Football Business - May 2008

This was the question a lot of commentators posed as the season ended with the top four once again being the top four. If predictable is boring, then will fans turn away from the spectacle? I am not a supporter of a Premiership club but I followed the games on the last day closely. I must admit, though, that I found the relegation struggle more gripping than the title race. Although what goes up increasingly go down, the boost to a club’s finances from one year of Premiership money and two years of parachute payments make a one season stay worthwhile.

There are, of course, big differentials in what clubs received. Payments for the season ranged from £29.1m for relegated Derby County to £49.3m handed out to Manchester United as champions (topped up by £30m earned from the Champions League). Each club gets a flat fee of £22.8m as part of an equal share of the revenue from television broadcasting deals. As the club featured most on television, United took a further £12.1m from the 25 live matches in which they featured, while their merit payment for finishing top of the Premiership was £14.4m. In contrast, Derby’s earnings from television appearances were a guaranteed minimum for the least-watched clubs of £5.6m, while their merit money was a paltry £720,000.

Even so, relegation hits every aspect of a club’s activities and the adjustment can be harder for clubs who have been in the Premiership for a few years. Television money disappears, sponsors want to pay less and those players who want to stay can expect much smaller pay packets. Average salaries in the Premiership are about £900,000, but in the Championship they are about £200,000. The Deloitte Sports Business Group calculates that the three relegated clubs will have their income slashed by about £20m each next season. A lot of that is due to the loss of lucrative television deals. Fulham, who survived on the last day of the season, can expect to earn about £30m next year from the Premiership’s broadcasting revenues. The three relegated clubs can look forward to a maximum of about £1m of television money from the Football League.

Hull City went from being a £16m to a £60m turnover business after their victory in the Championship play of final. They already have a Premiership style stadium in the shape of the £43.5m Kingston Communications stadium which opened in 2002. If Bristol City had gone up their turnover would have increased five times compared with a multiplier of about four for Hull. They have plans for a new stadium, but it is unlikely to be ready before 2012. In the meantime City chairman Stephen Lansdown admitted that their revenue levels meant that staying in the Championship would be a challenge.

Getting out of the Championship is becoming increasingly difficult. None of the three clubs relegated last year managed to win promotion. This means that there will be six clubs in the Championship with parachute payments next year, not to mention well funded clubs like Ipswich, Wolves and Queen’s Park Rangers. The Championship is becoming increasingly competitive as was reflected in the bunching of points in the 2007-8 season. Many of the teams in the division now have large followings, 18 of them having been in the Premiership at some point since its formation. Hence it’s no surprise that the Championship is now the fourth most watched league in the world with a total crowd pull of 9.3m, meaning that it attracts more fans than Italy’s Serie A.

At a lower level, Halifax went bust and can only re-form at a lower level. Their plight illustrated the difficulties of smaller northern clubs that face competition from bigger clubs within easy reach. Another club in trouble was Nuneaton Borough which might have to go into liquidation or administration, falling out of the Conference as a result. Gretna still does not have a buyer and has been relegated from the Scottish Premiership to the Scottish third division.

I suppose a lot turns of what one expects from football. A well-known social historian of football once said to me that watching the game involved suffering for one’s team. I understand what he meant if one was following a smaller, less successful club. But is it the kind of experience that the fans of Manchester United have? For them, football means entertainment and that means success on the pitch. Is watching some of the best players in the world play flowing football in a superb stadium the future? Are we too nostalgic for draughty grounds in which Bovril sipping fans watched cloggers in a mudbath?

Sports economist Stefan Szymanski reckons that 'Competitive imbalance is a fact of life in any sport. It exists in the US, where they go to great lengths to create equality of opportunity. English football is achieving record popularity and those who think it would draw more supporters if smaller teams had more of a chance ignore the fact that bigger clubs would shrink. Look at France where money is more equally divided. Their best players go abroad and their league has a lousy standard of play.' Szymanski asks, 'Why should we bothered?' Should we be? I guess it all depends on where you stand (or sit).

Football Economy is a monthly article about the business of football by Wyn Grant, the publisher of footballeconomy.com.