Finances In The Football League ChampionshipSat, 9 August 2008
The Football League Championship, the second tier of English football, clearly has a lot to offer. However, trying to keep up with Premier League (the top tier) is costing it dear, and is unsustainable in the medium to long term.
As stated in Sky Sports Championship Preview yesterday:
In recent years the Championship has earned a reputation as the most competitive division in English football, and rightly so.
Void of the financial gulfs which dictate the realistic aspirations of teams in the Premier League before a ball has even been kicked, the second tier operates at the opposite end of the spectrum.
Virtually anyone can beat anyone, helping to provide an entertaining platform on which the majority of the division can harbour hopes of mounting a promotion bid, while being equally wary of getting dragged into the relegation dogfight at the bottom.”.
In its Annual Review of Football Finance 2008 launched on 29 May 2008, Deloitte reported that “Championship club revenues increased by 3% (£11m) to £329m in 2006/07″ and that “[in] terms of total attendances in 2007/08, the Championship is now the fourth biggest football league in the world eclipsing Serie A in Italy and Ligue 1 in France and pushing La Liga in Spain very close for third place.”
However, Deloitte further reported as follows:
- An increase of £31m (14%) in 2006/07 means that Championship clubs’ wages growth has exceeded revenue growth (£11m) resulting in an increase in the wages/turnover ratio to 79%, an increase on the ratio in the previous three years, which had been around 72%.
- Operating losses amongst Championship clubs increased for the third successive year, although the gap in operating performance between the average Premier League and Championship club decreased from £9.1m to £7.9m.
- Based on available information, the Championship clubs had aggregate net debt at the end of the 2006/07 season of £289m. Ten Championship clubs had filed accounts showing net debt at the end of the 2006/07 season in excess of £10m. In general, Championship clubs can only hope to significantly reduce their net debt in the short to medium term by either promotion to the Premier League or an injection of equity funding, that is owners, putting in more money, or selling on to new owners with more money.
- Aggregate operating losses for Championship clubs increased from £53m to £75m; in excess of £3m per club in 2006/07 (although increased parachute payments and solidarity payments from the Premier League in 2007/08 should help).
Championship clubs are clearly over-extending themselves, either in the hope of getting into the Premier League, or at least remaining in The Championship, which keeps open the prospect of getting into the Premier League at some time in the future. As the outlook for a return on investment become more distant, fewer investors will be prepared to continue to fund this over-extension, which in all likelihood, will ultimately result in a crunch in the medium to long term.
The Premier League itself is built on the profile and success of the big four clubs.
Overall, English league football would be better off if the top clubs left the domestic league to play exclusively in a European league, leaving a much more level, and more importantly, sustainable, playing field in the top two tiers of English football.
Further, as long as Championship clubs continue to focus primarily on the rewards on getting into the Premier League,they are not getting the best value for their own product, The Championship itself. The Championship could do a lot more to market itself globally.