Today there are rumours of a Premier League Club in a debt crisis.
That’s not surprising. Just like the banks, some clubs pay their employees far too much money. They mortgage the hope value of future revenues and profits, whilst crippling themselves with crazy costs.
If someone wants a multi million pound wage packet they need to identify millions in revenues that they have added by their efforts. Guaranteed bonuses, high base wages and the like cannot be afforded if the business is suffering from bad loans or from lower advertising and TV revenues.
Sometime things need to be brought down to earth. I am all in favour of successful entrepreneurs making good returns, or employees earning big bonuses where they have added revenue and profit and share the success with their shareholders. What cannot be sustained is high base wages and guranteed bonuses out of all proportion to the earning power of the bank or football club.
March 26, 2009
(not enjoying-ed) Manchester United…
March 26, 2009
The new “English disease” (really a United Kingdom disease) is a passion for living well above our means plus zero saving. This is coupled with a limitless appetite for those in public life (or representing lobby groups) to spend other people’s money. On the BBC Today programme we constantly hear that all we need to solve problems is “more resources” or “more public money”. What they really mean is they want to lift cash from your wallet and mine. The subliminal message is – keep out the “Tories” because they will run down the public services and, by inference, ruin the prosperous client state on which many voters (including overpaid BBC executives) now rely on for their affluent lifestyle.
I have no interest in football, but there seem to be lots of parallels between soccer cuckoos and legacy banks. Footballers do not have a divine right to solicit taxpayer support so that they can continue to earn £1,000 a week during the biggest recession since 1929.
However, I am well aware that the Prime Minister has an election to win and what better way for middle class politicians (most of whom don’t know one end of a football pitch from the other) to establish their credentials with their client voters by fabricating an spurious interest in soccer. “I didn’t just save the world, I saved (a famous football club-ed)”. It reminds me of the time we had a regime change at the FTSE 100 company I worked for. Our new CEO had strong connections with the Blair court and everyone suddenly had to start pretending that they supported Chelsea.
The world that created the UK celebrity football lifestyle is already history. If necessary, let the football industry collapse, throw the rubble up in the air and see what emerges. Don’t supply any public money. The Prime Minister must content himself with merely with saving the world.
March 26, 2009
I thought some Clubs had even leased players from offshore companies owned by British banks. Leeds United used to have this trick and no doubt some of the business models in Jersey – not just Granite for Northern Rock – are looking a bit underfunded.
Do we know just how much “sponsorship” of sports clubs Northern Rock was undertaking in its myriad of financial “schemes” ?
March 26, 2009
They mortgage the hope value of future revenues and profits, whilst crippling themselves with crazy costs.
Exactly what Leeds Utd did and they’ve paid heavily for it.
I’m surprised it’s only one Premier League club in crisis, although it’s not hard to work out which club you mean. It’s not just the Premier League either, the lower leagues if anything have a more serious problem, there are currently 29 Football League clubs in financial crisis and I wouldn’t be surprised if more than one of them goes into administration before this season’s out.
But as you rightly point out it’s hardly surprising, if you try to run a club on an unsustainable model which many do – the bubble always had to burst eventually.
March 26, 2009
John
Not sure which Club you have in mind, but would suggest all Clubs are at risk if Sky pull out of purchasing games.
Most Clubs have fixed their finances on TV revenue, and Gate receipts continuing going up, and their costs are based on this assumption.
Alan Sugar attempted to get some realism back into finances when he was at Spurs many years ago, only to find himself villified by the supporters for not spending enough.
The conundrum is that Sky needs a Sports channel to get advertising and subscription levels to also run its business. I wonder if it could continue to be able to run its services without the income from a sports channel.
Sky suggest that customer subscription numbers are rising, but with the coming on broadcast of Freesat (no monthly subscription) this may be sort lived. Sky and football could then be the looser.
From a personal point of view, I think all of the country’s international matches, be it cricket, football, rugby, etc should be on free to air channels, so the whole Nation can view and support.
March 26, 2009
It had crossed my mind as to whether Sky can continue paying billions for football. I would guess a TV subscription would be the first to go if you lose your job…. or does the Govt cover this in welfare payments!?
March 26, 2009
No Sky does. They will not cut you off for quite a while if you explain the circumstances. They must know they get scammed, but just absorb the costs. Try that with your utility company and the BBC. They are a bit more expensive than the BBC, but not far behind the utility companies.
March 26, 2009
Have you recorded the video yet that I suggested you make about the banking crisis and your remedies for showing on YouTube? Daniel Hannan’s brilliant three minute speech against Brown in the European Parliament was the most viewed yesterday at over 330,000. It is now in the main stream media and he has had a fifteen minute interview on Fox News. Get cracking!
Reply: Yes, Daniel did well. I do not have the equipment to make such a video.
March 26, 2009
John,
Go out and by a camcorder right now!
March 26, 2009
Sorry I meant buy.
March 26, 2009
Appeal to readers of this blog :
Is there anyone who lives near London, has suitable video recording kit, and would be willing to help out ?
March 26, 2009
Surely Conservative HQ have the necessary equipment which they can put at your disposal.
Don’t forget to mention the way the beeb and the labour lobby are always acting in concert – Andrew Neil didn’t like that on Monday because the truth hurts.
reply: My views are available readily on this website. on the Hansard record, and on various TV and radio programmes.
I do not work from Conservative HQ anbd this website is my private site, paid for by me.
March 28, 2009
I believe David Cameron is looking to use new technology outlets in campaigning, he must surely support “on message” You Tube video making. I am sure DC has not missed the Hannan Effect, and surely as leader must be looking at ways to use that to the Conservatives benefit.
There are many blogs and sites that now attest to and record the biased behaviour of the BBC. HM loyal opposition should not have to go to internet campaigning in the absence of fair reporting from the BBC to have dissenting opinion heard, but if that is what is required then that is what should be done; so as to best serve those people who oppose this Government and its communications wing, the BBC.
By the way, Doug Carswell MP seems equally displeased with the BBC today and seems to be advocating non-payment of the licence fee on his blog as a means of protest.
Reply: This site is my U tube – people can read as well as watch videos!
March 26, 2009
A good start in sorting the obscene wages of players would be bring in a genuine free market, rather than the cartelised highly regulated nonsense that now exists.
March 26, 2009
Bit like the railways, utility companies, banks, the city, airports, TV, housing, retail, car sales, supermarkets, and so on huh?
March 26, 2009
In my big headed way I would just like to point out that I have said for years that the banks were a cartle supplier of a monopoly product. Am I smug? Yes. But I’d rather be rich than right.
March 26, 2009
“If someone wants a multi million pound wage packet they need to identify millions in revenues that they have added by their efforts.”
Move the decimal point only one place, and you could say the same for New Labour’s public sector.
I wish the Tories would grab NewLabour’s mid-90s “fat cat” theme, and start applying it to today’s public sector.
March 26, 2009
I believe part of what Mr Redwood is describing here is the devaluing of risk. Here the risk that future expectations would not be met, is similar to a young couple that devalues the risk of their new quarter million pound 1 bed flat not returning sharply to fair value. Or a bank making prudent loans, only so far as you believe that there is no more boom and bust. I have watched in the bond market a few years back as the risk premium on even non-investment grade corporate bonds have fallen as low as 1.5% (often over 10% now). But why was risk ignored and why was it so devalued? Also why did it catch us unaware?
Well the answer is that it did not catch all of us unaware. Those of us who follow the Austrian economic school of thought could see that too much money had been created. Our supposed elastic money supply only ever expanded, sometimes to accelerate growth, other times to inflate out of recession (2001). This extra created money first went into every prudent investment, and when the prudent had as much debt as they were willing to shoulder the extra money needed to go somewhere. So debt was thrown at the imprudent. Debt was thrown at house buyers so they could resell houses to each other at an extra 15% a year every year. Money went into football clubs and a range of other bubble economy activities. It was always ludicrous that I could live in a far nicer rented house for less rent then I would pay in interest to a bank for an inferior home. It was always ludicrous that my local high street had 4 mobile phone shops and 7 estate agents and 5 coffee shops. It was especially ludicrous that I could borrow almost any amount of money I wanted, and I was encouraged to invest in things with a negative real yield. But most of all it was ludicrous that the factors of production became bided up in almost every area of the bubble economy. Now Mr Redwood talks of football clubs and banks. Yes, fair point, but who cares. Both are highly variable costs. If a football club can’t pay it is still a private business. It’s owner oligarch throw in more money or half the players get sacked. If a bank is in difficultly it fires X thousand employees.
But the real scandal is the factors of state production became bided up, and these costs are not variable. Millions of public sector non-jobs have been created, middle management that do nothing but create paperwork and restrictions for the front line heroes like beat officers, and nurses. Yet these people are handed new BMW and large salaries to attract and retain, but in reality attract only the officious and the liberal socialists, moreover they never ever get fired. Any future Tory government must cut away huge amounts of non-jobs from the state. And sadly they cannot even cut tax either; they might have to raise them. For we also have generational levels of debt to repay.
March 26, 2009
Lots of similarites and a treasure trove of metaphors! Like useless managers, bribery, control freakery and so on.
March 26, 2009
If the premiership was interested in sorting out it’s problems, as well as stopping the use of using lower league clubs as feeder clubs (a bit like the mercantile system) then it would bring in wage caps like rugby league did.
the wage caps (not per player but for the team in general) realy did sort the game out and openend up the league to many teams having a chance of winning, instead of one or two dominating because of the financial advantage they had.
football got aborbed by corperatism and as such taken away from the people, it’s time reality was brought back to the game and it was given back to the people.
March 27, 2009
john
dont be silly
if an employer (a football club or a record company) wants to offer an aritist talent (a footballer or rock star) too much money to work for them its very much the football clubs or record companies fault and not the fault of the footballer or rock star
economics in both are not as black and white as you think, you attract the right rock stars to your label and others follow making them worth more than their sales, theres a whole set of secondary factors
if i was a rock star i wouldnt waste any time trying to “identify millions in revenues” that i am afraid is in most models the record companies problem, although changing with downloads etc but still largely too
and its the same with footballers
you forget how much the well chosen rock stars earn the record companies, and that more than covers all the ones who loose money for them, and this complex little equation works for football clubs too
and then you have the dynamic that many clubs are owned as tropheys and are not strictly run on commercial lines, if some wants to run a racehorse at a loss as fun thats their problem, and if club shareholders want to do the same likewise
so i think your all mixed up on this one
and the johns deacons, john entwistles, etc etc have made the country a lot more money than most “successful entrepreneurs making good returns”
being a entrepreneur is not the only way to contribute to the economy or to be financially worth lots of money
i would have thought conservatives would support such folk
Reply: I am all infavour of people with talent and crowd pulling power earning big money. I am not in favour of overborrowed businesses paying their employees too much and ending up bankrupt, unable to repay their loans.
March 27, 2009
Football and banking are in the same boat, both are run by overpaid egotists who make the mistake of thinking they can never make a wrong decision – we was robbed being the most common whine from the perma tanned tattooed morons on the pitch, while we are being robbed is the cry from the great British public.
March 27, 2009
Thee is one club in the premiership which has problems which is (name removed). There are others in the lower regions of the league ie Leeds, Swindon etc who have in the past been in trouble financially.
The football league does deduct points if a club goes into administration. The business model for a football club is based on being a fan and I fail to see how most would exist if funded by a normal business model (which involves keeping staff costs firmly under control).
It is clearly only a matter of time (maybe until the end of the season maybe) before financial reality hits this sport.
Why should a highly skilled sports man who kicks a ball around a pitch for entertainment be paid so much more than say a doctor or a nurse who save many lives?
There is a fundamental inequality here.
March 28, 2009
who cares if football clubs go bust, record companies go bust, they get bought and sold, let the market sort it out
really we have much bigger problems to worry about