Tuesday 22 November 2011

Who says that Manchester City FC made a loss?

According to the BBC and others...

Manchester City has reported an annual loss of £194.9m for 2010-11, the biggest in English football history. But the operating loss does not include the club's huge sponsorship deal with Etihad Airlines, worth a reported £35m a year, or revenues from this season's Champions League campaign. Uefa's Financial Fair Play rules, which come into full effect in 2013-14, say clubs must break even over three years. However the latest figures fall outside the accounting window for that.

The previous biggest Premier League loss was £141m reported by Chelsea in 2005 - when they went on to win the league....

Although City's results next year will be boosted by the 10-year sponsorship deal with UAE's Etihad, questions have been raised about the £400m agreement. Etihad is based in Abu Dhabi, which is also the home of Sheikh Mansour, a member of the emirate's ruling Al-Nahyan family. Concerns have been raised that the deal has been inflated to help City meet Uefa's financial fair play rules.

Liverpool managing director Ian Ayre has said: "Are Etihad, City and Sheikh Mansour related parties? If they are, it's up to Uefa to rule on them." Arsenal manager Arsene Wenger has also claimed the deal "raises the real question about the credibility of financial fair play".


Look, these top Premier League clubs are not a business as such but a status symbol. Once yer oil sheikh or oligarch has got a string of penthouse apartments, a private jet and a sea going yacht etc, the ultimate status symbol is a Premier League football club. The owner is quite happy to subsidise the club to the tune of £100 or £200 million a year, it's conspicuous consumption, it's a way of showing off how rich he is, if he made a profit on his ownership that would defeat the whole object. The owner doesn't look at that £100 million or £200 million as a loss any more than he looks at the running costs of his jet or yacht as a lost, it's just a cost of living.

As to the second point, whether income from a sponsorship deal with a related party counts as proper income or not, well who cares either way? There are people who are not quite rich enough to buy a whole team, so what they do is sponsor one, have the stadium named after them for £10 million a year, see e.g. Newcastle, Arsenal.

If the sponsor concerned, Etihad, is an arm's length third party and is prepared to pay £400 million over ten years for sponsorship to boost his own image/ego, then that would count as proper income, but why is this any different from the actual owner chipping in a couple of hundred million to boost his own image/ego? It's not as if the owner expects much in return, in a financial or material sense. One day his money will run out, or more likely he'll get bored and then that will be the end of that chapter.

5 comments:

Dick Puddlecote said...

I'd wager the Etihad and Emirates deals have more than a little tax avoidance aspect to them, too. ;)

dearieme said...

Why will nobody buy Everton?

Mark Wadsworth said...

DP, as far as I can make out, UK football, like all 'low brow culture' is taxed to the hilt, full whack VAT, Business Rates, PAYE, no subsidies of any kind, and so on, and is all the more successful for it. See also: why London musicals are so much more successful than the UK film industry.

D, because there's no glamour value attached to owning Everton. Presumably.

dearieme said...

And there is to Blackburn? Golly.

Mark Wadsworth said...

D, the bloke who spent a fortune on getting Blackburn to the top of the league was a local businessman who was from the old Victorian benefactor school of football club ownership.