Governing the business of football – the A-League and English Premier League search for the same answers

Football club ownership is in the news in both hemispheres at the moment. In the UK, Manchester Utd and Liverpool fans are both protesting about the investment approach taken by their American owners. Co-owners Tom Hicks and George Gillett have decided the business culture clash has gone on long enough, and put Liverpool up for sale. But the Glaziers, at least publicly, have no plans to sell despite the on-going green and gold protests from Utd fans.

These owners under seige come from a US sports model where debt is heavily leveraged against the club’s assets. But the average UK fan prefers that owners dip into their own personal wealth to support the extravagent player purchases that defy business logic. Last financial year, Chelsea reduced their losses to 47 million pounds (down from 70 million), while Man Utd actually made a pre-tax profit of 48 million pounds. But while Utd’s finances remain supported by heavy debt, Chelsea’s have been propped up by their owner Roman Abramovich. In fact Chelsea can now claim to be effectively debt-free, after Abramovich converted all his interest-free loans to the club into equity. Strangely, I can’t recall hearing about Chelsea fans protesting about the amount of money that Abramovich is personally losing, despite the Daily Mail last year estimating his investment at over 700 million pounds.

After taking over West Ham earlier this season, David Gold told the Daily Telegraph “The place was a car crash. “Every page we turned in every document revealed yet another problem. It was the worst set of figures I have seen. ”You have to say I’m certifiable – potty. There’s no other business like this. In fact that’s a misnomer, it’s not a business. We’ve lost the plot. It’s insane.” The current plight of Portsmouth, Cardiff and Crystal Palace (and before them Bradford, Wimbledon and many more clubs in the Football League) shows that the insanity is widespread and lessons have yet to be learned.

The basic principles of profit and loss haven’t been ignored to this degree since the dot com boom allegedly changed the rules of business. It did in many ways, as the music and publishing industries will testify. Yet it still proved that consistently running up costs higher than revenue eventually leads to collapse – as the glorious rise and fall of Boo proved.

In a bid to take clubs back to business school, Michel Platini has launched UEFA’s answer, a club licensing discussion paper. If implemented, the proposal marks a significant change in European football. It brings in an new era of regulation that franchised sport in Australia and the USA already knows well. According to UEFA, the future is marked by “discipline and rationality”. and they believe, it would stop clubs such as Portsmouth going into administration by forcing them to live within their means. While not easy to achieve, this is a fine a necessary goal that reflects business rather than sports reality.

The UK’s politicians have also got in on the act, with Prime Minister Gordon Brown saying recently that debts at some clubs were “too high” and warning them to “look very seriously to their responsibilities to supporters”. Labour are taking this issue seriously enough to include football reform in their election manifesto, claiming that they want to give football back to the fans. The proposals under review include clubs having to give as much as 25% of the club to fans. UEFA’s Platini has applauded this approach, saying that supporters were the only people who had a genuine “identity” with clubs.

Fans owning clubs is not new, with fan groups called “socios” owning 25% of 4 of Spains top flight clubs. But even there all is not good in the business of football, with players threatening to strike in a bid to receive unpaid wages. According to Michel Platini, the German model is the way to go, with 51% of each club being owned by the fans.

So what does all this have to do with the A-League? Well club ownership is the talk of the town here in Oceania too. A-League clubs Adelaide and Brisbane are already under FFA control, and in the last few weeks the two most recent expansion clubs – Gold Coast and Queensland Fury have come under the microscope. The Gold Coast have struggled to connect with their local community. Average home crowds were 4,488 despite the club boasting some big name players and being in the running to win the league until the very end. Meanwhile, owner Clive Palmer raised the ire of fans and the FFA with unpopular moves to restrict ground attendances in a bid to control the finances.

Up in Townsville the Fury also had a big name signing, ex-Liverpool player Robbie Fowler. But their maiden season didn’t fare as well, as they narrowly avoided finishing bottom of the table and attracted an average of 5,884 fans. After having put AUD $2.5 million into the club, sole investor Don Matheson can no longer sustain it. While this isn’t a good situation, it has at least opened the FFA’s eyes to the situation, with CEO Ben Buckley saying “to be successful long-term there needs to be wider community and corporate support for North Queensland Fury and it cannot be left to one person to drive the club”.

Giving the game and the team’s “back” to the fans is a popular approach at the moment, but on it’s own it doesn’t guarentee that the business itself will be run anymore successfully. Alongside the community support and involvement is required top level financial governance, a customer-focused business model and strong leadership. It’s not a new approach, but unfortunately it is still not common sense.

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