Must-Read Article For Any Football Fan

[StevieH]

doesn't really belong in any one particular thread this but it's a fantastic summary on money in football and how the game has changed. well worth the ten or fifteen minutes it takes to read.

Follow the Money

David Conn writes about football and the global marketplace

http://www.lrb.co.uk...ollow-the-money

On 13 May Manchester City, the club I have supported since I was a boy in the 1970s, won the Premier League, their first championship since they won the old Football League in 1968. In those days, fans stood on old, groaning terraces; there were no sponsors’ logos to compete with the badge on the players’ shirts; and to my mind at least, the game had nothing to do with money. This year, the championship was won in injury time at the end of the final game of the season with a goal by the Argentinian striker Sergio Aguero, whom City had bought for £38 million less than a year before, and even the children hugging their disbelieving dads knew that money was the reason. City were acquired four years ago by Sheikh Mansour bin Zayed Al Nahyan, scion of the ruling family of Abu Dhabi, who has since spent almost £1 billion revitalising an exhausted club, the majority of it on signing and paying 22 new players. The City of Manchester Stadium, built with £127 million of public money for the 2002 Commonwealth Games in the poorest part of town, has been renamed the Etihad Stadium, after the Abu Dhabi airline which pays lavishly for the privilege. The executives appointed by the new regime have been diligent in expressing their respect for the club’s history and loyal supporters, while branding it in such a way as to associate its globally televised triumphs with the image of Abu Dhabi.

Little of this could have been foreseen in the late 1980s, when English football was forced to reorganise itself after a series of disasters. In May 1985 the main stand at Bradford City’s neglected old ground caught fire and 56 people were killed. Less than three weeks later, 39 were killed and six hundred injured when rival fans clashed and a wall collapsed at the European Cup final between Liverpool and Juventus at the Heysel Stadium in Brussels. The following season, attendances at Football League matches fell to their lowest since the league expanded to four divisions in 1922. Yet even in that grimmest of seasons the total attendance was 16.4 million. The Premier League measures its success by comparison to the 1980s, but in the 1970s crowds of forty and fifty thousand were still common at the top clubs. Tickets were very cheap, as they always had been: in 1977-78, when Manchester City were still a fine team in the old First Division, a season ticket on the huge Kippax Street terrace cost £11; many in the crowd were teenagers. In 1989-90, the season following the Hillsborough disaster, when 96 Liverpool supporters died in a crush, it cost £4 to stand on Liverpool’s Kop; last season the cheapest seat on the Kop for a match against top opponents was £45.

Lord Justice Taylor’s official report in the wake of Hillsborough documented a class-divided sport, the directors helping themselves to the boardroom buffet while young fans died on the terraces. Taylor recommended that run-down grounds be modernised and terraces replaced with seats (the latter change was applied only in the top two divisions). His verdict was damning – ‘old grounds, poor facilities, hooliganism, excessive drinking and poor leadership’ – yet ‘despite those features which disfigure football today and the decline in attendances from the peak years,’ he observed, ‘the game still commands massive public support and interest.’

By requiring the clubs to treat supporters not as hooligans to be penned into fenced enclosures, but in the way that a modern business treats its customers, the Taylor Report played its part in the transformation of English football into today’s pricy, seated, box-office entertainment. But football’s popularity was increasing even at the time of Hillsborough, as Taylor himself noted. Just a few months after his report was published, before a single ground had been improved or the Premier League proposed, a television audience of 22 million watched England play Germany in the semi-final of the 1990 World Cup. Soon after that, Nick Hornby’s Fever Pitch, a tender account of his lifelong support for Arsenal, was published; a host of writers and journalists emerged from the closet, having been furtive fans all along. Far from stigmatising the game, the media began to glorify it, and football’s image, if not yet its stadiums or administration, was rehabilitated.

When the Premier League was launched in 1992, most fans strained to see any difference. It featured the top 22 clubs, just as the First Division had done; the three bottom clubs would still be relegated to a second division (later boosterishly renamed the Championship) at the end of the season, and the three top clubs from that division promoted. Yet BSkyB, which had outbid ITV for exclusive live television rights, proclaimed it ‘A Whole New Ball Game’ on its billboards. In 1994 came the landmark signing of a foreign superstar, the German World Cup winning striker Jürgen Klinsmann, by Spurs. The following year Arsenal bought Holland’s Dennis Bergkamp, and Middlesbrough, of all places, recruited a Brazilian international, Juninho. The new era was hailed as a rousing revival after the horrors of the 1980s; there was little talk, at first, of football having sold its soul. Ticket prices were not yet exorbitant, footballers’ wages not yet a source of dismay; there was little sign of clubs collapsing under piles of debt.

My education in the way football really works began with the takeover of City by Francis Lee in 1994. Lee had been City’s top goalscorer in the glory years of the late 1960s and early 1970s. Now he was ousting the deeply unpopular Peter Swales, who had been chairman for twenty years, and I was in the stands cheering his arrival. But when I interviewed Lee, I was unsettled to discover that the takeover was in fact a corporate deal. He and his associates were buying 29.99 per cent of the shares in Manchester City Football Club Ltd for £3 million and loaning it £3 million more. It had never occurred to me that the club was something as mundane as a limited company, in which businessmen could buy shares. Lee’s consortium, a straggle of Manchester men made good, immediately declared their intention to float the company on the stock market. Flotation, I found out, works as an ‘exit’ for shareholders in private companies, allowing them to cash in personal profits on their shares.

One of Lee’s lawyers explained that they were reorganising City’s company structure in preparation for the planned flotation. They would form a new holding company, Manchester City plc. That plc would in turn own Manchester City Football Club Limited, which would continue to be the operating company, taking the fans’ money, employing the footballers and running the club. The purpose was set out explicitly in the document addressed to shareholders: ‘Manchester City Football Club Limited [must] observe the requirements of the Football League and the Football Association from time to time in force.’ But the rules of the League and FA would ‘not be applicable’ to the new holding company.

The rules from which Manchester City were now breaking free had been imposed by the English Football Association when professional football began, to restrict shareholders’ and directors’ ability to take money out of football clubs through dividends or salaries. The FA did indeed ‘invent’ football as a sport, defining its rules following an inaugural meeting of public school old boy enthusiasts in 1863, at the Freemason’s Arms in Lincoln’s Inn. Their amateur pursuit spread into the industrial cities, and was adopted by a scattering of enlightened employers and churches (Manchester City was formed by St Mark’s Church in 1880), the new spectacle devoured by crowds wanting entertainment and places to rally. Competition between clubs intensified, and they began paying wages to attract better players. The FA, reluctantly, sanctioned professionalisation in 1885. The Football League, the first in the world, was formed in 1888 by 12 clubs, six from the North-West, six from the Midlands, principally to provide the new professional clubs with regular fixtures, so that they could plan their budgets. That is still the game’s structure today: the leagues are club competitions, and the FA is the overall governing body, supposed to be the guardian of the game’s ethos and values.

In 1892, the FA permitted Preston North End, football’s first great power, to convert itself from a members’ club into a limited company. Preston had, years earlier, been the first to break the rules against professionalism, paying good players from Scotland to come to the club at a time when paying players was still illicit. The club’s application to form a company was partly to raise new money, partly to limit its members’ personal liability for the increased operating expenses. The FA decreed in 1892 that a club could make itself into a company, but that dividends to shareholders must be restricted. Here was the basis for football’s future development: the clubs became businesses, which could pay players, build grounds, charge supporters for entry, and form themselves into companies. But the FA insisted they remain clubs in their culture. The supporter’s gut feeling that the club is a collective endeavour, an organisation he belongs to, not a company seeking profit for shareholders, was embedded in the regulations. Rule 34, requiring football club-companies to be run essentially as non-profit organisations, with their directors serving as ‘custodians’, was in the FA handbook until the late 1990s.

Tottenham Hotspur was the first football club to be floated, in 1983. I asked the FA why it had allowed Spurs to form a holding company. It hadn’t been an issue, I was told. The top clubs’ appetite for money was growing, while the FA, struggling for direction under its old amateur constitution, had lost confidence in its ability to govern the modern game. Manchester United was next to float, in 1991, immediately making £6 million for Martin Edwards, the majority shareholder, who sold a slice of the shares that had originally cost him and his father about £600,000. United were anticipating the windfall to come the following year, when the rights to broadcast Football League matches on television would be up for renewal.

The Football League had from the beginning stipulated that gate money be shared, so that the clubs in the cities, with large catchment areas, would not dominate those from smaller towns. When television began to cover the game in 1965, the BBC paid just £5000 for highlights, and the money was shared equally among all 92 clubs in the four divisions. By 1988, after moves by the big clubs to keep more of the league’s income, 50 per cent of the £44 million four-year deal with ITV was awarded to the First Division clubs, 25 per cent to the Second Division, and 25 per cent to the Third and Fourth. Everyone in football knew that the new deal would be huge. Rupert Murdoch had worked out that buying exclusive rights to live football coverage was the only way to get an audience loyal enough to pay for a Sky subscription.

Along with safety measures, Taylor had called for ‘the fullest reassessment of policy for the game’. ‘It is legitimate to wonder,’ he wrote, ‘whether the directors are genuinely interested in the welfare of their grass-roots supporters. Boardroom struggles for power, wheeler-dealing in the buying and selling of shares and indeed of whole clubs, sometimes suggest that those involved are more interested in the personal financial benefits or social status of being a director.’ The reassessment never took place, at least not in the form of a coherent plan in the interests of the game and its grass roots. In anticipation of the 1992 TV bonanza, the First Division clubs plotted to break away from the Football League, but for that they needed the FA’s backing; a director each from Arsenal and Liverpool was deputed. The document the FA produced, ‘The Blueprint for the Future of Football’, backed the breakaway in a disastrously misguided attempt to assert superiority over the Football League. Their idea was that the Premier League, reduced to 18 clubs, would be run by the FA for the betterment of the English game as a whole, with the national team at its apex. The other three divisions were outraged, called for unity and sued the First Division clubs when they were ignored, but in the end they had to settle for a minimal annual payment. The top 22 clubs, flying in the face of the FA’s presumption that it would run their new competition, never became 18 (though they did reduce to 20 in 1995-96), but instead rode off together to make huge money. They no longer had to share their TV deals with the rest of football. This was the fundamental change. Players’ wages ballooned; the owners of some clubs became very rich indeed; and the England team never again hit the heights of 1990. When I put all this to Graham Kelly, the FA chief executive who backed the breakaway, he told me forlornly: ‘We were guilty of a tremendous collective lack of vision.’

The TV deal with BSkyB – and the BBC, for highlights – amounted to £305 million. Premier League clubs were suddenly very lucrative for the men who owned the shares, and flotation became all the rage. Newcastle United, Aston Villa, Chelsea, Nottingham Forest, Sunderland, Leicester City, Bolton Wanderers, even Preston North End, now in the Second Division, floated their shares. Others, like City and Arsenal, reorganised their structures in preparation. All the clubs followed Spurs’ model: they formed plc holding companies to bypass the FA’s rules restraining personal money-making. The FA offered no protest, and in 1998 quietly scrapped the rules. In the new era, football would suffer a crucial lack of regulation by the game’s governing body.

The Premier League, powered by intense sporting and commercial competition, provided perfect ‘content’ for the media during a consumer boom, and has been hugely successful. The game has been transformed by the arrival of foreign players and the modernisation of training and management techniques under the influence of European coaches, most notably Arsène Wenger at Arsenal. The overseas stars brought European finesse to the English tradition of fast, direct football, and a more exciting style of play has been the result. The Premier League’s TV deals have grown hugely: £670 million in 1997, £1.6 billion in 2001, a dip to £1.1 billion in 2004, £2.4 billion in 2007. The current deal, for 2010-13, is £3.1 billion, including overseas rights reaping £1.4 billion. In June, in the middle of England’s humdrum performance in the European Championships, the Premier League announced it had secured £3 billion from BSkyB and BT (its first entry into the field) for the right to broadcast live matches in the UK in 2013-16.

Yet in this time of unimagined riches, professional football clubs have become insolvent 56 times since the Premier League began. The most calamitous case was that of Leeds United, which reached the European Champions League semi-final in 2001 but collapsed two years later. The club’s chairman, Peter Ridsdale, confessed that in borrowing £82 million to buy and pay the wages of players good enough to compete with a dominant Manchester United, Leeds had ‘lived the dream’. Over the last twenty years, players’ wages have increased in direct proportion with every TV deal. Their increasingly powerful agents, with commissions at stake, argue that the players are ‘the product’, and that agents are entitled to their share. It was a shock in 1995 when the centre-forward Chris Sutton signed for Blackburn Rovers at £10,000 a week. Now that seems quaint beside the £198,000 a week Manchester City pay the Argentinian striker Carlos Tevez. Clubs have consistently overspent, whatever their revenues, on the wages of players who might keep them in the Premier League or, in the case of the biggest clubs, help them qualify for the European Champions League. In 2009-10, 16 of the 20 Premier League clubs made losses; in 2010-11, 12 of the 20 did.

The lowest placed Premier League club now earns around £40 million from television alone, while clubs in the Championship earn around £2 million. Not surprisingly, several insolvencies have been the result of relegation from the Premier League. Leeds, Leicester City, Bradford City, Crystal Palace and Wimbledon have all gone into administration that way. Portsmouth was the first club to suffer insolvency while still in the Premier League. In February 2010, with debts of more than £100 million, it was put into administration by Balram Chainrai, a Hong Kong based financier, who had lent the club £18 million to bail out a Saudi Arabian businessman, who replaced a venturer from Dubai, who took over from a Russian Israeli, Alexandre Gaydamak. Gaydamak had funded Portsmouth’s overspending on players and their wages with £32 million in loans; the club, managed by Harry Redknapp, won the 2008 FA Cup but Gaydamak then declared himself unable to continue. Chainrai secured his loan and in October 2010 took the club out of administration, then sold it to a Russian banker, Vladimir Antonov. In November 2011, Antonov was issued with a European arrest warrant by Lithuanian prosecutors alleging massive fraud at his bank, Snoras, which he denies. With Antonov’s funds no longer available, Portsmouth fell into administration for the second time in two years, and was relegated to the third tier (League One) at the end of last season. On 25 July, the administrators announced that the club may soon be liquidated unless its first team players agree to transfers or wage cuts.

As the clubs’ great fortunes drained away, transferred to the players and their agents, the stock market quickly lost its enthusiasm. However, most of the big clubs’ shareholder-owners and directors proceeded to cash in, as overseas buyers – attracted by the Premier League’s glamour, its pre-eminence as a global brand and its burgeoning income from the media – arrived between 2003, when the Russian oligarch Roman Abramovich acquired Chelsea, and 2008, when Sheikh Mansour bought City. David Moores, whose family (the founders of Littlewoods) invested in Liverpool Football Club in the 1960s, got £89 million for his 51 per cent stake when the club was sold to the US buyers Tom Hicks and George Gillett in a leveraged acquisition in 2007. Martin Edwards ultimately made £93 million selling his Manchester United shares bit by bit. Sir John Hall and his family made £75 million when they did the same with their stake in Newcastle United. Arsenal’s shareholders, including descendants of upper-class gents who held the shares from the 1920s and had never taken a penny out, banked £300 million between them when they sold to the US investor Stan Kroenke between 2009 and 2011: none of that went to the club.

The Premier League likes to say that it shares its bonanza with the rest of football, and it’s true that the percentage it hands over has increased gradually over the last twenty years, but the current figure is still only 8.75 per cent – compare this with the 50 per cent of the TV deal that trickled down to the lower divisions before the Premier League was launched. Some of this money reaches grass-roots facilities via the Football Foundation, but at £12 million, 1 per cent of the Premier League’s £1.2 billion annual income, the investment is too small to make much difference to many of the municipal mudbaths up and down the country.

As for Manchester City, Francis Lee’s regime ran out of money, and the club tumbled out of the Premier League in 1996. They regained their place in 2002, and two years later moved into the new stadium the council had built. In 2007, City were bought by Thaksin Shinawatra, the ex-prime minister of Thailand who had been ousted in a military coup, charged with corruption and accused by Human Rights Watch of being ‘a human rights abuser of the worst kind’. His assets were frozen in Thailand, and the club was heading for insolvency when Sheikh Mansour plumped for it as the Premier League club he would fund to trophy-winning success. Thaksin made a personal profit of £90 million when Mansour bought City for £150 million.

Football clubs have had owners since the 1880s, but it wasn’t until the 1990s, when the tax-exile steel magnate Jack Walker took control of Blackburn Rovers, that anyone had tried to inject huge amounts of money into a club in a short period of time with the express purpose of winning a championship, which Rovers achieved in 1995. Many deride what has happened at Manchester City, and with good reason, yet even critics have been surprised by how professionally the club has been run since the Mansour takeover. And putting millions into a club is surely less of an offence than owners buying clubs to take fortunes out.

Manchester United are the standard-bearers of the Premier League era, relentlessly victorious on the field with teams repeatedly built and rebuilt over the last twenty years by the manager, Alex Ferguson. The club has expanded its Old Trafford stadium to accommodate 76,000 seats, making it by far England’s biggest; ticket prices and lavish corporate entertainment bring in between £3 and £4 million each matchday. United had cash in the bank and no debt when in May 2005 the US-based Glazer family bought the club in the face of angry protests from fans. It was a leveraged buyout, financed with £525 million the Glazers had borrowed from banks and hedge funds, then loaded onto the club itself to repay. The takeover has cost the club £550 million in interest, bankers’ fees and charges, while £423 million of its debt remains. In July the Glazers announced a plan to seek investors to pay off some of their debt, via a float on the New York Stock Exchange of a new Manchester United holding company registered in the Cayman Islands. The Manchester divide, between City’s remote owner putting £1 billion in, and United’s draining £550 million out, throws into relief the spectrum of outcomes, not to say random consequences, when England’s football clubs are sold in the global marketplace.

Yet there are alternatives. In Germany football suffered a decline in the 1980s similar to England’s, with crowds in the top division, the Bundesliga, reduced to an average of 17,000. And German football too has had a remarkable revival, fuelled by TV’s millions (and government support), with proud new stadiums and a remodelled image. Last season the crowds at Bundesliga matches averaged 45,000, the highest in the world. Supporters could watch Bayern Munich, fielding world-class players who reached the European Champions League final, for €15, in standing areas that accommodate 13,500 supporters. (In 1993 the German football association decided to retain standing areas in stadiums because they made it possible to sell cheaper tickets to younger or poorer supporters.) The cheapest ticket to see their rivals in the final, Chelsea, play a top Premier League match was £56. Chelsea’s chief executive, Ron Gourlay, has acknowledged that young people struggle to attend matches at Stamford Bridge.

Germany has been able to do things differently partly because the clubs, even the biggest of them, are still member organisations. The Bundesliga has repeatedly voted to retain a rule that supporters must own at least 50 per cent plus one share of their own clubs. At Bayern, 82 per cent of the club is owned by 130,000 members, who elect the president and board. Bayern has sold 9 per cent stakes over the last ten years to Audi and Adidas, the investment helping to pay for a new stadium, the Allianz Arena, but control of the Bundesliga clubs cannot be bought and sold, the constitution cannot be changed except by a vote of members, the league strictly regulates the amount of debt that clubs can carry, and all profits are reinvested into the clubs. The German game, sponsored by corporations but owned and watched by working-class supporters, is run with precisely the coherence that the English FA was seeking when it first deregulated the game. Germany’s national team reached the semi-final of this summer’s European Championships; in 2010, they dispatched England’s ‘golden generation’ of celebrity players, 4-1, in the World Cup.

The failure of the England team to improve is a visible consequence of a sport divided and confused about its purpose and priorities. The national game was never reshaped with the England team at its apex, as the FA had wanted; the top clubs, meanwhile, are more powerful than ever. Many argue that the principal problem is the prevalence of overseas players in the Premier League, crowding out young local players who don’t get the chance to gain experience at the top clubs. Only 30 per cent of Premier League players are English, whereas around 70 per cent of the players in the top leagues in Spain, Italy and Germany are qualified to play for those countries. But just as significant may be that the Premier League has failed to develop a strong English coaching culture, relying at the top on European coaches and Ferguson, a Scot. Little of this is likely to change as the new season gets underway. The national team’s hesitant efforts in the summer will, along with the game’s wider problems, struggle for attention amid the tumultuous weekly dramas of the Premier League.

Edited August 28, 2012 by StevieH

[carmine]

Theres something you don't read often.....quality football journalism. Sad reflection on the state of our game but very good article nonetheless

[StevieH]

Theres something you don't read often.....quality football journalism. Sad reflection on the state of our game but very good article nonetheless

many football journalists today will admit that there's nothing quite like being allowed to research a piece properly and write it up as you want to. so much content now comes in the form of cheap blog-style articles which journos must throw up quickly with the goal of sparking debate and online comment. and generating ad hits. david conn is really good though.

[SantiSuk]

Loads of downsides from the so-called progress of the game in the UK, but it has been a tremendous success for the UK's global image (not sure it is the huge financial boost to the UK it is painted) and although there are less kids on the terraces there are probably a whole lot more kids watching complete games of football in the UK than there has ever been.

Its tempting to say that the dominance of one or two clubs in the league will eventually lead to its demise. Unfortunately the experience in Spain suggests that even if that is a correct assertion it is going to be a very slow process.

[oldgit]

Excellent article explaining the transfer of our national sport from the fans to the corporate sector. The F.A were woeful in trying to stem the tide and,even as early as 1892,the die was being cast. As usual,the government,whether they be Labour or Tory,do not give a toss about the sport unless it reflects on the country as a whole i.e hooliganism.

[mrbojangles]

Excellent read. Cheers for that stevie