href="#litres_trial_promo">Chapter 6, at the very top end of the game at least, that is now changing. For the first time ever, big football seems to be turning into a good business.
SAFER THAN THE BANK OF ENGLAND: WHY FOOTBALL CLUBS ALMOST NEVER DISAPPEAR
On 15 September 2008, the American investment bank Lehman Brothers collapsed, followed almost immediately by the world’s stock markets.
Any football club on earth was a midget next to Lehman. In the fiscal year ending in September 2007, the bank had income of $59 billion (148 times Manchester United’s at the time) and profits of $6 billion (fifty times Manchester United’s), and was valued by the stock market at $34 billion. If United’s shares had been traded on the market at the time, they probably would have been worth less than 5 per cent of Lehman’s. Yet Lehman no longer exists, while United very much does. So does almost every club in Europe that existed in 2008.
In the years before the global economic crisis, people worried a lot more about the survival of football clubs than that of banks. Yet it was many of the world’s largest banks that disappeared. Then, after the recession began, worries about football clubs increased again. Many people pointed out that when Chelsea met Manchester United in the final of the Champions League in 2008, the two clubs had a combined net debt of more than £1.3 billion.
While Europe’s biggest clubs are now becoming serious businesses, many small clubs still live from debt crisis to debt crisis. Yet the notion that football clubs are inherently unstable businesses is wrong. They virtually never go bust. Although large numbers of them are still incompetently run, they are some of the most stable businesses on earth.
First, some facts. In 1923 the English Football League consisted of eighty-eight teams spread over four divisions. In the 2016–2017 season, eighty-four of these clubs still existed (95 per cent),* and seventy-two remained in the top four divisions (82 per cent). Thirty-seven were in the same division as they had been in 1923. And only eight teams still in the top four divisions were two or more divisions away from where they had been in 1923. (Of the twenty-two teams in the First Division in 1923, only three were playing below the second tier in 2017: Bolton Wanderers and Sheffield United in the third tier and Notts County in the fourth tier.)
You would have expected the Great Depression of the 1930s, in particular, to pose the clubs something of a threat. After all, the Depression bit deepest in the north of England, where most of the country’s professional clubs were based, and all romantic rhetoric aside, you would think that when people cannot afford to buy bread they would stop going to football matches.
Crowds in the Football League did indeed fall 12 per cent between 1929 and 1931. However, by 1932 they were growing again, even though the British economy was not. And clubs helped one another through the hard times. When Orient in east London hit trouble in 1931, Arsenal wrote its tiny neighbour a cheque for £3,450 to tide it over. Clubs know they cannot operate without opponents, and so unlike in most businesses, the collapse of a rival is not cause for celebration.
The Depression culled only a couple of clubs. Merthyr Town, after failing to be re-elected to the league in 1930, folded a few years later, the victim of economic hardship in the Welsh valleys (as well as competition from far more popular rugby). Wigan Borough went bankrupt a few games into the 1931–1932 season. It left the league, and its remaining fixtures were never played. Aldershot was elected to replace it, and sixty years later, in another recession, it became only the second English club in history to withdraw from the league with fixtures unplayed.
Almost equally hard as the Depression for English clubs was the ‘Thatcher recession’ of the early 1980s. Again many working-class fans lost their factory jobs. The league’s attendance dropped from 24.6 million to 16.5 million between 1980 and 1986. Among those who continued to show up were lots of hooligans. Football seemed to be in terminal decline. As Ken Friar, then managing director of Arsenal, put it, ‘Football is the oddest of industries. It sells one product and has ninety-two outlets for it. In any other business, if not all ninety-two outlets were doing well, there would be some talk of closing some of them down. But in football, all ninety-two outlets claim an equal right to survive.’
Many clubs in the early 1980s seemed to be dicing with death. If we look at one of the diciest, Bristol City, it will help us understand just how football clubs almost always survive.
Bristol City got into trouble in the same way that a lot of clubs do. In 1976 it had been promoted to the old First Division, then the highest tier in English football, a status the club had last enjoyed before the First World War. The fans were excited: attendance jumped from 14,000 per game in 1974–1975 to 24,500 in 1976–1977. The average ticket then cost less than £1, but the higher ticket sales still boosted the club’s income from around £250,000 per year to £665,000. City survived three seasons in the top flight. As we’ve already seen, that took money. The club paid handsomely in the transfer market, and its wage bill doubled: all City’s extra income was channelled straight to the players.
The money didn’t do the trick. In the 1979–1980 season, the club was relegated just as Britain, in the first year of the new Thatcher government, was entering recession. First Division attendances dropped 5 per cent that season, but Bristol City’s gates fell 15 per cent, while its wage costs rose 20 per cent.
Clearly the club needed to lose some of its expensive players. Unfortunately, the manager, Alan Dicks, who had just overseen the most successful period in Bristol City’s modern history, had signed many of them on extraordinarily lengthy contracts – some as long as eleven years. Soon after relegation, Dicks was sacked. But by the end of the next season, 1980–1981, City’s average attendance had collapsed to 9,700 per game (half the level of the previous season) and the club was relegated to the Third Division. Income was tumbling, yet most of the squad were still drawing First Division wages. When City’s accounts were published on 15 October 1981 it was apparent that the club was in deep trouble, but the best that the new chairman could say in his report was that ‘so much of this depends on success on the playing field’.
It is doubtful that promotion back to the Second Division would have improved the club’s financial position materially in 1981–1982, but that’s a purely academic question since by the end of 1981 Bristol City were heading for the Fourth Division. By now only 6,500 fans were showing up each week, about a quarter the number of four years earlier. An independent financial report produced that December showed that the club owed far more (over £1 million) than it could realistically repay in the foreseeable future. Early in 1982 Bristol City Football Club PLC – the limited company that owned the stadium at Ashton Gate, the players’ contracts and a share in the Football League – was on the verge of appointing an official receiver to liquidate the company. That would have meant the end. In a liquidation all the players’ contracts would have been void, the share in the League would have been returned to the League, the stadium sold, probably to a property developer, and any proceeds used to pay the creditors. Like so many British companies at the time, Bristol City seemed headed for extinction.
But football clubs command more love than widget-makers. Just before City could fold, Deryn Coller and some other local businessmen who were also fans offered to take over the club. It was at this point that the ‘phoenixing’ plan emerged.
Coller and his associates created a new company: BCFC (1982) PLC. It was to be a ‘new’ Bristol City: a phoenix from the ashes of the old club. The Coller group aimed to sell shares in the new company to fans. With the money, the group would buy Ashton
