Championship Finances: Five Key Takeaways
On August 1, the peerless blog The Swiss Ramble published an invaluable presentation of the profit and loss accounts for Championship clubs in the 2011-12 season.
Of course much has happened since including the arrival in the competition of Queen’s Park Rangers; a club the financial wealth of which will be decidedly byzantine and worthy of a week-long series of articles. Accounts for Wigan Athletic would also make for very interesting viewing as would those for the third of the newcomers from the Premier League – Reading having been subject to worrying rumours that Anton Zingarevich might up sticks and sell his 51% stake in the past couple of days.
Even at the time, the statistics provided did not include Coventry City and Portsmouth which is a little like discussing totalitarianism without mentioning Chairman Mao and Pol Pot although that’s no fault of the piece as neither club had published a financial summary by the cut-off point.
But the figures still bear detailed study and it’s perhaps worth underlining some of the headline ‘takeaways’ – apologies for using this term, an egregious one even by the standards of modern day business speak:
Being a ‘big club’ is still important
No matter how plucky the performances of some of the smaller fry in the fray, most obviously Champions Reading, the cachet that comes with decades of tradition means residual support is large enough to keep a club fighting even if success was a long time ago.
So, the trio that led the way for match day revenue were Leeds United (£11.4 million), Southampton (£11.8 million) and West Ham United (£13.6 million). Even allowing for the high price of following the Hammers, this is significant and it’s no surprise that South Yorkshire duo Barnsley and Doncaster Rovers were at the foot of the table at under £10 million. The Keepmoat Stadium’s narrow confines along with a miserable, tempestuous season on and off the pitch particularly harmed the latter.
Parachute Payments warp the contest but don’t guarantee a bounce back
These modern day curios actually got even larger this past season but they were sizeable in 2011-12, utterly warping the contest to the extent that the media revenue (for it is under that banner that they are accounted) enjoyed by six clubs stretches rightward on the graph to a position well nigh out of sight.
However, the sextet in receipt of the monies suffered mixed fortunes on the pitch with only West Ham achieving promotion. Hull have subsequently bounced back of course but Birmingham City, Blackpool, Middlesbrough and Burnley have seen little short term benefit even if the Lancashire duo have started 2013-14 well.
Fans of opposing clubs forced to content themselves with the meagre solidarity payments may rail as much as they like and it is indeed a rum solution to reward failure in this way. However, the dramatic overstretching that comes with a Premier League sojourn and the difficulty of getting players off the wage bill when relegation is suffered means that the payments can often be swallowed up in paying the players – the lump sum won’t have made Birmingham City any more comfortable about having to pay Nikola Žigić for instance.
Selling players is essential
Nonetheless, the Blues understood this quickly and moved swiftly to excise the names of Roger Johnson, Craig Gardner, Liam Ridgewell and Jean Beausejour from the payroll. While Gardner and Ridgewell have established themselves back in the top flight, a combined £21.7 million for the quartet constitutes amazingly good business and the likes of Southampton, Watford and Peterborough also generated 50% of their revenue from the moving on of personnel.
‘We’re selling our best players’ you’ll hear fans cry but the risky strategy undertaken by West Ham and Newcastle United a couple of years previously won’t work for most so downsizing is essential, parachute payments or no parachute payments. Look at Reading – they engaged in the classic Schumpeterian process of creative destruction in netting close to a combined £10 million for Matt Mills and Shane Long; ten months on, a second Championship trophy in six years had been earned.
Owner debt is debt – plain and simple
The occasional criticisms we aim in the direction of the likes of QPR are always rebuffed with recourse to the wealth of the clubs’ owners – and in a way, these supporters are quite right to invoke the example of Chelsea and Manchester United who have also borrowed to maintain their success.
But two wrongs don’t make a right and similar hedging continues apace in the Championship. The level of money owed to owners is extraordinary with Brighton leading the way on £120 million, Leicester paying for the excesses of the Sven-Göran Eriksson era on £86 million and East Midlands neighbours Nottingham Forest only a million behind on £85 million.
While Brighton’s loans come interest free, those of most of the others most certainly do not – with Leicester forking out £5.3 million in interest over the calendar year and Ipswich an extraordinary £3.5 million. We should remember that few balance sheets display a ‘goodness of one’s heart’ line.
Mismanagement is widespread
Even allowing for the absence from the statistics of the benighted duo Portsmouth and Coventry, the detail within the tables reveals remarkable levels of underperformance in certain sectors.
Take Middlesbrough, by almost any measure, enduring a terrible time of things and a club whose travails were picked apart by Mike Baker for us recently. Low match day revenue of £4.6 million is comparable to an immeasurably ‘smaller’ club in Millwall and although the latter are London-based, South Bermondsey is a long way from the King’s Road. Apathy has taken root at the Riverside and low crowds have become the norm now.
Similarly, Nottingham Forest’s commercial revenue – a factor which is so important as any reading of Swiss Ramble’s equally masterly dissections of Premier and Champions League football will reveal – are almost comically low. Sure, there are no visits from Juventus to help attract advertisers but a figure of £2.6 million is roughly a third of that enjoyed by rivals Leicester (£7.9 million) and considerably less than Derby County’s number at £6.7 million. Although I abhor the over commercialisation of the game, every club should be doing all they can to maximise their potential in these areas.
So it’s a fascinating picture and one that we should be extremely grateful to Swiss Ramble for unearthing. The five points above are obvious ones and represent only a dipping in to the full picture. The 2012-13 figures should make for even more illuminating reading.