Sunday, May 14, 2006

Most English clubs want "fairer" income distribution

A joint study between financial advisers Grant Thornton and Birkbeck College of the University of London’s Football Governance Research Centre shows that a majority of England's football clubs are in favour of a greater distribution of revenue within their leagues. The November 2005, 5th annual State of the Game study, recently discovered on the internet by Soccer Investor, revealed that 60% of the English Premier League's clubs and 57% of both Premier and Football League clubs are in favour of a greater distribution of revenues within their leagues, while 80% of all clubs would back a fairer distribution of riches across all leagues.

Predictably, 50% of Premiership clubs object to greater redistribution to the Football League, but opinion is fundamentally split with 40% of clubs willing to back greater distribution. 10% remain undecided.

"The game is at a cross-roads", says Prof Christine Oughton, Director of Birkbeck's Football Governance Research Centre. "The Premiership is experiencing a growing crisis with stagnant attendances and a lack of a competitive balance", she continued.

"Despite seeing the football bubble burst with more than 36 clubs going into administration in the last 10 years and many others having to drastically tighten their belts, debt remains a big issue", said Joe McLean a football finance expert at Grant Thornton. 83% of all clubs remain concerned about the levels of debt they are facing (up from 79% last year) and 22% are very concerned.

"Football has moved on from the financial excesses witnessed within the game just a few years ago; although progress has been made, serious debt problems remain. With many clubs in better shape, the emphasis is gradually shifting towards addressing the structure of the game and specifically towards issues such as revenue distribution, improved corporate governance and competitiveness. Consequently the overall appeal of the game is thrown into question", McLean said. "More clubs want a fairer distribution of TV revenues, because the current financial model upon which the game is based is too risky for proper long-term planning", he added.

Some 85% of all clubs and 70% of Premiership clubs believe that greater redistribution would help to reduce business risk. "With so much revenue at stake, the difference between finishing fourth rather than fifth in the Premiership and missing out on Champions League football can be massive, having a devastating effect on club finances. Likewise, finishing 18th rather than 17th can reduce a club's income by millions of pounds", said Oughton.

"The fact that eight out of 10 football clubs believe a better distribution of revenues would reduce risk and tackle competition is a clear signal that unless a more level playing field is established through a better sharing of resources the game is destined for further difficulties. Attendances will continue falling, competition will remain stifled and interest in the game will wane being mildly rekindled only when the big games take place", continued McLean.

Looking at the results in greater detail, the research revealed that overall progress among football clubs in England and Wales in improving corporate governance standards is continuing to head in the right direction, albeit at a slow pace. Nearly all clubs now approve a 1-year business plan with more clubs now conducting a form or risk evaluation. Problems do remain, for example, only 8% of clubs have a nominations committee and 19% an audit committee. Training for board members remains weak.

Looking ahead, 94% of clubs support agent fee transparency and 92% want to see a tighter regulation of agents, a move Oughton believes "would go some way to help dispel some of the clouds that give the game a bad reputation".

The PLC model is clearly on a downward path. From 20 clubs listed (10 on the LSE) at the height of the trend back in 2000, only 12 remain in public hands (4 on the LSE). Football has instead witnessed a growing involvement of organised supporters through Supporters Trusts. They are now involved in 57% of all clubs ranging from the Premier League to the Football Conference.

Membership has grown significantly and is now estimated to be in excess of 100,000. "When Supporters Trusts first emerged, critics claimed that clubs run by fans would recklessly spend resources on a whim, perhaps for a new centre-forward. On the contrary clubs run by Supporters Trust have demonstrated a refreshing level of prudence", said Prof Jonathan Michie, one of the reports co-authors.

"Despite debt problems still present in many clubs, the penny appears to be dropping in the minds of many football stakeholders and clubs in particular. We are witnessing early, though distinct signs that the tide is slowly turning away from a game made of poorly managed and unaccountable clubs and a lack of competitive balance and moving towards better run clubs, greater supporter involvement and crucially, greater support for a more level playing field in terms of the financial distribution of revenues", concluded McLean.

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