In The Spotlight: Business of the Beautiful Game
14 July 2015
On the evening of Tuesday 16 June 2015, Henley Business School hosted an event on the topic of the ‘Business of the Beautiful Game’.
The Vice-Chancellor of the University of Reading, Sir David Bell, chaired an informal panel discussion, which bought together external industry experts and faculty to discuss current issues in the business of football and football finance.
The stands were packed at the Henley Business School theatre at the University of Reading for a unique opportunity to see a team of football ‘galacticos’ debate a range of issues facing the game.
Introduced by the Dean of Henley Business School, Professor John Board, and with the University’s Vice-Chancellor, Sir David Bell (DB), refereeing, the stage was set for a ding-dong battle!
The line-up of the panel for the evening kick-off was:
- Professor Adrian Bell (AB), Head of the University’s ICMA Centre; he specialises in the history of finance. Adrian is a fanatical Liverpool supporter and co-author (with Tom Markham and Chris Brooks) of an article on when to sack a football manager
- Michael Bolingbroke (MB), who is currently the CEO of Inter Milan, and was formerly at Manchester United having previously been a significant player in the success of both Cirque du Soleil and the Jim Henson Company. He originally trained as a chartered accountant at PwC, having graduated from the University of Reading in economics
- Dr Tom Markham (TM), a football and finance specialist with an MBA in Football Industries, has the distinction of being the first person ever to gain a PhD in Football Finance, is Head of Strategic Business Development at Sports Interactive, the makers of Football Manager
- Philip Nash (PN), a qualified chartered accountant and psychology graduate, was formerly held senior positions at Arsenal and Liverpool, and was more recently Chief Operating Officer at Glasgow Rangers before becoming a consultant in the sports industry.
Has Football Been Spoiled?
DB opened the discussion by quoting from J B Priestly, who said of football in 1934: “Nearly everything possible has been done to spoil this game... but the fact remains that it is not yet spoilt, and it has gone out and conquered the world.” (in English Journey), and asked the panel: ‘has it been spoiled?’
TB reflected on globalisation, and the impact that has had on the game but asserted that is certainly was spoiled in his view.
MB highlighted the seismic changes in football, from the days when clubs were owned and run by local foundry owners for the benefit of their workers, and certainly with no thought of charging spectators who wanted to watch. Indeed, he noted, Manchester United were asked to leave their first ground because they wanted to impose such a charge. In the last 20 years, the potential profits have attracted a much wider pool of owners, and whilst teams in France, Germany and Italy are on the same curve, the commercialisation of the English Premier League has put it well ahead of any other nation.
And PN noted that the advent of the Premier League – in tandem with the introduction of satellite television – led to a massive increase in broadcast income, commercialisation, and huge international fan bases.
Is Football Now Middle-Class?
DB asked whether football has become a middle-class sport.
AB responded that he believed that Chelsea is definitely a middle-class club! He felt that it was a good thing that games were still not broadcast in the UK at 3pm on a Saturday, despite the fact that these games are broadcast live in other countries. Nevertheless, the smallest Premier League club will earn £100m+ annually from TV rights from 2015, and with more money coming into the game, he felt it was inevitable that this will create more competition and further demand.
MB answered the ‘middle class’ question by suggesting that this was a peculiarly British question, and not one that would be asked anywhere else in the world. In his view, so long as fans have a good time and their clubs win trophies, they will be happy. The reality is that the audience for football has changed radically, and for the better, with many more women and youngsters now regularly going to games.
Can Only the Top Teams Compete?
DB asked TM whether it was now universally accepted that only very few teams will be able to compete at the top level, a view with which TM agreed. ‘In the mid-90s, there were examples of teams – most notably Ajax and Red Star Belgrade – winning European trophies with home-grown talent, and whilst much is being spent on youth development, players are now moving on earlier on their career, and there is evidence of the top clubs hoarding the best young players.
Are Football’s Finances Fairer?
DB then asked PN about the impact of the Financial Fair Play (FFP) regulations. PN noted that the list of the top 20 teams had changed very little, whilst accepting that Manchester City and PSG have had the backing to break into football’s elite. PN explained that the FFP regulations require clubs to manage their finance so they at least break even, and of the 20 clubs in the English Premier League, 19 made a profit last year. ‘So the FFP rules are beginning to take effect, and owner equity is being restricted, solidifying the stability of the clubs.’
MB added that we have to look at why the FFP rules were introduced, citing the increased flow of funds into the game. ’The whole industry has seen dynamic fluctuations,’ he said, ‘but some clubs still go bankrupt because they haven’t adapted quickly enough. So whilst FFP may have frightened off a couple of investors, the money coming into football is generally being better managed.’
Do Footballers Earn Too Much?
DB put it to AB that ‘fans accepted that the biggest stars should earn big wages, but are disillusioned with rich, mediocre players.’ AB agreed that fans don’t care what players earn, so long as they perform on the pitch. PN concurred, adding that: ‘fans want trophies, and the best players – like pop stars and F1 drivers – are entitled to earn top wages. In general, though, players’ wages are in line with the market rate.’ And TM reflected on ‘two waves of inflation’ in football, the first being in the early-2000s, when Manchester City and QPR ‘spent way more than they could afford,’ adding that in his view, whilst FFP has brought much needed regulation, it could have been more effective.
Are there Too Many Teams?
The next question from the chair raised the issue of whether there are too many professional teams in the English leagues. TM suggested that the statistics indicate that there are too many, but noted that there is a trend towards amongst ‘football hipsters’ going back to support small, local clubs. And he noted that if based on the European model, a 2-division structure.
DB then invited questions from the audience, which included the following (with answers paraphrased)
- Will clubs lower ticket prices? TM: it’s a great PR exercise, and West Ham are doing it to fill their new stadium; Manchester City have had problems selling tickets to capacity, whilst the clubs that attract fewer tourists (such as West Brom) are forced to keep ticket prices lower; MB: clubs want to make more profit, but given the media income they could reduce ticket prices if they chose to do so; each club needs a plan, addressing local demographics; letting kids in free could be one option;
- We’re witnessing huge income growth, and Manchester United is now a billion pound brand; is there an end to it? PN: Not for the foreseeable future; TV rights will continue to grow; the long-term threat is from e-sports, and they are already attracting big stadium audiences; they are the new superstars;
- Is football just another business? TM: there’s a mix of professionals and others in football, and the level of professionalism is rising fast, but it is still well below that in other sectors; AB: No, Bournemouth have shown that football can be fun! It’s vital, and fans love their approach; PN: I do see football as a business, with products and services, profits and losses, but it’s also an exciting business with very loyal fans, and lots of emotion. Some acumen therefore goes out of the window. Unlike most other businesses, in football the audience is there, but the challenge is how best to monetise it. You can be a fan without being a customer, so clubs have to work hard to convert – and keep – them. MB: Football owners need to remember that it starts and finishes with the game; if Bournemouth were relegated, they may still have fun, but will the fans be happy?
- Given the rise in popularity of football in Asia particularly, will we see more twinning? PN: top clubs will always look for ways of working within the rules and this gives them a chance to do so, within FFP, but twinning can be an expensive exercise; TM: I think we’ll see more synergies, with owners buying multiple clubs, and I think that this has worked well in some case, such as Watford/Udinese and Inter/MLS/Indonesia;
- Could the FIFA situation have wider implications? MB: there will be a new President, and events have spoken, but the bigger issue is that the FIFA scandal has shown how much football matters to people, so good governance is especially important;
- Do clubs have a moral, ethical responsibility to provide affordable tickets? MB: yes, but each club has to assess their relationship with their own fans, and take decisions accordingly;
- Can we ever get away from the soulless lack of terracing? PN: I believe that terracing will return, and it has already happened at Celtic, for example;
- Can co-operatives provide a way for fans to gain ownership of their clubs? TM: fan ownership has its place, and in Germany – which is often cited as best practice – fans control all the clubs (a maximum of 49% of the equity can be sold outside); this has made the game more affordable, and more owners are German; because of this, they want their national team to win, with exceptional results as we’ve seen;
- And in reference to the article co-authored by AB and TM (with Chris Brooks): Are managers sacked too often?! AB: In my view, managers are not sacked often enough! I believe clubs should sack and sack again, regularly. Look at the achievements of Chelsea compared to Arsenal. Expensive managers know how to win. You can buy a top manager off the shelf, and win the Champions’ League the following week! But it takes big money, especially when you sack them; PN: I disagree. It’s very expensive to get managers – and their support staff – in, and out. And it’s extremely disruptive. New managers inevitably want funds for transfers, and often bring in ‘comfort blanket players’ who are generally of a lower calibre. Successful clubs need short-term managers, and long-term directors to provide continuity and good governance; MB: The manager is at the heart of the team, and changes are hugely disruptive, so there are definite advantages to long-term success; TM: the traditional model of managers who make the decisions is a best practice, although it’s clear that a new manager can revitalise a team in difficulties; MB: firing a manager means firing 5-10 people, so it can be like firing an entire board.
DB thanked the panel for their insights and opinions and closed the discussion.
After the debate, audience members gave their reactions; below is a representative selection of comments made:
‘Really enjoyable – what a great mix of people and opinions.’
‘I thought it was an excellent discussion – it’s just a shame that there wasn’t time for more of the issues to be explored in more detail.’
‘Very good, credible speakers, and some fascinating insights.’
‘I’d like to have heard more about the rise of football in Asia, but the topics covered were relevant and interesting, and it was especially interesting to get such a range of opinions.’
‘It’s the first event we’ve been to at the University, but it was superb, so we’ll definitely be coming back for more.’
‘I’m not really a football fan, but I found it fascinating to hear about the business side of things.’
‘How marvellous to be able to call upon the alumni to create such a high-profile, stimulating discussion.’