Published on May 13, 2008 by Phil McThomas
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I was watching the season finale of 30 Rock last week. Jack takes a job with the Bush administration. He gets to his office on the first day to find an overhead water pipe leaking onto his desk. When he mentions the leaking pipe to his long-serving office-mate, he’s told “No, it’s not [leaking]. We’ve looked into it and it’s not.” When he brings it up again later, he’s told “It’s not leaking. Would you like to see the study?”
This is what popped into my mind when I read this story in the Telegraph about the closing gap between the Big-4 and the rest of the Premier League.
Premier League communications director Dan Johnson said: “The new broadcasting deals are closing the gap, because the biggest increases have been in the overseas contracts which are divided equally between the 20 clubs. Furthermore, the increase in money means a lot more to the smaller clubs because it is a much bigger percentage of their turnover.”
Never mind that the rest of the article points out that Man Utd received £78 million in TV payments, £50 million more than Derby. And that two years ago, the difference between top and bottom was £30 million. Or that Newcastle - superior to Middlesbrough by just one place and one point - received £5 million more than their north-east neighbours.
But don’t worry. The gap is closing - in real terms, on a per-capita basis, allowing for inflation, if you index it against the price of a loaf of bread - according to the Premier League’s study.
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Published on April 19, 2008 by Phil McThomas
One of my favourite quotes from one of my favourite books:
The History of every major Galactic Civilization tends to pass through three distinct and recognizable phases, those of Survival, Inquiry and Sophistication, otherwise known as the How, Why and Where phases.
For instance, the first phase is characterized by the question ‘How can we eat?’ the second by the question ‘Why do we eat?’ and the third by the question ‘Where shall we have lunch?’
(From “The Hitchhiker’s Guide To The Galaxy”, by Douglas Adams)
It turns out that industries also go the the ‘How, Why, and Where’ phases when faced with disruptions caused by modern life.
When it comes to the Premier League and selling television coverage, it goes like this:
How can I make money on this?
Why are other people already five steps ahead of us?
Where can I find a good lawyer?
It looks to me like the Premier League too busy not learning anything from the record industry to deal with these problems the right way (and I define the ‘right way’ as giving the public exactly what they want, at a tremendous value, while making scads of cash from the situation).
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Published on April 18, 2008 by Phil McThomas
Robin Van Persie should be congratulated, along with his Arsenal colleagues, for his focus on providing entertainment while he’s on the pitch. A comment he made recently though was a reminder of who the team is really there to entertain.
Just before the recent defeat to Manchester United (another nice dose of entertainment), he spoke these words to the Times:
“For me, the basic of football is to give enjoyment to people buying a ticket. That’s where it starts. We are like 11 actors on a stage, we have to give enjoyment.”
Again, this shows what a great attitude Arsenal have, and it’s entertainment that will drive football’s success in business terms.
But Van Persie - and many others - often forget that the people buying the ticket make up a tiny percentage of the people being entertained. How tiny? Well, for every fan in the Emirates Stadium, there are another 1250 fans watching the game live around the world. So the people in the ground represent less than 0.1% of the live audience (never mind about the people enjoying the game in packaged highlights around the world).
That ratio - 1250 to 1 - should be remembered when the new season ticket prices are being announced. For example, Boro are offering really good value for kids in order to boost their attendance, while leaving the adult prices untouched. But is such tinkering really worth it when there’s a vast worldwide market waiting to be tapped?
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Published on April 2, 2008 by Phil McThomas
A theme I’ll look to develop in this blog is the financial mess that football clubs find themselves in. I think it’s pretty fair to say that many clubs don’t have a good business model.
Looking at a club purely from a business perspective, you’ll often find lots of income and customers, but expenses that result in a net loss.
If this blog had 23,849 loyal readers, I can tell you two things
1) I’d be generating some income, but still a pretty modest amount - maybe $100,000 in my wildest dreams.
2) I’d be making a profit, because there’s no way I can spend more that $100K a year on a blog.
By an uncanny coincidence, 23,849 is also the average attendance that Southampton enjoy in the 2006/07 season. What did they do with this impressive fan base?
1) Generated lots of income - £10.5 million in matchday receipts and £23.2 million from all sources.
2) Made a loss of £1 million (which was only so low because the club made £5 million in trading players).
It beggers belief that a business with thousands of loyal customers who pay, on average, £450 a season just at the ground, can end up losing money. But Southampton have managed it, and most clubs are doing something similar.
Fast-forward to the end of the 2007/08 season and things have not improved for the Saints. Today’s news included a dispatch about Southampton being prepared to take a £3 million haircut on Theo Walcott’s transfer fee just to accelerate the pace of installments. This is like taking the ‘lump sum’ option when winning the lottery rather than accepting payments over thirty years - never a sign of solid financial planning.
