Can Ipswich Town compete at the top end of the Championship on a limited budget? Stuart Watson spoke to Sheffield Hallam University’s football finance expert Rob Wilson about the size of the task they face.
Broadcast billions
Domestic Premier League broadcast rights were sold for around five billion pounds for the period 2016-19. Throw in a bumper new overseas TV package, due to increasing interest in the brand from China, and that figure rises to an eye-watering £8.3bn. The knock-on effect is huge. Sunderland were awarded less than £2m in prize money for finishing bottom of the Premier League, but scooped £93m altogether once the TV money was shared out.
Parachute payments
The Premier League provides a further financial cushion to those relegated to the Championship in the form of parachute payments.
These used to be spread over four years, but have now been cut to three years. And if you get promoted at the first time of asking, then the next lot of parachute payments are reduced to two years (Norwich City, therefore, are now in their final year).
The value of these payments are worked out as a percentage of the money earned by the team that finished bottom in the top-flight, so remain on the rise. Sunderland, Hull and Middlesbrough are set to receive around £45m in year one, £30m in year two and £15m in year three.
Odds stacked against Town
“We’ve just finished some research into parachute payments and it shows, unequivocally, that they completely distort the competitive balance in the Championship,” says Rob Wilson, football finance expert at Sheffield Hallam University.
“The odds are increasingly stacked against a club like Ipswich. Their turnover is around £15-16m a year, then you’ve got a club like Newcastle who, after factoring in their first year of parachute payments, turned over £80-90m in the Championship. There is a stark gulf in financial clout between the haves and have nots.”
‘Vicious circle’
“Premier League teams, or teams who have been in the Premier League recently, see their revenue streams driven by television money,” says Wilson. “But those existing in the Championship or below are becoming increasingly reliant on ticket sales, as well as any sponsorship or commercial income.
“Gate receipts are the lifeblood of a club like Ipswich, so losing around 3,000 season ticket holders in two years will be something they are thinking very, very carefully about. It’s not a trend they can afford to continue.
“It can become a vicious circle. You sell less season tickets, key revenue is down, you become less competitive in the transfer market, you become less competitive on the field, you sell less season tickets... The loop goes on until you hit the base level of core supporters and reach a stage where, at best, you are simply treading water.”
‘Glimmer of hope’
“The more research we do, the more the evidence shows that investment in an academy system is the way forwards for those trying to bridge the financial gap,” says Wilson.
“If you can strike gold and get two or three top homegrown players emerge at the same time, and sign a couple of gems through some sophisticated scouting, then you can generate some momentum.
“The Huddersfield story has given everybody that little glimmer of hope. If you’d have asked me this time last year whether they had a chance of being promoted I would have said ‘absolutely not’. They have a turnover of around £12m a year, but they found that sweet spot.
“Those stories will be an exception to the rule though. I think there will be more yo-yo clubs going forwards. The narrative has changed with Financial Fair Play. Increasingly people are going down the Burnley model – get promoted, don’t overspend, try your best and if you do get relegated be in a great position to go back up again in the next year or two, eventually looking to establish yourselves.
“Clubs that get promoted are coming up with sensible three or four year plans rather than getting carried away and overreaching.”
Managerial change the answer?
“We’ve done some research on that and found that, for clubs working on a limited budget, managerial stability produces more points over the long-term.
“Marcus Evans’ five-point plan – focussing on the academy, sensible transfer fees and managerial stability – is, theoretically, the right approach. I appreciate I am talking from a theoretical viewpoint though.”
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