Since 1996, every Championship Trophy and FA Cup has rested in the trophy case of either Manchester United, Arsenal, Chelsea or Liverpool with one singular exception. All 30 of those pieces of silverware have gone to the Big Four except for the 2008 FA Cup, which has been ensconced in a sacred place at Portsmouth’s Fratton Park. That is the same Portsmouth that is now all but certain to go into administration and quite possibly obliteration in the coming weeks. Those two facts are not just a coincidence – they are connected in an inexorable, tragic manner.
The economics of English football are simply perverse. It is very expensive to lose in England and get relegated, but it is also ridiculously expensive to win. Owning a sports team, at least in the short run, is usually a break-even investment at best. Unless you happen to have Russian kleptocrat or Middle Eastern decomposed dinosaur money, it takes an astute, conservative businessman to own a football team and avoid getting wiped out in the process.
From a pure business standpoint, the best model is to be something like what Aston Villa or Tottenham are right now – successful enough to be competitive with the big boys, avoid any relegation issues and get an occasional sniff at European competition but small enough to cash in on an occasional lucrative Gareth Barry or Michael Carrick sale without enduring the ire of your fans. That is a sweet spot that is very tough to hit, and Portsmouth is a prime example of what can happen when you miss that narrow target.
Since moving up to the EPL for the 2004/2005 season, Portsmouth has flirted with relegation on occasion, but more often has finished in the middle of the pack. They have been modest dabblers in the transfer market, and several of their biggest purchases (Jermain Defoe, Glen Johnson and Lassana Diarra) have been sold for bigger profit. David James was a significant purchase, but has been a good servant to the club. Other purchases (John Utaka and Dave Nugent) have been clunkers, but most of the Portsmouth transfers have been prudent. Portsmouth seemed comfortable walking that economic tightrope in the world’s most expensive football league.
Then came the triumph/tragedy of the 2008 FA Cup run. After beating Manchester United at Old Trafford and Middleborough, Portsmouth found itself in the surprising position of being the last premier league team left in the competition. Their 1-0 victory over Cardiff City at Wembley is one of the great moments in club history. However, as the players walked up the stairs at Wembley to receive their medals, they were also ecstatic about what this victory meant to them financially – most players had written into their contracts bonuses of over £250,000 for winning the cup, and manager Harry Redknapp was in line to get a cool £1 million. All told, the bonus bill for winning the FA Cup probably totaled over £15 million. This is a giant amount for a team that only has about £70 million per year in revenue to begin with.
Why would Portsmouth agree to such bonuses in the first place? Those types of performance based bonuses are pretty standard in England, and it seemed like a low-risk situation. After all, who would bet that Portsmouth would be the first team in a decade to wrestle a major trophy away from the Big Four? Frankly, if Steven Gerrard’s pile driver had gone slightly wide of the goal in 2006, West Ham would probably be in the same position as Portsmouth is today.
Nevertheless, those bonuses had to be paid, and once a team starts spending beyond its means in the EPL, they are in danger of entering a result-dependent economic death spiral. The only place to get the type of money Portsmouth needed is in the transfer market (bye-bye Defoe, Diarra and Sulley Ali Muntari), which, of course, hurts the results. As the results suffer, managers start to come and go, the team starts to sink, gate revenue starts to fall, and the team sinks even more. More players are sold (Glen Johnson, Peter Crouch) and all of the sudden the 2009/10 season looked over before it began. Perhaps some of this spiral could have been avoided if the team could get a loan to get over this FA Cup bonus hump, but loans can be a risky business in football (i.e. Leeds), and it was never a real possibility anyway with the collapse of the credit market just as Portsmouth was putting their new trophy on display.
Now Portsmouth is starring at the abyss and have no room to back-peddle. There is always talk of some sort of shadow investor from some foreign land who can rescue the team, but wealthy people usually did not become wealthy by investing in soon-to-be-relegated financial sinkholes.
For better or worse, the structure of the EPL is that only four teams can afford and absorb the financial consequences that come with success. Manchester City is trying to break into that crowd, and is set up to afford anything. Beyond that, winning in England is a curse. Nearly every team that has broken into the top four over the past decade (Newcastle in 02/03, Leeds in 00/01, Chelsea before the Abramovitch takeover) has seen financial misery. Portsmouth is just the latest team to realize that losing is lousy, but winning in England can be death.
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