In football, the biggest losers win

June 14, 2010

“Football is just a business nowadays, isn’t it?”

Well, actually no, it’s not, and it never has been – at least not if a business means an enterprise intended to maximise shareholder value.

In the “good old days” – so called because they were bloody awful – football clubs were financed by a Big Sugar Daddy, often the millionaire who owned the local mill or maybe a small chain of shops in the town.

As Chairman of the Board, he would treat the club as his little indulgence, a rich man’s hobby, an alternative to collecting old masters or old mistresses.

In return, he would behave as if he owned the club (which he did), his name would probably be on the main stand and his real business – the one that generated the money – would advertise in the match programme and on boards around the touchline.

With players’ wages subject to a Football League limit so low as to have become a joke (or a national disgrace) by the 1950s, the BSD had little to lose, even though there was no income from TV, only peanuts from sponsorship deals and match tickets cost less than you’d pay nowadays for a half-time coffee.

What’s changed? Everything, except the role of the BSD. Millionaires or the simply rich need not apply nowadays, at least not if a club entertains serious ambitions in the English Premiership (or the Spanish Primera Liga or Italian Seria A).

You need to be a billionaire, preferably a multi-billionaire, prepared to kiss goodbye to 250 million pounds or more, as have done Messrs Abramovich at Chelsea, Ashley at Newcastle, and the oil sheikhs who give me and thousands of other Manchester City fans a warm feeling every time we fill up with petrol.

Players’ and managers’ wages have the whiphand, rather in the same way that the stars and the directors have captured Hollywood from the big studios. The difference is that, while today’s Hollywood moguls may sometimes have to kowtow to the box office stars, they never lose sight of the bottom line.

By contrast, in football the bottom line is not the profit, it is the limit the BSD sets to his generosity.

Ultimately, moneymaking activities at top football clubs are aimed not at maximising the net gain, but at minimising the net loss, subject to the team being kept in the manner to which it is accustomed. In other words, moneymaking is intended at best to defray some of the BSD’s outlay.

So, a business? No, each club is more like the charity supporting a national institution. The British Museum, for example, is never going to make a profit – nobody seems to think it should.

Instead, it survives thanks to a few large gifts (mainly from the government, of course) and thousands of small donations from the general public, and it supplements its income from these sources with a number of business activities, mainly their shops.

Neither football clubs nor art galleries can survive without subsidy because in both cases the same dynamic is at work: the more money comes into the global “game”, the more the price of the assets is bid up worldwide.

In the same way that the arrival of Arab, Russian or Chinese money on the art auction scene raised the price of museum assets, it has found its way into football and inflated the value of the assets, i.e. the players and, increasingly, the managers.

So while the art gallery benefactors’ charity serves to liberate Damien Hirst, Tracey Emin and co. from poverty, the money flowing into football does the same for its stars, their WAGs and their agents.

In football, the winner is usually the team with the biggest budget – in other words, the one whose BSD is willing to lose the most.

Although nowhere near as socialised as American sport, top football clubs in Britain subsidise (albeit grudgingly) their weaker competitors further down the pecking order by sharing out income from the contracts negotiated between the league and the TV companies. This is a cross-subsidy in two respects.

Not only do the smaller clubs get a larger share of the revenue than would be warranted by viewing figures alone, they also benefit from the resulting increase in their TV audience, which makes them a far more attractive proposition for advertisers and sponsors.

Nobody doubts that, in the short run at least, the big names of European football would make far more money if they were able to negotiate their own contracts, leaving the competition to survive on the scraps, but so far football’s welfare state has survived.

(None of this is a secret, though it appears to have come as a surprise to the Glazers and their backers, who seem to have thought they were buying the right to exploit the Manchester United label as freely as if it were a reality TV franchise.)

I can offer a medium-term forecast (it’s easier than forecasting the economy!). Governments 10 years from now will be funding a lot more of our football than they do today, simply because politicians will be unable to resist the pressure (or temptation) to rescue failing clubs.

I say more than today because taxpayers are already contributing directly or indirectly, something which is not always recognised, thanks to the fact that the subsidies are often concealed in more or less devious fashion (does anyone understand the finances of AC Milan or Real Madrid?).

At this point, any British readers muttering “It couldn’t happen here” should ask themselves whose name is on the shirt of the Newcastle United players.

It’s Northern Rock, which belongs to us all as taxpayers (including Sunderland supporters – delighted no doubt to see their hard-earned taxes going to such a worthwhile cause).

There are other examples of indirect subsidy by central and local government in Britain, certainly more than enough to establish the precedent that football clubs have to be bailed out because they are part of our national heritage, what our parents fought the War for….. I’m yawning already.

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