NBTTT: Football finances and business models (spoiler there is no magic money tree)

Agree with what the Big Feller wrote down there are just wanted to add a bit more about the idea that we just need some rich backers to buy the club and all our financial problems will be solved.

When you boil it down, there are two kinds of owners: Those who put money in, and those (who want to) take money out.

For owners who put money in ownership of the club is a means to other ends e.g. credibility / prestige. No significant overall return on investment expected. So you have the billionaire plaything (e.g. Chelsea, Man City) and the local plaything (E.g. Stoke, Brighton). These owners don’t necessarily expect a return on their investment. Ability to succeed depends on the level of investment that local backer is able to provide and how well it is spent (see QPR). Arguably we are at the poorest end of the spectrum of this kind of owner.

For those who want to take money out, the club is purchased as vehicle to make money for the owners. This is very difficult to do in football where most of the money doesn’t touch the sides and filters through to players and their agents. So ultimately there are three ways that you can make money:

1. You make the club profitable, so that you can extract dividends.
2. You lend it money so that you can extract interest.
3. Or you sell it on for more that you purchased it for making a capital gain.

Needless to say these are all easier for larger clubs who are able to build revenue streams through building a global brand and fan-base and participating in the Champions League. Arguably this is the only real way to make a club profitable and depends on income diversification strategies and is therefore limited to the top few clubs.

It is hard to think of provincial clubs that have successfully made money for their owners on a long term basis. West Ham are earning interest for Gold etc and are trying to go ‘global’. WBA and Swansea have recently been sold for a profit (making money for their old owners) but it will be interesting to see whether it is possible to make money for the new owners. Watford seem to do OK but I don’t know much about how the Pozzo family structure their business.

Southampton are the obviously the best example and their model is effectively the old 1980s/90s Norwich model. Sell good players and buy cheaper replacements. Even then, the club is actually up for sale at the moment.

Its lazy thinking to think that new owners will simply solve our financial problems. There are a huge number of clubs where the owners have purchased them to try and make money (often by lending money to the club to try and get promoted) and have failed, damaging the club in the process. I would personally prefer to stick with the owners we have and pursue the Southampton / old Norwich model as I don’t think there is a viable alternative.

TLDR; Football finances are f**ked.

Posted By: Knitted Jesus, Jul 10, 10:32:23