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A few weeks working in Australia, where the recession’s effects are much more limited than here in the UK, took me away from the British winter weather and the general atmosphere of gloom. Being away for a while also gave me the chance to get some perspective on the impact of the recession on football.
Whatever might be the claims about the appearance of the green shoots of recovery, the very best that can be said is that the situation is moving from catastrophic to terrible. This is going to be a long and deep recession in the UK. Unemployment over 3 million, short-time working and frozen or cut wages are bound to have their effect on football.
Of course, we know that football has some very special characteristics as a business: strong loyalty to a brand (although there is more ‘churn’ than keen fans acknowledge); demand that is not that much affected by price; and a strong desire for ‘entertainment’ in difficult times.
For some time I have argued that the recession is likely to hit Football League and non-league clubs more than those in the Premiership. There will be effects on Premiership clubs: season ticket sales will fall, particularly at the less glamorous clubs, as will match day sales. The biggest hit will be in the areas of corporate boxes, shirt sponsorship and, to an extent, merchandise sales.
Nevertheless, the basis of the Premiership model is the television deal and revenues have held up well. Indeed, the next deal on overseas rights might see a more than modest increase in the money paid out.
The success of the Premiership model continues to attract envy from abroad, in particular the extent to which English clubs are dominating the Champions League. Sepp Blater and Michel Platini are having another go at the Premiership, although they deny it is their target. They are proposing a ‘luxury tax’ on Europe’s biggest clubs. OK, it would hit Real Madrid as well, but the main losers would be the top four in England.
Whether the proposal will be implemented remains to be seen. Even Uefa admits the devil is in the detail. If the scheme inhibited movement between Europe’s top clubs, it would fall foul of the right freedom of movement for labour within the European Union. However, it may well be that the football authorities have received informal clearance from the European Commission. The present mood is very much one that favours greater regulation.
However, the real hits are being taken outside the Premiership. Southampton and Darlington face a very real threat of going out of business. Both clubs moved to a new stadium which has proved to be something of an albatross round their necks. Southampton couldn’t really stay at the cramped Dell if they had serious aspirations to retain their status as a Premiership club.
The move to St. Mary’s left them with a mountain of debt which they could only service if they remained in the Premiership. They got relegated, they spent in an attempt to get back, the attempt failed, the parachute payments came to an end and, with a struggling team of journeymen and Academy players, attendances slumped.
Many Saints fans would blame Rupert Lowe for their current plight. However, Uncle Rupe has launched a scathing attack on Barclays Bank, blaming them for cutting back the club’s overdraft facility. Bankers are an easy target and everyone likes to play the blame game.
The bottom line is that the administrator has said that it is going to be difficult to find someone to take a £30m pile of debt in the middle of the recession. If someone wants to buy a football club, there are more attractive prospects available. Wealthy Saints fans may rally round, but they are going to need a lot of money.
The club’s chances of survival will be helped if they are not relegated to League 1. That depends on a decision to be taken by the Football League. Given that it was the holding company and not the club that went into administration, should the penalty of a ten point deduction for ‘bad management’ apply?
Given the harsh penalties applied to clubs like Luton, why should Southampton escape because of a legal nicety? That is certainly the view of other Championship clubs near the drop zone. On the other hand, it would be absurd if a city the size of Southampton was left with an empty stadium with no other use and no football club.
The way out may be for prosperous fans to do a deal with Barclays Bank and Aviva (formerly Norwich Union) who have been helpful to take back ownership of the stadium in lieu of their debt and lease it back to the club.
The situation at Darlo is bleaker, but some of the elements are the same including an over sized new stadium and a controversial owner who still owns the ground although the club has gone into administration. Add into the mix an unglamorous northern town with limited potential for growing a club and it is difficult to see who is going to come to their rescue.
Other League 1 and 2 teams facing financial challenges that we have featured on www.footballeconomy.com in the past month include Stockport County and Swindon Town. In the Conference, Weymouth saw their former chairman come to their rescue after a white night turned out to be somewhat tarnished. The problems at Ashford Town, Bromsgrove Rovers and Merthyr Tydfil look harder to resolve and at least one of these clubs could disappear. At Ebbsfleet United, the MyFootballClub formula has seen a sharp falloff in renewals from subscribers wanting to play fantasy football for a second year, leaving the club short of money.
However, in the Premiership the money is swirling around. American sports franchise owner Stan Kroenke paid over the odds to substantially increase his stake in Arsenal to over 20 per cent and to head off the threat of a takeover by Alisher Usmanov. However, the Uzbek steel magnate could still team up with disgruntled former board member Lady Nina Bracewell Smith to increase his stake to over 40 per cent. To parody the title of a pre-war film, the Emirates Stadium Mystery remains unresolved.
Wyn Grant is a regular contributor to Albion Road and also the publisher of footballeconomy.com, a website covering the business and economy of the game of football.
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