By Jason McKeown
The other week, I got chatting to a sales manager about how he is going about motivating a team he has just taken charge of. He talked about how he had issued them the challenge of increasing their sales, by urging them to think bigger.
“Instead of trying to go from 50 a week to 60, why not aim for 70? Because even if you fail to reach 70, you will probably be in the 60s.”
It is a thought process summed up by the saying: “Shoot for the moon: and even if you miss, you will land amongst the stars”. When I was in sixth form several years ago now, there was a giant mural in our break area with that motto written across it, and it has always stuck in my mind. Aim bigger, and if you fall short you will probably still have achieved something notable.
And that dilemma is one that arguably faces Bradford City right now. With 10 games left to go, the target is to finish in the League One play offs and, ultimately, to make it to the Championship next season. That seems almost unnerving, after a stop-start season of fairly low achievement. Could the club really be playing in the second tier next season? And if they were to be promoted, what would happen to them?
Is this really the ambition we want to aim for?
Why wouldn’t you want to get promoted?
As Bradford City fans, we would probably all agree that our natural place in English football’s pecking order is the lower echelons of the Championship. Current attendances might be somewhat artificially boosted by low season ticket prices, but a huge fanbase is there and crowds this season are better than many clubs in the second tier. Valley Parade is a stadium more than good enough to stage Championship football. The basics are all there.
Yet on the field and from a financial perspective, the club seems way behind.
Is the team good enough?
It has been a popular talking point amongst my friends of late: who, in the current Bradford City team, would be good enough to play in the Championship?
The obvious answers – Reece Burke, Josh Cullen and Wes Thomas – are loanees. Rory McArdle (with credible ambitions of playing for Northern Ireland at Euro 2016) and James Hanson would fare okay, as would James Meredith if he could find greater consistency. Beyond that, you’re probably struggling.
Which would suggest that any Bradford City promotion this summer would mean an urgent need for major signings, bringing us onto…
Could the club afford to be in the Championship?
It’s 12 years since City were last in the second tier, and the standards appear to have improved hugely. Clubs at the top are spending astonishing sums of money on players. The levels of debt carried by most clubs is frightening (in 2013/14, only three Championship clubs made a profit). The Premier League parachute payments that relegated clubs receive has created a huge imbalance.
You have to build a team that can compete against clubs that think little of spending £10 million on a striker, and face relegated Premier League clubs with a huge war chest to spend as they attempt to get back to the promised land.
And there are the wages. According to the excellent Swiss Ramble website, which looked at the wage bill of clubs in the 2013/14 season, you would need a wage budget of at least £10 million to survive.
QPR’s wage budget was a staggering £75m (although they are an exceptional case). Leicester City, who were champions that season, had a wage bill of £36m. The three clubs with the lowest wage bills (Barnsley, Doncaster and Yeovil, who all had under £10m) were the three clubs relegated. Bournemouth, who along with Doncaster and Yeovil were promoted to the Championship that season, stayed up with a wage bill of £17m.
It is rumoured that Bradford City’s wage bill this season is around £3m. So a huge increase in spending in this area would be needed.
The Financial Fair Play rules also hinder how much money you can throw at the problem. It has been the norm to see Championship clubs hit with a transfer embargo for spending more on players than their revenue streams allow. This would be a real challenge for City in view of the season ticket initiative. More bums on seats doesn’t mean huge takings at the tills, and this would limit the transfer budget that Phil Parkinson would be allowed (assuming the chairmen are not able to put in more money themselves).
Merely surviving in the Championship would be a huge, huge achievement.
How big is the difference in revenue?
Huge, absolutely huge. And from 2016/17, when the new £5.1bn Premier League deal comes into effect, this will have an instant knock-on effect for Football League clubs.
From next year, the parachute payments for relegated Premier League clubs are changing, reducing from four seasons worth a year, to three (clubs relegated after one season will only receive two years worth). The parachute payment amount is calculated as a percentage of the equal share of broadcast revenue paid to Premier League clubs (ie how much each Premier League club receives as a minimum). Clubs receive 55% of this amount in the first year after relegation, 45% the following year and 20% in year three.
Based on the estimated average TV money windfall of £85m that each Premier League club will receive under the new TV deal, this means relegated clubs would receive £44.5m, £36.4m and then £16.2m over these three seasons.
To help compensate for this imbalance, the Premier League provides an annual solidarity payment that is split between all of the other Football League clubs, worked out as a percentage of the third-year parachute payment.
So from 2016/17, Championship clubs will receive 30% of that third-year parachute payment, League One clubs 4.5%, and League Two sides 3%. Based on that £16.2m figure, this works out as £4.9m per year for Championship clubs, £729k for League One and £486,000 for League Two.
Back in 2010, the solidarity payment was £2.2m per year for Championship clubs, £330k for League One outfits and £220k for League Two teams. That was nearly £2m a season difference between the Championship and League One, and from next year this annual difference will be more than double.
But it’s not just the solidarity payment. Under the current TV deal with Sky Sports and Channel 5, each Championship club receives £2m per season. League One clubs receive £360k and League Two £240k. Another huge disparity between the divisions.
(And before any City fan gets too outraged by this imbalance, it should be noted that the person who instigated all of this, back in the day, was Geoffrey Richmond.)
What does this all mean? The difference for Bradford City in getting promoted or staying in League One, in terms of their solidarity payment and TV money next season, will be around £5.7m. In the Championship they would earn roughly £6.9m, in League One roughly £1.1m.
That earnings gap will have a real impact in time, given it will continue season after season. It is creating a huge dividing line. All of which begs the question…
Can the club afford not to be in the Championship?
The gap between the Championship and League One is growing, and it is becoming harder and harder to bridge it. Under the new arrangements for solidarity payments, and with the Football League TV deals so weighted towards Championship clubs, League One and Two sides simply won’t be able to break into the second tier of English football unless they can get there quickly and hang on.
What if City went up and it went wrong?
On the day after Bradford City celebrated the League Two play off final win at Wembley, a much bigger fairytale took place at the same stadium. Little old Yeovil Town – non-league for most of their history – were promoted to the Championship after beating Brentford. It was an amazing story.
Yeovil went straight back down despite fighting valiantly. But then they were relegated again from League One, last season. This time around, they are languishing near to the bottom of League Two.
What went wrong? According to Glovers chairman John Fry, “When we came into that Championship I could see what was coming. I was probably the one person that day when looking around at the celebrations and I thought ‘hang on a minute, we have to get the money in here’.
“Probably my biggest regret is I could not think of a way. My key worry was making sure this club did not go broke…We have hit the world of Financial Fair Play, you can spend so much, but you can’t spend beyond that. When you’ve built a team for the Championship and the salaries they would have been paid to the revenues you get in League One and League Two, you have to change things. You have to terminate contracts, get people off the books and I’m telling you it’s an absolute nightmare in trying to develop your business, because all the time you are having to change people.”
Yeovil went up to the Championship, tried valiantly to compete, and then faced the consequences of adjusting back to lower revenue from Leagues One and Two. Spending significant money to compete with your new higher rivals, and agreeing long-term player contracts on salaries that wouldn’t be affordable if relegation occurred, is a gamble.
It’s also one that this club knows only too well.
What if City went up and were realistic?
In 2014, Burnley were promoted to the Premier League despite being one of the favourites to go down (they were promoted on a wage bill of £15m, were still receiving parachute payments from their last time in the top flight, and yet still made an £8m loss that season). There were questions raised at the time over whether it was too soon for Burnley to go up – excellently answered in this article – although they were instantly relegated from the Premier League.
Yet the Clarets never broke the bank when in the top flight. They gave it a go but weren’t quite good enough. They returned to the Championship boosted by parachute payments and the club generally in stronger health.
With nine games to go, Burnley are currently closing in on an immediate promotion back to the Premier League.
What if City were promoted to the Championship, didn’t go for broke and came back down? With a manageable wage budget for life back in League One, and the profits from a year in the Championship, City could gradually build and challenge straight away for an instant return to the second tier. And if they succeed and get back to the Championship, they would be well positioned to make a better fist of staying there.
As the Burnley article states, “if a team promoted a division is relegated at the first attempt, they should ensure they are stronger for the experience with the view to one day returning and staying.”
(And another lesson to take from Burnley’s 2013/14 promotion is that having a low budget in the Championship doesn’t mean you can’t still over-achieve.)
What if City didn’t go up?
Just short of a year ago, Chesterfield triumphed 1-0 at Valley Parade in a promotion six-pointer. The Spirietes finished sixth and inside the play offs, with 69 points. City came seventh and outside the play offs, with 65 points. Had City beaten Chesterfield that night, they would have finished inside the play offs.
Yet Chesterfield’s reward for a top six finish was a 4-0 aggregate play off defeat to Preston. And now this season they are fighting relegation to League Two. A dreadful and painful hangover from the disappointment of the Preston defeat, demonstrating just how fleeting success can be.
City are currently targeting a play off place again, and if they achieve it but lose, we supporters might still consider that to be a sign of progress. But the pain of losing in the play offs could prove destabilising.
If City make the play offs, we will surely want to win them and be promoted. Otherwise why bother? So everything would be on the line – glory, or crushing disappointment. Both would need managing.
Is investment needed?
How can it not be?
By getting to the Championship, Bradford City would get more matchday income, more commercial revenue, more TV money, and a greater share of Premier League solidarity payments.
And yet that still wouldn’t be enough.
Mark Lawn and Julian Rhodes have taken a very principled approach of keeping City in the black over the past nine years. Yet if the Bantams have to effectively triple their playing budget in order to compete (and even then they’d be one of the division’s lowest spenders) they would need further investment from somewhere.
Would Lawn and Rhodes be willing to pump further money into the club? Perhaps, perhaps not. Financial Fair Play Rules state that the maximum permitted loss a Championship club can make is £5m, unless the owner injects equity, in which case the maximum permitted loss is £13m.
Although as it stands, and very understandably, Lawn and Rhodes do not want to go into the red.
Would the answer lie in attracting outside investment?
A German consortium have held talks about investing into Bradford City. A year ago, Gianni Paladini unsuccessfully attempted to buy the Bantams.
Interest is out there, and it’s growing.
A year ago Mark Lawn admitted he and Julian couldn’t afford to fund the club in the Championship. He went back on that statement later, but the doubts clearly remain. They are largely trusted to have the fans’ best interests at heart, and have stated they wouldn’t sell the club to anyone who didn’t share that viewpoint. The talks with the German consortium are said to be ongoing. Everyone watches on with interest.
Shoot for the moon…
Mark Lawn’s comments last year about not being able to afford the Championship continue to be used against him by some. After a season of struggling to stay in the play off hunt, a conspiracy theory has been floated by some (and we can call it a conspiracy theory given it is pure speculation) that the club don’t want to get promoted, and so are “accepting mediocrity”.
The financial rewards available from promotion to the Championship are huge, but the problem for any League One club with short or long-term ambitions to get promoted is that every other club in the division receives that money too (if not a lot more through parachute payments). It’s like the Government suddenly announcing that a £1 coin is worth £10. We would suddenly be richer, but so would everyone else and so the benefit is negated.
But clearly, staying in League One risks being left behind. The gap between the two divisions is only going to get wider, and the sentiment “there’s always next season” risks building up a bigger problem. Slow and steady may not win the race.
If City aren’t promoted this season it won’t be the end of the world, but it could go a long way to determining the club’s long-term existence. If the play offs are missed out upon, everything will largely carry on as it is. But if the top six can be reached and the play offs won, it could prove a life-changing experience for the Bantams.
Shoot for the moon, settle for the stars if needed, but beware of black holes too.
A good way to describe a ‘catch 22’……
Loanees will be the key… especially with the new rules next season. It is interesting to see us how we have handled Burke and Cullen as a pre-curser for getting in what I expect to be a number of season long loans next season (whatever division we are in).
Remember GR once saying at an old Skipton bantams meeting that we needed to become a “yoyo club” with regards to going between the championship and the Prem. He referenced west brom at the time. As you say, Burnley seem to have perfected this art and it’s just a shame that GR went back on the idea during his “six weeks of madness”.
The philosophy now applies just as much to going between tiers two and three as it does to going between tiers one and two
Nice angle on the sales front, Jason.
However, years ago, in Sales I had my ‘own’ game plan …… ‘A fast start’ I only needed three sales a day to hit my personal target of fifteen. From Monday (day 1) I aimed for five. I only twice achieved that.
More often than not, I fulfilled my quota by close of business on Thursday.
That is not to say Friday became a day of rest – we all want to go the ‘extra mile’ What it did mean, is purely and simply ‘not having to chase my tail’, come Friday.
And so it should be with BCAFC …. Get the points onboard now, not ‘need’ three more (or four ?) at the last game.
Not easy, I know. But the Moon is there, for all to see – so lets get there.
As a fan I want our club to take every opportunity to play at the highest level and consequently we must accept this season’s real promotion challenge. Once promoted it is key that we manage our finances accordingly and fortunately I for one trust the current custodians of our club to do so within budget.
Stability both on and off the field is one of our strengths
If we brought in a few random Scandinavians and managed to find the most skilful English player of his generation knocking about in the Scottish lower leagues we’d probably just about stay up. Worked last time…
Cracking article mate, looking at all angles, enjoyed reading it
The thing people forget with investors is that they generally want a return on their investment – especially foreign ones. I don’t understand, if Championship clubs are all running a loss, how anyone can make that return. Either the clubs are all run by benevolent benefactors happy to squander lots of cash on their pet project or they’re going to hell on a financial handcart.
People have talked about an implosion in football for years but it never seems to happen. Why not?
Thoughtful article which hopefully makes fans lick their lips for the weeks ahead. One area to touch upon is the external investment. The more I think about it, the more I realize that City are ripe for a takeover. Why? Low debt if any, heading in the right direction (financially and off the field), loyal and potentially large fan base (why cant we be the next Leicester?), large stadium and most importantly you’ll be able to buy the club for a snip compared to other comparable football teams. Paladini knew this and that’s why the Germans are sniffing at us. I sure there are others doing their cost/benefit analysis.
The riches of getting to PL means that an investor with spare cash who isn’t silly, could easily multiple the value of their investment (yes and potentially lose it too). Think about it, how much are Bournemouth worth now compared to the price the owner paid for it originally i.e. several factors more….
If you look at the clubs who are left on the shelf (not had massive financial investment in them), we stand out head and shoulders above the rest. The majority of PL & championship clubs are foreign owned or owned by very rich business folk. In the lower divisions who else can pull and sustain 17k+ fans weekly? Sheff Utd are already owned by a Middle East company, Pompey owned by fans and Coventry by some opaque set up. The only negative is we do not own the ground but a couple of million will sort that out.
So my point. Its not a case of whether City will be taken over in the next few years but when and crucially will the new owners share the same values and goals as us fans or not.
What would they be buying though Harry? All BCFC own is a share of the league and some player’s registrations which, to be fair, aren’t worth much at this level. Aside from probably a few footballs those are our assets. We don’t own the stadium, training facilities, offices etc etc. So in terms of bricks and mortar assets we don’t have anything.
Whilst I agree that we don’t have debt and certainly the intangible goodwill of 18,000+ demented souls providing a revenue stream is valuable can any investor really make any sort of return through a football club?
Certainly if I had £10m to invest and wanted a return as opposed to a hobby I could probably think of a thousand better ways of doing that than investing in football which all points to what a brilliant job the current Chairmen are doing.
That being said, I’m no financial genius and I’ll happily be proved wrong. I just don’t understand a model whereby someone puts a lot of money into a club, turns it into a loss making business, and sells it for more than he paid for it.
Andy all valid points. So what you are buying is a ‘Brand’, with a loyal fan-base, in a city with one of youngest demographics in the land i.e. our fan base will potentially grow faster given the right environment (its not doing to bad at present). A club who in our football pyramid structure, are only 2 levels below the top level, and maybe only one come May 🙂
There are many companies and rich individuals who sit on large cash surpluses. Yes, you could punt £10m into treasury bonds and get a negligible return but at least you don’t risk your investment. Or you measure the risk and go for something riskier, buying a football club is clearly one of them. Just because a club loses money each year doesn’t mean its market value falls as well as you point out. I bet you most of the football clubs in the PL/Championship are worth more now than what they were 10 years ago, even though most have lost money each year. The cashflows under the new PL TV deal PL skew the stakes even higher for those who can get into the top division.
For the record I think our chairmen have done an amazing job and whoever takes over the reins needs to understand the special relationship the fans have with the club and vice versa. None of us want the club to become the next Charlton, Newcastle, Fulham, or Coventry where a takeover has led to so much acrimony. Mark and Julian know that and I trust they will make the right call.
Very good, Jason. But, when you think about it, isn’t it sad that the people’s game is now effectively a rich, usually foreign, man’s toy. One of our great problems is the ownership of the ground.
Interesting piece. Two elephants in the room for me. If we get promoted, what will season ticket prices look like? And is Phil Parkinson- who I admire- good enough to manage at that level?
My concern would be, that without substantial investment, probably coupled with a marked increase in Season Ticket/Flexi card prices, then we would not be able to compete and would probably be ‘dead men walking’.
This is some information about our local rivals, who do not have to pay anything to play in their stadium!
Company name: The Huddersfield Town Association Football Club
Owned by: Dean Hoyle, founder of discount greeting cards chain Card Factory
Turnover: £10.8m (£11.3m)
Pre-tax loss: £6.8m (-£4m)
Net debt: £37.4m
Wages and salaries: £11.8m
Bank: Lloyds Bank
Auditor: Revell Ward
Y/E: 31 May 2014
Dean Hoyle, who founded Card Factory with his wife Janet in 1997, continues to bankroll the Terriers and at the year-end converted £3.5m of his existing loans to share capital. The multimillionaire has now loaned the club more than £37m since joining in April 2008. Huddersfield’s losses for their most recent financial year are expected to be in the region of £6m”.
Source http://www.insidermedia.com/insider/national/146216-championship-club-club the article also gives similar information about the finances of other Championship clubs.
Surely the point is about managing expectations? If we were to sneak up this year then the owners – if we receive no investment – must make it clear that while the goal is to stay up they will continue to look after the best interests of the club and even finishing 24th should not be viewed as a completely outrageous failure.
We will be stronger to compete again in L1 afterwards and bouncing back to the Championship should be the expectation. Keeping money in the back pocket from TV revenue, gates against the likes of Leeds, Huddersfield, Sheff Wed, Newcastle/Sunderland? I would certainly rather that than spend beyond our means and potentially still be relegated anyway leaving us in a poor position for the following season.
Lets face it – if we get promoted it would be a nice problem to have!
great article , and I agree with just about all of it , apart from the bit about James Hanson being good enough for the championship. that little ditty was hilarious.