The Modern game needs to look at Rome and Arsene to secure it's long term future

There’s a famous expression that Rome wasn’t built in a day. Rewind back nearly three decades to 1984 and Apple under Steve Jobs launch the first Apple Macintosh. In 1985 Apple released Jobs from his position and by 1997 the company was looking at the real possibility of going bankrupt. Fast forward back to the present day and Apple are now valued at more than 600 billion dollars a staggering turn around in fortunes masterminded largely off the back of the vision of one man. The rise in fortunes isn’t alone to the technology industry either. Back in 1984 kicking a ball around a field for 90 minutes didn’t bring the players the same riches that we see today. Before the formation and the days when the top league was known as Division One, the average wage of a top flight footballer was just £480. Wayne Rooney’s current contract at Manchester United see’s him collect an annual salary of £8 million a figure just shy of £154,000 a week. Whilst today’s players aren’t all earning multimillions per year in the top flight, the average wage in the Premiership by the 2009-10 season has risen to £22,353 per week, close to nearly 47 times the amount players were earning 25 years previously. Looking at this on an annual basis this means the average annual salary will be £1,162,356 per season, not bad work if you’re fortunate enough to get it.

Football like the world of technology has changed beyond belief over the past three decades with the money inside the top flight of the English game beyond the wildest dreams of the Chairman of any owner back in 1984 could have ever imagined. Manchester City, today crowned Premier League Champions for the first time today have since 2008 spent a total of £930.4 million. Of that total just £365.3 million of that money came from revenues generated by the club with the rest coming from the pockets of billionaire Sheikh Mansour to the tune of £565.1 million. Whilst figures like these might not be a problem to a billionaire benefactor like Mansour, other clubs are now finding that chasing the dreams and living beyond their means can only last for so long before the bubble bursts and the problems begin to mount. Portsmouth found themselves the first club to have ever gone into administration in the English Premier League. A successive round of financial problems has been well documented to be joined by the names of Glasgow Ranger north of the border fighting for their very survival. With so much money flooding into the game it’s hard to believe that any top flight club could manage to get themselves into a financial mess but it’s a sad reality of the changing face of English football.

Whilst the blue half of Manchester will be celebrating their first title win since 1968 today, just over ten miles down the road at neighbours Bolton Wanderers fans will be commiserating after their relegation to the Championship with debts estimated to be in the region of £100 million and no rich billionaire benefactor to bail them out. Owen Coyle’s Wanderer’s will see a total of 14 players either out of contract in the summer of loan players returning to their parent club. Captain Kevin Davis, influential playmaker and winger Martin Petrov and top goal scorer Ivan Klasnic are just three names who will be out of contract in the summer. Whilst West Ham and Blackpool are both in with a chance of regaining their place in next season’s Premier League, Birmingham City have failed to go up at the first time of asking of the three teams that were last relegated and ultimately only one of those three will find themselves back in the top flight after the end of this season. Bolton will be looking very closely at Birmingham City’s plight and the challenge ahead as they try to balance their books, consolidate their debts and attempt to jump back into the top flight of football at the first time of asking.

The cost to Birmingham City of failing to be promoted will most likely be administration. Birmingham will have all but run out of money by June. The club’s owner Carson Yeung is absent facing fraud charges in Hong Kong relating to £59.7 million is a case of alleged money laundering. The banks have withdrawn a £7 million overdraft facility and the club cannot raise much needed revenue by remortgaging St Andrew’s as HSBC hold the deeds to the ground as security on an outstanding loan. The club are subject to a transfer embargo imposed by the football league, manager Chris Hughton is largely believed to be heading out of the door to join neighbours West Bromwich Albion after Roy Hogson’s departure to take over the reins at England and the clubs wages to income ratio remains hovering very close to the 100% mark. The parachute payments received by the midlands club are nowhere near large enough to offset the huge wages of star players retained on the clubs books like striker Nikola Zigic earns a reported £2.5 million a year alone. Birmingham City in the next month are set to follow in the footsteps of Portsmouth and fall victims for chasing the dream with too much vigour and financial recklessness.

Failure to publish their accounts on time for the second season running means the level of debt Birmingham City is actually carrying isn’t being reported. Contrast that to fellow relegated side Blackpool and we see a totally different picture. Despite only staying up for one season, they sit one game away from a personal first time return against Sam Allardyce’s West Ham United, another club carrying significant levels of debt from their time in the EPL. Blackpool’s promotion saw their income levels rise by a staggering 450% to £51.7 million. During their season in the EPL their net cost on transfers was £3.5 million but that brought in ten players, losing only two in comparison. The wage bill only rose by less than £600,000 or roughly 4.5% year on year. Majority shareholder Owen Oyston paid off all the clubs external debt as cash balances at the bank rose from £2.8 million to £8.1 million.  Blackpool’s finances for the following Championship season will make very interesting reading indeed having seen stars like Charlie Adams depart in the summer to Liverpool, the inclusion of wage reductions for players and staff following relegation and the addition of parachute payments being received. I’m sure if Blackpool were to win promotion via the play offs again, Blackpool would start the season fully believing they would potentially be able to stay up this time around as all three of last season’s promoted clubs have managed to do this time around. Whilst QPR only managed to survive on the last day of the season, in comparison Norwich City and Swansea City have been able to breathe easy and stop watching over their shoulders for some time and finish the season in 11^th and 12th places respectively both finishing on 47 points, 11 ahead of newly relegated Bolton Wanderers. They both managed to do so on reality meagre budgets in comparison and all three sides will be hoping to consolidate and build on this season when the season restarts in earnest this coming August.

The gulf in football from the EPL to League Two is vast and we see the average League Two player earns £747 per week, some £21,606 behind their top league counterparts. The significance of winning promotion to the EPL or remaining in the league has never been higher with so many clubs carrying such high levels of debt without the backing of billionaire owners at their disposal. Whilst this true of many clubs, Wolverhampton Wanderers have continued to buck this trend and despite being the first club to be relegated this season, remain debt free. Their main struggle this summer will be trying to keep hold of their main players rather than a worry about balancing the books.

The annual PKF survey published in regards to the state of English and Scottish football brought about some interesting revelations into the views on football finance in the game and the way clubs are structuring and using finance on offer to them or will potentially be doing within their business models in the forthcoming season. In 2011 10% of English Championship clubs increased their banking facilities a figure very similar to the previous season though most banks remain reluctant lenders to the sector and are unlikely to commit further facilities. 40% of Championship clubs envisage having to use 90% of more of the total banking facilities presently made available to them during the coming season a sign that borrowing will remain a significant part of trying to gain promotion or avoiding relegation will be done raising levels of debt within the national game. Whilst 50% of clubs said they didn’t envisage using the facilities the other 10% stated they were unsure whether they would have to take advantage of the facilities or not. A further 30% of clubs admitted that they were having problems sourcing finance for the season a figure of nearly 1 in 3, a worrying sign and trend for the forthcoming months and years in football indeed.

10% of clubs admitted to being late with payments due to the HMRC and a further 10% wouldn’t commit to admitting whether or not they had made late payments. Of that 10% not one club had done so with the agreement of the HMRC itself. Another worrying statistic is 20% of Championship clubs have admitted they are worried that a sizable challenge by the HMRC on the use of image rights in player’s contracts would likely to cause them an issue. We’ve seen the issue north of the border with Glasgow Rangers and it would be hugely naïve to believe the potential problem doesn’t exist in the EPL.

44% of EPL clubs have player’s contracts in place whereby player’s wages will decrease if they are relegated from the top flight. Impressively that figure increases to 90% of Championship clubs who it seems are way ahead of their EPL counterparts in now beginning to see the financial impact potential relegation can bring.

Whilst looking at the clubs who’ve recently been relegated or promoted, it would be hard to forget the last of this season’s EPL clubs to have been relegated who haven’t already been mentioned so far, so step forward Blackburn Rovers. Until today Rovers were one of only four clubs to have lifted the EPL championship alongside Arsenal, Chelsea and Manchester United. This season has been a turbulent one on and off the pitch for the Lancashire club which has seen the fury of fans vented at the owners the Venkys and manager Steve Kean with calls for both to go. Fans have begun to boycott home games, the club shop and fail to renew season tickets in a bid to bolster the chances of removing Kean and ultimately the Venky’s themselves. When the Venkys took over at Blackburn Rovers they promised the fans they would deliver European football within five years and the signing of Ronaldinho. What they actually delivered was Championship football and David Goodwillie who last month narrowly avoided a prison sentence after being guilty of his second assault within a year. Perhaps someone should take the Venkys aside and remind them that despite the money of the EPL, it’s the fans who remain at the heart of any club and not the finance. Whilst the owners deny any attempts to sell the club it wouldn’t come as any surprise after the mistakes they’ve made during their tenure see’s Kean removed from his job or the Venky’s try and sell on the club. The next twelve months promises to be an even more turbulent time for Rovers if not.

I’ll end this the same way that I started it. I mentioned how Rome Wasn’t built in a day. It’s best to remember the cornerstones of Roman civilisation stood for hundreds of years and to this day we still have Rome although in a different form to its earliest times obviously. The way the English Premier League is currently operating, unless serious changes are made at the bass roots of the industry the debts carried in the game are going to be a burden that some clubs will no longer be able to potentially trade. Birmingham City are likely to go into administration next month, Portsmouth and Glasgow Rangers both remain in administration already as do Port Vale. If Bolton Wanderers fail to bounce back in their first season of asking will they be left facing administration? With debts of £100 million relegation will pose very serious questions of the Wanderers board and how levels of debt were allowed to build up to such levels in the first place, questions the game should have been asking itself a long time ago now.

I will leave you with my favourite bit of research from this entire piece which surrounds Mr Arsenal aka Arsene Wenger, the man who revolutionised the Premier League more than any other manager in my opinion. Since Arsene Wenger arrived at Arsenal the top sides in the country have continued to spend lavish sums on players backed largely be either billionaire owners in the cases of Manchester City and Chelsea or be leveraging large amounts of debt in the case of Manchester United. The following shows the overall spend on player purchases since Arsene Wenger’s arrival in the English game of some of the clubs around them in the same time and more interestingly after transfer monies received what their net spend was.

Manchester United:

Overall Spend: £534.05m
Overall Received: £283.975m
Net Spend: £250.075m

Manchester City:

Overall Spend: £628.1m
Overall Received: £155.543m
Net Spend: £472.557m

Chelsea:

Overall Spend: £720.83m
Overall Received: £216.185m
Net Spend: £504.645m

Liverpool:

Overall Spend: £523.33m
Overall Received: £318.87m
Net Spend: £204.46m

Tottenham:

Overall Spend: £392.55m
Overall Received: £217.93m
Net Spend: £174.62m

Now compare this to Arsene Wenger’s record at Arsenal where their overall spend is less than all other five clubs, the transfer income was only bettered by one club in the shape of Liverpool and the last figure in comparison is astonishing and none of the other biggest clubs in the country even come close. Read it and marvel at it folks.

Arsenal:

Overall Spend: £314.75m
Overall Received: £310.514m
Net Spend: £4.236m

Remember under Arsene Wenger Arsenal have never failed to qualify for a Champions League slot. If there’s a starting point for other teams to base themselves upon then all roads lead to Arsenal.

Who do you think you’re kidding Mr Wenger if you think that Sky will run?

Arsenal manager Arsene Wenger, never a man to stray away from controversy re-entered the arena with his claims that football has “sold its soul’ to television companies and said Premier League bosses must intervene to ensure fixture scheduling was fair to clubs. However he does accept the importance of the money that TV rights bring into the game. Does Mr Wenger have a point or should he be grateful when considering the reliance that many English clubs have on the income received from TV rights and broadcasting deals?

Mr Wenger’s claims of unfairness stem around the fact that all five of Arsenal’s games in January have been moved for the television cameras. I’m sure he has a point but the bigger picture remains that for many clubs in the league without the money brought into the game from TV broadcasting rights they’d be facing the wall. Arsenal luckily for Mr Wenger remains one of the best run clubs on a financial basis anywhere in the world. Only Bayern Munich can realistically be in with a shout of being able to claim they are run on a better basis.

In 2010 Arsenal’s turnover was £382 million of which over one fifth was derived from TV and Broadcasting monies received to the tune of £85 million. Arsenal finished with a pre-tax profit of £56 million. Arsenal’s debt stood at £136 million most of which was occurred after the building of The Emirates which had helped to bring in more revenue than TV standing at an impressive £94 million. The interest due on the debt annually stands at £19 million. With turnover up £66 million on the previous season and a sensible transfer policy, Arsenal are well on course to reverse their debt in the next few seasons. Interestingly the owners at Arsenal didn’t put a single penny into the club for that financial year. Compare that with Aston Villa for example where £206 million was pumped into the club; £116 million in cash and £90 million in loan notes or at Blackburn Rovers where £104 million was put in made up of £100 million in capital and £4 million in interest free loans. Of Aston Villa’s £91 million turnover 57.14% was from TV money. Blackburn’s total of £58 million was even more reliant with 74.14% of the total coming from TV money. So Arsenal in theory can afford to be able to moan a bit louder than most clubs but you cannot escape the fact that football income from TV if offset against wages would have allowed Arsenal to pay off 77.27% of their final wage bill which stood at £110 million.

Whilst Mr Wenger bemoans his fixtures being re-arranged for the sake of television, over in La Liga television plays an even bigger part in the gulf between the clubs in the Spanish top flight. Arsenal may have finished 22 points behind eventual League winners Manchester United last season they finished 29 points above Birmingham City who were relegated to the Championship having finished 3^rd bottom. Contrast this with La Liga and Villarreal who finished 4^th the same position as Arsenal in the Premier League. Villarreal’s point haul of 62 points was 34 points behind the total of League Winners Barcelona who finished the season with 96 points. Second placed Real Madrid finished the season on 92 points, 12 more than the English Champions Manchester United. Barcelona’s goal difference was a staggering +74, Real Madrid’s +69. In comparison Manchester United’s were +41 and Chelsea’s +36.

The most astonishing fact for Villarreal was that they finished closer to the 3^rd relegated team Deportivo than they did to the eventual winners Barcelona, separated by just 19 points. Villarreal were even closer to Almeria who finished bottom on 30 points than they were to catching Barcelona at the top.

Television revenue in La Liga has created the wide gulf. Clubs in La Liga are able to negotiate individual deals with TV companies and ultimately it’s made La Liga into two leagues. One between the top two of Barca and Real and a separate league between the remaining 18 competing clubs. This occurrence isn’t however just a Spanish problem, just look north of the border where the Scottish Premier League is dominated by the two Glasgow giants Rangers and Celtic. Last season’s champions Rangers finished with 93 points one ahead of their closest rivals. Third placed Hearts finished the season on 63 points, 30 off Rangers or to look at it another way a full ten wins behind just to have drawn level on points. Equally as impressive as the top two sides in La Liga Rangers finished with a goal difference of +59 and Celtic +63. Although Scottish football doesn’t have the same levels of income from TV that English football has and certainly not of La Liga’s top two with their own deals, the revenue generated on the turnstiles and from European competition year in year out has created its own two tier league structure in Scotland to mirror that of Spain. In England you can claim that on their day any club is capable of beating any other where as in Spain and Scotland such a claim wouldn’t hold as much weight even if you do get the occasional shock defeat in both leagues from time to time.

It’s estimated that combined Barcelona and Real Madrid receive 125 million Euro’s per season from TV deals. That figure is just on the domestic market and doesn’t include income from the Champions League deals. That figure in context to the Premier League is three times the money that Champions Manchester United got from TV income. Villarreal received 42 million Euro’s from their TV deal. Some of the smallest clubs in the league had deals worth only in the region of 15 million Euro’s. It’s not hard to work out how the Spanish League ended up with their players going on strike when 50 million Euro’s went unpaid from the end of last season. Under a new proposed shared domestic TV rights deal in La Liga, Barca and Real are still set to receive a combined 35% of the revenues coming in with the rest being shared between the remaining 16 clubs.

So unlike in England with Mr Wenger’s comments, you’re unlikely to hear the same murmurings coming from Spanish clubs as you do here. The real issue for them is the complete imbalance of TV money instead which presents such a wide gulf in their league. I’m sure given the opportunity to be able to receive the same amount of money as Arsenal do every season from TV income, the remaining sixteen clubs would quite happily play at 2am on a Thursday morning every week to be given the same.

The bottom line and the crux of the matter is football and TV now walks hand in hand. Since Sky entered the game back in the nineties the two parties would not be able to exist without each other anymore. Why did Sky TV pay an astonishing £1.782 billion for the rights to screen 115 games a season between 2010 and 2015? Because they make their money back and some.

Arsenal have the right as I mentioned to moan when they can boast gate receipts higher than the money they receive from TV deals and can feel rightly aggrieved to have had to change all five fixtures in a month to suit TV. However the coverage they receive will be worldwide. They will be watched by fans all over the world who will watch the likes of Robin Van Persie which will translate in shirt sales for example resulting in a higher income for the team. The wider the audience the more they will be able to claim from sponsors. If you can say to a sponsor that your advert will be shown in five consecutive games on TV in one month, in puts you in a much stronger position than a side like QPR for example who are reliant on the money of new owner Tony Fernandes to pay the reported wages of Joey Barton who is said to be on £80,000 per week when their ground Loftus Road has a capacity of just 18,360 and wouldn’t generate the required amount to pay the total wage bill every season.

So in conclusion whilst Mr Wenger might be bemoaning the rescheduling of the fixtures I’m sure the Arsenal board and commercial department aren’t singing from the same hymn sheet. Perhaps he should spare a thought for the teams outside of the top two in the Scottish and Spanish Premier Leagues as they search for a more level playing field. Football is a business first and foremost now. You cannot escape that fact. If you get into bed with Rupert Murdoch sadly you have to pay the price. So instead of moaning I’m afraid you’re just going to have to accept that football is no longer what is used to be, namely a sport. What happens on the pitch for 90 minutes is now simply a by product or an afterthought if you will.

Will football implode financially in the next three weeks or even three months?

Over the past couple of season’s finance in football has become an obsession of sorts for me - heightened I guess by the troubles that we saw off the pitch at Pompey not to long back. It’s one of the reasons that as a fan I’ve tried to give all the backing I can muster to the campaign to save Plymouth Argyle and spread the message of the fantastic job Fans Reunited are doing on their behalf as well. Reading the news today that their players have once again agreed to defer their wages really brings home how bad the situation is down there and the reality is that if a new owner doesn’t step up to the mark soon then it really could be curtains for the club. 124 years gone just like that? It surely cannot be allowed to happen? Apparently many parties have been interested. One ex-Pompey connection being that of our old owner Terry Venables. I hope that story for the sake of Plymouth Argyle is widely off the mark. The involvement of Peter Ridsdale must be mad enough given his track record at Leeds United and then Cardiff. Is it any surprise to Pompey fans that clubs who’ve employed our ex-CEO Peter Storrie have all had financial problems either with him involved or after his departure; Pompey, West Ham, Southend and Notts County. Not something you’d want people to remember about you surely?

For the past 12 months or more when writing about football finance I’ve held the view that the game of football believes it’s inside an insulated bubble which cannot be burst. I’ve talked about Arsenal, Wolverhampton and Bayern Munich as some who’ve bucked the trend. I’ve mentioned Portsmouth and Plymouth Argyle for obvious reasons. Glasgow Rangers will not be too far away when I’ve gotten to grips with that case. But voices from within side the game aren’t always that common. So I was interested to read the comments from Arsenal’s long serving manager Arsene Wenger when I opened the sports pages of the papers on Monday morning to see him starting to take the lead in the fact that the game isn’t as untouchable as it thinks. Whilst Plymouth Argyle continue to make the headlines in their search for a new owner, I found it refreshing to read the thoughts of a man who alongside the influx of money into the game, has been a revolutionary and a driving force behind making the EPL the league it is today – a worldwide force and phenomenon. Wenger’s arrival and his approach to diets etc for me is one of the reason’s the EPL went on to become so successful. Sure we still hear about antics from players such as Andy Carroll at the criticism from England Manager Fabio Capello that he needs to curb his drinking, but would Carroll have been able to have kept pace with the likes of Paul Gascoigne, Tony Adams, Paul Merson, Paul McGrath or Alan Knight and the entire Portsmouth team who ex-Manager John Gregory famously described as being like a pub team? I think Carroll wouldn’t have lasted much past 11pm.

“I believe that Europe overall, as a unit, is going towards a massive crisis, which nobody really expects now. I am convinced that Europe will go into a huge financial crisis within the next three weeks or three months and maybe that will put everything into perspective again.

Football is not untouchable. We live with people going to the stadiums as well and from advertising from people who buy products. All our income could be a little under threat in the next few months. Football is not only about money. We believe in ourselves that we can compete with them but it’s as simple as this.”

Arsene Wenger’s quotes taken before the Arsenal game against Borussia Dortmund in the Champions League this week.

Wenger had been talking about the dominance of two football clubs; Real Madrid and Barcelona and their power to negotiate their own TV rights away from the rest of the Spanish League. He threw in the names of Chelsea and Manchester City as part of a group whose spending power has separated them from the rest of Europe’s sides. For the Arsenal manager it’s created an uneven playing field where the rest of the clubs are unable to compete. In my previous blog I mentioned the affect of trying to keep up with the Jones’ and how spending big has become the norm in a bid to stay in the top league and compete. If prove of that was ever needed and how big a part players wages play in today’s modern game the recently released following financial breakdowns about wages show just how big a part they have to play and their impact on it’s possible collapse in the not too distant future;

For every pound earned by an EPL club in the 2009-10 season 68p was spent in wages. In Italy’s Serie A it was 69 cents in every Euro and in France’s Ligue 1 it was an even more staggering 75% of everything earned.

With this trend showing no signs of abating how long can the game worldwide sustain these levels of spending before everything starts to go horribly wrong?

One side in Europe who’ve bucked the trend and won on a comparatively small budget were Arsenal’s mid week opponents and current Bundesliga Champions Borussia Dortmund who assembled their Championship winning side at a cost of just £5 million pounds. This outlay was more than covered when Real Madrid purchased playmaker Nury Sahin for a reported fee of around £8.8 million this summer. Although I’m not suggesting that Dortmund are major contenders to go on and win this season’s Champions League, the revenues generated by reaching the group stages for a club already well run financially should be held up as a shining example to other clubs worldwide that success can be achieved on a sensible budget and that you don’t have to break the bank in order to achieve success. To have beaten a side like Bayern Munich with their financial clout in the German leagues is no mean achievement and shouldn’t be undervalued at all.

Spending big has never been a sure fire way to success although Pompey did manage won FA Cup win but we all know the financial implications of that. Interesting to see that or the last seven Champions league finals, six of them have featured and English side in them. The final between Internazionale and Bayern Munich was the only one to have not featured an English side. Of those seven finals there have been two English winners; Liverpool who famously came back from being 3-0 down to AC Milan to win and penalties and the other was Manchester United’s win over Chelsea which was also decided on penalties. So for all the financial power of the EPL spending big still doesn’t guarantee you success in Europe. 

The question remains though as to how long the levels of spending and big wages can be maintained. Scottish clubs forced to compete in wages with their richer neighbours over the border in England have seen current league leaders Glasgow Rangers in an apparent financial meltdown. Whilst Glasgow Rangers and Plymouth Argyle might be far removed from each other in terms of miles and balance sheets in terms of assets, it remains a fact that both sets of supporters will be sat looking at one another very worried at this moment in time. Will one go to the wall; will both go to the wall? If it happens will it be the message that starts the shock waves around the European game and forces them to start taking action. The next three weeks or three months could tell us the answer to that question.

Would you like to argue against Arsene Wenger on the subject?