Questions - football generally (1 Viewer)

[oldskyblue58]

Why is football as a business model different to normal practice?. What is so different about it that makes any normal business model go out of the window - where owners make decisions they wouldnt normally? What makes it so different that its customers believe it is their right to demand that owners should throw money at it with little prospect of recovery? Why is it that clubs shouldnt balance their books, maintain a net asset position and be able to pay their way? Or that owners should write off millions to please its customers or walk away on their (fans) say so - why ?

Would be interested if someone could explain all that - please not in terms of SISU this is a much wider enquiry. Given that most clubs claim to be an exception to normal business rationale and most clubs are in the financial mire by using the exception and justify it by using the oft used term of "but football is different". Why is it different? Has it worked being different?

look at it this way - the fans are the customers buying the product ..... the squad is the equipment for providing the product........ the product is the success of the team/club. Is that so very different to making mobile phones, cars or widgets?

Would be interested to see what people think and how they justify financial risk (mismanagement) for such poor return....... why is football different ?

 

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[wingy]

Why is football as a business model different to normal practice?. What is so different about it that makes any normal business model go out of the window - where owners make decisions they wouldnt normally? What makes it so different that its customers believe it is their right to demand that owners should throw money at it with little prospect of recovery? Why is it that clubs shouldnt balance their books, maintain a net asset position and be able to pay their way? Or that owners should write off millions to please its customers or walk away on their (fans) say so - why ?

Would be interested if someone could explain all that - please not in terms of SISU this is a much wider enquiry. Given that most clubs claim to be an exception to normal business rationale and most clubs are in the financial mire by using the exception and justify it by using the oft used term of "but football is different". Why is it different? Has it worked being different?

look at it this way - the fans are the customers buying the product ..... the squad is the equipment for providing the product........ the product is the success of the team/club. Is that so very different to making mobile phones, cars or widgets?

Would be interested to see what people think and how they justify financial risk (mismanagement) for such poor return....... why is football different ?

sorry OSB dont know the answer to that ,i but i do know we're all getting cut adrift by the the new regulations ,and dominance of the mega clubs ,the inequity in tv money share etc ,so i guess its insane but it has'nt been about football for a long time ,there seems to be a theory through tv and the powers that run the game that if you dont have a, large fan base you should'nt be allowed to join the club ,Blackburn we're the first,buying success,yet it would have been much richer for them if they'd achieved it under don Mckay ,so unlucky missing promotion twice by a whisker , Scott Sellars comes to mind,back on point its a product now and less a sport ,shame!.On further analysis you could liken it to religion,the grounds the churches,the players the gold within,the regulators and tv representing the diocese distributing the finance ,and the rich benefactors building higher steeples and having more stained windows and obviously gold ,and for all of us away from the top table,we await the second coming.It defies logic. Maybe we could use it to solve the ills of the world instead of bombs and bullets, as someone wrote recently, if fifa was a country shound'nt we have bombed it by now.Would certainly reignite the international scene with something riding on it,dont think there'd be any foriegn managers.

 

[rob9872]

Player valuations too subjective and opinions so wide. I can only liken it to buying art.

 

[wingy]

hi again OSB ,if you take a look at my last post in the masterplan you,ll get the gist ,wonder if you fancy doing some number crunching on what its cost us in lost revenue ,if the info's available,against what the mortgage would cost.

 

[johnniericoh]

Football finance reminds me of the continual failure of auditors to sign off the books of the EU - that monolith continues to drift on year after year clearly operating illegally as far as conventional finance ethics is concerned.

Football is probably worse because at times it is a bit more transparant via the media which unearths some gems in financial malpractice.

There is no single factor that stands out - but we could probably look no further than the onset of the Prem League (PL) which reared its ugly head twenty years ago and the whole football world went crazy.

Multi million £ transfers, Multi million £ salaries, Multi million £ debt all gathered apace to from then to where we are now.

Along the way the financial tools for stability were totally ignored by a significant number of clubs resulting in the neglect of balance sheets, profit and loss and cash flow measurables.

Can it be right for a Mr W Rooney to receive an annual "salary" that is 90 times more than the PM gets (£13,000,000 v £145,000) - it is absolutely ludicrous. Can it be right to lay out £50M for Torres and £35M for Carroll both seriously under performing players - the world is insane.

Having created the above festering culture we then get the Sheiks, Greeks bearing gifts, Chinese giveaways et al using football as a hobbyhorse to fulfil their bloated egos thus creating the most unlevel playing fields in sporting history.

Clubs like our beloved CCFC will NEVER aspire to the heights of the modern game (even with FULL ownership of the stadium and rail access etc) so one might say what's the point. But us fans I think are more resilient than that and I for one can take enormous pride in what we achieved in 1987 with players on modest wages and managable transfer fees.

Well OSB58 I don't think I have answered your question fully but at least you know where I am coming from.

PUSB

 

[Disorganised1]

The TV money is the clue - if you can just get into the Champions League then the spin-offs ammount to mullions, so people gamble to get there, and if the prize is big, so are the stakes. Somehow footballers managed to become caught up in it.

 

[oldskyblue58]

Thanks for the contributions guys.

Very conscious that I view things with an accountants view point, doesnt mean I dont have the passion just that I question (as everyone knows) the figures.

Think the parallels with religion and art are good ones. All come down to throwing money at something that perhaps others do not see the value of, that perhaps there is no logic to the expenditure but folk get wrapped up in it and lose sight of the normal stop signs.

I also agree that player salaries are ludicrous and that the drive for TV money fuels much of it

To answer wingy's query about lost revenue - i assume from non ownership of the Ricoh - is hard to estimate as it is so closely linked to the success on the field. ACL hasnt made great profits and to date has accumulated net losses. There would be savings by eliminating duplication of staff etc, biggest loss of funds is/would be the Ricoh sponsorship which I assume is ACL's not CCFC's. The car parking, shop rents etc are included in the ACL accounts so taking all into account I would guess we missed out on a net profit (ie after all expenses) of say £1m to £2m per annum. But it is only a guess and others may have different ideas - they may well be correct

As for the mortgage cost well ACL carries original cost of stadium and fitting out at something like £32m assume thats all financed. That would allow a secured loan on those assets but say interest at 5% over a 25 year period that would equate to a total of £23.5m over the 25 years in interest. Payments on the loan would be £186k per month or just over £2.2m pa. Only hypothetical of course.

Might raise the question of if we had to borrow money from normal bank sources is the purchase of the stadium viable ?

btw At 5% pa SISU funds forego £1.5m pa on the monies lent to SBS&L (£30m)

 

[wingy]

Inrelation to how much ACL have had to spend ,would the higgs contribution come off that top figure,have put it in FAQ 1,in answer to Paxmans cost of lease

 

[oldskyblue58]

the money higgs put in would have been to fund the stadium build and as it is a 50:50 venture would have matched the council. It wouldnt be 50% of the full cost because something like £20m was financed by a loan to ACL.

What Higgs trust and council didnt do is to put money in to pay for day to day expenditure.

Hope that helps wingy

 

[BurbageSkyBlues]

For me, the big difference to normal business principles, is the point of brand loyalty.

If you are affluent, and shop at say, Waitrose, and then lose your job, you might shop at, say, Asda, to contain costs. If you are a football fan, and lose your job, you might reduce the number of games you go to.....but you don't start supporting another team. The effect of this, is that it makes it harder for teams to gain supporters from local rivals, and hence it is important, in the longterm, to retain the interest of your existing fanbase and their descendants. When this fails, typically after a sustained period of spiralling decline, it becomes very difficult to regain growth, without disproportionate investment.

There are a few clubs that have an incredibly loyal fanbase (eg Leeds) but the majority will be like us. It's ten years now since we dropped out of the PL, and a generation of support has been lost, almost. Of we made tasty bread, word would get round, and it would sell well. Playing tasty football will take longer to convince the apathetic population that it is worth a trip to the Ricoh, unless it is sustained for a substantial part of the season.

This becomes nigh on impossible to reverse, if youngsters from perimeter towns become attracted to rivals (eg Nuneaton and rugby schools attach to Leicester).

As a football business, success and support in the next decade is influenced by events today......& the longer we are in this trough, the more unlikely it becomes that we will climb out of it.

 

[wingy]

Thanks OSB, those FAQ s explain a lot but the little nuances of it all just need teasing out ,think I'm coming to the conclusion that stadium purchase is mostl ,ikely apipe dream,best bet would be to hope for overall control of ACL at some point,don,t no if you got a copy of that council report rob or rich mentioned a little way back ,where it said the the value of the council freehold was only 0.6 mill as of 2006 with ACL as leaseholders ?

 

[oldskyblue58]

no havent seen that report wingy - have you got the reference to it ?

 

[wingy]

no havent seen that report wingy - have you got the reference to it ?

http--cmis.coventry.gov....

 

[oldskyblue58]

cheers wingy