Everton

Some thoughts on the Super League – impact on Everton

All the past certainties – participation in the world’s wealthiest domestic football competition, tv rights payments, sponsorship deals, all the potential for the future (new stadium, prospect of European football etc) are now subject to considerable doubt following the announcement of the proposed TSL (The Super League).

The certainties upon which business and investment cases were built, the plans that Brands and Ancelotti will have formed are with one announcement laid bare. Decisions made by others will seriously impact Everton and many other clubs. However slow we have been in the past to take advantages of the opportunities put before us, well, we now enter a different paradigm, one that has many questions attached to it.

The impact of the proposed TSL is huge. The removal of qualification to a meaningful Champions League or Europa League renders the Premier League impotent. The appeal and value to sponsors and broadcasters diminishes with the stroke of a pen. At the same time, the proposed riches offered to the six participants of the TSL creates even greater resource imbalance. Their already considerable financial advantages increase exponentially – up to four times what the current Champions League offers four participants each year plus enhanced commercial contracts. Without the introduction of new financial regulations and cost limits everyone else will literally play for the 7th place trophy.

The Super League proposal

Essentially, twelve clubs have signed letters of intent to form a breakaway league, pan European, played midweek, independent of UEFA. The twelve clubs are Manchester United, Manchester City, Arsenal, Chelsea, Tottenham and Liverpool plus Barcelona, Real Madrid, Atletico Madrid, Juventus, AC Milan and Inter Milan. These twelve clubs plus three others would have permanent membership of the League and a further five clubs would be invited to join each season. As of yet, what the qualification criteria is, is unknown. The new League would feature two groups of ten clubs playing nine home and nine away games. The top three of each group automatically qualify for the quarter finals. The fourth and fifth clubs would play a two legged knockout to determine the last two places in the quarter final. Then two legged knockout quarter and semi finals followed by a single legged final at a neutral venue.

The League also intends to create a women’s league with the same format.

The funding of the league is substantial. The fifteen founder clubs would share an initial sum of US$ 3,500 million – approximately US$ 233 million (£166 million approximately). Expected annual revenues would amount to US$ 400 million (£285 million) a year – a 300 to 400% increase on expected earnings from the current Champions League.

To fund the league initially, financing would be provided by the US investment bank JP Morgan Chase to the tune of US$ 5,000 million – debt that would be repaid from the broadcasting rights.

So what can be done about it?

Firstly, fan action – the shareholders, the owners must be made aware of the thoughts of fans to this outrageous scheme. Coordinated social media activities followed by season ticket boycotts when fans are allowed back into grounds.

Can the Premier League throw out the six clubs? Would they wish to do so in the knowledge of how damaging that will be to future revenues. Given the parlous state of finances for many Premier League clubs, especially in a post pandemic environment, could clubs afford to take that risk? Broadcasters would demand extensive revisions to existing contracts given the material change to the Premier League with the absence of the big six. Plus the next broadcasting round 2022-25 has yet to be determined. Broadcast rights payments would fall substantially in the absence of the big six and without the competitive element of European qualification the Premier league becomes a much less attractive proposition. Equally sponsors at league and club level would want to revise existing contracts

From a legal perspective, can the Premier League deny the six clubs the right to set up another competition? There’s sufficient legal precedent (FIA Formula One Championship [2001] OJ C169/5, Hendry v World Professional Billiards and Snooker Association [2001] All ER (D) 71, and perhaps the most famous of all relating to Kerry Packer’s Cricket Circus, Greig v Insole [1978] 1 WLR 302 which suggests they would have extreme difficulty in doing so. If they could then the six clubs would resign from the league. Again is that a position the Premier League really wants to find itself in?

So what else can be done? Fortunately, rule changes within the Premier League require fourteen clubs to agree to change. One thing for sure is that the six have now forever created a unified block of fourteen.

For me the only way to countenance the retention in the Premier League of the six participants in the Super League, is to apply extremely strict financial regulation with financial penalties (not sporting penalties as that seem to have no bearing on these clubs) for non-adherence.

Thus (i) introduce Premier League Financial Fair Play which imposes restrictions on spending – a comprehensive wage and operating expense cap. Further to that (ii) set a zero limit to operating losses, i.e. clubs can only (within the cap) spend what they earn from “approved revenues”. Approved revenues would remove the Super League revenues (broadcasting, matchday and sponsorship) from the calculation. Thus the six clubs can not receive a financial advantage over the rest of the Premier League by virtue of Super League revenues.

Whilst that helps maintain a semblance of sporting integrity it does mean that the six clubs become extremely profitable. Perhaps that is the absolute intent of their owners. Become an incredible cash cow as a result of not being able to spend their new found riches on player wages and other operating costs.

Alternatively, introduce a wealth tax on the income derived from the Super League, a punitive tax of pick a figure 50%, 60%? Tax the clubs and redistribute the revenues to the other members of the Premier League to compensate for their reduction in earnings and value as a result of the actions of the six.

An alternative football – going back to our roots?

The really bold move is for the Premier League to admit it has lost the arms race, the race for more money, higher transfers, big sponsorship deals, corporate entertainment at games, ridiculous ticket prices and astronomical player salaries. Create a new league with cost controls (much lower than current costs) – a league that created value by being sustainable and thereby benefiting the football pyramid below it? Isolate the greedy by refusing to bow to their greed.

Unfortunately a return to a simpler game more closely attached to its past rather than the last 30 years of the Premier League would create huge losses for current owners and would shelve current and future investment plans. Would that bother the “ordinary” fan? Would football be any worse for a massive but short deflationary period where all the excesses of the last couple of decades are removed?

Is this the Premier League’s opportunity to do something of this nature? To reintegrate with the Football League, to reduce the enormous gap between itself and the Championship which forces the Championship clubs to commit financial suicide each year in an attempt to reach the promised land.

Impact on Everton

For Everton, the timing is about as bad as it gets. Despite the generosity of Farhad Moshiri and the presence of Ancelotti we’ve not yet made the footballing break through our spending and cost base demands. The plan was definitely to include European revenues to match against our costs. Similarly the investment in Bramley-Moore whilst creating shareholder value is/was clearly the platform to generate much higher revenues, have a higher profile, more commercial income and attract better players especially with the prospect of European football in a brand new stadium.

Has that been taken away from us? The honest answer is no-one knows yet. Will the uncertainty make it more difficult to raise finance, will it make the finance more expensive? The answer to both questions is definitely a yes. The bigger question is whether the new face of football, the new economy of football for Premier League clubs warrants the investment in the stadium. That is a hugely tricky call and I am certain it will occupy the thoughts of Farhad Moshiri and the Everton board plus commercial partners for some time to come.

The greed of others is going to change football, of that there is no doubt. How great that change is, is down to the negotiating skills of the Premier League board, individual club owners and the response from each club in adapting to the new circumstances.

It is a deeply worrying time, but we have to believe that acceptable solutions and/or a complete rethink is the way forward. It’s a watershed moment – good luck to all who have to navigate through it ensuring that for the most important stakeholders in football, the fans, there’s a viable sport to continue supporting.

 

5 replies »

  1. Paul – Do you think this has taken Moshiri, long time adversary of Kroenke, by surprise? I have to believe that they wouldn’t have gone as far as they HAVE with the stadium without this being at the back of their minds and some semblance of a justification, don’t you think? Thank you for providing some rational commentary to distract from the (rightly) angry mob, pitchforks and torches!

    • Hi Robert, thanks for your comments. I think you make a very good (and often over-looked) point about the animosity between Kroenke and Moshiri (perhaps as a proxy for Usmanov). I have the feeling that those providing the finance (ie the lenders) have always had an eye on what was happening at UEFA in terms of the Champions League reforms, but also given JP Morgan’s role in financing the Super League it is almost impossible to think that those who were/are working on Everton’s financing were not aware of the TSL plans. The uncertainty it creates in terms of Everton’s future income streams will (IMO) certainly cause a delay in completing the financing.

  2. Once again Paul, Thank you!

    One thing I’m certain of is that the self styled ‘Super Six’ shouldn’t get concessions from the PL, UEFA, FIFA or any other governing body. This is the moment, in my opinion to say ‘stay or go’, reform football to make it as competitive as possible.

    We are Everton fans, god knows we’ve watched some turgid shite but we’ve also had those nights and days that convince me every year to do it again next year and that is where my allegiance lies.

    The ‘super clubs’ (I have to laugh every time I say it) are scared to death of being competitive. Bring it on!

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