By Mac Byrne
Business guru Lord Sugar’s hard hitting investigation into the running of the top tier of the national game blew the whistle on a business model with no logic and gave a red card to some X-rated business practices that would render most businesses insolvent.
Sugar, formerly owner and chairman of Tottenham Hotspur Football Club, set out to ascertain, from those in the know, how the league is run today and what its key problems are in order to propose a plan of action aimed at steering it towards a profitable future. As Sugar says, “Football needs a dose of hard business reality.”
To get the full picture Sugar interviewed key figures at every level of the Premier League structure; Richard Scudamore, Chief executive of the Premier League; Dave Whelan – former player, multi-millionaire founder of JJB Sports and Chairman of Premier League minnows Wigan Athletic; Football Agent Jerome Anderson; Spurs Manager Harry Redknapp and the Premier League’s all time top goal scorer Alan Shearer.
Not surprisingly the buck – or more aptly the ball – was well and truly passed, given the chaotic way in which the business side of the league operates, with player level absolving themselves of liability on the basis that they do not dictate what they are paid; agents claiming they just represent the players; Manager(s ) stating that they have no knowledge of salaries or transfer fees; Chairmen that they are held to ransom by agents and players; and the man at the top stating that the individual football clubs run themselves!
The root, both of the success AND the failure can be traced back to the initiation of the Premier League in 1993 and its partnership with BskyB. This was an association that revolutionised football in the UK, taking a game that was slowly dying and transforming it into the global phenomenon it is today. This alliance resulted in an injection of TV money which today equates to ITRO of £40m paid to each Premier League club.
The usual response from any business receiving such a windfall may be to use it to build the business – invest in infrastructure?; increase their marketing budget in order to gain more market presence; perhaps save for a ‘rainy day’?; pay off debts?; or expand?; AS WELL AS investing in assets such as staff or technology. However, football clubs have been using the majority of this ’new money’ – in Wigan Athletic’s case 91% of their total income – to entice a higher standard of (staff) player with ever increasing transfer fees and on ever inflating salaries, in order to gain the success they crave on the pitch. In doing so they have well and truly taken their eye off the ball when it comes to the other aspects of the business.
Whilst any fan – of which Sugar is one – realises that football holds a somewhat unique position in the business world, given the emotional attachment and brand loyalty fans have to their clubs, there are basic business principles that every commercial venture lives or dies by. First and foremost, to operate at a profit, of which only 6 of the 20 current Premier League Clubs are currently doing!
Sugar revealed that the Premier League community is currently operating at a staggering, combined annual loss of £3.3bn, relative to Europe’s other main leagues – Spain’s La Liga (Circa £800m) and Italy’s Serie A (Circa £425m).
He ended what was, to a large degree, a thankless task by outlining his 5-point plan for the development, and as he says, the survival of the national game;
1. Tougher penalties for financial failure. If you’re insolvent you close! simple as that! As Sugar says, once clubs are left to die and the current situation, whereby most know that insolvency comes with the safety net of a Premier League bail-out, becomes a thing of the past, the message will hit home.
2. Abolishing the ‘trend’ of buying clubs with borrowed money which is creating a culture of ‘instant debt’ for even the most (previously) profitable clubs – Manchester United for example.
3. Imposing a pan-European/global salary cap. If a complete meltdown is to be avoided this is fundamental to the future of the game itself, not just the league. Although how this is implemented – given the disparate levels of budgets of each club – is the £3.3bn million pound question!
4. Applying the same creditor settlement rules to football as apply to the business world at large; Ceasing the current process of paying first and foremost IN FULL, all of those associated with the playing side of the club prior to ANY other creditors (inc. PAYE).
5. Funnelling a proportion of the TV money into a Trust Fund to be drawn on ‘in times of genuine financial hardship’ for the League/clubs.
