Thursday, March 15, 2012

The Peculiar Economics Of Football – Part I

It’s been a tough few weeks for Pompey and Rangers fans. As Revenue and Customs come knocking at the door looking for a hefty dose of unpaid tax, people are left wondering whether or not the two clubs will still be in existence come the end of the season. And you know football is in a bad way when the subject makes its way onto the letters page of Socialist Worker. With some justification writers identified the profit motive as central to the crisis currently affecting football. But is this the whole story? Don’t get me wrong, I am definitely someone who believes that capitalism = bad. My worry is that in our haste to pin the blame on the particulars of profiteering alone we lose sight of the overall picture.

The relationship between football and business goes back a long way. Small Heath were the first club to assume limited liability status way back in July 1888, and by 1920 all but two of the clubs in the football league had done the same. The FA imposed a maximum wage cap in 1901 (and also barred match bonuses) much to the chagrin of the Association Footballers’ Union. And in 1913 chairman Sir Henry Norris moved Arsenal FC to Highbury chasing increased crowds and revenue, dropping the Woolwich in the process. 

Yet, in his book Pay Up and Play the Game, the economic historian Wray Vamplew suggests that professional sports (including football) were characterised by “peculiar economics” in the period 1875-1914. He argues that while one might normally expect a capitalist enterprise (Microsoft, Coca-Cola, McDonalds etc) to constantly seek to maximise their profits, there is evidence to suggest that this was but one consideration for the owners and directors of football clubs in this era.

In Victorian and early Edwardian times there was certainly a feeling that sport and commerce shouldn’t mix, it was after all still the golden age of the amateur. The Football Association limited the dividend payouts of club shareholders to 5%, a tidy return for some but hardly capitalism’s greatest ever get-rich-quick scheme. There appears to be a lot of data indicating that profits were often ploughed back into clubs, either being held as reserves, used to buy new players or invested in ground improvements.

The owners and directors may have made some money out of the clubs but equally they were attracted by the kudos and prestige that came with their position. Charles P Korr brilliantly captures this mood in a piece on West Ham in the 1920s. He tells the story of how the board of directors invited assorted local dignitaries, politicians and businessmen to celebrate the unveiling of a new stand in August 1925. It was, he writes, “where one section of the local elite toasted another”.

To say that sports, especially football, are no longer suspicious of money would be an understatement. Quite obviously revenue streams are of huge importance, which is why such a high premium is placed on shirt sponsorship, TV income, and gate receipts. One need only witness the plethora of Premier League clubs who embark on pre-season tours to the far east – a geographical region to which most sports journalists apply the soubriquet, “rapidly expanding market” – to see that money and markets matter. In this regard it is true to say that a team such as Manchester United is as much a brand as it is a football club.

Indeed football is a lucrative career for some people. As working class people are being priced out of the game by the soaring costs of replica kits, season tickets and satellite channel subscriptions so there are plenty of companies and individuals making money. Sportswear manufacturers such as Nike and Adidas can claim higher revenues than many countries can boast GDP. Sepp Blatter, bigot-in-chief at FIFA, is earning’ $1million a year. David Gill, one time director at Chelsea before switching his allegiance to Man Utd, takes home nearly £2million a year. And, of course, at the top end of the spectrum there are players who make more in a week than most of us will earn in 25 years of wage slavery. But is profit now the only motivating force in football?

It simply isn’t the case that the owners of the biggest clubs in the country have acquired Premiership outfits purely in the hope of making a profit. The owner of Manchester City, Sheikh Mansour bin Zayed al-Nahyan, may eventually turn a profit at the Ethiad Stadium but he hardly needs the cash. With personal wealth topping £20 billion it’s safe to say that he’s never struggled to pay the electric bill. You could make an argument that the club is now part of his investment portfolio but equally the ownership of a Premier League football club is the 21st century status symbol, allowing an owner to bask in the reflected glories of their team. The same can be said of Roman Abramovich, the billionaire oligarch who has shelled out upwards of £700 million in transforming Chelsea since purchasing the club in 2003. As much as my instinct is to distrust anything a friend of Vladimir Putin utters, his statement rings true:
“I have no Napoleonic dream. I'm just hard-working and pragmatic. I'm realizing my dream of owning a top football club. Some will doubt my motives, others will think I'm crazy. The goal is to win. It's not about making money. I have many much less risky ways of making money than this (buying Chelsea football club). I don't want to throw my money away, but it's really about having fun and that means success and trophies. Investors have very short memories.”
Where Charles Saatchi collects art, so Fenway Sports Group collect sports clubs. Where J D Rockefeller once used his enormous wealth to create institutions that bore his name, so Abramovich looks to build a footballing legacy to compliment his business empire. Part prestige, part hobby, and entirely self-indulgent this is the conspicuous consumption of the beautiful game. Without wishing to downplay the insidious role played by profit in modern day football it must be said that there is still something peculiar about the economics of the nation’s favourite sport. As worrying for those of us who invest time, money and way too much emotion into following the ‘people’s game’, is the fact that football is currently the de rigueur plaything of the rich.