parent company
CSI going into administration before the club itself subsequently again went
back in administration.
Under the terms of the new CVA non-football creditors
will be paid just 2p in the pound on monies owed whilst footballing creditors i.e.
the players, agent’s et al will be due all monies owed to them by the club.
However the deal is dependent on the club being able to remove the large
earners off the clubs wage bill before anything is finalised and Pompey boss
Michael Appleton heads into pre-season with just ten senior pro’s set to return
to training and no goal keeper in place having released first choice GK Jamie
Ashdown as well as Matt Gledhill and Daniel Nizic.
Once again those most affected by the actions of a few
remain the fans and local businesses as well as the UK tax payer though unlike
in the case of Rangers FC the fall of Portsmouth FC won’t have such a disastrous
knock on effect to other clubs as it is about to north of the border.
The question remains what is being done to stop a
possible meltdown of the highest order in English football. Whilst UEFA’s
Financial Fair Play system will see attempts made to stop clubs living beyond
their means and getting into debt, this will only affect the clubs playing in
Europe each season and won’t stop the problem which has seen clubs like West
Ham and Bolton build up levels of debt of over £100 million each. Wigan
Athletic chairman Dave Whelan has called for a wage cap to be introduced and
was joined this past week by West Ham Co-Owner David Sullivan who expressed his
opinion that a cap should be introduced. The high levels of revenue being
poured into the English Premier League haven’t seen debt levels decrease, but
increase further as clubs wage bills continue to rise and money going out of
the game in the form of fee’s being paid to agents. These levels of debt can
only be sustained for so long as we have seen in the case of Portsmouth FC and
it’s surely only a matter of time before we start to see some of the middle
size clubs being caught out which will start to have a ripple effect through
the leagues.
Sadly as always I fear it will be at the point of no
return for some when things are finally ever changed.
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