1 A business like no other
We started this course saying that football was a business like no other, but what is the ‘business of football’ and how does it differ from more conventional businesses? More fundamentally, is it a business at all?
To start to answer some of these questions you will now take a look at the business of football as it operates away from the pitch. The following video, voiced by Eleanor Oldroyd, gives you a fascinating insight into the football business by giving behind-the-scenes access to people working across the industry. As you are watching this video consider the statement outlined in the box below and ask yourself the question ‘how does football not only survive but thrive as a business?’
Whilst 2013/14 season was a boom year for the Premier League with it returning to pre-tax profit for the first time since 1999, outside the Premier League life remained challenging.
The wages to revenue ratio in the Championship was at 105%, the second consecutive season with a ratio of over 100%, Championship clubs’ aggregate net debt increased for the first time to over £1 billion. For many years the division has struggled financially. Championship clubs continue to spend much more than they generate, a clearly unsustainable position without owner benefaction.
(Adapted from Deloitte, 2014)
Activity 1 Football and more ‘conventional’ businesses
Timing: Allow about 30 minutes
As you watch the video, note down the ways in which you think that football may differ from businesses usually considered more conventional, such as supermarkets like Sainsbury's or Aldi.
Download this video clip.Video player: 31700_nc_2014_businessfootball_vid002_business-360.mp4
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Transcript
The business of football
Pete Winkelman, Owner and chairman, MK Dons
I think football is so different from any other kind of business, because I suppose fundamentally it‘s not a business. You don’t look at income and expenditure sheets in quite the same way. But of course what football is, it’s a great emotional driver. It does drive our other businesses here at stadium MK. But most importantly it drives a community. It’s about identity. It’s about a place and about celebrating the place that you’re in.
Eleanor Oldroyd, Voiceover
Is running a football club part of the entertainment business, a rich man’s hobby, a community asset or all three? And what difference does it make if you’re a club outside the Premier League? Here club chairmen, fans and other executives talk about the unusual nature of the football business, seen through the eyes of both a traditional club, Chesterfield and a newer one, MK Dons. How does it compare to other businesses, such as supermarkets, and what does the future look like for the business of football?
Andrew Cullen, Director, MK Dons
Well it’s very different because actually you’re dealing with people’s emotions and passions. It’s not a product that you can take or leave. We can have a fantastic day and people love us but equally we can have a very very disappointing day, we can lose 3 or 4 games on the trot, but people still stand by us. They come back and want to come and watch us, whereas perhaps with a supermarket brand, if they were disappointed 3 or 4 times with the same product they’d go somewhere else and choose a different brand or a different product. You don’t do that with football. You actually keep coming back and keep supporting and following the club as much as you can.
Eleanor Oldroyd, Voiceover
Loyal fans provide a constant revenue stream through ticket sales, but clubs are also looking to create income from other commercial activity, such as their stadiums, sponsorship, retail outlets and even hotels. However one of the main sources of revenue – particularly for smaller clubs – has all but disappeared.
Chris Turner, Chief Executive, Chesterfield FC
Years gone by there used to be called a transfer market where clubs from higher up used to come down, look at clubs like ourselves, look at our players, take them up to a higher level, pay a transfer fee. Those days are very far and few between because now as we all know the Premiership and higher league clubs go abroad and bring foreign players in, etcetera etcetera, so players at our level very rarely get transferred to the higher level. So that transfer stream has virtually dried up.
Pete Winkelman
The MK Dons has lost about on average about one and a half million pounds a year in the 10 years I’ve been involved. In a bad year it can hit 3 million pounds so it really is a very hard thing to keep going. Of course some of the very much bigger clubs, they can have some very rich owners that that isn’t a problem for them doing.
Eleanor Oldroyd, Voiceover
Fans are a vital source of revenue to football clubs. In the 2012-2013 season, across the three divisions of the Football League, aggregate attendances remained above 15 million for the 10th consecutive season demonstrating the passion and loyalty of fans throughout the game. But in reality, how much influence do they have over the business decisions that their club makes?
Pete Whiteley, Chesterfield fan
I think when it comes to decisions about football matters a club can’t really take any notice of the fans. Fans will have their favourites when it comes to players and their favourites when it comes to formations but there’s no place for sentimentality in football.
Margaret Faiers, MK Dons fan
Ticket prices, we know we need a lot of younger fans and I think we can influence the club in say if you want them then price the tickets to the price they can afford.
Pete Whiteley
I think off the pitch, if decisions are being made – whether that is how we sell tickets, ticket prices, you would hope then the club would have regard to its customers and I think at a football club, talking to those customers, albeit that they are a single captive audience I think does make a difference when it comes to keeping them on board.
Eleanor Oldroyd, Voiceover
When there are a number of clubs in close proximity they are each fiercely competing for people who love watching football live in a stadium. In a conventional market, one geographical area or city would struggle to sustain multiple businesses offering almost identical products and often with very similar names. And the football business is no different.
Chris Turner
We’re on outskirts of Sheffield 10 miles away from Bramall Lane and probably 15 miles away from Hillsborough and in the opposite direction we’ve got Derby and Forest, not too far away from us. But we’re a town of about 80 to 90 thousand people and some do go to watch those particular other clubs on a Saturday afternoon, we know that. We have to fight for our 5 or 6 thousand people every week that support Chesterfield.
Eleanor Oldroyd, Voiceover
Winning promotion, especially to the Premier League, is now the Holy Grail of football. But success can cost a fortune, especially as players’ wages continue to rise, even in the lower leagues. For example in the 2011 to 2012 season, League 1’s clubs, on average, spent 93% of their revenue on players’ wages. One increasingly valuable source of income is money from television rights, the impact of which is seen both on and off the pitch.
Chris Turner
The wages have absolutely rocketed due to the revenue coming in from broadcasting. The standard of football in the Premier League has risen beyond anything that’s been seen in the past. Throughout football it’s not been as great for clubs like ourselves in League 2 currently, we get around three hundred thousand pounds a year from it.
Andrew Cullen
A Premiership football club will this season pick up nearly 105 million pounds in broadcasting revenues. We will pick up about three hundred and fifty thousand pounds, in League 1 from broadcasting revenues. That’s the difference.
Eleanor Oldroyd, Voiceover
Niall Sloane was editor of BBC’s Match of the Day for many years and now runs ITV Sport. He has no doubt about what the future holds.
Niall Sloane, Director of Sport, ITV
I can only see the rights going up and up and up. BT and Sky will still be in position. Who know with the Googles etc, You Tube whatever will get their act together and they’ll start bidding. I cannot see anything other than the continuation of this because we thought 2 deals ago it can’t get any higher and it just has. So, it’s an extraordinary thing you know but it keeps going.
Eleanor Oldroyd, Voiceover
But with the development of digital technology, will social media platforms have the confidence – and deep enough pockets – to enter the marketplace?
Niall Sloane
I know people have been looking at a kind of facebook for football where you would view your premier league match in that context so the man in Soweto could talk to the man in Stockholm, the man in Stockholm could talk to the man in Sydney and it’s a global conversation going on in that space.
Andrew Cullen
A few years ago we wouldn’t have been able to watch a live football match on our telephones, mobile phones, we can now and we can consume it on tablets. And I think that’s going to be something which maybe clubs not at the top tier will look to see how they can actually develop their product and monetarise that to try and generate extra revenue.
Eleanor Oldroyd, Voiceover
Football has become a global network with English football watched all around the world which, in time, may also generate some benefits for clubs like MK Dons and Chesterfield. But has the globalisation of the football business reached saturation point?
Niall Sloane
I don’t think it has because if you look at the number of territories, the number of key territories around the world, it hasn’t quite cracked it. Has it worked in India? Not yet. Is it working in China? To a small degree. North America and the United States? Maybe. But until you get college kids desperate to have a career in ‘soccer’, I don’t think you’ve reached global saturation.
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Discussion
These are some of the differences we noticed between football and more conventional businesses:
- The nature of competition is different – football clubs compete with one another for customer and sponsorship income but also can’t survive without competition within their league. If you were running Sainsbury’s you would see the demise of another large supermarket chain as an opportunity – as a football club the demise of another club would be treated differently.
- Brand loyalty – football fans are probably the most loyal customer base a business can have – can you imagine feeling the same way about your local supermarket? This means that supermarkets and other businesses have to work much harder than football clubs to attract and keep their customers.
- Financial sustainability – if most clubs were conventional businesses they would go out of business – more conventional businesses such as supermarkets can’t afford to run themselves in this way.
- The emotional commitment to football that many owners have goes beyond what would be seen as a sensible financial decision in many other businesses.
- Much of the talk in the film is about money – we wonder if supermarket executives and staff were interviewed they would talk more about aspects such as products, the shopping experience and customers needs.