Whilst attention understandably has switched to the final games of the most disappointing season imaginable and particularly the leaving date of the soon to be departed Allardyce and CEO Robert Elstone, it’s probable matters are coming to a head in the boardroom regarding the final budgets, design and capacity of Bramley -Moore.
It’s a well-worn path, particularly on this blog, but the case for a 60,000 seat stadium needs repeating. This case hasn’t gone away on the back of a poor season. If anything, the case for being bold and benefiting in future years from that boldness is accentuated by what’s been witnessed at Goodison Park this season. What’s happened at Goodison this year is the result of a series of poor decisions, some over many years, others more in the short term. It is not however, just a case of bad luck. We need to reverse the process of poor decisions and execution.
I’ve heard a lot about risk, the risk that a 60,000 seat stadium can’t be filled, it will be too expensive, we can’t raise the finance. Well correct me if I’m wrong but professional sport is a “risk” business. Ask Ellis Short at Sunderland, ask Randy Learner, ask Hicks and Gillett. In their own ways they dared to dream, put their and others’ capital at risk, to say nothing of the clubs themselves. Each of course, failed losing significant sums of money and putting the clubs in perilous positions.
They failed because they formed poor plans and did not invest in their management teams to bring in sufficiently good people to see those plans improved and executed well.
What’s that got to do with the current position at Everton?
Well, it’s my assertion that what is considered to be the “low-risk” option by many, one of a less aggressive increase in capacity perhaps to 50-52,000 is actually much riskier than going for the maximum the Bramley-Moore site can hold, thought to be around 60,000.
How can this be the case? Simply the marginal increase in revenues after financing costs generated by the smaller increase in capacity when weighed against the debt the club carries, plus the level of impact of that marginal increase on our competitive position makes our ability to compete with the “big 6” and perhaps some of the remaining 14 Premier League clubs lessen not increase. Thereby decreasing the long term viability of the project, and ultimately the club.
The way of de-risking the move to Bramley-Moore is not by reducing costs and the debt burden, not of making it comfortable to fill the ground to capacity, it’s in making the team successful and competitive on the pitch. We de-risk Bramley-Moore through our Premier League position, our competitiveness in domestic cup competitions and through regular participation in European competition. Not only would that ensure higher attendances, but would generate significantly higher revenues across all income streams.
We can only become competitive on the pitch by maximising every income stream available to the club, one of which is matchday income after financing costs. I’ve demonstrated time and time again that based on reasonable cost and revenue assumptions a 60,000 seat stadium generates significantly more net revenue than a 52,000 seat stadium (for example).
Vanity has its uses
I’ve heard people question whether 60,000 is just a “vanity” exercise, arguing that if it is then it’s not worthwhile. I’ve usually said it’s not, it’s based on sound economics. However, in one very important aspect it is a vanity exercise. It’s a vanity exercise to our commercial partners present and future. It’s a statement about our ambitions, our intent and where we wish to aim the club. That translates into future value for our commercial partners, improving our current negotiating position and in future generating higher commercial revenues on the back of our boldness and ambition.
Whilst the Bramley-Moore stadium says a lot about our future ambitions it can’t be viewed in isolation in terms of the future progress the club makes. It has to be viewed in the context of a portfolio of decisions the club must make in the very near future.
Because there are so many decisions to be made – stadium, stadium financing, CEO, manager, Director of Football, possible change of Chairman, changes in commercial relationships with kit manufacturers and distributors in the next 12 months, choice of naming rights partners, the temptation (almost natural response) is to err on the side of caution. Yet to do so will condemn Everton to many more years of absolute and relative under-performance. Simply, the gap between us and those above us will continue to grow at ever increasing rates.
If that happens we have no chance of a sustainable competitive position in the Premier league. We will at best be “the best of the rest”. Apart from being unattractive from a fan’s point of view, I believe increasingly it will become unattractive to sponsors.
The value of hope
We often say as Evertonians “it’s the hope that kills you”. Well for commercial partners that’s true also. There’s currently a small premium we receive versus the “rest” based on the hope value that we become one of the newly formed “big 7”. The less likely that appears to be the case the smaller that “hope” premium and our commercial value will be in future years. Whilst the big 6 increase their commercial values the remaining clubs will probably see a flattening out and possibly a reduction based on lack of “hope” value and the marginal increase in risk of relegation.
So, returning to Bramley-Moore. A 60,000 seat stadium increases the marginal revenues over financing costs – that helps support the improvement in playing squad. It also sends out a “vanity” message and much more to other commercial partners, it demonstrates ambition and by arguably improving the prospects of improved performance on the pitch increases the commercial attractiveness of the club. That in turn generates more revenue. More revenue improves the team, assures the stadium is filled to capacity and becomes a virtuous circle.
However, for that to happen the correct decisions have to be made now, not sometime in the future. Those decisions have to be linked with improvements in the management of the business at board level, C level and below. With those improvements better deals can be struck with better partners and progress ensues.
Thus, we really are at critical juncture. I’m sure we will make changes in the footballing management in the widest sense and bring about better strategy and decision making – that seems the easy bit in all honesty. Equally critical is the off-field management and decision making. One of the most pressing decisions from which a great deal of other decisions will hang is getting the stadium and its size right. Being bold de-risks, being timid increases risk and reduces the prospects for success.
Mr Moshiri, time to be bold in every sense.
Categories: Everton finances