The formation of the PL + FFP

[Marc]

I don't know how I stumbled across this article, it was on an old Man City form. I think I may have been googling ticket sales distribution. I've no idea who wrote it, but it's written in laymans terms and very interesting. I imagine most of it is true because of the details, it's too random to make up. Lengthy ready, but worth it if you're an English football saddo.

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THE DELAYED REQUESTS FOR FINANCIAL REGULATION IN THE PREMIER LEAGUE BY LIVERPOOL, ARSENAL AND UNITED, IS NOTHING BUT SELF-PRESERVATION.

In a recent article in The Telegraph, it was reported that at the Premier League’s annual meeting, Liverpool had put forward the idea of tightening financial controls on clubs. Manchester City are believed to have been opposed to the idea, insisting that they would prefer to run their club as they see fit.

Of it’s supporters were Fulham, West Ham’s David Gold, Arsenal and United’s David Gill, who it appears, alongside Chelsea had been key in developing the infamous Financial Fair Play regulations brought in by Uefa.

Now I am all for financial regulation of some kind, and I know that sounds rich coming from a City fan. But I have seen our club stumble around in the financial might of the Premier League on many occasion and it has never a pretty sight. And I know that the number one factor of that struggle every time has been money, because I have seen us fail in many attempts to make money to help us compete.

Due to these failed attempts, I have seen us relegated twice and then sell players to make ends meet. I’ve also seen us bounce back and loan millions of pounds in order to try and maintain our presence in the Premier League. And after seeing us reportedly go nearly bankrupt under Thaksin Shinawatra, I have seen us get bought by an owner, who not only has never ending riches, actually has a business brain and a plan that will hopefully keep the club sustainable for many years to come. So you would think that reading that article should have made me feel content, to be finally seeing some regulation being thought about. But in fact, it just left me frustrated.

After 20 years of the Premier League, 20 years of unprecedented TV revenues and 20 years of financial inequality between the leagues, here were three of the main creators of that inequality telling the rest of the League that we needed tighter financial regulations. And on top of that, here were 2 clubs full of riches, advising on Uefa’s FFP regulations. Regulations that tell clubs they can only live within their means. To live within their means in a league where club earnings are nowhere near comparable. A league where you are enticed to take financial risks on investing in the best players, because the more successful you are, the more money you earn.

Their feign concern for the good of the league comes 30 years after their initial desire to rob the rest of the Football League for some of their TV & Sponsorship revenue. To understand what I mean, you need to go back to the roots of the Premier League.

For those of you that are not aware, the Premier League is not a creation dreamt up by the FA. And despite what it says in the FA’s “Blueprint For The Future Of Football” – released at the dawn of the League – nor was it created as a way to streamline the First Division and help improve English players by having them play fewer games in the elite of the English Leagues.

The Premier League was actually born from the desire of 5 club chairmen & directors to take advantage of the huge amounts of money that were about to be available from the new era of Sky TV. These men were David Dein of Arsenal, Philip Carter of Everton, Martin Edwards of Manchester United, Irving Scholar of Tottenham Hotspur and Noel White of Liverpool.

The demand of a breakaway by these 5 clubs was not a new threat. This was a threat that’s roots go back to 1981. For in 1981-82, the big clubs of the First Division began to grow tired with sharing revenue with the rest of the Football League and Philip Carter, the chairman of Everton, held a meeting of club chairmen at Goodison Park, where famously Manchester United’s chairman Martin Edwards was quoted as saying:

“The smaller clubs are bleeding the game dry. For the sake of the game, they should be put to sleep”

This contempt for the smaller clubs of the Football League was only the start of it.

Believe it or not, TV money was not always given to just one league and split depending on your league position. Before 1985 – based on the founding beliefs of the FA that revenue be shared equally to keep the league alive – TV money from the BBC & ITV was split evenly across the 92 clubs. And as an added assistance the away team also received 20% of gate receipts. This guaranteed a steady income to small town clubs with lesser attendances, which in turn, helped the Football League survive (providing their clubs were ran correctly) and added a little bit more healthy competition for trophies.

But in 1983, unhappy that they were sharing the profits from their larger stadia, the big clubs lobbied the Football League and gate sharing was abolished meaning that the away teams no longer received any money from their matches. Something that may not seem too significant, but if you consider the difference in revenue between 0% and 20% of a 50,000 seater stadium, especially when your stadium only holds 20,000, you’ve instantly got a larger gulf in revenue between yourself and the larger clubs.

Two years later recession had hit the nation, gate receipts were at their lowest since 1922 and many clubs were on the brink of survival, with some communities rallying around to keep their local side a float. With money hard to come by for the majority, the 22 First Division clubs, led by Philip Carter, unsympathetically threatened to breakaway unless they received a greater share of the TV & Sponsorship money.

Philip Carter had previously met with all 22 chairmen to discuss their demands, and the chairmen’s options were simple: “vote yes or we break away”. And so, unsurprisingly the chairmen voted yes and met with the PFA’s chief executive Gordon Taylor. Here they threatened to breakaway from the Football League unless they received a greater share of the TV revenue, their argument being that they needed to compete with the bigger clubs in Europe.

After 6 hours the ‘Heathrow Agreement’ was signed and TV money was no longer split evenly between the 92 clubs. The new agreed split was for 50 per cent to go to the First Division, 25 per cent to the Second Division and just 25 per cent split between the Third and Fourth Division. The ball was now rolling.

The big clubs insistence that their size and popularity demanded more money and more influence within the League was growing. David Dein of Arsenal joined the Leagues Management Committee and in 1988 the League struck a deal of £44m with Greg Dyke at ITV. However this time the bigger clubs got a larger share due to their games being shown live almost exclusively.

The next TV deal was up for renewal in 1992. Sky TV were emerging and the long-standing gentlemen’s agreement between ITV & the BBC to keep TV money down was about to meet some competition. After the problematic and sometimes tragic events of the 80’s, it was agreed between the FA & the Football League that despite years of politics between the two of them, they would approach this new opportunity together and use it to benefit British football from the grassroots up, signing off on a document called ‘One Game, One Team, One Voice’.

Less than a month later however, the First Divisions ‘Big Five’ – Arsenal, Manchester United, Liverpool, Tottenham and Everton – had a private meeting with Greg Dyke to discuss a break away from the Football League. The big clubs asked Greg Dyke if he would pay them big money for the rights, to which he was more than happy to. From there, David Dein and director of Liverpool, Noel White went up to face the FA.

When approached by Dein and White, the chairman of the FA Bert Millichip embraced the idea of a break away, thinking in some way that he had undermined the Football League. Feeling that he had prevented them from taking power away from the FA under the ‘One Game, One Team, One Voice’ agreement. Which couldn’t be further from the truth. The ‘Big Five’ had won.

The FA had given permission for clubs to breakaway from the League and take all the money for themselves. Understandably the rest of the League clubs were livid, not only were the 22 clubs of the Premier League about to gain unprecedented riches without them, they were also losing their 25 per cent of the TV money. The FA and the Premier League agreed to keep the promotion and relegation system and kindly compensated the 70 clubs for their loss in revenue to the measly sum of £3 million to split between them all.

Despite their discussions with Greg Dyke, the TV rights were still up for bidding. Rupert Murdoch’s failing BSkyB company was losing money and needed a unique selling point. At the time Alan Sugar, the chairman of Tottenham Hotspur, was making the dishes for BSkyB. And it was at the clubs meeting where he famously rang Rupert Murdoch to inform him of ITV’s bid and tell him to “blow them out of the water” which Rupert duly did agreeing £305m for exclusive rights from 1992-1997.

This was it. No longer was the draw of the bigger clubs going to help keep the Football League alive. And no longer were TV audiences going to watch without paying. This was the apparent beautiful dawn of the Premier League.

It needs to be remembered that the self-anointed ‘Big Five’ orchestrated this. The other members of the First Division at the time did not have to tag along. But one would say that this all depends on how you view their options. Here was an opportunity of untold riches, imagine the things a club could do with that money! This could make or break a club; to not join would be foolish, but to join and get relegated in to a league without that kind of TV money could be fatal. It’s understandable that – despite earlier protests to the idea – no club turned down the invitation.

With the European ban on English clubs being lifted in 1990, the people involved in the break away claim that they struck the deal in order to keep up with the big teams in Europe, and it is hard to dispute that claim. The large Spanish and Italian clubs were and still are benefitting heavily from TV money and they were dominating the European competitions in the 90’s. But it does not hide away from the fact that the break away was at least short-sighted and utterly selfish.

Football was booming and making more money than ever before. New safer stands were going up, post Hillsborough, and ticket prices were soaring. Chairmen could see an opportunity to float and raise extra funds to compete or more often than not, take for themselves. And after the first season it was already evident how things were going to pan out. The team who was making the most money won the first championship and the three clubs with the lowest wage bill got relegated. And it was no surprise who was paying the most wages and why.

After floating in 1991 to fund the all-seating of the Stretford End, Manchester United used the money and the birth of the Premier League to gain their fortunes off the pitch. They bombarded the country with merchandising at a level that had never been seen before for a football club. Expanding themselves as a global brand through tours of the Far East and releasing products such as their own Champs cola (worth £5.3m in 1992-93), wine and champagne and many other forms of merchandise, some more hideous than others. Not to mention their commercial tie-ups with the New York Yankees and their lucrative shirt deal with Sharp.

In 1994 they opened a megastore and used the spare land around the ground to expand the stadium to 67,700 adding in 180 executive boxes that were subsequently booked up, before creating their own subscription television channel in the late 90’s. This was all added to the revenue from their museum tours and thousands of conferences and events at Old Trafford every year.
Arsenal never did float, but benefited from increased share prices. Instead of floating, David Dein introduced a much criticised bond scheme for fans in order to raise the cash for seating the North Stand. With the bonds came a huge hike in ticket prices, way above inflation, which saw Arsenal raised the funds for their development.

Along with merchandising of their own and tours of Asia, Arsenal made a healthy profit, they could not raise half the amount of money that United could. Their stadium & club shop were half the size and they lacked the executive boxes and global brand. However Arsenal still used their profits to bring in players on good wages and continued to fight well on the pitch. And when they weren’t winning the league, maintained second position behind United.

After the first season only 14 clubs made a profit, a small one, whilst 8 made a loss. This new era of riches was proving to be no different to the old era of moderate revenue. The other clubs were willing to loan millions just to try and keep up with the likes of Manchester United. Meanwhile, back in the Football League, half the clubs had been able to sell their best players to the Premier League clubs and managed to make a small profit. Football was now worth £387m but overall the 92 clubs only managed a profit of £12,000.

The evidence of this shows, that spending beyond your means is not a new issue. In fact 10 years earlier in 1981-1982, a report on professional football finances found that all but 14 of the 92 Football League clubs were technically bust.

30 years ago the issue was glaring the Football League and the FA in the face. Even though TV revenue was split evenly and gate receipts were shared, clubs were spending as much as they were willing to risk on trying to compete at the best level they could. Yet despite this the governing bodies still allowed the further financial suffocation of the Football League, and the monopoly of the Premier League to gorge itself on the millions from BSkyB.

30 years down the line and we still have the same problem. However the problem is more difficult than ever before. Clubs are still spending beyond their means in futile attempts to compete with the top clubs, only this time the figures are far higher.

Since 1992, thirty-six of the Football Leagues 72 clubs have been in one form of insolvency or another. Many have been large clubs who have almost collapsed upon dropping out of the Premier League, unable to cover the wages and loan payments due to the instant loss of revenue.

The gulf in earnings and money spent on wages between the top clubs and the rest of the League is almost immeasurable, yet only now do the influential men of the Premier League clubs come out and call for regulation. The question is, why now?

For 20 years the top clubs have been exploiting global markets and making millions from it. They’ve been inflating the transfer market by regularly breaking transfer fees to bring in players on some of the highest wages in Europe. Throughout this time They have been watching other clubs drive themselves in to the ground, loaning millions to pay inflated wages and transfer fees for the best players they can, all in the vain hope that it will get them higher up the table and earn those extra millions to cover the costs.

So where was their concern when Leeds were in trouble? Where were their calls for regulation during Sheffield Wednesday’s troubles, or Oldham’s, or Swindon’s? What about when Southampton were in difficulty, or Bradford or Nottingham Forest or Portsmouth? The answer is that there wasn’t any concern. It didn’t matter then, for some reason. You reap what you sew after all, right?
So why is there this recent call for regulation? Is it finally because too many clubs have crashed and burned and English football has been in trouble for too long? Nobody outside of the meeting can say exactly, but it seems very unlikely that this is the case.

One of Platini’s main concerns when discussing UEFA’s FFP has been the management of clubs with super rich foreign owners. Owners like Sheikh Mansour at Manchester City who has been capable of comfortably funding the club himself using loans that he then wrote off, clearing the debts of the club, but leaving it with a wage bill that currently far exceeds their turnover. Again, this is nothing new, but the wages at City, as we all know are large and their last accounts recorded a loss of around £190m.

So is this the issue that Liverpool and the others are using as the basis for their concerns over regulations in the Premier League? Are they concerned that Manchester City might go bust? I very much doubt that either. The term ‘self preservation’ springs to mind and you only have to look at the recent change of fortunes for some of the clubs involved to understand why.

Arsenal are currently known as admirably having well balanced books. But this cannot be said as being a cause for great delight among Arsenal fans or their shareholders. For after the mighty efforts of David Dein in forming the Premier League, Arsenal increasingly found it hard to compete financially with United. Unable to expand their stadium to increase ticket sales, they subsequently struggled to find land to develop a new stadium on. They found themselves not only building a multi million pound stadium, but also re-developing a large area of Islington in order to do so, at an apparent cost of close to £1billion. This is a cost that Arsenal are still paying off, forcing them to keep their wage costs down and in doing so have lost many of their big name players to rival clubs, including 3 captains in the last 3 years and 4 players to the new found wealth of Manchester City.

Due to the acquisition of the club by the American Glazer family, United have recently found themselves beginning to make a loss, despite still turning over more than any club in England. The debts of £500m laden on to them by the Glazers, as well as the apparent £500m that they have also bled from the club, is making it difficult for United to improve their wage structure and transfer fees in order to compete.

Chelsea do not seem to be having such issues. Under their Russian owner, Chelsea are still yet to end a financial year earning a profit. However, last year they benefited from finally securing the Champions League title and another FA cup. They have a net total spend of £163.5m over the last 3 years not including the £63.5m spent this summer. And they seem to be on the up again.

Despite Liverpool’s up and down fortunes on the pitch, their global fan base guarantees they are still a club with a very healthy turnover. They are currently under the new ownership of American John W Henry. Henry has come in after the highly criticised reign of Hicks & Gillette and cleared the clubs debts, bringing in some much needed stability and profit. Henry has been publicly critical of Manchester City’s £400m, 10 year sponsorship deal, covering their stadium, campus & shirts.

West Ham and Fulham are in different situations to the clubs above. David Gold has turned around the fortunes of West Ham and brought back financial stability to the club, by investing his own money and selling on the higher paid players and bringing in similar players on lower wages. He was recently involved in bringing financial regulation to the Championship and since their promotion last season, he is keen to bring a similar system to the Premier League.

Mohamed Al Fayed has been (as far as any observer can tell) a very good owner for Fulham. He is another who has invested a lot of his own money in to the club using soft loans and like many, has brought stability to the club. Fulham are a surprising addition to the list of supporters for financial regulation in the Premier League after previously being against any suggestion of a system that “kills the dreams” of others.

When you consider the situations that these seven clubs currently find themselves in, self-preservation is at the top of their list. You would hazard a guess that both West Ham & Fulham see their survival in the league as their main benefit from financial regulation. Both of them are financially stable and with relatively wealthy owners, and Fulham have made the Premier League their home as they enter their 11th consecutive year in the League. But the new riches at Southampton, Reading, QPR and Nottingham Forest will no doubt have them looking over their shoulders.

As for the other 5 clubs; their reasons are not too dissimilar. Self-preservation is their number one aim too, as you would expect, but it is not for survival in the league, this is for survival at the top. They want to continue dining at the top table and feasting on the financial banquet of global sponsorships, television revenue and European competition money. And who can blame them?

Liverpool’s reasoning is that they see an opportunity. Their new owner has removed their debts and now their turnover should see them building profits. The only issue for them now is that there are clubs with a lower turnover being supported with more than those profits by their rich owners.

It is fair to point out that Chelsea are not one of those believed to be supporting regulation in the Premier League. But along with United they were influential in the creation of UEFA’s FFP, and that is because they know where they stand. They are up there at the table with the big names of UEFA. They have got a growing global fan base and a recent Champions League trophy win. There is no way that they are going to go against any financial regulations proposals if it means they can fight for that status with as little competition as possible. The last thing they want is another club coming to take away all their hard work.

And that goes the same for Arsenal and Manchester United. They have got the status, they’ve had it for years and they have still got the earning power, but they are losing the profits. Why shouldn’t they get behind financial regulations proposals?

The desire of Arsenal, United & Liverpool to survive at the top is not what frustrated me about these latest discussions on financial regulations. It was the fact that these clubs were once again using their influence to push forward short-sighted ideas in order tilt the game in to their favour.

With the UEFA FFP regulations dictating that clubs need to spend within their means, they are doing nothing more than maintaining the current hierarchy of clubs throughout Europe. Which is why it comes to no surprise to see that Chelsea and Manchester United were heavily involved in the arrangement.

United, Arsenal and Liverpool’s feigned concern for the well being of the league and its members is laughable and almost sickening. These are not regulations to save the league; these are regulations to save league positions. It’s far too little, and it’s 30 years too late.

To bring such regulations in to the Premier League now will do nothing more than strengthen the monopoly of the top 5 or 6 clubs. And it frustrates me that nobody within the governing bodies seems to notice that this is the case.

With the Premier League, we have a league that not only rewards you with larger sums of money the higher up the league you finish. But by finishing in the top 4 you gain such global presence and financial benefits from TV and European competition, that you earn tens of millions more than the clubs beneath you in the same league. And yet we are discussing bringing in a regulation that prevents you spending more money than you earn? How is it feasible for mid table clubs to even consider fighting for a European spot?

It is already an almost impossible task to reach the top 4, let alone maintain that position. If we implement a similar policy as the UEFA FFP regulations, the only options for mid table clubs would be to hike up their already inflated ticket prices and sponsor every inch of the stadium and football kits. And then who will be the ones to suffer? Yet again it will be the fans; the ones that are there no matter what. Because we’re always here to be walked over when we’re needed.

This is a league that was created by the few greedy chairmen of clubs; we now have a situation where those clubs are suffering from their own success and greed. David Dein’s greed for more ticket money and executive facilities led to Arsenal making an expensive decision to build a stadium and half a new town. Manchester United lost control of their club due to a disagreement with their wealthy and powerful shareholders. Inadvertently handing ownership to an American family who have straddled the club with unprecedented debt that would bankrupt any other football club.

Now these clubs are trying their hardest to maintain their status by feigning concern about the well being of others, and I for one am not buying it. This is a world that they created and they need to learn how to survive in it like the rest of the clubs have done. They turned the sport in to a business and just like in any other business; other companies have found wealthy backers and are now challenging the top companies. This is nothing that couldn’t have been predicted.

If the Premier League wants to bring in regulations to keep clubs managed correctly and wants to prevent clubs from spending amounts that could seriously damage their position in the league, then great. But they need to think harder.

The fundamental issue is not with the clubs spending beyond their means any more. The new issue is the 27-year-old issue of the financial inequality of the League. If you want to stop people spending beyond their means, then great! Fantastic! But make the League an even financial battleground first.

Dare I suggest that we share the TV money and vastly improve the compensation and support for relegated clubs? And if we really want to go crazy, why not use some of the billions in the league to support the Football League better? Maybe we could actually improve the measly amount that the Football Foundation receives and actually give grassroots football in the UK a chance to succeed.

It is obvious for the majority to see that regulation in the form of UEFA’s FFP only maintains a clubs position within the league and does nothing to solve the issue of a club being relegated with large overheads. So you would like to think that it shouldn’t be hard for the FA to see it.

If we don’t even out the financial playing field first then all we are left with is Formula One during the Schumacher years, La Liga, or this years SPL. No thanks.

 

[Stan]

The author was definitely @SirBalon given how long it is.