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Building Stadia – Reinventing The Future

Sat, 29 May 2010

“Wolverhampton Wanderers plan £40m Molineux revamp” caught my eye.

In the late 19th and early 20th century, it was not unusual for success, and sometimes, the very existence, of English football clubs, to be built around or together with stadia, such as:

Much of the post-war evolution of major English clubs has focused on personalities – managers and players, and more recently, owners as well.  Apart from repairing war damage, grounds across the country appear to have remained largely unchanged until the Hillsborough disaster in 1989 and the Taylor Report that followed.

The stadia development over the past 20 years has taken place against the backdrop of tighter regulation by the football authorities, including ground grading requirements in non-league football.

For much of this time, the cost of re-developing stadia was seen as a greater burden to the a club than transfer fees and wages.

The Premier League, formed in 1992, raised salary expectations:

“As a result of the increasingly lucrative television deals, player wages rose sharply following the formation of the Premier League. In the first Premier League season the average player wage was £75,000 per year, but subsequently rose by an average 20% per year for a decade, peaking in the 2003–04 season, when the annual salary of the average Premier League player was £676,000.”

Total transfer fees paid by Premier League clubs increased rapidly from 1992 onwardsThe trend has continued until recently, up to 2008 (the latest figures available from Deloitte).  High transfer fees have been sustained over the last two years by Manchester City.

The increases in transfer fees and wages in the Premier League inevitably raise expectations in lower leagues.

Increasing transfer and wage costs has resulted in increasing levels of debt, notwithstanding increasing revenues, not only in the Premier League, but in the Championship and the Football League as well.

Over-extended football clubs increasingly turned to using their principal asset, their ground, as security for loans to finance increased operating costs or debt, even going so far as to sell their grounds, as in the case of Brighton & Hove Albion in 1997.

Even as high as in the Premier League, Portsmouth have been described as “a club which have spent massively and where wages, at one stage, accounted for almost all of the turnover while their stadium was decaying, the training ground ramshackle and with no business plan for the future.”

Expensive players brought the aspiration of instant success, an aspiration many clubs found easy to sell to the fans.  However, more likely than not, the real outcome has been financial ruin.

UEFA’s new regulations emphasize sustainability, and football clubs living within their means, with certain allowance for new investment, presumably to develop stadia and facilities.

Football clubs are coming to the realization that their stadia and facilities, and not their players, are their real assets.  Players come and go, stadia and facilities remain, especially if they are owned and developed by the club itself.

Not only do stadia and facilities owned by the club represent a real and substantial asset in the club’s accounts, they also provide a more realistic means of generating income:

  • More people attending matches means increased gate receipts.
  • Greater demand for tickets provides some room to increase ticket prices.
  • An increasing fan base means more merchandising opportunities.
  • Commercial activities and outlets at the ground also contribute to revenue.

Clubs at the top levels may see TV revenue, advertising and sponsorship as more important sources of income, but for most football clubs outside of the top levels, the football ground is the primary source of revenue.

Increasing a fan base may take longer without expensive players on the field, but it is a more sustainable model.  Better facilities also allows stronger links with the community and for the development of home grown talent, a prospect fans of any club find exciting.

Property prices and construction costs may be relatively much higher than they were at the end of the 19th century or early 20th century, but when compared to modern transfer fees and player salaries, developing stadia and facilities may increasingly be seen as a more viable means for a club to grow.

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One comment

  1. [...] Insights A collation of my football-related articles and posts « Building Stadia – Reinventing The Future Rich Benefactors – The End Of History Sat, 29 May [...]



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