Football and Finances: Championship NOT Fourth Most Popular....Young Fans Driven Away....League Chairman Predicts Difficult Financial Year

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Several articles of interest re football finances in general; not re QPR, specific.

Paul Wilson/Guardian Blog - first-class average but Championship isn't fourth
We are told that the Championship is the fourth biggest league in Europe, but it is not even the most popular second division

The bigger and more often-repeated the lie, the more likely it is to be believed. No, we are not talking Chinese propaganda again, even if the impossibility of four billion people watching the live broadcast of the Olympics opening ceremony did not seem to occur to the commentators who trotted it out.

A similar, slightly smaller fib has been taking root closer to home. It has become accepted orthodoxy that the Championship is the fourth most popular league in Europe. After the Bundesliga, the Premier League and La Liga, it is frequently claimed, more people watch the Championship than Serie A, Ligue 1, the Eredivisie and all the other European leagues. Aidy Boothroyd, the Watford manager, said so last week. Paul Rawnsley, director of the sports business group at the accountants Deloitte and Touche, welcomed the news that last weekend's Championship gates averaged more than 20,000 with the observation that the Championship was Europe's fourth most watched league in 2007-08.

Yet statistics can lie, and it is also true to say the average gate in the Championship last season was 17,028, which means it was not even the most popular second division in Europe (the average gate in 2. Bundesliga was 17,207), let alone better-attended than Serie A (23,186) or France's (21,817).

Confused? The fact is that Championship teams play 46 games a season, compared to 38 in Italy and France, 34 in Holland and Germany, 30 in Greece, Bulgaria and Kazakhstan. It is greatly to the Championship's credit that 9.4m people saw its matches last season, but playing more games ultimately means only that the same spectators are counted more often. In terms of aggregate attendance the Championship can say it is fourth highest, though that stat is produced by the sheer number of games. In terms of average attendances, surely the only acceptable measure for purposes of comparison, the Italian league is fourth most popular in Europe, which is roughly what you would expect, while the Championship trails home in eighth behind the big four plus France, Holland and Germany's second tier.

For the record, the average Bundesliga attendance last season was 38,612, ahead of the Premier League (36,076), La Liga (29,124) and Bradford of League Two (13,659). The last is worth mentioning not only because it was comfortably the highest in the bottom division, and because it beat everyone apart from Leeds and Nottingham Forest in League One and was higher than seven clubs in the Championship. Bradford are always worth mentioning because of a deal they struck with fans to reduce drastically season-ticket prices (to around £150) provided take-up was sufficient. The numbers tell their own story about the scheme's success - the crowd at Valley Parade last Saturday was 14,038, in a division where the average gate in 2007-08 was 4,341. It could be argued Bradford fail to extract maximum revenue from their bumper gates, though programme and catering sales have increased and there's the intangible benefit to players and fans of the stadium being mostly full.

If this all seems rather small-time and hand-to-mouth by Premier League standards, it should be remembered that few things in the Premier League are exactly as they seem. Just ask Mike Ashley, who thought he was buying Michael Owen and Mark Viduka when he paid for Newcastle and failed to realise he was merely acquiring a pile of IOUs. Or ask Philip Long, head of corporate recovery at accountants PKF, who have titled their seventh annual survey of football finance Under Pressure. It would appear - who'd have thought it? - that Premier League clubs are among the worst placed of all institutions to survive a credit crunch.

You may have noticed that more clubs than usual are trimming squads and wages, and some have publicly stated they are finding it difficult to raise money for transfers. That is just the surface picture. According to PKF, there has been a dramatic rise in clubs using more than 90 per cent of their overdraft, up from 46 per cent in 2007 to 89 per cent this year. That's probably everyone except Chelsea and Hull, and a significant spike, even if it is hard to understand how an answer of 89 per cent can be arrived at when a question is being asked of 20 clubs. Ticket prices have peaked, sponsorship is slowing and banks with less money to lend are beginning to take a more realistic view of some clubs' financial viability. Not before time, you might think. 'Excessive spending has produced a false economy in football,' the PKF report concluded. 'Clubs with huge financial backing can buy their way to the top, forcing others to try and compete by spending money they don't have.'

Well knock me down with a feather. Still, it's good to have it in black and white so that even Peter Kenyon understands it. The Bradford season ticket offer has closed for this season, but don't worry. Around 90 per cent of bigger clubs will be catching them up soon. Guardian


Louise Taylor/Guardian Blog
Middle-aged, middle-class and muted - meet today's fan
A faltering economy and high ticket prices are driving away young supporters from attending football matches

Talk of looming recession can prompt drastic measures. Across England cars are already being driven unusually slowly in the hope of conserving petrol, shopping is being done at Aldi rather than Waitrose and increasing numbers of holidaymakers have opted to sleep in camper vans instead of exotic five-star hotels.

Yet during a summer when it seems that every other conversation centres on escalating food and fuel costs, fans of Premier League football clubs appear strangely immune to the credit crunch.

As our survey shows, season-ticket sales are, in several cases - and despite price increases - significantly up on this time last summer. Indeed the only club prepared to own up to slightly sluggish ticket-office activity was Blackburn Rovers. Nonetheless they remained optimistic that a "couple of new signings" would swiftly produce an upsurge in demand.

"While not being recession-proof, football is to a certain extent recession-resistant," explained Dan Jones, a partner in the sports business group at Deloitte and Touche. "Football is a special thing, it gets people through the working week and fans will give up a lot of things before they let go of their season tickets."

Accordingly at certain clubs guaranteed seats remain as elusive, and prized, as gold dust. Whenever he can get his hands on a spare ticket, Paul Mecher, a heating engineer, happily makes the 300-mile round trip from his home in the north-east to Anfield - but Liverpool are not in a position to even consider offering him a season ticket. "There's a waiting list but when I tried to get on it I was told the list is closed because they've just got too many applicants," lamented Mecher.

Not that Premier League clubs should necessarily be complacent. Jon Keen, deputy chairman of the Football Supporters' Federation, explained: "English football fans are among the most loyal sets of consumers in the world. Our clubs know this and, in their greed, they'll exploit it. But they aren't thinking about the long-term future good of the game. It's a mistake to just look at the numbers of season tickets being sold and think everything's healthy. For instance I think that, while people may not give up season tickets, they will economise by not going to cup games."

Keen, whose organisation claims a nationwide reach of some 142,000 fans, is also deeply concerned about the changing profile of the typical season-ticket holder, something which is turning the working man's ballet into the preserve of the middle class and middle aged.

"The demographic is altering," said Keen. "Season-ticket holders today are very different from those of 15 or even 10 years ago. Their age and affluence is going up. The average age of a Premier League season-ticket holder is now 44 and a recent survey showed that only around 9% can be classified as working class. That figure used to be around 75-80% and the average age was much younger . . . Season-ticket prices have gone up by an average of 7.2% this summer but it's a completely short-term strategy. A whole generation is being priced out of Premier League football. A lot of young people are growing up without ever having experienced live games."

Keen warns that the forty-something white-collar lot who do go are often simply too polite to generate the sort of electric atmosphere which used to be English football's hallmark. "The atmosphere is declining, if not dying, at many matches - it's not as vibrant as it used to be. And that is not what the television companies who fund our clubs want."

Tellingly, Newcastle have introduced a "singing' or "noisy" corner in the heavily corporate St James' Park, in which vocal fans will be encouraged to lead the renditions of the Blaydon Races in exchange for season tickets reduced to £390. "By doing this Newcastle are acknowledging the game has a problem," said Keen. "The noisy corner would have been totally unnecessary a few years ago."

In mitigation, some clubs - albeit less fashionable ones such as Middlesbrough and Bolton - appear to see the bigger picture and are trying to attract young fans. Bolton offer a £50 children's season ticket; Boro have introduced a £95 version for under-18s plus under-21s concessions.

With commercial departments at some clubs expressing private concerns that imminent recession will dramatically hit corporate-box and hospitality revenues, this refusal to turn a blind eye to economic gloom may yet prove impressively far-sighted. Guardian


Football League - MAWHINNEY PREDICTS "DIFFICULT YEAR" AHEAD

Football League Chairman Lord Mawhinney has encouraged League clubs to be economically prudent in the year ahead, as the effects of the worldwide Credit Crunch take hold.

Speaking to Sky Sports News following the publication of The League's Agents' Fees Report for 2007/08, which revealed that clubs committed £11m to agents last season, the former cabinet minister said, "I think this is going to be a difficult year, economically, for a lot of clubs - not because they are run badly, but because the national economy is not in good shape.

"I have been a member of parliament for 26 years, and I understand the pressures on the budgets of ordinary people up and down the country. People spend money on things that they are interested in, or that excite them, but they also spend that money only after they have dealt with the fundamentals of life.

"People's disposable income, what they've got to spend on other things once they deal with these fundamentals, is likely to decrease this year. I think that probably means that some people will spend less on football. Also, a number of companies whose profits are being squeezed may have less money to spend on sponsorship and supporting their local clubs.

"Clearly football fanatics will continue spending their money on football. There will be other people who will say, 'I'd like to spend my money on football but I have to put petrol in the car, stay warm or put food on the table. These are higher priorities'. Consequently, I think this may be a very difficult financial year for a number of clubs.

"Football clubs are an essential part of their communities and communities are hurting. The Bank of England was telling us just this week that communities are likely to continue to hurt for some time. Football cannot be totally protected from that economic squeeze.

"My advice to our own clubs is that you should review your budgets, make sure they are as tight as possible and make sure you administer them as tightly as possible." Football League


Sunday Telegraph - Credit crunch makes Premier League clubs feel the squeeze
As the Premier League prepares for its big kick-off, football is showing the first signs of suffering with the prospect of a recession looming.
On Wednesday, Mervyn King, the Governor of the Bank of England, issued householders with a grave warning that hard times were ahead and, after more than a decade of exceptional prosperity, the football industry is realising that it is not immune to the economic realities of the outside world.

A range of new research has shown that the credit crunch is having an impact from the boardrooms controlled by billionaire owners down to the loyal fans who provide the foundation for every club.

"Across the country we are getting the same message: the credit crunch is hitting football – and the effect is likely to be even greater next year," said Professor Tom Cannon of the University of Buckingham's Business School.

The most obvious immediate impact has been on the amount spent in the Premier League transfer market, which is poised to show its first yearly drop for more than five years. Indeed, with just over two weeks until the summer window closes, the clubs have so far spent £300 million on transfers compared with a record-breaking £530 million for the full period last year.

Portsmouth, for example, are largely funded by a wealthy foreign owner, but have admitted they cannot invest further in the squad this year. "I did say we intended to bring in three top players but that was before the credit crunch," said their chief executive Peter Storrie. "We cannot keep spending the amount we have spent since the summer of 2007 – in excess of £60 million on players. On top of that you have agents' fees while the wage bill has gone up substantially."

Mounting difficulty with borrowing money has also placed a potential obstacle in front of those clubs hoping to push through with building projects on new grounds and training facilities, while the flurry of major takeovers of clubs appears to have ground to a halt in recent months.

A newly published study by the PKF Football Industry Group, titled Under Pressure, surveyed a sample of club finance directors and underlines some of the adjustments that are being made. It shows that, as more Premier League clubs anticipate making a loss this season, there has been a dramatic rise – from 46 per cent in 2007 to 89 per cent this year – in the number of clubs intending to use more than 90 per cent of their overdraft.

The study also reveals that two thirds of Premier League clubs intend to reduce their first-team squads this year compared with only 15 per cent in 2007. Clubs have also admitted to increasing problems with sourcing finance amid growing pressure from the banks.

Spending on Premier League wages

2002-03: £761m
2003-04: £811m
2004-05: £785m
2005-06: £854m
2006-07: £969m
2007-08: Over £1bn

Attracting sponsorship has become a particular problem in the Championship, with threequarters of respondents in the study reporting a decline. "The optimism reported by clubs who expect their sponsorship to grow next season is likely to be short-lived," said Stuart Barnsdall, a PKF assurance and advisory partner. "The current arrangements are based on existing three or five-year sponsorship deals that have some years to run and, once they are complete, it is doubtful that new deals will be easy to secure.

"The pressurised climate is here for some time to come, so it is imperative for the long-term stability of the industry that clubs tackle their money concerns with a matter of urgency."

The ability of leading clubs to operate successfully in the present climate is, however, greatly helped by the guaranteed income from broadcast revenue, longer-term sponsorship deals and the sale of season tickets, which have remained encouraging despite unpopular price increases.

In the Premier League, there is an in-built yearly five per cent increase in revenue from the television deal, though many experts are predicting declines in merchandise sales and corporate hospitality. "While all clubs are starting to feel the bite of the credit crunch on their sales of tickets, merchandising and corporate hospitality, the Premier League financial directors are reporting a more widespread set of financial challenges and pressures than in previous years," said Charles Barnett, a partner at PKF. Even so, the total revenue Premier League clubs receive is expected to rise this season to almost £2 billion while the new TV deals from 2010, particularly the overseas rights, should continue to show a significant increase.

Supporters, though, warn that they cannot be taken for granted. "Fans are experiencing the current economic realities just like everyone else," said Malcolm Clarke, chairman of the Football Supporters' Federation. "I would expect that there would be a particular impact with fans travelling to away games and the sale of replica shirts. Football often thinks it is divorced from the realities of the world and the complacency in some areas has been quite staggering."

The Managers

Fees of £20.3 million for Robbie Keane, £17 million for David Bentley and £13 million for Andy Johnson do little to suggest that the general spending capacity of the managers has yet suffered enormously from the credit crunch.

However, even if major deals involving Robinho and Dimitar Berbatov are finally secured, the overall outlay is still likely to be less than last year. Paul Rawnsley, director of Deloitte’s sports business group, argues that the drop is “not alarming” when set against previous years. Yet this was supposed to be a bumper summer.

The likes of David Moyes, Alan Curbishley, Kevin Keegan and Arsene Wenger appear significantly restricted when set against the ambitions of their respective clubs, while Harry Redknapp has been told there will be no more money to spend this year.

Professor Tom Cannon, of the University of Buckingham’s Business School, said: “I don’t think that last year we would have seen the Gareth Barry deal collapse over what seems to be £1 million, or Manchester United taking so long over Berbatov. The anticipated spending boom hasn’t materialised. Deals are collapsing over what seem to be relatively trivial sums.’’

The Players

With Frank Lampard this week agreeing a five-year deal worth almost £34 million and Premier League wages continuing to soar, it is hard to instantly see how the players are suffering from the economic down-turn. Since the launch of the Premier League in 1992, total club wages have risen from £75 million to in excess of £1 billion – and they now represent 63 per cent of turnover.

However, the financial climate has prompted significant change in the structure of contracts. Lampard’s deal is unusual in that it will rise from £121,000-a-week until the third year before dropping back down as he nears the age of 35. It would also be surprising if there is not a significant performance-related element to the deal.

One of the most interesting findings of this week’s PKF annual survey was the admission by Premier League clubs that a growing element of the first team squad’s salary is now performance-related. In 2006-07, less than a third of Premier League clubs had applied a performance related element to between 10 and 25 per cent of the first team squad’s salary. However, that figure has more than doubled over the past year to 78 per cent.

The Fans

Despite the spiralling cost of living, the loyalty of fans has remained admirably consistent.

Premier League attendances last season broke all records at an average of 36,144, while the Championship can even boast being the fourth most watched league in the world. On the opening day of their season, the majority of Football League clubs recorded larger attendances than last season’s averages, while the Premier League will be bullish about their ability to maintain support.

Arsenal, for example, have a waiting list of 40,000 for their capped number of 42,000 season tickets, while Sunderland, criticised for their increase in prices, are still nearing last year’s tally of 30,000.

Elsewhere, Bolton’s sales are slightly up after they dropped the price for children, while Fulham have added 30 per cent to their sales.

However, attendances at clubs such as Wigan, Blackburn Rovers and Middlesbrough will be closely monitored for signs of the credit crunch’s impact. There is also the possibility that all fans will become more selective over the matches they attend, as well as what they are willing to spend on merchandise, catering, match-day programmes and corporate packages.

The Owners

In the City, it is common knowledge that a number of Premier League clubs would carefully listen to offers from potential new owners.

However, aside from the rumblings at Liverpool, there has been little recent sign of major change. Indeed, after high-profile takeovers at Manchester City, Newcastle, Liverpool, West Ham United, Manchester United, Portsmouth and Aston Villa since 2005, it has been an uncommonly quiet summer in the Premier League.

The global economic climate encourages caution among potential investors, while finding a bank to facilitate a leveraged buy-out has become more difficult. There is also the simple fact that there are a finite number of sufficiently rich people with an interest in Premier League football.

“The number of UK billionaires is a fairly small number, and many of those have indicated they do not want to get involved in football,” one City source said. “Quite simply, the financial requirement is for billionaires, not millionaires.”

The credit crunch also threatens to hit club owners seeking loans to fund major building projects. Tottenham, West Ham, Portsmouth, Liverpool and Everton are all trying either to extend their grounds or to relocate.

Money matters

Gross summer transfer spending by Premier League clubs

2003: £250m
2004: £260m
2005: £290m
2006: £330m
2007: £530m
2008 (to date): £300m

Source: Deloitte Annual Review of Football Finance Telegraph


Posted Earlier this week on QPR Report

Football Finances Report - Survey of Football Club Finance Directors-
Another report on Football Finances has been released. This one is from PKF Accountants and Business Advisors. The 22-page report, interesting for what it says about football in general, rather than specific to - or even mentioning - QPR, is entitled "Under Pressure: Is it Time for the Industry to Go on the Defensive? -The Annual Survey of Football Club Finance Directors 2008" can be downloaded for free

From PKF Accountants and Business Advisors
One of the strongest themes of our seventh annual survey of football club finance directors is evidence of increasing financial pressure on the English Premier League (EPL) clubs. While all clubs are starting to feel the bite of the credit crunch on their sales of tickets, merchandising and corporate hospitality, the EPL FDs are reporting a more widespread set of financial challenges and pressures than in previous years.
PKF’s Football Industry Group commissioned an independent research company in June and July 2008 to undertake structured telephone interviews with finance directors of football clubs. A total of 37 interviews were completed with finance directors in the English Premier League, Football League Championship, Football Leagues One and Two, Scottish Premier League and Scottish First Division. All responses were recorded anonymously to ensure the confidentiality of the respondent.
To find out more about our Football industry group please click here.
Please click here or on the publication image to download this survey in pdf format, you will need to complete your name, email address and post code. - PKF

FOREWORD
For the first time ever, one of the strongest themes of our seventh annual survey of football club finance directors is evidence of increasing financial pressure on the English Premier League (EPL) clubs. While all clubs are starting to feel the bite of the credit crunch on their sales of tickets, merchandising and corporate hospitality, the EPL FDs are reporting a more widespread set of financial challenges and pressures than in previous years.

For example, fewer are expecting to make a pre-tax profit; more are under pressure from their banks; more are using over 90% of their overdraft facilities; and more are finding it harder to source finance. These pressures are manifesting themselves in smaller budgets for the first team squad; freezing of payroll costs and the first real attempts to link player salaries to performance on the pitch.

With new television deals in place both in England and Scotland, the potential fall in TV income has been replaced by the ability to attract new sponsorship as one of the FDs leading concerns, rising from 14% last year to 51%. So it is surprising that a majority of clubs remain optimistic that their revenue from sponsorship will increase in the coming year – and most of these think the growth will be more than last year. That said, the number that expect no growth in this area has risen significantly since our last survey. It is likely, too, that the optimism is largely down to existing deals that have some years left to run – rather than good prospects of securing new deals. As the credit crunch prompts potential sponsors to review the level of funds available to market their business, clubs may well feel the knock-on effect.

This year we have introduced some new questions; 62% of FDs confirm that the wages to turnover ratio is a key performance indicator, with 75% of respondents using a benchmark between 50% to 65%. Worryingly, 17% of clubs use a benchmark greater than 65%, which almost certainly means they will be loss making. Furthermore, 14% of FDs describe their clubs’ finances as being ‘in need of attention’ or worse.

It will be an interesting season as we see how clubs manage these financial pressures when faced with demands to buy players to produce results that mean enhanced league positions.

We believe the current pressurised climate is here for some time to come, and it is therefore important to the long-term stability of the industry that money matters are controlled.

We hope you find the survey of interest and our thanks to all those who gave their time and views to enable us to create this insight into the state of the game’s finances. As usual, we have made a donation to the PFA Benevolent Fund for each completed survey."
Charles Barnett Partner, Football Industry Group


EXECUTIVE SUMMARY

FINANCING THE CLUB
Ticket sales still the most important income source
Ticket sales continue to be the biggest source of income for football clubs but their importance has slipped slightly for all leagues over the last 12 months, while alternative uses for the stadium, new media and ground naming rights have increased in importance.
TV and radio deals constitute the most important income stream for the EPL.

TV and radio deals generate most income growth
The predominance of the role of TV and radio deals in football is even stronger this year with 41% of respondents – and 78% of EPL respondents – saying that TV and radio deals generated the biggest percentage increase last season – up from 20% last year.

Sponsorship revenue continues to increase
Sponsorship revenue increased for 57% of clubs last season and the majority of football clubs (62%) are confident of sustaining and growing their sponsorship revenue in the 2008/09 season.

Credit crunch bites into match ticket sales, merchandising and corporate entertainment
The three revenue streams most affected by the credit crunch are match tickets, merchandising and corporate entertainment. The EPL has been most affected by the decline in corporate hospitality spending while the most significant impact of the credit crunch for other leagues is on ticket sales.

EPL under more financial pressure
More EPL clubs have been under increasing pressure from their banks – up from 31% to 44% this year. There is also a sharp rise in the percentage of EPL clubs planning to use more than 90% of their overdraft facility from 46% in 2007 to 89% this year.
A third of EPL respondents have had problems sourcing finance this year – up from just 8% in 2007.
Additionally, there is a significant increase in the percentage of EPL clubs with debt funding guaranteed by a director or shareholder - up to 89% of respondents from 54% last year.

PLAYER COSTS

More EPL clubs cut first team budgets
Two thirds of EPL respondents say they will be reducing their first team squad size this season – up from only 15% in 2007. This contrasts with 44% of EFLC clubs who will be increasing squad size – up from 33% in 2007.
However, there is no let up in payroll costs – 59% of respondents are budgeting to spend more on the first team squad salaries this year. The only league where the percentage of clubs spending more on player salaries has fallen is the EPL – a dramatic drop from 69% in 2007 to 33% this year.

More clubs using performance-related pay
There is a significant incr ease in the percentage of clubs making between 10 and 25% of player’s pay dependent on their performance. This has increased from 34% in 2007 to 54% this year. The most noticeable increase is in the EPL where 78% of respondents are now applying performance-related criteria to between 10 and 25% of the first team squad’s salary. Last year only 31% of clubs were doing this.

More transfer budgets frozen
Fewer clubs will be increasing their transfer budget this season and the majority (59%) will be sticking to the same levels as last year. Only the EFLC have a larger percentage of clubs that will be increasing their budget this year.

Attitudes towards football agents harden
The reputation of football agents continues to fall within the football industry. More than half of respondents consider agents to both hinder negotiations and add cost – up from 44% last year.
The strongest detractors of agents are the EFLC (78%) and the SPL (75%).
When asked if they thought that agents are becoming more powerful and influential, only a third (32%) think they are while 14% think they have less influence.

INVESTING IN THE CLUB

More ground investment across all leagues
More clubs are planning on investing in their grounds this year – up to 76% from 58% last year.
The greatest percentage increase is from EFLC clubs where the percentage has risen from 44% in 2007 to 89% this season.

Attracting external investment most important for EFLC clubs
It is ‘very important’ or ‘quite important’ to 68% of respondents to attract significant investment from external investors. It is very important to more than half (56%) of EFLC respondents.
The main reason for attracting external investment is still to develop the stadium although the percentage of EPL clubs giving this reason has fallen from 83% last year to just 33% this year.

Players’ salaries still the biggest concern
For the fifth year running, the inflexibility of players’ salaries continues to top the list of FDs’ concerns although this is now joined by the ability to attract sponsorship – up from 14% in 2007 to 51% this year. Not surprisingly, the fear of relegation is also a major concern to the EPL (67%).

TABLE OF CONTENTS
Foreword 04
Methodology and sample profile 05
Executive summary 06
Analysis of key findings
– Financing the club 08
– Player costs 14
– Investing in the club 17
PKF services to football clubs 22

See Full report at PKF


Also Earlier last week: Latest Football League Report on Payments to Agents
Latest Football League Agents Report released (QPR third biggest spenders in the Football League during first half of 2008