Is the bubble ready to 'pop'?

[davieG]

From the guardian/observer - http://www.guardian.co.uk/football/blog/20...r-league-owners

The Premier League on borrowed time

In the red, in the headlines for the wrong reasons and in for a big shock as they prepare to cope with Uefa's crackdown on overspending

The lurking dangers stored up in complacency during the Premier League's world-conquering boom have finally broken to the surface. Portsmouth, at the bottom, have had their share of TV money withheld as they stagger towards court to contest a winding-up order. At the top end of the table Manchester United, who still make more money than any other club, launched a plan to borrow £500m to part-refinance the £700m debt loaded on to them by their American owners.

The time is drawing to a close when the Premier League can convincingly maintain their laissez-faire approach to the national sport, in which the clubs, cherished by fans for generations, are simply commercial companies, available to buy and sell by anybody without a fraud conviction, from anywhere, with whatever plan.

When Lord Triesman, the FA's first independent chairman, tried in October 2008 to persuade the Premier and Football Leagues into stronger moves to protect against "pitfalls" among which he identified "debt mountains" and "cavalier ownership", he was relentlessly trashed by the Premier League.

"I don't think anybody who is rational can look around [in the economic downturn] and think they are immune," Triesman warned, estimating that English professional football was £3bn in the red. "The debt mountains are owned, and therefore the clubs are owned, by either financial institutions some of which are in terrible health, or very rich owners who are not bound to stay, or not very rich owners who are also not bound to stay … I think this poses very tangible dangers."

In response, Richard Scudamore, the Premier League's chief executive, who was paid a £1.537m salary package in the year to 31 July 2009, including a bonus of £745,566 for negotiating the TV rights, defended the "responsible" approach of his paymasters.

"Our clubs are all heavily regulated but they've also got directors and owners who will assess the level of risk of their overall debt," Scudamore said reassuringly. "This is at the top of clubs' agendas and I think they are managing it responsibly."

Events since include financial restrictions at debt-laden Liverpool, a £72m loss for 2007-08 declared by West Ham, who were repossessed by a broke Icelandic bank, overspending at Hull City and questions about whether several clubs are viable "going concerns" without investment from owners. These lend perspective to deciding which was the shrewder assessment, Triesman's or Scudamore's, of the state the game was in.

Scudamore has spent the past few months notching up lucrative new international television deals in countries where the appetite to watch the Premier League appears to be ever-expanding. With £1.7bn already in the bag for the 2010-13 domestic rights from Sky and the BBC, the Premier League expect to equal or even better the record £2.7bn deal for the 2007-10 on which the clubs are currently feasting.

That in itself signals the question being asked not just here but around the world, as Portsmouth's plight and United's dispiriting debts have garnered global attention. How has the world's richest league, with the most lucrative TV deal and some of the most expensive match tickets anywhere, whose clubs have become merchants of football and vigorous exploiters of their own "brands", generated such financial carnage? What mismanagement has been permitted, and why, to result in Portsmouth fans marching in protest yesterday and Manchester United supporters' groups ­gathering in Stretford to plan action against the club's owners, the Glazers?

All the clubs script their own soap opera, but as time lends patterns to the spate of takeovers in which mostly British owners sold out for multi-millions to mostly overseas buyers in the Noughties, certain categories are becoming clear. Portsmouth's financial state is the most alarming since the "live the dream" meltdown at Leeds in 2003, and the takeover by Ali al-Faraj, a Saudi businessman of modest wealth who has not yet been to Fratton Park, is one of the most bewildering. Yet the cause of the crash is fairly simple to explain.

Portsmouth won promotion to the Premier League in 2003 having been backed financially by the Serb-US businessman Milan Mandaric, and were then taken over in January 2006 by Sacha Gaydamak, an Israeli-Russian who was 29 years old at the time. The club have stayed in the top flight since, but have never expanded Fratton Park from its 20,000 capacity, the smallest in the division, and so have not been able to accommodate more fans, and earn more money from them. They also have no training ground of their own and until 2007 did not have a youth academy.

When Harry Redknapp was manager he assembled a side that brought the FA Cup back to a chiming Portsmouth in 2008 and featured at various times David James, Sol Campbell, Glen Johnson, Sylvain Distin, Niko Krancjar, Pedro Mendes, Sulley Muntari, Jermain Defoe, Peter Crouch and Lassana Diarra. He achieved this by massive overindulgence, to pay those players their ­millionaires' wages.

The club had gobbled up all the TV millions that Scudamore and his consultants had dutifully reaped for the clubs, and still managed to lose £17m in 2008, and £23.5m the year before. Was the FA chairman wrong to warn this could not go on? Was Scudamore right in October 2008 to say the debt was being managed responsibly?

The excessive spending was being absorbed by borrowing from banks and from Gaydamak himself, who was putting in his own money, as loans. After the economic crisis hit, Standard Bank called in a £30m loan: they did not want it rolled over, with the interest serviced, they wanted their money paid back. ­Gaydamak, the backer, is said by his advisers to have experienced financial problems of his own and to have tired of the bottomless demands of owning a Premier League club. So he stopped pouring money in and suddenly Portsmouth's debts were no longer sustainable. For three months running, their wage bill, despite the mass sale of all the star names except James, was not paid on time. Her Majesty's Revenue and Customs have slapped in a winding-up petition for unpaid PAYE on the players' mammoth wages, Faraj cannot secure bank lending, and the fans marched in protest against this reality yesterday despite their game against Birmingham being postponed, which is rather harsher than the dream they lived.

Most other Premier League clubs are in this same category: despite the huge wealth they have generated, and football's remarkable resilience in the ­recession, the majority overspend on wages, and rely on money paid in by their owners to keep them solvent. Some of the owners are still English, even hometown men-made-good, such as Dave Whelan at Wigan, and Peter Coates, whose bet365 Group has invested in Stoke City's robust recent rise.

Wigan's accounts for 2008 noted Whelan celebrating the club's "momentous" Premier League survival, at a cost of losing £11.2m, and accumulating net debts of £48.2m. The auditors wrote: "These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company's ability to continue as a going concern."

Without Whelan's financial contribution, and the support of the banks, Wigan would be bust. That same warning has been reproduced in other clubs' most recent financial reports, including Hull City's and, most sobering, Liverpool's. The overspending trickles down into the Football League, where Championship clubs are desperate to reach the Premier League, yet have to survive on far less TV money: £3m on average per club compared with £40m. When Lord Mawhinney, the League's chairman, announced in November that he would be resigning this spring, he noted that 70% of clubs had changed owners in his seven years, said overspending was the league's worst blight and called again for a salary cap.

Liverpool and their bitterest rivals, Manchester United, make unlikely partners in a debt-laden category of their own, giving unsuspecting football fans a crash course in a common financial practice: the leveraged buyout. The Glazer family at United, and Tom Hicks and George Gillett at Liverpool, did indeed borrow huge money to buy the clubs in the first place, then loaded the debts, and the responsibility to pay the interest, on to the clubs. At United, ticket prices have almost doubled since the Glazers' takeover and the fans' money can be said to have been used directly to service the £325m of interest for which the takeover has since made the club liable.

United's prospectus, launched this week to borrow £500m, finally confirmed that Sir Alex Ferguson does not, as he has claimed, have the money from the £81m sale of Cristiano Ronaldo to spend. If they manage to raise their £500m, at a mooted 9% annual interest, United will take £70m in cash and pay off part of the Glazers' hedge-fund debt, which is running at 14.25% interest.

Of the top clubs, only Arsenal are regularly making a profit without significant outside investment from an owner. But that happy financial position, and the promise of Arsène Wenger's blooming side are compromised by the takeover threat from two battling investors, the American Stan Kroenke and the Uzbek‑Russian Alisher Usmanov.

At the root of all this is that English football's boom has not been managed with a sense of prudence and care for the future. Unlike clubs in Germany, 51% owned by their supporters, or the famous member-owned Barcelona and Real Madrid, English clubs are companies, up for sale. Ownership of them is a lottery, best illustrated in Manchester. If you get lucky, like City, so improbably bought by Sheikh Mansour bin Zayed al-Nahyan of Abu Dhabi, as recession-proof as anyone, you have almost £400m invested in the club, all of it converted to shares, not loans. If you are an unlucky red devil, you get the Glazers' leverage.

Roman Abramovich, at Chelsea, has also invested hugely, £700m, converted into shares too, but even City and Chelsea face the looming halt being called by Uefa and their "fair play initiative". The European governing body, putting detail into the gut instinct of Michel Platini, their president, that all the debt and sugar daddy investment is not sustainable or good for the game, have dictated that from 2012-13 no club who run consistently at a loss, or rely on benefactor investment, will be allowed to compete in the Champions or Europa Leagues.

It is an admirably solid move by Uefa, only now dawning on the Premier League clubs who, with their debts and sugar daddies, have dominated the Champions League's latter rounds in recent years.

While the Premier League's free-­market ownership lottery has allowed clubs to beam in the glow of popularity, Platini, who learned his football in smoke-filled post-match hubbubs in his father's bar in Joeuf, a mining town in north-east France, has called a halt. We cannot, argues Uefa's football man, carry on like this.

[surrifox]

an interesting read indeed. In 4 or 5 years time when they are back in obscurity Pompey will have the same shite ground , no training ground and no marketable players despite the millions that have swirled around the club over the last 10 years- they will be able to look back on an FA cup win and some very good players at their club though

[davieG]

an interesting read indeed. In 4 or 5 years time when they are back in obscurity Pompey will have the same shite ground , no training ground and no marketable players despite the millions that have swirled around the club over the last 10 years- they will be able to look back on an FA cup win and some very good players at their club though

And yet people are happy that we maintain our massive stadium debt and sell the training ground for at best some short term gain or at worst to line a pocket or two.

[ozleicester]

It is indeed concerning times. This i think brings us ever closer to real Euro league.

[MC Prussian]

A very interesting, insightful, yet scary read. I can't see why the FA doesn't start to act and halt these general proceedings in English football and come up with a more fan-friendly scheme. How on earth Manchester United supporters still want to pay double the prices compared to before the takeover, I simply don't understand (talking about masochism). With such high expenses and knowing that the club could potentially go bust at one point once the owners decide to abandon their "project", I can't tell if I wouldn't want to follow football any longer.

[Fosse Boy]

A very interesting, insightful, yet scary read. I can't see why the FA doesn't start to act and halt these general proceedings in English football and come up with a more fan-friendly scheme. How on earth Manchester United supporters still want to pay double the prices compared to before the takeover, I simply don't understand. With such high expenses and knowing that the club could potentially go bust at one point once the owners decide to abandon their "project", I can't tell if I wouldn't want to follow football any longer.

Since when did any governing body care about fans?

[Shrenchel]

It's coming. It's the smaller teams that will suffer though. Market leaders like Manchester United will always find someone to bail them out because they will always make sales. They might not be able to buy quite the quality of players that they could but now they've built up their fanbase they'll still sell shirts in Japan, pay-per-view TV in China, tickets to pre-season tours in Korea, thousands of pounds a head corporate hospitality, season tickets at almost a grand a pop (with a lengthy waiting list) and a club megastore turning over hundreds of thousands of pounds every match day.

People try and compare it to teams like Leeds but they didn't have any of those things. Manchester United are probably the biggest sporting club brand in the world.

[MC Prussian]

Since when did any governing body care about fans?

Yes, I know about the "dirty" side to this business. And I don't mind governing bodies getting a slice of the money pie, as long as its a reasonable amount that is in accordance with how well the football league stands on its own feet. But since establishing the Premier League, the FA representatives seem to have garnered way over the top. The only reason why they're still so well off in terms of compensations and salaries is the TV/marketing deal scheme. By constantly expanding the Premier League brand into homes of Asian/African/third-world countries, to people who've hardly ever heard of Fulham FC, let alone Leicester City, but who are willing to either fabricate cheap memorabilia or ignorant enough to support a big team they've never seen play live, they maintain their positions. And sadly not for guaranteeing a financially and globally healthy top level of English football (which I thought was the main responsibility of a governing body).

Luckily enough, England appears to be the only country with such stupefying issues. So far.

[Fosse Boy]

Yes, I know about the "dirty" side to this business. And I don't mind governing bodies getting a slice of the money pie, as long as its a reasonable amount that is in accordance with how well the football league stands on its own feet. But since establishing the Premier League, the FA representatives seem to have garnered way over the top. The only reason why they're still so well off in terms of compensations and salaries is the TV/marketing deal scheme. By constantly expanding the Premier League brand into homes of Asian/African/third-world countries, to people who've hardly ever heard of Fulham FC, yet alone Leicester City, but who are willing to either fabricate cheap memorabilia or ignorant enough to support a big team they've never seen play live, they maintain their positions. And sadly not for guaranteeing a financially and globally healthy top level of English football (which I thought was the main responsibility of a governing body).

Luckily enough, England appears to be the only country with such stupefying issues. So far.

Don't disagree with much of that but I would argue that it's the purpose of the governing body to govern and protect all aspects of the English game equally (top flight, non-league, grass roots, youth football or whatever) rather than just focusing their attentions on protecting the most marketable aspect of the sport their supposed to govern (i.e. the top leagues).

[MC Prussian]

Don't disagree with much of that but I would argue that it's the purpose of the governing body to govern and protect all aspects of the English game equally (top flight, non-league, grass roots, youth football or whatever) rather than just focusing their attentions on protecting the most marketable aspect of the sport their supposed to govern (i.e. the top leagues).

Can't the FA governors be elected out of office or how does this work? Would it be possible to start a petition or create a big enough public protest wave (e.g. gather football fan clubs and their respective members) and urge the FA to

a) change their policies

b) replace the money-grabbers or

c) tackle both

?

In case I might come across as overtly naive, I'd like to apologize for my lack of knowledge.

[Fosse Boy]

Can't the FA governors be elected out of office or how does this work? Would it be possible to start a petition or create a big enough public protest wave (e.g. gather football fan clubs and their respective members) and urge the FA to

a) change their policies

b) replace the money-grabbers or

c) tackle both

?

In case I might come across as overtly naive, I'd like to apologize for my lack of knowledge.

Not too certain on how the FA works constitutionally, so I wouldn't know if that could be possible. In any case I doubt there are enough football fans in this country who are genuinely bothered about the idiots who govern their sport for any kind of popular movement to have an effect.

[davieG]

It's not down to the FA, all they can do is implement what FIFA & UEFA come up with, the Premier and Football League are autonomous bodies an the PL with all their apparent money have a much greater influence over UEFA & FIFA than the FA does.

If you've read the report you'll see that the FA can only make recommendations to the PL and likewise to FIFA & UEFA

[Fosse Boy]

It's not down to the FA, all they can do is implement what FIFA & UEFA come up with, the Premier and Football League are autonomous bodies an the PL with all their apparent money have a much greater influence over UEFA & FIFA than the FA does.

If you've read the report you'll see that the FA can only make recommendations to the PL and likewise to FIFA & UEFA

But the FA are still to blame to some extent for allowing the PL so much power and influence over the English game in the first place? If we're looking at the root cause of the mess described in this report then they're the ones who sanctioned the Premier League breakaway and allowed Scudamore et al to pretty much do as they pleased with our top flight and its member clubs in the past decade and a half?

[davieG]

But the FA are still to blame to some extent for allowing the PL so much power and influence over the English game in the first place? If we're looking at the root cause of the mess described in this report then they're the ones who sanctioned the Premier League breakaway and allowed Scudamore et al to pretty much do as they pleased with our top flight and its member clubs in the past decade and a half?

They haven't as I said legally they can't control the PL, let's face it the FA are appropriately named as they have FA control over the top leagues.

They didn't sanction it willingly they were forced to by the threat of legal action from the top teams which according to all reports at the time they would have lost.

If you want to blame any authorities then you need to look to FIFA & UEFA who have any power that's going that can be seen by their belated action re the Champions League qualification criteria.

[CosbehFox]

It is indeed concerning times. This i think brings us ever closer to real Euro league.

There will be no money to fund the Euro League. Any Euro League will be self-dependant on TV money, the Asian market being the biggest. There are very few European clubs with the Asian pull yet.....

Luckily enough, England appears to be the only country with such stupefying issues. So far.

The others are leading themselves as they begin their construction of TV deals like the English. The most horrid thing is that Murdoch has even muscled in on being the no.1 broadcaster for the likes of Bundesliga...a league which did symbolise the nearest thing to a purists league. Sky bidded for the rights but lost, so he went and bought 'Premiere'. No surprise despite Bundesliga 1 and 2 have a set schedule for years - there's now more games on a Sunday and evening kick-offs on Saturdays.

It's coming, really for it to have a substanial effect we need one of the big boys but it's going to hit the sustainable likes of Hull and Pompey first

[DJ Barry Hammond]

The guardian is always a good read - what a good artical with some interesting insight into the situation.

In terms of the situation, its a difficult one, because anyone wanting to call a halt to whats gone on before may end up causing a football recescion with the smaller clubs potentially falling. If the big teams don't have money to spend, the smaller clubs won't get there transfer fees which a few depend on.

The bubble is ready to go bang, because sooner or later TV will realise it doesn't need to pay as much as it does for football rights - they'll pay top whack for the bits it really wants (Man Utd's vs Liverpool etc) but not give a stuff about the lesser stuff. I remember when I used to watch most Super Sundays on sky, but these days its only the odd game I tune into - same with the Champions League. There's more and more interests outside of football these days and it will result in a squeese once again for the lesser clubs.

However, I'm sure the Premier League Board will ignore this and concentrate on garnishing more and more millions for its top stake holder clubs rather than introducing what it needs to and that is a wage cap (based on fan attendancec to bring back the importance of those who truely support the game).

[davieG]

The guardian is always a good read - what a good artical with some interesting insight into the situation.

In terms of the situation, its a difficult one, because anyone wanting to call a halt to whats gone on before may end up causing a football recescion with the smaller clubs potentially falling. If the big teams don't have money to spend, the smaller clubs won't get there transfer fees which a few depend on.

The bubble is ready to go bang, because sooner or later TV will realise it doesn't need to pay as much as it does for football rights - they'll pay top whack for the bits it really wants (Man Utd's vs Liverpool etc) but not give a stuff about the lesser stuff. I remember when I used to watch most Super Sundays on sky, but these days its only the odd game I tune into - same with the Champions League. There's more and more interests outside of football these days and it will result in a squeese once again for the lesser clubs.

However, I'm sure the Premier League Board will ignore this and concentrate on garnishing more and more millions for its top stake holder clubs rather than introducing what it needs to and that is a wage cap (based on fan attendancec to bring back the importance of those who truely support the game).

This is mostly going abroad though and that is part of the problem of large transfer fees, it's sucking all the football generated money , either by way of TV or gate revenues out of the country. In effect with our high entrance and TV fees we're indirectly subsidising football in Europe because as can be seen the clubs are not making profits although those running the clubs are hardly suffering.

[CosbehFox]

The guardian is always a good read - what a good artical with some interesting insight into the situation.

David Conn has been pretty good on the likes of Notts County, Leeds and Hull. Bates has had him banned from Elland Road.

[davieG]

From the BBC

Portsmouth have threatened to sue the Premier League in a bid to get the club's transfer embargo lifted.

The Premier League banned the club from operating in the transfer market and has redistributed the club's £7m share of TV income to Pompey's debtors.

Portsmouth chief executive Peter Storrie told the Sunday Mirror he believed the club had a "good case".

But league chief Richard Scudamore told BBC Radio 5 live's Sportsweek the club would effectively be suing themselves.

"The whole notion of suing the Premier League is interesting because you're suing yourself as a club, and the other 19 clubs," said the chief executive of the world's richest football league.

It would be rank bad management if a Premier League club were to go into administration

Richard Scudamore

Scudamore added that the embargo would remain until there it was "absolutely nailed down, absolutely clear, absolutely concise" that there were no outstanding liabilities.

Portsmouth were thought to have owed about £10m to clubs in the Premier League and abroad.

The Premier League's decision to use the £7m TV money means the club, which is also facing a winding-up order from HM Revenue & Customs (HMRC), still owes £3m in outstanding transfer fees.

But Portsmouth, who are £60m in debt overall, say they are up to date with debts to domestic clubs and that the league had no right to give money to foreign clubs, or withhold cash in advance of future payments.

Consequently, Portsmouth want the remaining £2m that is being withheld from their TV money by the Premier League.

Storrie told the Sunday Mirror: "I can confirm we have issued a legal letter to the Premier League to demand that the transfer embargo should be lifted."

However, Scudamore said the money would be released once Portsmouth could provide "watertight" contracts to prove that debts had been settled.

Portsmouth's staff and players have been hit by the club's financial problems with salaries failing to be paid on time in recent months.

David James

Portsmouth say they do not have to sell their top players in January

Keith Harris, chairman of investment bank Seymour Pierce, told Sportsweek that if a Premier League club were ever to go into administration, this would "probably" be the season.

But Scudamore believed any top-flight club which went out of business would be guilty of "rank bad management".

He also denied that the Premier League could have done something sooner to avert the financial crisis at the south coast club and put the blame firmly on the club's owners.

"We can only go by our rule book. I don't think anyone wants the Premier League running football clubs, it's very much for the owners to run the football clubs," said Scudamore.

"The owners run the club and in fairness to the people running that club they are working extremely hard to live the dream and they are scrabbling hard to make sure this club stays alive.

"You can't say it's impossible to imagine a Premier League club going out of business when it is still in the Premier League but the reality is, given the amount of central income that is generated, it would be rank bad management if a Premier League club were to go into administration.

"Infrastructure-wise Portsmouth are in a difficult position but the clubs have assets - the players - so they have choices.

"They might not want to sell them because of their own aspirations but in the harshest scenario that's the circle of life of a football club."

606: DEBATE

Pompey's debts have been called in, what will happen when Liverpool & Man Utd's debts are called in

ML

Scudamore said debts were not necessarily a bad thing, but added that he agreed "in principle" with talk of Uefa plans to introduce a "Financial Fair Play" criteria for European club competitions.

Under the rules which would govern the amount of debt clubs could accrue, Liverpool and Manchester United would be banned from the Champions League.

"What we have issue with is benefactor funding or borrowings because we feel that is part of the mix.

"If you end up with a situation where clubs are only allowed to spend what one might call their revenues and if nobody's allowed to have any debt or benefactor funding, you end up with a situation where those with the biggest revenues end up at the top."

As opposed to those with the biggest benefactors so what's wrong with that? If someone's going to be allowed to be on top due to finance then surely it should be the ones with the biggest sustainable revenue rather than the transient sugar daddies. Of course a level playing field would be the best solution.

[DJ Barry Hammond]

Bah still sue the Premier League - since when has it become an Administrator?

[sdb]

David Conn has been pretty good on the likes of Notts County, Leeds and Hull. Bates has had him banned from Elland Road.

Did 1 on Man Utd the other week too i think. Boy are they in the brown stuff

[lcfc_jme]

Haha, the Premier League is fucked and might die on its arse. Awesome stuff from the Best League In The World.

[Wycombe Fox]

Portsmouth's bubble's about to go

http://news.bbc.co.uk/1/hi/business/8468078.stm