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Could Your Premier League Club Be the Next Rangers or Portsmouth?

rangers debt Could Your Premier League Club Be the Next Rangers or Portsmouth?

The recent financial struggles of Portsmouth and Rangers have been the subject of debate amongst fans. The worry is that maybe your club is not the invincible landmark of history that it once seemed. The overall financial climate in today’s world means that finances have become a hot topic. While there have been countless pages dedicated to these issues, it is a point worth reiterating.

In June 2003, Roman Abramovich bought the companies that held ownership to Chelsea FC. Steps were quickly put in place to achieve the status of global branding. The goal, seemingly, to match the worldwide fame of footballing echelons Manchester United and Real Madrid. A spending spree, one of which English football had never been on par with, ensued. Manager Claudio Ranieri commented on it as being his chance to build his very own Roman Empire- the pun was more than likely intentional.  The tinkering Italian did not get to see any real benefit of it. While many feared a period of Chelsea dominance, there was another fear factor involved. Outsider influence had never been so threatening in the Premier League.

This outsider influence posed one problem that bordered on critical. Once a club over spends on one transfer dealing, there is a domino effect on the rest of the market. TV rights had already seen that the market was inflated; thank Rupert Murdoch for that one. Couple that with the ever-increasing influence of agents in the modern game and there was a dilemma on the horizon.

Ronnie Whelan spoke of his experience at Liverpool, claiming that it was assumed that Kenny Dalglish was paid more than the rest of the players. Nobody knew for sure. The players just did not talk about it. You got your pay and that was that. At Manchester United, there were claims of Busby’s astute ability to control a wage structure:

“The great thing about Busby was that you would go in there fighting and full of demands. And he would give you nothing at all. He might even take a tenner off your wages. And you would come out of thinking “what a great guy”. I remember going in there once absolutely livid. And ten minutes later I came out, no better off, walking on air. Delighted”.- Eamon Dunphy.

It is a far cry from modern procedure. The lack of respect for authoritative figures has infected the spinal cord of the game. Carlos Tevez flat out refused to take a manager’s instruction, took a couple of months of a holiday and decided he would come back at the business end. Roberto Mancini has shown that all-too-foreign aspect in the English game — pragmatism. Pragmatism is a nasty word around these parts. We prefer to think that our players wear their hearts on their sleeves. Given the current climate, the saying “no one is bigger than the club” is beginning to feel jaded. It is the fairy tale we all want to believe, that history counts. If history counts then money talks. Money not only talks, it speaks in biblical proportions.

On 19th May 2011, figures released in the media made for damning reading. The general estimation is that a healthy company will spend 32% to 40% of their overall revenue on wages. The figures published by the media in relation to the Premier League showed a complete lack of respect for this estimation. Out of the twenty clubs in the premier league, only one had stayed within this principle. Arsenal was paying 29% of their annual revenue to wages. The biggest offenders in this were not surprisingly Manchester City; an obscene 106% of their revenue was spent on wages. Newcastle paid 90%, Manchester United 46%, Chelsea 82% and Liverpool 65%.

Agents in particular have had an enormous influence in this field. Their relentless pushing of their clients and use of competitive methods have led to wage inflation every year. Take the example of Bill Shankly’s Liverpool and their total wage bill of £571 a week in 1960. With players today reportedly earning in excess of £100,000 a week, it makes the Anfield legend’s team look like the best bargain you’ve ever come across in a pound shop.

The knock on effect is that the smaller clubs who try to compete with the big shots simply cannot afford too. This and the Andy Carroll transfer are probably the reason Newcastle spend so much of their revenue on wages. The fans at St James’ Park are incredibly passionate (not that this isn’t true of any self-respecting club). This has placed a greater pressure on the friendless Mike Ashley to put his money where his mouth is. Newcastle has actually shown a profit for the first time since 2006. This however is a knock on effect of the Andy Carroll sale. In order to continue making a profit off the transfer market in particular, you would have to have a steady line of youth graduates in your club playing first team football. The alarm is increased when you look at the sides’ teams field in the Premier League.  The English national side becomes the real loser here. Of the 641 players listed as playing in the Premier League in 2011, only 42% of them were English.

In 2011/2012, the transfer market also showed an alarming rate of expenditure. Revenue generated from sales was £370,550,400. The expenditure in the market was recorded at £562,773,200, which is a loss of £192,222,800.

With UEFA’s Financial Fair Play rule supposedly already in place, there was an alarming lack of interest in the outlines set in the rule. The influence of billionaire owners is certainly a factor here. It is hard to get away from the picture of the owners being some sort of high rolling gamblers, with stakes too big for a bookmaker to risk. They are willing to pay any amount for the players they want. They sift through managers and discard them, often resulting in costly severance packages. Why take the Chelsea job? The payoff is worth your while at least.

Some restraint has been shown in this area. After Manchester United sold Cristiano Ronaldo for a world record £80 million, the club then looked to hold onto most of the profit from the sale. The other side to the coin is the sale of Fernando Torres to Chelsea. Liverpool in turn bought Luis Suarez and Andy Carroll. Newcastle was the big beneficiates of this occurrence, much in the same way that Parma had seen the benefit of Zidane’s once world record transfer to Real Madrid (selling both Lillian Thuram and Gigi Buffon to Juve for then records in their positions).

The Torres transfer is of particular interest. The deal was finalized with a figure above market value. Transfers such as this one are probably the clearest example of what mortal clubs have to deal with these days. It is near impossible to compete with a business that is willing to make a loss in order to ‘beat your prices’.

You can’t leave the Glazers out of the equation either. The Glazers use Manchester United to service their own debts. They bought the club on the strength of a loan and then take their wages out of it. Their debts are now Manchester United’s and while the club makes a profit, it serves most strikingly, as a payoff for their own debt. The club, along with Chelsea, actually accounted for more than 50% of the Premier League’s overall debt in 2011.

It is not just the financial aspects that are worrying; It is the complete lack of respect for both history and the present. The chances of this changing anytime soon looks slim. Fans want trophies, billionaire owners want their fun – they want their flutter. It leaves you to wonder . . .just what comes next? Nomadic franchising?

This entry was posted in Chelsea, Leagues: EPL, Manchester City, Manchester United. Bookmark the permalink.

9 Responses to Could Your Premier League Club Be the Next Rangers or Portsmouth?

  1. Guy says:

    It makes you wonder if Rangers are just the tip of the iceberg. Time will tell.

  2. dan says:

    I don’t know where the 90% figure came from (probably pre relegation?) because there is now a wage and age cap at Newcastle and our biggest earner is Alan Smith!

  3. CTBlues says:

    I could see it happen to Chelsea if Roman decided to leave.

  4. IanCransonsKnees says:

    It very nearly happened to Liverpool and it will happen to someone someday. It’s even worse outside the topflight. The way the creditors get treated is disgusting, look at Leicester City as an example. Millions in debt, admin the only resort, debts wiped out. Fast forward five years or so, around £25-30m in debt mid table in the Championship.

    Nomadic franchising, it’ll come but only for the top five or six teams. It’ll suit those fans thats latch onto those clubs to bathe in the reflected glory to begin with. How they’ll feel when they experience being also rans for s change will be interesting to see.

  5. raok says:

    Europe is bankrupt and everyone slags wenger for not spending money.

  6. scrumper says:

    This article completely misses the point. It is the basic economic premise present in all commerce and history has nothing to do with it:

    “whatever the market will bear”

    What do we mean by that, – it is the highest price you can sell your goods in the market you are in. In football it is the huge fanbase creating demand. The bigger and wealthier the club then the greater appetite for inflated transfer fees, wages, tv deals etc to stay ahead. If suddenly Man Utd or Real Madrid attendances dropped by half and stayed that way and demand for club memorabilia plummeted their current financial position would be unsustainable. You’d eventually see a sell off of players, severe wage caps and of course the current owner wanting to bail. Real Estate is a perfect example of this premise.

    Oh and IAW paragraph six, somebody needs to give me an example of how Roberto Mancini exhibits pragmatism and how that is a foreign attribute???

  7. Pleb says:

    Manchester United’s financial status may be sustainable. The point is, that outsider influence has become a factor in the market. Could any regular business spend 106% of revenue on wages? Does that even make sense? The real estate business is a good example though, there is only a certain amount of inflation that can happen before the whole thing goes bust.

    A large portion of Real Madrid’s wealth comes from the redevelopment of an old training complex in Madrid. That trebled revenue in one year for them, it also allowed for the “Galacticos” era.

    Mancini exhibited pragmatism by bringing Tevez back, I would have thought. He did say that Tevez would never play for City again only a few months ago. Would Ferguson or Dalglish have allowed Tevez to play again?

  8. alex says:

    Hopefully Man Utd and Swansea will go soon.

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