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The State of finances in 21st century football
By Simon Wright – Follow me on Twitter @Siwri88
IN A PERIOD WHERE MANY OF US HAVE HAD TO MAKE SACRIFICES IN THE ECONOMIC WORLDWIDE RECESSION, THE GAME OF FOOTBALL CONTINUES TO DEFY THE NORM. NEW PARACHUTE PAYMENT AGREEMENTS FOR PREMIER LEAGUE CLUBS WHO LOSE THEIR TOP FLIGHT STATUS, PLUS EXTREMELY HIGH PLAYER WAGES HAVE LED TO QUESTION MARKS OVER THE STRUCTURE OF FINANCIAL FAIR PLAY.
BUT HOW DO FINANCES AFFECT THE SMALLER CLUBS, WHO ARE ALWAYS BATTLING TO SURVIVE, AND HAS FOREIGN OWNERSHIP BEEN A GOOD THING FOR THE ENGLISH GAME. FREELANCE JOURNALIST SIMON WRIGHT INVESTIGATES.
Last week, a new parachute payment agreement was made for Premier League clubs who end up being relegated. They will receive an excess of £60m over a four-year period from next season, replacing the current structure that sees £48m received over four years by current Championship sides who were in the Premier League as late as 2009.
This means the likes of Reading and QPR are set to earn fortunes despite being demoted to the second tier of English football. It is a system that has come under scrutiny, with the current Rochdale boss Keith Hill saying last September when in charge of Barnsley: “I’ve never been rewarded for doing anything wrong or being relegated. Clubs that get relegated get rewarded financially, how does that make sense?”
Football fan Laura Jones agrees with Hill’s viewpoint on parachute payments in the game. She told me: “I agree with Keith that parachute payments are rewarding the failure of Premier League teams. The increase to £60m, plus whatever the club makes whilst in the Premier League allows the team to retain higher quality players. These become perpetual yo-yo clubs.”
Sports finance specialist Rob Wilson from Sheffield Hallam University told BBC Sport: “The bigger increase in parachute payment should, by rights, help the transition for any club that gets relegated to the Championship. What it will also do is make it a little bit more difficult for other clubs in the Championship to compete.
It is hard to find anyone who agrees with the parachute payment structure, but it is difficult to find an alternative that will cater for all parties.
The explosion in player wages
Questions have been raised about the explosion in player wages, with many believing the annual wage per week of a footballer is far too excessive.
Manchester United’s Wayne Rooney received a public backlash from his own supporters when he stated a shock desire to leave the club in October 2010 for ‘lacking ambition,’ then he changed his mind and signed a new contract, earning a seemingly ridiculous sum of £250,000 a week.
Lower league expert Lee Cloke spoke to myself, and feels a better equality needs to be put in place when it comes to player wages.
He stated: “Player wages are at an astounding high and are only going to continue to increase unless a wage cap is put into place.
“Of course, those playing in the Premier League are going to receive more than those in League One and Two, I don’t think that’s ever going to change, but there needs to be some sort of fairness and equality installed when it comes to footballers wages – they’re all doing the same job after all.”
Foreign investment has its perks and negatives
There was a time when clubs were well-run by owners who respected the football business, and were able to handle finances accordingly. This all changed when Roman Abramovich bought Chelsea in 2003, and was followed shortly afterwards by the likes of the Glazer family at Manchester United, and Randy Lerner at Aston Villa.
Some foreign takeovers have been successful, as fans of Manchester City and PSG can vouch for. Others like Malaga saw them enjoy brief flirtations with massive sums, followed by financial meltdown.
So, has foreign investment been a good or bad thing for the game due to the wealth of money being piled in. Sheffield Wednesday supporter Laura feels it runs both ways.
She said: “I think you can argue a case for both sides. Without foreign investment, some clubs would already be extinct.
“The distinction has to be between a foreign investor who wants to run clubs like a business and those that just want a hobby. The Venky’s (at Blackburn Rovers) spring to mind.
“The biggest effect on English football has been the creation of the Premier League. Its financial gravitational pull has changed the face of football.”
Fighting on against adversity
The English football landscape has changed immensely since the Premier League’s inception in 1992, and in recent years, some former club’s from the elite have suffered massively through bad financial mismanagement.
2008 FA Cup winners Portsmouth have suffered immeasurably, with two lengthy stints in administration and were on the brink of liquidation on several occasions. Luckily, the ownership of the club is now with the fans, and there might be a future at Fratton Park after all.
Coventry City recently slipped back into administration, a move that has left Coventry fans feeling angry about how the Sky Blues have been run in recent years by owners SISU.
It is worse for Bury, who reportedly need around £1m within the next fortnight, or they face potentially going out of business, whilst clubs like Scarborough, Chester City and Rushden & Diamonds were liquidated due to the financial pressures in the game.
Lee Cloke is a fan of struggling League Two outfit Torquay United, and admits the Gulls have had to be extremely careful with its finances.
He said: “We don’t spend any money that we don’t have, and that has sometimes been the difference between promotion and a disappointing early play-off exit.
“We were fortunate enough to have had a fan (Paul Bristow) who won the lottery in 2010 and invested heavily in the club. His money helped the club to build a new all-seated stand and invest in new training facilities for both the first-team and academy.
“Torquay is by no means a poor club, but most certainly is one that is careful with its money.”
Where will football finance be in the future?
UEFA’s introduction of Financial Fair Play has come into force already. Due to financial irregularities, Malaga have been expelled from playing in European competition next season, whilst other clubs like reigning UEFA Super Cup holders Atletico Madrid and Fenerbahce had prize money withheld last September as investigations began about their financial conduct.
With television money from the likes of ITV, BSkyB and now, BT Vision pouring in with every passing season, along with more takeovers on a foreign landscape, there is a question to say whether football will be in a better financial position in five years time.
Lee thinks not, adding: “I’d like to think that there would be a huge change and rethink in the structure of finances within football in order to make it fairer for all involved.
“I love football, I always have and I always will, but the money involved in the game has been slowly ruining it over the last 20 years.
“It pains me to say, but in five years time, I see football in an even worse place than it is now, with the more appealing clubs under mass investment and the smaller clubs wallowing in the dark with lack of funds and lack of support.”
Laura Jones added: “I think that is a question for the end of the next financial year to see how financial fair play has affected clubs, if they have affected them at all.”
As ticket prices continue to rise, along with the massive fees in television contracts, and the huge packages players receive on every new contract, football risks itself becoming a total exception to the rule of cutting costs and saving in a time where the average individual is making more cutbacks than ever before.
Should the government get involved, or could the national governing bodies ensure a slightly fairer system for all clubs in England at least?
These are questions for another day. However, football risks alienating supporters and followers away from the game if it continues on the path of potential financial destruction.