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Saturday, March 20, 2010

Annual Review of Football Finance Reveals Disturbing News

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In an earlier article (Pssst, here's £60m for your soccer team..... ) which I have posted in my blog, I alluded that the Beautiful Game is degenerating into something exclusive to people who have plenty of money to spare.

An increasing number of Premiership clubs are being taken over by foreign hands: Manchester United are being owned by Americans, the same goes for both Liverpool and Aston Villa, West Ham United by Icelanders, Fulham by an Egyptian whose primary interests is in retail, Chelsea by a Russian with a personal fortune of £9 billion, who is obsessed with winning and can earn far more from his trade in oil and minerals.

As of this writing, we even have the ex-Thai Prime Minister wanting a slice of the action by taking over the reins of Manchester City. Is the Premiership gradually becoming an expensive playground for the super-rich? I fear the answer is yes.

And how true can this get, going by the latest annual review of soccer by one of the world's top-four auditors Deloitte & Touche. The Deloitte Annual Review of Football Finance, released on 31 May 2007, revealed that the following startling financial facts:

1) The combined wages of the English Premier League is expected to surpass the £1billion mark for the first time ever since the competition was formally inaugurated in 1992 - 1993. The wages of the twenty teams rose to £854 million for season 2005 - 2006 compared to "merely" £168 million in 2005. Now isn't it wonderful to be a soccer player instead of having a desk-bound job?

2) Wait, the rich pickings gets better for we can expect the first £200,000 a-week player in the EPL to emerge before 2010. Currently, the top earner in the Premiership is widely considered to be Ukrainian Andriy Shevchenko and German Michael Ballack (both Chelsea), whom each is believed to be banking at least £130,000 per week.

I feel that even if you are proven players like them, you should only be getting a basic wage and the appropriate performance bonuses. Otherwise, soccer clubs will be forced to charge fans even higher ticket prices to keep up with the operating costs. This is the best measure to insulate the business when on-pitch results are not so rosy, and also help motivate and reward players and the management for winning.

3) The 20 clubs in the top division generated a total of £1.4 billion in turnover two seasons ago (2005 - 2006), a figure which is expected to go up to £1.8 billion for Season 2007 - 2008. I have reasons to suspect that the majority of these revenues came from the booming Asian economies, where the newly-rich are most willing to pay astronomical sums to catch their soccer heroes play "live" in off-season games.

4) Taking into account the money spent by teams in the lesser divisions in attempts to break into the Premiership, the total debts that have been taken on is an astonishing £2 billion. For next season, there will be in place a new 3-year TV deal worth £2.7 billion, which is widely to be a catalyst for wage inflation and for servicing such debts.

The new TV revenue - including domestic and international rights - equates to about £300 million extra per season over the next 3 years. What I can see is it is going to be the turning of a vicious cycle: teams secure loans to enter the top division and earn more TV money, which is then used to service debts. And yet with reduced revenue, they will be forced to borrow heavily again.

Mark my words, the spiraling finances involved in the soccer scene will get out-of-hand one fine day.

And the ones who will bear the brunt of the fall-out will be the fans themselves, as they are already being squeezed by soccer clubs to pay for higher ticket prices, more expensive jersey replicates, program sheets and even those who cannot afford a trip to the stadiums will not be spared - they are likely to be charged more for pay-per-view TV for "live" or even games which are broadcast delayed.

Finally, I foresee that the ownership of more top-tier clubs will land into foreign hands. While these foreigners are generally super-rich and provide instant cash inflows, they may not represent the best interests of the soccer fraternity.

After all, they are probably businessmen by nature. Who can guarantee that these clubs are not merely cash cows to be milked and the fans are not being taken for a nasty ride? It is obvious to me that the foreign owners have had considerable sporting success AS WELL AS financial gains. I feel that it is high time for the British government or even the highest governing body FIFA to step and start regulating such transactions before things get worse.

Kumcheong Tang is a firm believer of "What Goes Up Must Come Down" --- all good times will end someday. More can be found at http://soccerpedia.blogspot.com

Article Source: http://EzineArticles.com/?expert=Kumcheong_Tang

Labels: annual review finance, finance reveals news, football news

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The Importance of Keeping Up With Finance News

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