Financial Fair Play is incompatible with business

Gary Tipper_PalatineGary Tipper, managing partner at Palatine Private Equity, discusses the business of football, and how the new Financial Fair Play rules are incompatible.

 

 

 

Almost every business in every sector is built upon the idea of competitive advantage. Firms will do whatever it takes to find a gap in the market, including accepting losses for the first few years. Sadly, it seems that one of the UK’s most lucrative industries, and one Manchester is particularly good at, seems not to agree.

I am, of course, talking about football. Having seen Manchester City spend and lose millions over the first few years after being taken over by Sheikh Mansour, UEFA decided to solve a problem that never existed by creating the Financial Fair Play (FFP) regulations. As a hardened City fan, the words Financial Fair Play are enough to make my blood boil, especially when considering the fair aspect.

Before the regulations were announced, I think most football fans thought the idea of FFP was to make sure clubs were not taken over by disreputable owners. The likes of Leeds and Portsmouth have experienced this in recent years, with mis-management leaving the clubs debt-ridden and ultimately heading for administration. No one wants to see this happen again, as in the end it is the fans that really suffer.

However, what UEFA have come up with is a system that effectively means that the clubs with the largest turnovers are the ones that can spend big in the transfer market, protecting the old order of European football. No other industry in the world blocks new money being invested in it, which is essentially what UEFA is effectively doing to European football. Whether fans like it or not football is now a huge global industry and should be dictated by market forces not by an industry body trying to protect the old order.

Imagine if this sort of protectionism had happened in the technology sector, which in the 1960s and 1970s was dominated by the big hardware players like IBM. Had rules stopping businesses losing money been in place, companies like Apple, Google, Amazon and Facebook would not exist. Each of these household names lost millions if not billions in their development years, enabling them to become the large organisations that ultimately transformed an industry and broke up the old monopolies that existed.

Why should football be different? If money hadn’t come into the likes of City, Chelsea, PSG and others, European football would be an oligopoly for the foreseeable future – making it incompatible with business.

Here football can learn a few lessons from business. Instead of the current rules, make any new owner put up to two years running costs in a blocked account that is used if they decide to remove their support, ensuring clubs avoid administration. This would also have the effect of keeping away the buyers without any real financial substance.

When looking at sustainability, it is also important for the rules to focus on debt levels. In the past too much debt has led to the downfall of many clubs, but under FFP, it is currently seen as acceptable for United to have £500m of debt and Real €600m of debt while City are punished despite being debt free. The £50m fine handed to the Blues is another clear example of the real aim of FFP – further establishing the status quo.

As a global industry, the rules governing football should be along the lines of the rules that govern businesses. With the current rules being incompatible, they should be challenged as I think it is best for business. Manchester has had a great footballing history and with the emergence of City in the last five years should have an even better future, dictated not by UEFA, but by market forces

Premier League Clubs Support ‘Football v Homophobia’ Campaign.

Arsenal, Chelsea, Manchester City, Manchester United and West Ham are amongst the first to join the ‘Football v Homophobia’ campaign, with the group hoping to gain support from at least 50% of professional clubs in England.

The Hammers kicked off a month of action in February by sporting Football v Homophobia T-shirts before their 2-0 win over Swansea last Saturday. The idea of the campaign is to challenge homophobic behaviour by encouraging change in the way football players and supporters behave towards Lesbian, Gay, Bisexual and Transgender (LGB&T) people, by increasing education and reducing discrimination.

football v homophobia

The Football v Homophobia group aim to enable people to take action against discrimination in order to create a welcoming and inclusive football environment. Existing football structures need to be made safer and opportunities need to be created for LGB&T people to engage with football, 6% of the English population are gay and the representation of LGB&T people in the sport needs to be improved. There have been no openly gay professional footballers in England since Justin Fashanu in 1990. Former Leeds winger Robbie Rogers and ex-Aston Villa midfielder Thomas Hitzlsperger waited until they retired before revealing they were gay; suggesting both the ‘changing room culture’ and the hostile reaction they risked receiving from fans and the media made them uncomfortable revealing their sexuality sooner.

Brighton & Hove Albion players, as well as their fans, have previously been subject to homophobic abuse from opposition supporters while some professional players have even posted homophobic messages on social media. Liam Davis, Gainsborough Trinity midfielder, says he has only ever received one snap comment regarding his sexuality from the opposition, and that there has been no dressing room issues at any of the clubs he has been at. Davis is sceptical of the authorities’ approach to homophobia, believing they should do more to tackle the problem.

The Football Association are working to identify boundaries within football that prevent LGBT people from engaging with the sport, ensuring that every opportunity is given to enable members of LGB&T communities to participate and progress within their chosen area of participation in football. A high priority is to combat negative homophobic and transphobic language used in football – whether by spectators, players, coaches or any other bodies involved. The FA have launched their own campaign, ‘opening doors and joining in’, aiming to tackle homophobia and transphobia within football, more details can be found on The FA Website.

Written by: Emma Willis, Football Development Officer at Essex County FA

@EmmaWillis91

Find out more about Football v Homophobia or show your support at www.footballvhomophobia.com

Manchester United Lead Social Media League Table

As we head into May, we take a quick look at where clubs stand in the Social Media League from the Premier League right through to League Two.

In the Premier League, Manchester United continue to dominate the social media league table despite there resistance to joining Twitter with over 33 million Facebook fans, over 14 million more than the cumulative reach of second place team, Chelsea.

The top four clubs’ (Man Utd, Arsenal, Chelsea and Liverpool)  global reach is reflected in their total reach, but most surprisingly Manchester City, widely regarded as pioneers in social media and digital activity, have some way to go to catch up trailing Liverpool’s total reach by over 7.5 million.

Premier League Social Media Table

Premier League Social Media Table

Norwich City posted the largest monthly growth in Facebook followers with an 8.1% increase whilst Wigan posted the largest growth in Twitter followers at 12.3% on the previous month.

All Premier League clubs enjoyed growth in both Twitter and Facebook followers with the average growth on Facebook standing at 4.15% and Twitter an impressive 8.03%.

The total reach for all 20 Premier League clubs stands at nearly 95 million, 85.7 million of which are on Facebook reflecting the popularity of the platform and the global reach of the league.

In the Championship we see far more modest figures on Twitter and Facebook with clubs averaging around 29,000 followers and likes on each platform.

Championship Social Media League Table

Championship Social Media League Table

Bolton lead the way with a cumulative reach of 107,798, closely followed by Nottingham Forest with 107,171. They are joined by Wolverhampton Wanderers on 101,340, and are the only three clubs with a reach of over 100,000 in this league.

In League One, Portsmouth lead the table with a total reach of 53,060, some way ahead of second place Coventry City on 38,631. Three clubs, Tranmere, Shrewsbury and Crewe have less than 1000 Facebook followers whilst  it was difficult to find if Yeovil had an official account at all. Despite this, the average number of Facebook likes clubs in League One can expect to have stood at 8,138 with Twitter followers averaging 11,902.

League One Social Media Table

League One Social Media Table

League Two clubs posted healthy figures with the average total reach standing at 14,183. Capital One Cup finalists, Bradford City lead the way with 23,711 Facebook likes and 15,122 Twitter followers. Only one club (Burton Albion) had less than 1000 likes on Facebook, but it also proved difficult to find Dagenham & Redbridge and Torquay United’s official pages.

League Two Social Media Table

League Two Social Media Table

(Figures gathered 30th April)

Aaron Gourley

agourley@fcbusiness.co.uk

0191 441 4010

Fan engagement proving the key to growth

Last week saw the Soccerex European Forum take place in Manchester and the first ever report  looking at the economic impact of football within the Greater Manchester region, revealed that it alone nets £330m a year for the region’s economy, with 8,500 jobs supported by the game – read more here as reported by the Manchester Evening News.

That’s a pretty impressive figure for the region, where we are also based, in fact we estimate that football in the North West accounts for one third of our business, something we’re looking to grow. What is also interesting are the hot topics being discussed at an industry level and it’s probably no surprise that fan engagement is still right up there….

Soccerex’s breakout session on fan engagement proved so popular not everyone could get into the room! This alone demonstrates a level of anxiety; as clubs look to develop a strong commercial foothold and recognise that their fan base is crucial it appears so many are still unsure how to build upon this. Whatever league they might be in currently and whether promotion or relegation is on the horizon, every club is keen to monetize their fan base.

The value of knowing exactly how people are purchasing, what and when they are buying is compelling for clubs. They want to be able to develop individual customer profiles, deliver tailored marketing communications based on areas of interest and effectively liaise more closely with fans to build stronger engagement.

Galatasaray FC has been very focused on developing a vision around its fan relationship management (FRM). With the largest fan base in Turkey that spans the globe, it recognised that ticketing can be at the heart of understanding its customers and wanted to manage its customer database directly. By knowing what its supporters are looking for at an individual level, the club can now personalise its customer service and incentivise attendance with schemes around rewards, discounts, smartcards and loyalty points for priority tickets using data from its ticketing system.

Özgür Gündoğan, Head of Sales at Galatasaray FC, will be speaking about its FRM strategy at next month’s Sports CRM Summit, hosted by the Sports CRM Agency Goodform, held on Monday 20th May at IBM South Bank in London – see here for more details. You might want to come along to hear about it directly – here’s a synopsis of what he will be talking about:

“Being the top Turkish sports club known for its international successes and leadership on and off the pitch, Galatasaray SK has only 2 years ago moved to its new home. From the old 22K seater Ali Sami Yen Stadium to its namesake 52K seater Ali Sami Yen Sports Complex TT Arena, the club’s commercial model has gone through a massive transformation requiring brand new approaches in sponsorship, merchandising and most importantly fan relationship management. 

Özgür Gündoğan, Sales Director, Turk Telekom Arena, Galatasaray SK, has not only overseen the major overhaul of the club’s stadium marketing & sales strategies but also played a highly instrumental role in crafting the club’s long-term fan relationship management vision and roadmap. With the successful mid-season launch of Galatasaray’s white label ticketing solution, Galatasaray has put technology at the heart of their FRM strategy and Mr. Gündoğan will share their learnings and experiences throughout this journey.”

Of course, don’t hesitate to get in touch directly with me or one of the team if you’d like to discuss FRM and how our ticketing solution, TALENT Sport, might also help your club.

Mark Dewell, MD

IRIS Ticketing

http://www.iristicketing.co.uk/

The search for the Holy Grail!

The Red Knights!

You have to admire the ‘Red Knights’. Their charge to the rescue of the damsel in distress has been of epic proportions, so too the publicity it has generated.

We all know the story by now. The Glazers took over Man Utd in 2005, they saddled the club with more that £700m of debt in the leveraged buy out. Some fans disapproved so much that they split from the club and FC United of Manchester was born. After a series of ticket price rises and the revelations that the club was struggling to service the debt including an emergency £500m bond issue, the fans spoke out once again. Then a group of wealthy Man Utd fans headed by Keith Harris and Jim O’Neill came along and created the Red Knights with a plan to buy the Glazers out for an estimated £1.25bn.

But it all seems a bit Monty Python and the search for the Holy Grail to me!

After being subjected to a torrent of abuse aimed in their general direction, our hapless King, Arthur and his Knights of the Round Table try a number of times to storm a castle occupied by the French. However, their epic attempt comes to an abrupt end when the ‘Trojan Rabbit’ they were supposed to be hiding in is fired back over the castle wall towards them to the collective shouts of “Run away!”

It’s all very amusing and the French have the upper hand.

But how does this relate to the Man Utd story? Well, the Red Knights have a justifiable cause, but what must be remembered is that the Glazers bought a public limited company and apparently they don’t come cheap! This is their castle and they are up for the fight.

Now I’m not suggesting that Keith Harris is as hapless as our King, but the tale of his attempts to storm the Old Trafford board room have to be taken with a pinch of salt.

The whole anti-Glazer jamboree has gathered remarkable momentum with so many groups voicing their discontent to the backdrop of the Green & Gold campaign.

They are all making the right noises, but I just can’t help feeling that it all seems a bit empty and will ultimately fall flat. And if the Knights do gain control of the club will they be any better than the Glazers?

The debt is there now and unless the new owners are going to turn this into equity then it will remain a burden. What is also overlooked is the £500m bond issue will make up part of this bid, the very thing that caused the whole uproar.

I’m not for one minute suggesting that I support the Glazers. My stance on this is that the Premier League and the previous Man Utd board failed in their foresight to protect the club from the leveraging of debt onto the club. The business plan has some serious flaws that make it hard to believe it was agreed, but then on the other hand the club has acquired record sponsorship deals and turnover is at an all time high.

I just can’t help feeling that when the Red Knights finally think they’ve found their Holy Grail, they will be told to “go away we already have one!”