The ugly economy of the beautiful game – parts I and II

Image:  PSGMAG.NET

Part I: The English Premier League, with the help of austerity, is destroying its own foundations

The recent news that Sky and BT will pay more than £5 billion to broadcast Premier League (the top division of English football) matches for three seasons – an incredible 70 per cent increase on the cost of the previous deal – has thrown a spotlight in the finances of our national sport.  There is so much wrong with the political economy of the Premier League that it’s difficult to know where to start.

This gigantic deal is a result of increased competition among broadcasters in the context of seemingly unquenchable demand for watching Premier League matches live on television.  Interestingly, both companies actually make a loss on their Premier League coverage; they use it to drive customers towards their more lucrative services, such as broadband.

It is the nature of the creation of the Premier League as a distinct commercial entity in the early 1990s, when the top clubs held a gun to the head of the Football Association (FA), which means that very little of this money will flow down into the lower leagues of English football.

The Premier League is founded on a very narrow, disembedded view of economic value.  The idea that only the private enterprises that make up the Premier League contribute to the goods for which consumers are paying ignores the social and cultural context within which elite football is located.

Football is not simply a consumer marketplace.  Premier League profits depend on the sport’s status as one of the country’s favourite pastimes.  The Premier League may be the pinnacle, but its success is founded upon the ability of millions of people to participate in and enjoy football in myriad ways. Football has, in fact, been described in Polanyian terms as a ‘fictitious commodity’ by David Kennedy and Peter Kennedy – by which they mean that supporters are consumers of football, but also its part-producers.

However, participating in football is becoming increasingly difficult.  According to The Independent, the Thatcher and Major governments’ privatisation drive led to more than 500 school playing fields being sold every year they were in office.  The sales continued under New Labour, whilst under the current coalition government a school playing field has been sold every three weeks.  More worrying is the potential long-term impact of local authority spending cuts.  80 per cent of amateur football is played on council-run pitches, yet many have fallen into disrepair, even as costs have risen dramatically.  Plummeting participation rates are the inevitable result.

We are fast approaching a situation whereby the intricate scouting networks of the big clubs are able to identify very young children, from around the world, that demonstrate considerable early footballing ability, while the rest of us are treated purely as customers.  Depressingly, the vast majority of those plucked from pre-pubescence will be discarded by the sport – and certainly the elite clubs – before signing a professional contract, albeit not before having their wider education significantly disrupted.  The Professional Footballers’ Association (PFA) does astonishingly little to help those who do not quite make it.  It parades itself as a trade union – it is even, comically, a member of the Trades Union Congress – but it is overwhelmingly funded not by footballers paying membership subscriptions, but, yes, you guessed, by a slice of the TV money!

We know that Premier League crowds have been becoming more affluent for a long time, due to sharp increases in ticket prices in the Premier League era.  Will Hutton has also warned that the increased pay-TV subscription fees that will now ensue will further alienate ‘ordinary’ fans from their local clubs.

If the top clubs continue to starve the roots of the sport of nutrition, quality (even at the elite level) will eventually decline – and so too will consumer demand.  My view is that we are already seeing evidence of this trend.  Far too many matches between top clubs are now quite tedious.  It does not help that these clubs are, increasingly, managed by a tiny stratum of elite managers, lessening the chance of new ideas being developed.  Watching football has almost become like watching a Hollywood blockbuster, where the celebrity of the leading actors, rather than the quality of the script, is the main draw.

Rescuing football from itself may depend upon disbanding the Premier League (and the Football League, for good measure), with the FA once again running the game for everybody, as a public good.  A far more modest proposal would be for a portion of the extra £2 billion the Premier League will receive from its next TV deal (half, for argument’s sake) to be placed in a FA-run fund to help to protect the sport at all levels of participation.

Yet the Premier League clearly sees itself as a global product, impervious to intervention by geographically-constituted political entities such as the FA or even the UK government.  Its chief executive, Richard Scudamore, has already answered such demands by declaring that the Premier League is ‘not a charity’, and that behaving as such would undermine the competitiveness of the league.

It should be noted that the Premier Leage clubs have agreed to ‘give away’ around £1 billion of their £5 billion windfall. However, this represents only a 40 per cent increase in the amount shared with the rest of the sport, while domestic TV revenue rises by 70 per cent. There is no suggestion that international broadcast rights, or revenue generated by participation in European competitions, will be shared. More importantly, the majority of this money will end up as ‘parachute payments’ to clubs relegated from the Premier League. Under my plan, all of this money would go to the lower leagues and the game’s grassroots. (I would advise anybody who loves football not to read this article in The Telegraph, which allows Scudamore to present the £1 billion giveaway as part of his personal mission to revitalise local and amateur football. The numbers being discussed are mere crumbs.)

Even if Scudamore’s interest in the competitiveness of the Premier League was genuine, the distinction he makes between charity and business is obviously far too crude.  The Premier League should support the sport’s grassroots precisely because they sustain the culture which makes Premier League football so attractive to domestic and international audiences, nurturing the supporters who in turn help to produce, as well as consume, the sport.  In the social economy of English football, redistribution has an impeccable business case.

 

Part II: Premier League owners typify the UK’s flawed economy

In part 1 of this post, I proposed that the Premier League should hypothecate half of the extra revenue it will receive from the latest television broadcast deal, compared to the previous deal, to a Football Association-run fund to protect football at lower levels of participation (as well as suggesting more ambitiously that the Premier League should be disbanded).  The chances of this coming to pass are of course very low.

This second part of the post helps to amplify and explain my reasoning by taking a closer look at the kind of people that now run some of England’s biggest football clubs.  Daniel Taylor, writing in The Guardian, has done a great job recently of depicting many of these owners as candidates for the ‘Silly Party’ (based on an old Monty Python sketch), including Cardiff City’s Vincent Tan, who decided to make the Bluebirds play in red, and Leeds United’s convicted fraudster Massimo Cellini, who harbours an irrational fear of the colour purple and the number seventeen.  This is fun, but there is actually a far more sinister side to club ownership too, rooted in the pathologies of British capitalism.

A run-through of some of the ownership models on show in the Premier League helps to illustrate this point. Roman Abramovich’s ownership of Chelsea typifies the  role of Russia’s elite in London – which has a particularly distorting impact on property prices.  One in five of London’s most expensive properties are bought by Russians.  Abramovich – a close confidante of Vladimir Putin, and whose vast wealth was acquired in the murky and often murderous world of the immediate post-Soviet era in Russia’s energy and commodity sectors – himself owns a £90 million mansion in Kensington Palace Gardens.

Sheik Mansour al-Nahyan’s ownership of my own team, Manchester City, demonstrates the UK’s continuing willingness to do business with the oil-rich Middle Eastern emirates.  Mansour is a key member of the royal family of Abu Dhabi, the dominant member of the United Arab Emirates, one of the world’s most repressive countries.  Indeed, Amnesty International has accused Abu Dhabi of using the Premier League to cleanse its image.

The Glazer family’s ownership of Manchester United exemplifies the financialisation of the UK economy.  The family’s purchase of the club was funded by debt.  The majority of loans were secured against the club’s assets, although unsecured loans from hedge funds were also taken out. The club became ultimately responsible for servicing the loans at a cost of around £60 million per year.  A £500 million bond issue in 2010 allowed the club’s debt to be restructured, but also gave the Glazers greater access to the club’s income, and encompassed the sale and lease-back of the club’s training facilities.  In 2012 around 10 per cent of the club was listed on the New York Stock Exchange.

Like Manchester United, both Arsenal and Liverpool are owned by American investors with strong links to American sport.  Less is known, however, about how Stan Kroenke and John Henry, respectively, financed their purchases, given that neither club was publicly listed when the transactions took place.  We know, however, that Henry purchased Liverpool from fellow Americans  George Gillett and Tom Hicks, whose debt-based financing model resembled that of the Glazers and generated significant financial difficulties during their three-year tenure.

Kroenke’s ownership of Arsenal has also been controversial.  He has denied Arsenal fans the opportunity to invest in the club – leading to the demise of the innovative Fanshare model – and introduced the highest match-day ticket prices in European football.  He has also attracted the anger of Arsenal fans over enormous advisory fees extracted from club coffers.

Arsenal embody another of the flaws of the UK economic model by (like every Premier League club, except Chelsea) refusing to pay a living wage to all its staff.  The club’s chief executive, Ivan Gazidis, told Arsenal’s AGM that the issue is ‘well-intentioned but… complex and political’. Premier League footballers are paid colossal amounts, but, generally speaking, their employers reflect the UK’s transition to becoming a low-wage economy in international terms.  In fact, one club was even fined in 2014 for flouting the national minimum wage, although HMRC has refused to name the club in question. (It should be noted that Premier League clubs have agreed to pay the living wage to all of their full-time staff from 2016/17. However, this does not apply to sub-contracted work, where most low-paid jobs in football are concentrated).

In common with many of the UK’s biggest firms, the majority of the Premier League’s clubs are foreign-owned.  Yet the issue of pay brings to mind the example of one of the league’s British-born and British-bred rogues, Newcastle United owner Mike Ashley.  Ashley also owns sports merchandise retailer Sports Direct (and various other clothing brands).  In the football world, Ashley has been most controversial for several soulless attempts to rename the club’s stadium St James’ Park.  In 2009-10, the stadium was first renamed, quite absurdly, sportsdirect.com@StJames’ParkStadium.  Then, in 2011-12, it became the Sports Direct Arena (although Newcastle City Council refused to alter the city’s road signs pointing to the stadium).  Finally, the original name was restored when Ashley sold the naming rights to pay-day lender Wonga in 2012. Wonga clearly hoped that the move would help to sanitise its own grubby image, Abu Dhabi-style.

The tussle of the stadium naming rights reveals that Ashley is content to use Newcastle United as a marketing platform for his other business interests. Record profits, while key players are sold, suggests he has little interest in footballing success (you can read David Conn’s wonderful account of life at Newcatle under Ashley here).  Sports Direct is notorious for its use of zero-hours contracts – 90 per cent of its staff are employed on a zero-hours basis – as well as for making only miniscule contributions to the company pension scheme.  As such, it reflects tellingly the demise of workers’ bargaining power within the UK economy.

As David Webber outlines, there has been resistance among supporters to the various ownership models exhibited by the Premier League, led by Supporters Direct, which champions fan ownership of clubs via supporters’ trusts.  Manchester United fans orchestrated the high-profile campaign Love United Hate Glazer in 2011, with some going as far as establishing a distinct football club, FC United of Manchester (which now plays in the seventh tier of English football).

Football thus reflects many of our economic ills, but it also represents an opportunity to showcase economic renewal.  Despite its astronomical profile, football is a relatively small industry – a stronger approach to regulating the sport would have negligible impact on the wider economy, but could serve as a useful experiment in progressive economic statecraft in a post-crisis environment.  Labour has proposed that supporters’ trusts be given greater powers of appointment for club boards and the right to purchase up to 10 per cent of the club’s shares.  Yet, although this approach would give supporters a louder voice in the governance of their club, it would not significantly have disrupted any of the ownership models discussed above.

If football is to be saved from itself, a more radical approach is needed.  An FA-run licensing system could ensure that all clubs are run as not-for-profit trusts in entirety, thereby genuinely reflecting their profound reliance on the communities and traditions from which they emerged.  This would not eliminate commercial interests from the sport – and nor should it.  But English football needs, for its own sake, to find a way of enabling its patrons to share in its success.

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