Football must wait for the financial final act


Interesting financial news from Deloitte that FA Premier League clubs turned a profit in season 2013-14, the first time the combined results of the top 20 clubs in England have been in the black for 15 years.  The reason for the £190m surplus was a 29% increase in revenue, largely as a result of the-then new TV deal, which runs until summer 2016.  Wages rose only 20% that year.

Clubs will be happy to have stemmed the losses, although the first year of a new TV deal is always their high water mark, but the underlying bubble remains a problem.  Income cannot continue to rise at heady double-digit rates, shareholders of BskyB and BT will eventually see to that, despite the fact that next big boost from TV is already confirmed for season 2016-17.

The play to watch is not if or when a dysfunctional football sector gets its act in order, it’s when an almost-as dysfunctional broadcasting industry reaches equilibrium.  We’ve discussed before Sky’s absolute need for Premier League rights to secure their place as a prime broadcaster.  BT, Virgin, Netflix and others are busy eating into their movie, news and entertainment broadcast market.  It’s this need which is driving revenue towards the English Premier League.  Without English Premier League football, Sky are vulnerable.

Sky took the first step towards passing the financial pain of their new deal down the line to consumers this month in the form of a price increase.  The company have successfully done this before, many low income families are now paying £70 per month for satellite TV, and subscriber losses after previous increases have been almost non-existent.

Millions of people have high stakes skin in this game: subscribers, Sky and BT executives, their respective shareholders, Premier League clubs and the dependent ecosystem below them.  All the spinning plates have remained in the air, despite price increases through a recession, but one fundamental remains:

This is a bubble.

Speculators are confused when they only see a market inflate over a long period that it’s not a bubble.  The moment these TV deals become unaffordable to subscribers, or more likely, to the broadcasters, the bubble will burst.

Debts are high, profitability is here, but the underlying commercial pressures to stay in the league remain, so wage pressure will continue to eat away at available funds.  Those outside of the bonanza have to figure out how to compete for audience and players, while waiting on the final act.

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  1. What puzzles me about football and TV packages is, just where do people get time to watch all this football on TV?

  2. td67



    Are you thinking of Primo Carnero(sp)?



    The “Ambling Alp” if my shit memory serves me at all.



    He was a giant of a man but no a very good boxer, imo.

  3. Funny how I get all the flack and another poster posts, if the bastard had killed one of mine I wouldent be as forgiving as some…..wonder why that was?

  4. td67



    I’m sure we would all think differently if one of our own was involved.



    Thank God they weren’t.



    Any fitba news?

  5. Name calling Tony, come on, you are better that that, raise your game. Reach your potential.

  6. Phils up appols if already posted.


    The view from the other side of the Hedge Fund


    3 Replies


    It is always a good idea to ask someone who knows more about something that you do.



    I was puzzled about something in the Sevco saga recently.



    Mr David Cunningham King stated last month that finding a new Nominated Adviser (NOMAD) for Rangers International Football Club (RIFC) was no biggie.



    The stenographers took him at his word and The People were soothed that a new one would be along in a few days.



    Now as the de-listing deadline looms some of us thought this was an issue, but we were wrong.



    Well there you go. All those companies that have gone to the trouble and expense of going public over the years have been doing it all wrong.



    Had they been advised by a Sevco blogger, they would not have bothered.



    They could have sold the same shares to the same people for the same price and saved themselves a fortune.



    To assist me in finding a way through this financial maze I spoke to my chap in the Square Mile about all of this de-listing stuff.



    He graciously took time out from tending to his Hedge Fund to answer my fairly rudimentary questions.



    I hope you find them useful, because I certainly did.





    Q: Why do companies list themselves on an exchange?



    A: An exchange listing makes it easier to buy and sell shares issued by a firm to other people.





    Q: Why does that matter if the company does not get any money for the sale of already issued shares?



    A: The ability to resell shares creates a very large slice of the demand for shares in an Initial Public Offering (IPO) or a secondary offering. Few investors would buy shares where there was not a liquid market to sell them again. Make it difficult to resell shares and the value of those shares will invariably drop. This is called the liquidity premium.





    Q: So many people who bought shares in RIFC at their IPO will find it difficult to sell their shares if the company is not relisted?



    A: Yes. For fans who just want to own a slice of a beloved, if new, football club, this is probably not that much of an issue. Few fans bought in at the IPO to trade for a profit. However, even Dave King failed to warn them that they were really making a donation. They were buying shares in a publicly traded firm just two years ago and will not have expected delisting. It will be especially difficult for holders of small quantities of shares to move any of them at a meaningful price after delisting. For the financial investors who bought in hoping for a profit, delisting will just signify the end of a disastrous chain of events that has cost them all a lot of money. Holders of larger shareholdings might eventually find a strategic buyer looking to purchase controlling or blocking powers, but the price would be a small percentage of what most will have originally paid.





    Q: Is the delisting bad news for RIFC the company?



    A: In practical terms, no, but only because RIFC’s situation has been recently so dire that there was no chance of accessing capital markets for equity or debt any time soon. With only the most ardent of fans willing to lend to or buy shares in RIFC now, the AIM listing had become an irrelevant and a costly nuisance. If RIFC was a stable profitable business, delisting would take an easy source of additional capital off the table. As RIFC is not a stable profitable business, it can be argued that delisting simply does not matter in terms of the company’s survival. Professional investors and pension funds would surely not be so stupid (or of such an IQ?) to make the same mistake again.



    RIFC’s survival conditions are now much like those of the company it tries so hard to emulate. In Rangers FC’s 24 years under Sir David Murray, the club lost about £140m. Murray’s genius was in convincing people like Dave King and his friends at the Bank of Scotland to cover these horrendous losses. Unless there is a dramatic change in culture at Ibrox, RIFC will also have to find benefactors who are willing to endlessly pump in cash without a realistic prospect of seeing much of it returned. Only in years with qualification for UEFA’s Championship League tournament can Sevco, RIFC’s footballing arm, hope to make a profit. As they currently are struggling to get out of the SPFL Championship, it could be a long and exhausting road ahead.





    Perhaps ‘exhausting’ could well become a word that defines RIFC. It might come to pass that long before the newest club to play at Ibrox becomes an annual fixture in the Champions’ League group stages, it may well have exhausted the resources and patience of even their most generous and deep pocketed fans.

  7. I called it ‘the darkness’.



    If anyone has been touched by depression they may know what i mean.



    Black, black moods.



    Feeling like running a mile or just sticking a knife in someone.






    Thinking straight is hard when the mind is a mess.

  8. South Of Tunis on

    Primo Carnera .



    No great shakes as a boxer and an even worse actor. ..Fans of ham should seek out –Hercules.

  9. Please God, let the football return soon, this place is crazy when we don’t have a Celtic game to focus on.

  10. Did any of our bhoys play for their countries last night?



    Any injury news?



    Ronny Deila linked with Arsenal – ‘fishul!

  11. Captain Beefheart on

    Some quick points:



    Suicide isn’t an illness.



    Way too many quacks creating new conditions/illnesses.



    Somebody is making a hell of a lot of money.



    Anybody who cheers and films people about to kill themselves is a lowlife.

  12. South Of Tunis on

    Oscar Romero.



    An Arch Bishop in El Salvador. . Murdered by gunmen whilst delivering a sermon. . Perpetrators were never caught .. There is much evidence that the perpetrators were extreme right paramiltaries funded by Nicaragua and anti leftist organisations in the US of A

  13. Ray Winstone's Big Disembodied Heid on

    Primo Carnera was a palooka as a boxer and a ham as an actor.



    He ended up as a wrassler ( possibly of the chanty kind)

  14. Quote by Oscar Romero, who said: “When I give food to the poor they call me a Saint, when I ask why the poor have no food, they call me a Communist

  15. I don’t expect things to change, Paul67, unless people start taking the advice of Moonbeams and those who have informed us of other ways of obtaining the likes of SKY on the ole pc.



    A wee prayer offered for all those on that plane. May they all enjoy eternal rest.

  16. South Of Tunis on

    Suicide .



    I think ————-a great band .



    One classic Lp – Suicide and 2 wowee good 45s -Cheree / Dream Baby Dream ..



    Memorable UK tour in 77 ——— wound up Clash fans at every gig .



    Off oot to the beach with 5 dogs .



    Frankie Teardrop CSC -way down south

  17. cha1888


    I think in fact that quote was from Dom Helder Camara, Archbishop of Sao Paulo, Brazil. 2 giants of the Latin American church.

  18. Ray Winstone's Big Disembodied Heid on

    John Guidetti has a joke at the expense of another club and is being taken to task by the Compliance Officer.



    Paul Paton is charged with assaulting another club’s player……….and what?

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