I thought I would have a quick look at the income statements of the six clubs from the UK who have said that they will be joining the European Super League. They are as follows:
Note that these are the latest accounts I can get in each case: they are not all for the same year or same year-end.
Add them up though and this is a tale of £3,042 million of sales (if the profit on player sales which make up most of the p0ther income are taken into account) matched by almost exactly equal operating costs that are, after finance spending, turned into operating losses. A paltry maximum tax contribution of £4 million arises, mainly due to Liverpool.
So what's the story behind this?
First, these clubs are not that financially successful. It is only by player sales that they can even hope to break even. So, they are dependent upon other clubs to keep them afloat, most of whom will not be in the European Super League. Sanctions from them on player transfers could cripple the European Super League idea.
Second, in some cases debt casts a heavy burden over them. That's especially true at Manchester United and Spurs.
Third, none of these clubs looks to be in a good financial position. The trend is for tiny profit margins on revenue and heavy gearing - meaning most are very vulnerable to debt repayment.
So, what's the real motive for the European Super League? A way to manage the excessive costs of these clubs, and to sustain sufficient income to give a chance of paying their debts, I would suggest.
But given that the rest of the League also faces such struggles, for these clubs to try to achieve that at cost to the rest - which is what they are doing - is deeply counterproductive. Damage the competition in the UK, or undermine the market for the players that they have to sell, and these Super League clubs could in fact be putting themselves in a perilous financial position simply by making the changes to the structure of football that they are proposing.
What's really needed?
Some serious debt right off by their owners, for a start.
And some serious pay cuts for players, next.
Then there is a requirement to ensure that they can live within their means - and not require ongoing finance to cover losses as a part of their business model.
After that? A review to make sure that they make bigger returns to their communities via tax paid.
And then a review of their long term financial stability to see how those futures can be assured because if anything what these negotiations reveal is that none of these owners thinks that they are.
I'd summarise by saying I read the move as being that of a much of very frightened people trying to find some value in assets which as they stand look to have pretty marginal worth.
It's not a pretty picture.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I am now moving on to ground about which I know very little at all.
In any case, I understand the business model of the Superleague is based on the Amercian sports model (typically American football). As I understand this, it is a franchise model. Cities may lose their team; franchises move. Second, I believe that new young players arrive (from college football?) via a strict scheme, in which the players are listed in a table according to their expected ‘saleability’; but are drafted rather than sold. First pick goes to the team the performed worst in the previous year: “Currently, each of the 32 clubs receives one pick in each of the seven rounds of the NFL Draft (the number of teams drafting has changed over time, and there have been as many as 30 rounds in a single draft). The order of selection is determined by the reverse order of finish in the previous season. Barring any trades between clubs, each round starts with the team that finished with the worst record and ends with the Super Bowl champions.” (operations.nfl.com ).
I am not sure how a franchise-draft model is going to work in Europe; or maybe the Superleague expect it will simply allow them to control everything in football, from start to finish; top to bottom. Presumably at some point monopoly and cartel rules must come into consideration in Britain or Europe, or has modern capitalism simply now moved beyond that altogether into a sphere of indifference?
Maybe this example will galvanise popular public interest in monopoly and cartel power for the first time, and shake-up the craven, supine inertia of politicians who allow themselves to be bullied by corporations and their professional dependents.
The last is my hope
The Counterbalance Team – see today – are working on this
In the case of Arsenal and Spurs, their debt is related to building a new stadium. In the case of Manchester United, it is due to a LBO in 2005, initially at high interest rates that has since been refinanced via bonds etc. The ‘owners’ have barely repaid a penny of the initial cost of the buyout and I expect, never will. As long as they can claim tax relief for such financial engineering that was not for development purposes (ie new stadium), they will continue to do so, while paying themselves handsome dividends, the only PL owners to do so, I understand. They are also now selling off 2nd class shares with far lower voting rights, none of the proceeds of which has gone to the club.
They are the worst of the worst, when it comes to owners. Without them, MUFC would probably still be debt free as they were before they arrived, and able to live within their means. It is unfortunate that MUFC are lumped with Barcelona and R Madrid in terms of indebtedness, which in the case of the Spanish is far more related to bad transfer signings and high salaries. Eg Gareth Bale and Hazard.
The Guardain had yesterday (but it seems to dropped into obscurity) an article on an ‘unpublished Super League document justifying breakaway’ (https://www.theguardian.com/football/2021/apr/19/revealed-unpublished-super-league-document-justifying-breakaway) found hiding on their website which revealed similar financial motives behind the ESL move: “However, its underlying message is that the 12 clubs — including six from the Premier League — had no choice but to act because of the financial costs they were facing.”
Indeed
Yes, the clubs are in desperate shape, but in the case of MUFC is it because of a leveraged buyout, huge interest payments and other fees, plus greedy owners taking big dividends. Pre the Glazers, the club was debt free and had the largest and most modern stadium in England. All down to a family of carpetbaggers, not because the underlying business model was unsustainable.
Question on the tax payments point. For more corporation tax to be paid the clubs would need to generate profits, the only real way of doing so by reducing player wages. But the tax paid by the players on these wages would be greater than the rate of corporation tax so by doing this would it not reduce the overall tax take?
Don’t get me wrong, I don’t agree with the ridiculous wages in top level football, but by reducing them I’m not sure this would benefit communities. Or would you suggest a football wages levy?
I sustainable club paying tax on its profits has a going term future that is of much more overall use to society than one that maximises PAYE payment by being unsustainable
So the workers should get less so that the club owners can make a profit?
In this case, yes
Melbourne Storm had premierships revoked for cheating the salary cap and had to start the next season on minus points.
Canterbury Bulldogs had to start a season on minus points.
This is in a sport where players are very well paid. Not EPL standards, but well paid nonetheless.
Can I add Saracens to that list?
These were the ones that were caught.
What should footballers get paid, especially the elite ones for whom there is hot competition for their services?
Should there be a cap? Who determines that cap and on what basis? Is it relative to other activities (eg other sports, other occupations)? How do you enforce that cap internationally?
I regard footballer pay as one of the world’s non-existent problems.
£20 a week when I was a boy
That may not have been enough
But it kept football accessible for all
It isn’t now
Thanks.
OK, so what would you say is equivalent of £20 a week today for this occupation? How should it compare to other occupations? Are you saying it should only be a part time job (ie players should supplement their incomes with another job)?
Are you saying the principle of ‘accessibility’ should be limited to footballers, or would you want it extended to other occupations where access is an issue (and if you dig far enough, that is pretty much everyone).
£20 a week would have bought a very comfortable house in most party’s of England and Wales in the era I am talking about with an earnings multiplier of less than 3.
What do you think is required?
I could be more generous than that.
But current salaries are certain to exclude most from active support. Why is that reasonable?
Why isn’t a ticket price cap acceptable?
Touts can be identified these days
What do you mean ‘required’?
What is ‘required’ for Manchester United to get a decent team on the pitch? You could probably make it amateur (like Rugby Union and the Olympics not long ago, GAA today) and still get a decent team willing to play for nothing. Ticket prices just cover costs.
It would only work if they were playing against other amateurs though. They’d get thrashed by professionals. But I’m sure it would be entertaining and people will want to watch it.
‘But current salaries are certain to exclude most from active support. Why is that reasonable?’
What does that mean? The vast majority of participants in sport are amateurs, who need to meet some or all of the cost of participation (e.g. their kit, travel, perhaps a club subscription and match fees to cover ground rental etc.). Am not sure what that has to do with pay to elite players.
If you don’t get it let me presume you are being obtuse
In which case I am wasting my time
Not least because that makes it clear that you are not aware of concern on this issue within football itself
I am not being obtuse, and was originally responding to Sam.
I just don’t see it being a problem. Some clubs will get it wrong (eg Leeds) but I don’t recall football or Leeds or the world or ending.
I’m not sure I understand what you are looking for. Do you want to turn elite football into an amateur or low paid semi-professional sport? There are already sports that do this (GAA, US college football) or did so recently (rugby union) and the world ticked over. Fans were entertained.
NRL in Australia has a salary cap for clubs, but the players are full time professionals and well paid by local standards.
The problem with union and US college football of course was that if you ask amateurs to play in a contest with huge commercial value, you get some cheating (under the counter payments etc.).
I think you are being ridiculous
A sensible wage cap does none of the things you suggest
You even acknowledge as such
So why make absurd claims?
Since when in this ‘modern rentier age’ has debt-financed growth been a good idea?
It’s delusional.
Does the same financial motivation apply to the Italian and Spanish teams?
Probably
Take a look at the Burnley accounts to see a debt free Premier League Club with income of just over £133 million and £81 million cash (Accounts to 31/07/20). Please also note that the club was subject to a leveraged buy out in December which must now cause one to consider their vulnerability.
We have to accept that so much of a football club’s income is determined by media revenue. A Burnley club in the Championship would probably report less than £25million income, plus the so called parachute payments to cover the early years of relegation.
Interestingly, the new Burnley Chairman is calling for the appointment of a Football Regulator “in the style of OFTEL or OFCOM “.
It needs to be said that footballer’s incomes are going to be determined by demand and supply, just as those of bankers, executives and TV personalities are. If we want ensure that the public purse benefits, then we need to block off the tax avoidance schemes. If the community is to benefit from club income, then we need to place a government controlled levy on football media income.
Somewhere in there, exists a need to strengthen footballs ” Fair Play” rules and to protect the industry from excessive overseas ownership. The people of Bury, Bolton, Wigan and Blackpool will tell you that governance is lacking and community assets are at risk.
Thanks
“It needs to be said that footballer’s incomes are going to be determined by demand and supply, just as those of bankers, executives and TV personalities are.”
Are salaries of bankers and executives really determined by demand and supply? The board members who determine the salaries are often the same as those that receive the salaries. To simplify, if I could determine my own salary it would also be higher. I am wondering whether the high salaries of bankers and executives are more determined by access to power rather than by supply and demand.
Spot on….
For me it’s all about player salaries. I cannot understand how supposedly successful business people commit to paying such high base salaries without any guarantee of a return. It wouldn’t happen in any other industry