Premier League Bubble Is About To Burst


On the same day that Kaka moved from AC Milan to Real Madrid for a world record transfer fee of £56 million, Newcastle United put a ‘for sale’ sign up on their website and put their entire squad up for sale. At the same time, Setanta Sports looks like it’s heading for administration, Liverpool’s financial woes are so severe that the future of the club is in jeopardy, while West Ham United are 48 hours away from being wound up even after just being taken over by a consortium of Icelandic banks.

Even the most successful club, Manchester United, incurred massive debts of £667 million last year.

Ladies and gentlemen, the Premier League bubble is about to burst.

If Setanta goes into administration this week, this will have massive implications on the Premier League unless a new suitor can be found who is willing to pay the £159 million a year that Setanta owes for the 2010-2013 seasons. The Premier League clubs will be hard hit by Setanta’s collapse especially if the TV rights are re-sold at a massive discount which would undermine many Premiership clubs with massive squads of footballers who are paid exorbitant wages.

ESPN is the obvious choice of a broadcaster who might step in to buy Setanta, but there’s no guarantee that the Disney-owned company wants to take on a company that has massive debt especially after the Premier League bubble bursts.

It’s time for Premier League clubs to be prudent. The first place to start is with player wages. Clubs need to stop trying to compete with the Chelsea’s and Manchester City’s of the world and face reality. Just as the global financial crisis hit home last autumn, it’s now time for the Premier League clubs to face reality and realize that the credit crunch has finally now hit football.

8 thoughts on “Premier League Bubble Is About To Burst”

  1. It is interesting that it is all coming crashing down somewhat.

    On the Setanta thing, if the UK company goes into administration, does that affect Setanta Broadband. I understand they may not be able to show the Setanta broadcast, but I assume they could pick up the international feed like Fox for the games on Broadband? Anyone know if they are seperate entities?

  2. It’s a real shame about Setanta. They finally get broadband right – great feed quality, widescreen, user-friendly format etc – but it seems too little too late. I can’t help but think if they had invested earlier in the high quality broadband service that they *now* offer that they might have pulled in more viewers earlier. After all, even today how many people can get Setanta on cable? Answer: Not many. But who wanted to pay $15 month for a terrible broadband feed when you could get the same illegal low quality feeds for free? It’s great to see that Setanta broadband is now really good, and I hope that if they go broke that someone buys the website, but it seems to me that they missed the opportunity in the early 2000’s to really establish themselves as *the* online sports channel.

  3. Just what we need, ESPN taking an even bigger interest in sports tv rights. For any of you not familiar, I would advise you to take a look at their business model. Essentially, in the US (for US Sports), ESPN had, I believe, the same amount of annual subscription fees (it’s in the billions) as CBS had as its entire market cap…and that doesn’t count advertising ESPN owns.

    And on the Prem, people have been saying this for a while now. Some of the money and wages that get thrown around are absolutely ridiculous. One slip up and the club falls into perilous debt.

    Take Chelsea…if Abramovich is out, what happens?
    Liverpool…strapped with debt.
    Man U…they need what, 50mil+ / year just to service their debts? If they miss out on CL footie (Unlikely at the moment), then what?

    In cases like this you have to applaud the more financially sound clubs…

  4. Setanta was always fighting above it’s weight, sad, but not really surprising.

    Newcastle are in a better position now after the Profitable Group. The investment organisation, fronted by ex Liverpool stars, now Commercial Directors, Steve Mcmahon and Kenny Dalglish, have tabled a bid to buy out owner Mike Ashley.

  5. Be Happy–remember economics is a social science–if we all can convince our blokes to pay for something and smile then the economy gets better.

    regarding the SALES, money is not everything — remember the 70’s ??? and 80’s…. let Real Madrid buy everyone. They’ll be hurting this time next year and this article will be moot.

  6. ESPN will not step in and buy Setanta. Quite possibly, they foresaw this and have planned all along to buy the broadcast package from the Premier League at a greatly reduced rate. Good business for them, not sure exactly how that affects us, the viewers here in the US.

    It’s time for financial responsibility on the part of the clubs. You can’t spend money you don’t have, because you may not actually get it. Portsmouth, should the sale be completed to Dr. Fahim, will be in good shape, but only because they will have a wealthy owner. What about Southampton? Newcastle? Leeds? The list could go on and on. You have to manage your club properly, which means realizing that the money supply is not bottomless.

    This will be a very interesting summer, and a different league come next fall. May you live in interesting times…

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