Wednesday, 8 September 2010

The issue of football governance

Since the All Party Football Committee report provided an insightful view on football governance, the issue of the Glaziers leveraged debt, the leveraged debt at Liverpool and the personal indebtedness at Chelsea, Aston Villa and others has become more significant.

Even Governance at smaller clubs (such as loans at Accrington Stanley rather than share capital) has come under scrutiny with a winding up order almost seeing the club go under for the second time in it's history.

To the extent that the idea that organised crime could be running a football club is not as far from the truth as we think.

Set against this is the whole issue of greater supporter representation to secure transparency, a long term view and greater consideration for ordinary fans, often sacrificed on the alter of commercial profit or short term financial gain.

There is one overriding point, football clubs are essentially a monopoly. Fans don’t choose or shop around. Brand loyalty is 100% and clubs take advantage of this and this is at the heart of the issue.

Businesses may rise or fall, grow or go out of business but football clubs are essentially social enterprises, a community hub, a place where people have met and socialised for generations.

They are not businesses that should be allowed to fluctuate under the consequences of market conditions.

Rising ticket prices by clubs acting as monopoly companies, - exacerbated by significant debts - has removed accessibility and damaged the games reputation as a truely national sport.

Highlighted in the AAPG report last year is the case of Coventry City and Aston Villa where the proportion of 16-24 year olds has fallen as a proportion of spectators from 25% down to just 7%. It’s not age specific though, it is income related with many of the poorest in society including young adults priced out of football.

Manchester United now saddled with colossal debts have increased ticket prices exponentially and have found new ways to extend their fleecing supporters.

Notably season ticket holders who are now forced to compulsory purchase tickets for all matches whether they can attend or not. – Not to stop there the club will not allow the resale or a refund of that unused ticket if other seats remain unsold in the ground.

Back in February Manchester United gave strong consideration to increasing season-ticket prices to help with the club's enormous interest payments. United owners, the Glazier family wanted more revenue to help tackle their debt and seemed unconcerned about animosity of fans.

Since 2005 when the Glaziers have4 saddled Manchester United with enormous bdebt to fund their purchase, season tickets have gone up by an average of 48% in that time - however some fans have seen their ticket prices rise by as high as 69%. Interest payments on the debts have now reaching almost £70million next year.

Whilst the club are drowning in £716million of leveraged debt, the Glazers have taken £23 million out of the club in fees and personal loans.

Season-ticket holders are currently paying up to £931 for 19 Premiership games and fans have been priced out to the point that there are now empty seats inside Old Trafford for league games for the first time since 1992.

The Manchester United Supporters Trust successful campaign for a freeze in ticket prices has clearly rattled the club and shows that fans are the bedrock of football.

Whats wrong with football governance is that it allows an owner to risk all by buying a club on the never-never with high interest payments in the hope that they can sell on for a profit.

Community clubs with historic social ties are being treated as commodities of the wealthy with absolute disregard to our national game, to a game that was accessible to all, to the history and incomes of ordinary people.

The Glaziers are paying 14.25% on part of their loans. The hedge fund loans of £138million will be a staggering £589million by the time they are due to be repaid in 2017.

Monopoly practices to inflate prices have left fans out of pocket or frozen out of the game they once loved. Their children no longer going to the games.

The end result of all this is a club that will go bust and out of the league, - or a club on the edge not will require on-field successes and a breed of supporter that has deep pockets. Loyal fans are being exploited by anti-commercial practices in my view.

Liverpool, another great club face similar issues.

David Moores the clubs previous owner sold the club to Tom Hicks and George Gillett for £160M in January 2007 after promises of a new stadium and significant transfer funds for the manager and importantly – they would not place debt on to the club.

Liverpools debt of about £40M in 2007 is now around £350M and rising. The club are now paying £1M in interest alone every 9 days

This May the former Liverpool chairman David Moores has broken his silence over the disastrous American ownership of Liverpool Football Club with a letter to The Times Sports Editor - where he ‘regrets selling’ to new owners Tom Hicks and George Gillett and suggesting the owners should be realistic about the price of the club and ‘stop punishing the fans.

Liverpool FC was once a proud fans club that had respect for the income of it’s supporters. Like Manchester United owners debts are being serviced by anti-commercial practices fleecing fans.

The reds have increased all ticket prices, with some such as Category A games for the Kop going up by a whopping 16%.

Even the disabled and the blind are there to be fleeced with Disabled and visually impaired prices increased from £29.50 to £34.

Staggeringly the amount Liverpool paid in interest last year was the equivalent of allowing 45,000 people in to the ground, for free, for every single Premier League game.

A club spokesman defended the huge rises suggesting: "Our season ticket prices remain extraordinarily competitive, particularly compared with other clubs in the top half of the table." Blackburn Rovers who finished 10th charged £205 this season compared to Liverpool’s £680.

KPMG gave a stark warning suggesting "material uncertainty" casting "significant doubt" on Liverpool's ability to stay in business.

It’s not just at the top where governance has gone astray and fans are let down.

Football League Rules have been considered more robust in the APPG report however it was only the generosity of a rich benefactor who bailed out Accrington Stanley following £1million of debts and costs and a winding up order in the High Court the legacy of the previous owners.

The clubs finances where a mess and the poor old supporter was left in the dark – and – ultimately - if they want to save their club, out of pocket.

Accrington Stanley fans raised around £130 000 in a short space of time to save their club from poor ownership and poor governance.

Football is facing a governance crises and it I would welcome scheme’s such as Arsenals FansShare but ultimately transprancy will be given a shot in the arm with greater diligence and regulation over acquisition, rules on leveraged debt, taxation issues, transparency of annual audited accounts and supporter representation on football club boards.

Many of the financial changes will require changes to tax and company laws to frame football clubs seperate from ordinary businesses.

These changes must beat the challenges of having to effective retrospectively, or at least to deal with the here and now, Manchester United and Liverpool.

The full debat in Hansard can be found at http://www.parliament.uk/business/publications/hansard/commons/by-date/