Fans pay price as game flaunts its wealth in age of 'football capitalism'

Source: The Observer

* Jamie Doward
* The Observer, Sunday 9 August 2009

With top clubs and players seemingly immune to economic reality and ever more riches pouring in, has the sport lost touch with its roots?

Billy Connolly had this joke. "I used to support Partick Thistle," he would tell audiences. "That's Partick Thistle, FC. I say FC, in fact because for a long time I thought it was Partick Thistle, nil."

The same cruel jibes may soon befall another beleaguered Scottish football club that once boasted Thistle in its title – Ferranti Thistle, a works team from West Lothian, formed during the second world war. Over the subsequent decades, Ferranti flexed its footballing muscles and metamorphosed into Livingston FC, which in 2004 completed its coruscating arc of success by winning the Scottish League Cup. It was all downhill from there.

Last month, as what some believe is the worst economic crisis since the Great Depression sweeps the country, debt-laden Livingston breached insolvency rules, a transgression that under Scottish Football League rules triggered its demotion to the Third Division. Incensed by its punishment, Livingston yesterday refused to play its first fixture of the season, triggering chaos in the Scottish football calendar that has come to symbolise a wider malaise in the game.

For these appear to be difficult times for football clubs. With big-name sponsors including behemoths such as Manchester United's former backer, the insurer AIG, pulling out of lucrative deals, and bombed-out television companies such as Setanta unable to pay to screen matches, a chill wind is blowing across Britain's terraces.

Fans are also feeling the pinch. As unemployment queues lengthen and uncertainty about when the economy will bounce back continues, many are being forced, reluctantly, to turn their back on the beautiful game. Research suggests that 30% of regular matchgoers have resolved to go to fewer live games this season, scared off by soaring costs compared with 26% last year. Significantly, this shift in sentiment applies to top football clubs: a third of Arsenal, Liverpool and Manchester United fans say they will go to fewer games this season.

Virgin Money's Football Fans' Inflation Index indicates that, this season, prices for diligently following a team have risen 15.1% year-on-year. The index, which factors in rail fares, drink, food, shirt and ticket prices and pay-per-view costs, suggests "football inflation" has increased by 29.6% since October 2006, when it was launched

"It is very worrying that 'football inflation' continues at a level way above standard inflation," said Malcolm Clarke, chairman of the Football Supporters Federation. "Fans are you, me and the bloke next door, not a different race, and with people losing their jobs and being worried about the future it's not surprising that going to the match – a leisure activity – might suffer."

Part of the shift is as much cultural as it is socio-economic. Last week it was reported that the Chelsea players spent £120,000 on a surprise 24th birthday party for their team mate Salomon Kalou at Mayfair's Whisky Mist nightclub.

It was a sign that, while the fans might be feeling it in the pocket, their heroes suffer no such problems. "In the middle of all this, fans see huge sums of money being paid in transfer fees and even a club talking of paying a player a million pounds a month, which many regard as obscene," Clarke said. "A little bit of prudence – and a little humility – from those at the top of our game would not come amiss in the current climate."

At first glance the clubs seemed to have anticipated this. The annual review of football finances produced by consultancy firm Deloitte reveals many Premier League clubs froze ticket prices a couple of years back, aware there was a danger the game was about to eat itself alive. But Deloitte found the Premier League produced record operating profits of £204m in 2007/08, allowing it to wrestle its claim to be the world's most profitable league back from the Bundesliga.

Deloitte estimates that Premier League clubs' revenues in 2008/09 will be shown to have exceeded £2bn, with modest growth to come this season. And even the 72 League clubs, football's Cinderellas, seem to be in relatively robust health. Deloitte found in 2007/08, as the economic downturn started to bite, their combined revenues managed to exceed £500m for the first time.

True, net debt of clubs has soared – in the case of the Premier League from £2.7bn to £3.1bn in 2007/08 – but, as Deloitte notes, "the fundamentals underpinning the development of the football business in England remain strong".

Indeed, counter to popular perception, the industry is largely resistant to economic doom and gloom, and this has profound implications for its fans. As Stefan Szymanski, Professor of Economics at Cass Business School and a world authority on the game's finances, has found, "football capitalism" is an "incredibly stable economic system".

He points out that in 1923 there were 88 teams in four divisions of the English football league. Today 85 of them still exist and 48 are still in the same division. Compare that with a study of the top 100 companies conducted in 1912. Today 80% no longer exist; some have merged, some have been broken up, some have disappeared. "You had the Great Depression, the second world war, economic crises, two oil shocks, a succession of housing boom and busts, and football clubs have remained largely intact," Szymanski told a recent conference.

This is not to say clubs exist in an economic vacuum – experts suggest that as many as a dozen will follow Livingston into insolvency this season – but they are astonishingly adept at surviving, even in lean times. In fact until the mid-1980s, football was what economists termed an "inferior good" – the wealthier the nation became, the less people went to matches. "The richer we got, the less we wanted it, because it was considered second-rate; there was no investment, it was underdeveloped, it was hooliganised, it was horrible," Szymanski said.

But recent economic modelling suggests this is no longer the case. Since the mid-1980s (and as the threat of football violence waned) attendance has closely tracked national wealth: for every 1% increase in consumer expenditure there has been a 1% increase in crowds at league matches.

The corollary suggests that in the short term, most clubs will not be immune to the crunch. But because practically anyone can own a British football club, there is no shortage of millionaires, billionaires, oligarchs, oil sheikhs and financial consortia willing to prop them up. This may be just as well. As Szymanski notes wryly: "The one problem with 'football capitalism' is that it's almost impossible to make money."

As a result, clubs that are subsidised by wealthy owners are resistant to the laws of supply and demand that would normally determine prices. True, many have trimmed their season ticket prices this year, but only fractionally, and most pundits expect them to rise considerably when the good times return. Indeed, sales of season tickets at most clubs are said to be holding up well.

But clubs should not assume their fans will remain blindly loyal. Angered by the game's increasing "embourgeoisment", the perception that it is becoming a leisure pursuit open only to the middle class, some are walking away while others transfer their loyalties to rugby's union and league. Another segment of the fan base is lowering its sights. The Virgin Money survey found one in five disaffected fans intends to turn to lower league football for a less expensive fix of live football this season.

There are already notable beneficiaries of this trend. Yesterday AFC Wimbledon, a semi-professional club formed only in 2002 from the shell of Wimbledon FC, played its first game in the Blue Square Premier league – the old Conference division, one below the football league. To have come so far up the amateur leagues in such a short time is little short of astonishing and testimony to the support from Wimbledon's fans, who regularly turn up in their thousands to watch the team play. "When we get back into the league," club president Dickie Guy said, "they'll make a film of it."

More subversive is the trend among supporters to turn the clock back to a time when clubs were owned by their local community. The model here is Ferranti Thistle, not Livingston. FC United of Manchester, a one member, one vote club, formed by disillusioned Old Trafford fans in the wake of their club's controversial takeover by the American Glazer family, is developing a loyal, fanatical following. This season it asked supporters to decide how much they wanted to pay for their season ticket, based on what they can afford.

The club has already hit its target to raise £125,000, exceeding last season's sales. So far almost 1,200 tickets have been sold. "People said we were being foolhardy," acknowledged Jules Spencer, one of the club's board. "But why shouldn't a club trust its supporters?"

Spencer acknowledged it was "ironic" that the amateur club was formed at the height of Manchester United's success, when a new breed of wealthy supporters appeared on the terraces. But as the economic crisis festers and many fans can't or won't pay to follow their clubs and their lavishly rewarded players, more FC Uniteds could spring up.

"We don't claim we have the moral high ground," Spencer said. "We say we offer an alternative to top-flight football. But it might be nice to see a few more clubs like us."

Then and now

1960s

Johnny Haynes became the first £100-a-week player in 1961, while in 1960 a Manchester United programme cost 5d (2p).

In 1968 , Italy's Pietro Anastasi transferred from Varese to Juventus for £500,000, a world record.

In 1969, a season ticket to Manchester United cost between £10 and £15.

In his last year as England boss, Alf Ramsey's salary was £7,200.

2009

A 2006 survey showed the average basic salary of a footballer in the Premiership was £676,000 a year.

Cristiano Ronaldo's transfer fee from Manchester United to Real Madrid was a record £80m.

A season ticket to watch Arsenal's matches will set you back up to £4,000.

England manager Fabio Capello's starting salary was £4.8m.