Football Business - November 2008

Britain has fought off an attempt by France to use its rotating presidency of the European Union to impose a French-style regulatory system on British clubs. The real target was the English Premiership and the prime mover was not French president Nicolas Sarkozy or even sports minister Bernard Laporte but Uefa president Michel Platini who has made no secret of his hostility towards English football.

The French plan was to establish a supranational body modelled on the French regulator, the Direction Nationale du Controle de Gestion (DCNG). It can impose fines, freeze transfers, dock points and order relegation. French football has ended up in court 76 times since 2002. Platini has suggested that running a club with a large debt is tantamount to cheating.

Meanwhile, the credit crunch is starting to hit football The standard assumption in the sports economics literature is that demand for tickets at top flight clubs in any sport is relatively inelastic, i.e., relatively unaffected by changes in (real) prices. That may apply in normal economic conditions, but we are now in what is probably the worst economic downturn since the 1930s and football cannot escape unscathed - although that does not mean that the most doom-laden predictions will be fulfilled.

Some of the effects have been masked by the fact that season tickets were bought last summer before the economic crisis hit home. Attendance figures include season ticket holders whether they turn up or not. 'Walk up' matchday sales were once not available at top clubs, but Liverpool now regularly put seats on general sale, while Aston Villa - despite their current success - cannot get gates up to last year's average of 40,000.

The prawn sandwich brigade is being hit hard as well. Catering revenue at the Emirates is well below expectations. American company Delaware North paid £15m up front for a 20-year contract only to find that many executive box holders who pay £100,000 a year for the privilege are not willing to shell out another £100 for a pre-match meal. For the first time, the Gunners have put Champions League seats on general sale this season.

Despite forecasts of deflation, the cost of attending a game is increasing with many goods and services still increasing in price. The Virgin Money Football Fans' Inflation Index showed a 21 per cent rise in match day costs since last season with an estimated outlay of £106.21 per fan each match day, the first time the figure has gone about £100. Train fares have increased above the rate of inflation and are due to go up again in January.

The Football Supporters' Federation reckons that fans are cutting down on their stadium spending with more taking their own food and flasks (never a bad idea at many grounds given the quality of the food and drink on offer). Bolton Wanderers have made a free beer offer to early arrivals at the Reebok, are providing free travel to away grounds and have slashed the price of junior season tickets. Efforts like this can help, but more depends on the general state of the economy. For example, falling mortgage interest rates would help, although so far the cuts in base rate have not helped many house buyers. Probably not much of the fiscal stimulus package will help football.

The Championship will get a big boost next season from a new television contract, but the gap between it and the lower divisions of the Football League will widen. This may revive talk of a two division Premiership with no or limited promotion to the lower leagues. A new contract will increase the broadcasting income of the Football League from £32m a year at present to £88m. Under a long-established formula, Championship clubs will receive 80 per cent of the extra money from BSkyB and the BBC, but League One and Two will receive only 12 per cent and 8 per cent respectively. At present Championship clubs receive £1m each in television income a season, League One teams £375,000 and League Two sides £250,000. The figures for next season have not been finalised but the breakdown is expected to be around £2m for the Championship, just over half a million for League One and about £400,000 for League Two. The Football League's answer to critics is that the disparity is 'nowhere near the gap between the Championship and the Premier League, and yet you see a club like Hull reaching the Premier League and doing well.'

Small clubs argue that the task of reaching and remaining in the Championship will now become more difficult, and the game's hierarchies even more fixed. There is certainly evidence to support such a trend, although other factors apart from television income are at work. Some ten years ago smaller clubs such as Crewe Alexandra, Gillingham, Grimsby Town, Rotherham United, Stockport County and Tranmere Rovers could not only reach the second flight, but were able to stay there for at least a few seasons. In the last two seasons, clubs of a similar size are doing much worse. Southend were relegated after only one season in 2006-7, while Scunthorpe and Colchester United came down last May after one and two seasons respectively. Doncaster Rovers are struggling this season (although Nottingham Forest, a much bigger club, are not doing much better).

Mark Maguire, managing director of Stockport County, says an immediate effect of the TV deal is to make League One clubs 'desperate' for promotion this season in order to gain the extra money immediately and not be left behind. John Bowler, the chairman of Crewe Alexandria, thinks that the increasing number of foreign owners makes getting rid of promotion and relegation more likely because such owners have 'less affinity with our national game' and less regard for the role smaller clubs play. However, scrapping promotion and relegation would provoke a major fans' revolt as it is out of line with British sporting tradition. Reverting to the traditional model of two up and two down is more likely. Indeed, when there was a third division north and south, only one team from each league could escape each season which did not make for a very interesting competition and led some clubs to stagnate.

However, one has to remember that there are some major challenges that many of these small clubs face. Crewe and Stockport have to compete with the two Manchester clubs; Gillingham and Southend with the nearer London clubs (especially Charlton and West Ham respectively); Rotherham now play in Sheffield and have to compete for fans with the Blades and the Owls. Only Grimsby are really a 'stand alone' club (and they actually play in Cleethorpes). Not everyone can be a big club and not everyone wants to be.

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.