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Written evidence submitted by Steve Taylor, Brookes Business School

The author is currently researching football managers early day experiences as a new manager and is employed as a lecturer in Business specialising in Accounting, Finance and Business Strategy.

Submission of Evidence on the Governance of Football, and Potential Financial support to lower league and non-league clubs.

Introduction:

Football as an industry is driven by the need to win (egotistical), with an ecosystem that is populated by highly competitive individuals, all trying to gain the highest status for their club through league standings. Football clubs tend to be considered as utility maximisation organisations i.e. they are not run solely for profitability, but generally run on a balanced budget and aim to maximise the number of games they win in a season. The main stakeholders are the Chair/board, the managers, players, fans, media and football agents (1).

The main cost of any football club is the player wage budget, with the simple logic being that the players with the best technical abilities are most likely to win the most games in a season. The league system is a pyramid which forms a food chain where the biggest and wealthiest clubs hoover up young talent into their academies at an early age (1). Those at the top of the pyramid pay increasing wages to the players they sign and spend ever increasing amount to lure the individual talent to their clubs. For example, Chelsea spent over £200 Million to strengthen their squad for this year’s title bid 2020-21 season.

Is Football Governance fit for purpose?

The football association to a large extent must take responsibility for the current state of football in England.

1.1 The current state of play is that football has a pyramid structure where clubs can migrate between levels due to the annual . At the top of the pyramid you have the English (EPL) who are the top 20 elite football clubs in England. 1.2 The financial wealth is based on the ability of the EPL, which was set up as a brand in 1992, to attract largely pay for view customers. There has been increased competition to air EPL games – started by Sky initially with BT Sport and Amazon prime now competing for TV Broadcasting rights. 1.3 There has been a fragmentation of football within in England due to the commodification of football. In 1992 the English Premier League was formed as a breakaway group of the top 20 football clubs – with the intention to capitalise on the English Premier League (EPL) as a branded entertainment product. The growth in the revenue streams has come largely as the have been able to renegotiate larger broadcasting rights deals – the latest is £9.3 Billion deal over three years. This effectively gives each EPL club £123 Million per year. (2) 1.4 To understand the disparity between income received by the EPL and the other domestic leagues in England the main revenue streams need to be considered. These are usually three areas – Broadcasting rights, Match day income and Commercial deals. The EPL is truly a global brand that is broadcast throughout the world – the sponsorship i.e. commercial deals are with international brands e.g. Manchester United’s shirt sponsor Chevrolet, Liverpool shirt sponsor Standard Chartered. 1.5 Within football there is a financial divide between the English Premier League – the top 20 clubs in the English elite professional game have seen rises in income totalling Millions of pounds in the last few years. In the season 2017/2018 season the average distribution of income from the English Premier League was £145.55 Million for each of the top six clubs (3). Moreover, the three clubs who were relegated to the Championship had an average of £97.35 Million per club (3). In the season 2018/2019 these figures increased to an average distribution of income from the English Premier League was £146.56 Million for each of the top six clubs (4). Moreover, the three clubs who were relegated to the Championship had an average of £100.41 Million per club (4). 1.6 The football industry is based on ego, winning (sometimes at all costs) and polarises football club governance – on the one hand you have Boards who run their clubs prudently (financially), within a sustainable business model (1). At the other end you have businesspeople/serial entrepreneurs that can pull the rug from under a club. In the worst-case scenarios – adopting unsustainable business practices or selling off the key assets of the football club for personal benefit. For example, some non-league clubs the Chair and owner has decided to sell the football clubs ground for development of a supermarket. The net effect has been that the football club is homeless and needs to find a new home. The effect on the fans is that they also become homeless and the club loses its local identity i.e. representing its local community. (1) 1.7 Recently the EPL considered ‘Operation big picture’ which if adopted would have made the EPL less competitive. In particular the political move for nine clubs potentially being given “special voting rights” on certain issues, based on their time spent in the EPL. This could be seen sceptically as paying for extra power and privileges – the scheme did propose some £250m rescue fund made immediately available to the and 25% of all future TV deals (5). 1.8 The football pyramid is fragmented where each level looks after its own membership. There is a significant disparity in wealth distribution between different levels within the pyramid. 1.9 The conclusion is that the FA generally have overseen the development of the game and the current state is that the Governance is unfit for purpose. It would appear to the outsider to be an organization some would say are ‘old fashioned’ and out of touch with modern society today. A society which is built on values of diversity, inclusivity and in this industry the FA should be about ensuring sustainable football for all. The membership of would appear to be with an increasingly ageing population and in need of some fresh blood, fresh talent, fresh ideas and be more representative of the stakeholders that are involved in the game. The FA needs to consider the democratisation of football, where it is run for the benefit of all stakeholders, where facilities at clubs, the quality of football pitches and fan experience are taken as seriously as player wages, and club success.

WHAT LEVEL SHOULD GOVERNMENTS CONSIDER SPENDING PUBLIC MONEY

2.0 It is proposed that the government consider financial support down to level 10 in the league pyramid. Levels 1-4 are the EPL, Championship, English Football League 1 and 2. Non-league starts at level 5 with the National League.

2.1 The main impact to football clubs from level 3 EFL 1 and EFL 2 is the loss of match day income. Match day income consists of fans paying to come and see their team, and consuming refreshments before, during and after the game. In contrast to the EPL whose main income stream is broadcasting and commercial deals as some of the football clubs are global brands e.g. Manchester City, Arsenal, Chelsea, Liverpool.

2.2 To date there has been a patch work of emergency measures to the lower leagues. Whilst these measures have been expedited in troubled times and are appreciated by the recipients to keep the clubs sustainable when income streams are non-existent in the majority of cases. It is recommended that now is the time to take stock and set out a systematic redistribution of wealth. Where lower level football clubs’ levels 3-10 are given a share of a communal pot of money. This could be based on the levy of a tax on transfer expenditure e.g. 2% of 1.5 £Billion in the last transfer window would raise £30 Million in one transfer window. This money to be marked (ring-fenced) for stadia improvements, pitch maintenance to drive up the quality of some grounds and pitches, thus improving the fan experience. The alternative would be a flat rate levy on each club in the EFL as an alternative of £2Million per season whilst in the EPL i.e. £40 Million.

2.2 However, to date those below level 6 have been given £10,000 for Covid19 compliance i.e. Covid testing outside the ground, track and trace, and safety within the ground. This has enabled clubs to keep their doors open and play games at level 7 and below. However, because the government did not let levels 5 and 6 play infront of crowds there has been the need for financial assistance. However, it would appear that the disbursements have caused inequality between clubs as reported by the Non-League Paper (NLP) in October 2020.

2.3 It has been noted that Just recently a £10 Million package of support (national lottery) was announced by the Government for Level 5 in the league hierarchy (top non-league level), and Level 6 to be distributed amongst the 66 members. However, whist this money is clearly welcomed by the football club members it has led to an outpouring of anger as some clubs at step 5 based on lost gate receipts have awarded £95,000 per month e.g. Chesterfield, Hartlepool United whilst others in the same league were given £84,000 e.g. Woking and Eastleigh. At the next level step 6 the distributions have been again at two levels £36,000 per month e.g. Dulwich Hamlet and City, whilst the remainder are allocated £30,000 per month e.g. Hemel Hempstead and AFC Fylde (6).

2.4 Administration of communal financial assistance. The main income lost during Covid19 for non- league clubs will be match day income – admission to the ground, and spending on food and beverages. There is no doubt that some clubs will have better facilities and larger numbers of fans attending – however, it seems strange that from the NLP report that whilst York City only received £13.31 per fan i.e. £36,000 per month for 2,705 fans on average, that Borehamwood FC receives £116.02 per fan i.e.. £84,000 per month for 724 fans (6). A simple and defensive formula would have been £10 Million/94,387 fans = £105.95 per fan – based on 2019-20 National League data (7,8,9). Thus, Borehamwood should receive - £76,705 over three months and York City £286,586 over three months for lost gate receipt based solely on fan admissions.

3.0 The biggest risk to long-term viability of football clubs.

3.1 The biggest risk to lower league and non-league football clubs is the loss of match day income. Compared to the elite to the elite football clubs who generally have Billionaire benefactors i.e. Chelsea and Roman Abramovich, Manchester United and the Glazers, with commercial deals with multinational brands i.e. Chevrolet – American car manufacturer, Standard Chartered - American Bank (10); lower league and non-league clubs have benefactors who are local or international businesspeople with net worth’s in the thousands and millions, not billions.

Commercial sponsorships and revenue streams are much smaller; thus, match day income is a much larger proportion of overall income.

3.2 Poor governance by Chairs and Board members – a business model run on allowing a club to spend its gate receipts on player wages would leave it in a break-even position. Then any ancillary revenues from food and beverage sales would be surplus and invested back into the football club. 3.3 National restrictions imposed through governments during Covid19. An example of Merthyr Town who have decided to suspend their membership of level 7 for this season due to the pandemic. The national restrictions meant that the football club could not have fans at their home matches and therefore decided to suspend ‘hibernate its membership’ for a year. Without fans the club had reviewed its financial situation and had even considered moving its games across the border into England temporarily – the conclusion of the Directors was that the club would survive until November before it started trading insolvently.

4.0 What extent should elite sports support lower leagues

4.1 Covid19 has presented an opportunity for the football industry to take stock. To challenge whether it is run for the few or run for the enjoyment and participation of the many.

4.2 The benefactor model adopted in England stimulates takeovers of football clubs by wealthy patrons who are prepared to underwrite the debts of the football clubs they own.

Recommendations:

1. A systematic redistribution of a small portion of wealth from the wealthiest league in the world i.e. The English Premier League to other leagues in the pyramid. 2. Raising finance for re-investment in the infrastructure of football by taxation – either 2% based on transfer fees. Alternatively, £2Million from each club who was in the EPL based on the previous season. 3. The money to be entrusted to an independent organization (IO) who oversees the distribution of the financial support. A small representative body – including ex-players, fans from supporter trusts, football pundits who are otherwise not involved in the game. 4. Monitoring of the financial support – clubs prove that they have spent the money on the items that the money has been distributed for i.e. Covi19 compliance, with the proof via invoices provided on request by the IO. 5. Changes in the way the FA is run – an influx of new ideas, from a fresh perspective, ex- players and fans who love the game and are in touch with today’s society, and it’s challenges. References:

1. Taylor, S.B. (2020) PhD thesis – “From Hero to Zero to Hero”. Exploring the ‘early day’ experiences of new football managers. 2. Geey, D. Football Broadcasting Deals Across the top 5 European Leagues. https://www.danielgeey.com/post/football-broadcasting-deals-across-the-top-5-european- leagues/ 3. English Premier League financial distributions 2017-18. https://www.premierleague.com/news/691073 4. English Premier League financial distributions 2018-19. https://www.premierleague.com/news/1225126 5. Project Big Picture: Premier League managers react after proposals rejected https://www.bbc.co.uk/sport/football/54554427 6. Richardson, D. Treat us fairly or give us answers. The Non-League Paper, Sunday, October 25, 2020. https://www.magzter.com/article/News/The-Non-League-Football-Paper/TREAT- US-FAIRLY-OR-GIVE-US-ANSWERS 7. Vanarama National League, Average attendance 2019-20. https://www.footballwebpages.co.uk/national-league/attendances/2019-2020 8. Vanarama , Average attendance 2019-20 https://www.footballwebpages.co.uk/national-league-north/attendances/2019-2020 9. Vanarama , Average attendance 2019-20 https://www.footballwebpages.co.uk/national-league-south/attendances/2019-2020 10. The Deloitte Football Money League 2020 Report https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/deloitte-football- money-league.html