Football Business - Septermber 2008

The financial storm is not over yet but at the moment, within the Premiership at least, the top clubs are sitting pretty while smaller clubs in less prosperous areas have to be more innovative in their response. Watching football at the top level either live or on television isn't cheap at a time when incomes are being squeezed. A Sky package costs around £400 a year and season tickets have gone up by almost 800 per cent since the Premiership was set up.

Another consideration is sponsorship and corporate entertainment budgets which companies often have to cut back in hard times. However, Dan Jones of the sport business group at Deloitte, believes that Premiership football is less vulnerable than other industries, because of fans' enduring loyalty, and because much of clubs' money is already secured. The record £2.7bn television deal runs till after 2010 and Sky's competitors are already lining up for the next round of bidding.  Walt Disney is likely to make a bid through its sporting subsidiary ESPN. BT, which launched a live television service last year, is likely to make a bid, possibly in conjunction with Setanta.

The turmoil at Manchester United's sponsors, AIG, has focused particular attention on football shirt sponsors. Football shirt sponsorship has enjoyed steady growth in recent years. According to sports marketing consultant Sports Markt, total revenues last year were £287.8m in the six large European leagues, up 10.6 per cent on the previous year and doubling their value in eight years. But, as with most aspects of life in the Premier League, there is a gulf between the top clubs and everyone else, and the economic downturn is leaving other clubs struggling to find a sponsor. Newly promoted West Brom have no shirt sponsor, while Aston Villa is following Barcelona, which carries Unicef on its shirts, by donating its shirt rights to Acorns, a children's hospice.

'Clearly with three teams without jersey sponsorship income, the overall revenue from jersey sponsorship of all Premier League teams will certainly drop this year in comparison to previous seasons,' Andrew Walsh of Sport Markt told the Financial Times. 'In relation to other European top leagues, the actual figure appears even lower, due to the strong currency abroad.'  Shirt sponsorship represents about 20-25 per cent of a club's commercial revenues, but clubs are finding it harder to nail down sponsors for periods of two to three years.  A lot of sponsors are using it as a dip in and once they have got brand exposure they come out. Online gambling companies, a lucrative partner for several clubs, are questioning the wisdom of tie-ups after the government banned their names from appearing on children's replica kits. One thing is clear: as the economic climate worsens, so too does the outlook for football clubs' shirt sponsorship.

Crowds are generally holding up well in the Premiership. United's season ticket waiting list has melted away following the expansion of Old Trafford and successive price increases, but the crowds remain immense. The prawn sandwich brigade is still there in force with 96 per cent of the corporate boxes occupied. Arsenal and Liverpool still have waiting lists for season tickets and Chelsea has sold out despite adult prices ranging from £650 to £1,150.

However, clubs such as Blackburn, Bolton, West Brom, Sunderland, Wigan and Middlesbrough have to cope with more difficult local economic environments and a smaller travelling support with links with the area. Blackburn season tickets and corporate boxes are both down this season and the club is working harder to attract crowds match by match. The Baggies cut season tickets by 11 per cent after promotion last season, following a 20 per cut the previous season. That makes season tickets at The Hawthorns almost a third cheaper when the club was last in the Premiership. As a result, there have been capacity crowds at all three home games so far.

One of the big stories in the last month has been the decision of an arbitration panel that compensation should be awarded to Sheffield United by West Ham because of the Tevez affair. The amount of compensation is yet to be fixed, but the Blades are asking for at least £30m. Judging by an online poll in The Guardian, fans were divided pretty evenly about whether the decision was a fair one or not. West Ham have asked if they appeal to the Court of Arbitration for Sport in Lausanne, but they will take it on only with Sheffield United’s agreement which is highly unlikely given that both parties to the dispute agreed that the arbitration decision would be binding. Equally, an appeal to the High Court is unlikely to succeed as they would only intervene if the decision had been improperly taken by the arbitration tribunal in some way and there is no indication of that.

Certainly, the panel decision has rattled cages at the Premiership where they would like such matters to be sorted out within their own governance arrangements – and presumably at less cost in terms of compensation to their own clubs. Moreover, some former and current Sheffield United players are threatening to sue West Ham for loss of earnings, although legal opinion is that those actions are less likely to succeed. The original Premiership panel decision to fine West Ham £5.5m rather than deduct points was taken by an independent body, but the suspicion always hung in the air that the Premiership would rather have retained West Ham as a club than the unfashionable Blades from gritty Sheffield. The outcome is likely to be that the Hammers will have to pay compensation to the Blades, but possibly not as much as they were hoping for.

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