Football sees red
THE FOOTBALL industry faces a serious crisis. In the close
season around 800 players were laid off – 650 are still out of contract. The
collapse of the television company, ITV Digital, has widened the gulf between
the Nationwide League and the Premiership. Nationwide clubs lost £178m as a
result, with first division clubs each £1m worse off a year. Between 30 and 40
clubs could go into receivership or even out of business.
A new deal for the Nationwide League with Rupert Murdoch’s
Sky Sport is worth £95m over four years, compared to the £315m which ITV
Digital agreed to pay. The Premiership will face a cut of at least £400m when
it renegotiates its deal with Sky in two years’ time. This will put a number
of clubs in jeopardy. On top of that, US company NTL, which had an internet deal
with League clubs, is going into the equivalent of receivership.
While hundreds of players face redundancy or hugely reduced
wages, the recent World Cup showed the big-business nature of football. World
superstars now earn in excess of £100,000 per week. Manchester United and
England star, David Beckham, will ‘earn’ an estimated £10m from sponsorship
deals. Just as Michael Jordan was worth £1bn in sponsorship to the basketball
industry in the 1990s, Beckham is worth around £1bn to the Premiership.
The average Premiership player earns £400,000 a year and
many receive in excess of £1m. But then they are playing in an industry that is
worth £1.7bn pounds annually. Directors of clubs have made millions out of the
game on the basis of relatively small investments. The players have sought a
share of this wealth.
The whole of Europe is battling with a sudden drop of TV
revenue and ever increasing wages and transfer deals. The crisis kicked off with
the insolvency of German media group Kirch, which lost huge amounts after buying
the rights to the 2002 World Cup and the German football league, the Bundesliga,
and failing to recoup the money in subscriptions. ITV Digital similarly went
bust when it failed to recoup its outlay on rights for the Nationwide League.
Football is no longer a sure-fire guarantee of high viewing figures.
The Daily Telegraph commented: "Premiership clubs have
spent ‘just’ £157m on transfers, a three-year low. That figure was inflated
by the British record £29.1m move of Rio Ferdinand from Leeds to Manchester
United that accounted for almost a fifth of all spending in the four-month close
season. The economic downturn has similarly affected income… the 20
Premiership clubs turnover is down by more than £130m". (16 August)
Clubs also vastly increased bank borrowing. Leeds United saw
its gearing (total debt as a percentage of shareholders’ funds) rise from 66%
to 125% within a year. It is now close to 400%, hence the sale of Ferdinand.
Brian Sturgess, director of London–based analysts, Soccer
Investor, states: "European football is facing slowdown in rates of growth
of its television income or, for some leagues, a few years of negative growth.
This will inevitably necessitate a painful restructuring. The deflation in
transfer fees and wages resulting from an economic crunch will impact severely
on player values and on the balance sheets of highly geared clubs. The larger
clubs with strong franchises will survive in one form or another but many of
their smaller brethren could well disappear".
In 1996, ten British clubs floated on the stock exchange.
Since then there has been a freefall in values, with half now trading at less
than 25% of their issue price. More than £500m has been wiped off the value of
the listed clubs. Manchester United is down 42.7% and Celtic 60%. Chelsea
Village, the owners of Chelsea Football Club, has outstanding debts of £96.9m.
In Italy, the share value of Lazio fell by 70% and Juventus
45.9%. Serie A clubs reported a collective loss of £438.7m for the 2000/2001
season. Currently, there is no TV deal in place and the clubs have been offered
almost 50% less than previously. One of Italy’s top clubs, Fiorentina, was
relegated two divisions after it failed to meet financial guarantees, causing
riots in Florence. Parma wants a 42.5% reduction in wages, Lazio a third and AC
Milan 10%. In Germany, the cash shortage has led to a year-on-year drop of 33%
in summer transfer deals. Borussia Dortmund (a club that has seen its share
value plummet by 50%) is cutting costs by 10%.
Olympique de Marseille is cutting playing staff by a third
and Real Madrid was technically bankrupt last year until land sales balanced its
books. Galatasaray Sportif AS in Turkey posted profits down 16.8%. Greek clubs
AEK Athens and FC PAOK Thessaloniki face sanctions if they fail to pay
outstanding transfer fees. In Scotland, Airdrieonians and Clydebank have folded,
with a new club, Airdrie United, taking their place. Ferencvaros and Honved in
Hungary have failed to meet financial guarantees for next season.
For the smaller clubs the future is bleak. Enfield fans
formed their own club when the chairman sold the ground and proposed sharing
facilities outside the borough. Wimbledon supporters who oppose the attempted
move to Milton Keynes have set up a new club, AFC Wimbledon. Almost 5,000
watched the first match and the club sold more season tickets than Wimbledon FC.
If AFC Wimbledon proves to be successful, however, businessmen will undoubtedly
attempt to take it over. The fans will have no say unless they adopt the
measures needed to reclaim the game.
A democratic membership scheme should be initiated. For a
nominal fee, fans could then enrol in the club of their choice and would elect
representatives onto the board. The players and staff would also elect
representatives. Fans, along with players, staff and local community
representatives, would own and control the clubs. Football would no longer be
about passively watching your club. For the first time in over a century, fans
would be involved in the day-to-day running of their clubs. Fans, regardless of
age, sex, or physical disabilities, would be enabled to play for their club in
various leagues based on ability. The facilities could be opened up to other
sports and activities.
Under socialism the profit motive would be taken out of the
game. As a vast majority of clubs are running at a loss this would be an
improvement for most! Players would not receive the exorbitant income that they
receive at the moment. They would be well paid, nonetheless, with wages tied to
the average for a skilled worker.
A fight must be waged to rid football and other sports of
big business control. The fans must reclaim the game.
John Reid
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