How Money Shapes Football: Transfers, Contracts and Power Dynamics | The Review

0:00So, great to have you with us again. I hope you enjoyed last week's episode on the world of Formula One. This week, it's the turn of football. Time to look at how money works in the game where there seems to be so much of it, yet also so many financial challenges. The beauty of this is we'll look at it from multiple angles. Everything from the top executives running clubs and leagues to players and negotiation of their contracts. It's a crazy world, as we know. Welcome to the Business of Football. You mentioned the profitable status. Would that be possible in today's football environment, given the extremely large player expenditures that are just inherent within every budget for transfers that you didn't have in 88?

0:44I think it's silly if you don't run it to not lose money. Do I think you're going to make lots of money out of running a sports team? No, but that's not an excuse to lose a lot of money. There's a fundamental difference, right? And what we've seen in all sports teams is their asset value go up. right so you're getting a return in a different way which you know we didn't have in that that that period that's that's been a fundamental change um because sport has become a an asset class now for you know a lot of people do you think that's good you mentioned earlier some people maybe come in because they have big funds and they may not know the traditions and the dna when sports and asset class you have p come in you have the largest financial institutions come in Is that good or bad?

1:30Look, I think there are good owners and bad owners, wherever you come from, right? Abramovich was an unbelievably good owner. What anybody says, he put his own money in, he left it with no debt, he was passionate about it, he came to games. I think the worst owners are absent owners, right, who don't feel the temperature of his fan base, that it's just an investment. You know what? there's better things to just put your money in right because i don't believe it's a i don't believe it's a normal pe play like we put it in here in five years time we flip it i think you i think you your marbles have gone if that's what you're trying to think you can do so abramovich was amazing from an owning perspective and what he put into the club but then for you was that quite a strange transition where you're running a club a public company and looking very specifically at the business side of it and living within certain means to then move into an environment where you've got a new owner who is really changing the face of how some clubs in this country are spending money.

2:33And you're almost told, you know, you have a blank checkbook to be able to go and do this. I spent eight years in what today is still one of the most successful football clubs called Manchester United. Forget the on-field performance in terms of brand, what Manchester United represents around the world today. It's still right up there. And that was born out of that, you know, 96 period that we all did what we needed to do to build it. I mean, interestingly, Liverpool at that stage were a better known football club because of its success in the 80s, yeah? What they never did is capitalise on it.

3:13They never commercialised it. You know, so we went to Asia and owned Asia and still do in many ways. So there's lots of platforms, there's lots of foundations put in in that period. It's remarkable to me the commercial success of United in a period of time where their on-field success has been awful, last 10 years, yeah? But it hasn't really diminished or damaged the commercial value of Manchester United. Or the global brand. Correct. So I think there's other learnings there in terms of, you know, if you get these things right, they do operate like normal global brands. You know, it is about that affinity.

3:56It is about that loyalty. And when it comes back with success, which it will do over at some point, because it's cyclical, right, it'll go back again. It'll explode again. So, you know, so what I love doing is building things. And it's hard to think that I left United because I'm not a maintainer, right? I'm not a maintainer. And that sounds silly. People will call me all sorts of things like that. But the opportunity with Chelsea was to do it again in a very different environment. So the starting point for United was it had got good reputation, it was profitable, it had gone to the market, we were doing all those things that we did to make it more successful.

4:49Chelsea was bust. I mean, effectively, he bought it almost the week it would have gone under. Okay, so it was a very different starting point. And it was amazing, 2004, it had exactly the same issues as United did in 96. Didn't have a training ground, didn't have a full-time doctor, didn't have any of those things. It's hard to believe that clubs operated like that in the same league, right? Eight years apart, you start again. The difference being it was London and you've got a billionaire, right? But the job itself was the same job. It's like, how do you restructure this thing? So one of the big things, conversations that he and I had on several occasions before I even joined is, understand what you've got, what you're buying here you're buying something that means a lot to people so you've got to treat it with respect and he did and always did from day one to the day he left he fell in love with it, his first game was quarter final Real Madrid Man United at Old Trafford that's when he fell in love with the game and seven or eight months later he bought Chelsea he became someone who knew nothing about football to probably, I think, the most knowledgeable owner.

6:08There's him and Miguel Angel, Gill at Atletico, if you like. If you want to talk about people who really understand and enjoy it and know what it's about. How did the way that you invest in building the clubs differ because of the structure? One is public, you've got scrutiny. One is private, billion-dollar financing. Yeah, so look, this was a question of saying, so you do understand. I mean, it went like this. Look, this is a five-year play. And he said, I don't want to wait five years to win. I said, no, it's different, right? You know, what do you want to get out of this, right? What is it, Europe?

6:47What is success to you? And I don't think these conversations happen often enough, right? The success is selling the football club that's distressed to somebody who's got some money. It doesn't do anything for you. So it was like, what do you want this to be? He said, I want it to be the best club in Europe. That's what he saw success being. So I said, that's five years. And his repost to that was, I don't want to wait five years to win. I said, well, it's going to take you a couple of years to get into Europe. Then to be the best in Europe, you've got to always be in Europe, right? It was literally those stages.

7:20What do we have to do that? Well, we have to, you know, people always talk about how much money we spent. We spent smart money. you know our first week was building was was finding our training facility and took us two and a half years to acquire it and build it but in our first week that was the foundation that we put in because we were sharing we were sharing facilities with the university near the airport couldn't couldn't train this is a premier league club in 2004 Thursday afternoon you couldn't because the university was using it, right? People forget where this thing's come from. It's not always been what it is today, which is the best sports league in the world.

8:06So one thing that, you know, again, we talk about quite a lot, but to me it's really, really important is you get more money as a club. Let's say a better distribution deal gives you more money. As Harry just highlighted, spend and success are generally the two things everyone thinks to get up, we just need to spend more. So you get more money. what happens to you, Shrewsbury Town, to make sure that you don't just go and spend the more money you get on player wages and transfer fees? Because that currently is a concern, right? More money just inflates the things that you're currently spending money on.

8:34It doesn't allow you to actually develop as a business. Yeah, I think two people that you've had on the podcast before spoke really passionately last time around at the Honest Execs, Charlie Methven and Liam Scully. But if this money comes into football or into the EFL, we need to make sure that we've got stringent rules in place and there has been and we're in the motion at the moment of putting through more change to try and tighten that to make sure less money does go to players because this is no disrespect to the players that are playing the game but the players aren't getting exponentially better year on year but the wages continue to rise i'll get the numbers slightly wrong on this but one of the the facts that we heard today at the conference is revenue of within league one has risen by 21 this year which is on one side is brilliant but the player the money going out to players has increased by 58%.

9:23And if that continues to happen, it's not a good look for football. It's not a good look for the sustainability of the game long term. What is driving player wage inflation? I think it's, you mentioned it is you spend more, you achieve more, you get higher up than league. It's clubs want to compete. Clubs want to get that extra striker. They want to get that extra midfielder. They want to get 20, you've got 20 pros in the squad, 22 pros, 25 pros within your squad. if you've got that extra squad depth you think you can pinch an extra few points get you in the playoffs get you up the league you're always chasing success and you've got behind that you've got fans that want success but they tell you they want to be a sustainable club at the same time so I think the more clubs compete it's like any market there's a scarcity and a demand to everything and the more people want to sign a certain player the more that money goes to the player to the agent and disappears out the game but is it the problem for you as a should we say smaller budget League One club to have a team like a Birmingham in the league spending 10 to 15 million, i.e.

10:23more than the turnover of the majority of clubs in that league on a single player while you're competing in that same environment, therefore naturally just inflating the market that you're operating in? I mean, if you look at that particular example of Birmingham, somebody discussed it yesterday, is Wrexham and Birmingham good for League One, good for where we are? Well, as it happens, we're the only club that have beaten both Rexham and Birmingham this season, which is definitely unexpected. But you look at the league and think, well, if that's bringing in bigger audiences and part of the conference we've been talking about is the media rights overseas, the media rights in America in particular, if those people are bringing new eyeballs to the sport, then actually it is good for League One, it is good for the EFL, but it does make it difficult.

11:09And also it must lead to asset price inflation for all the clubs in the league, no? Yeah. But these are not big businesses. And I think this is the interesting part of football. They're not huge businesses. They are massively valuable brands and community assets. And they're far bigger in that sense than they are as a financially generating kind of asset. That's probably one of the hard things for someone like you to manage, isn't it? You've got all this passion and peace on the side. But actually, the financials to match it are quite hard. Yeah. I mean, we've got to turn over 6.9 million pounds.

11:38That's not a big business in any other area. However, we've got 6 ,500 fans coming through the gates every week, and this is one of the most important things in life. The other difference with football is everybody cares about what's going off at the club. It's not like if you run a barber shop or AI companies we talked about earlier, people think, oh, brilliant, the business is doing well. No one's sat there waiting for you to post your results on a company's house. No one's literally wanting to come in and demand you've done this a certain way. Why have you done it? How have you done it? it's so different that for that amount of stress and that amount of work that goes into it you'd probably want that to be two three times the turnover that you are but you're kind of limited to the area that you're in the supporter bases it tends to be historic and our job is to just incrementally increase that each year if we can to try and get that turnover to rise fans want investment fans want to see the clubs progress but you try and every club at the moment we're putting through their early bird season tickets and you start putting the prices up on things and you've got an absolute meltdown on your hands.

12:42So it's always a tough balance to make sure that you're trying to increase the revenues in the way that you can, but you're never going to suddenly double your revenue unless you get a really successful player trading model. And that's why a lot of clubs are going down the director of football style. And that's what Shusby Town have done because we realise that making profit from the pitch is one of the ways that you can actually grow that revenue. if you start working through, bringing through non-league players, bringing through academy players, and upward trading those players is a way to increase your revenue.

13:12So can you break down that 7 million? What is attributed in that to media rights and sponsorship and then licensing, ticketing, merchandising? So if you look at, so I'll go a little bit off-subject to come back to it. As a club, when I came in through the door, we lost 3.2 million pounds. We were generating six, spending nine, rough numbers. To get that back to our interview, you've got to break it down and go, well, hang on a minute, how much of that money is on player wages? Well, 74 % of that money was being spent on wages in 2023. We dropped that to 68%. So 4.4 million pounds of 6.9 was spent on wages, player costs, everything that goes with it.

13:55That's not our player wage budget. that's if you put everything there that's your hotels that's your food for the players that's your kit costs that's everything bringing that number down is how you make a big difference in making the club as sustainable as you can where you find that is as we mentioned if you start making cuts to that budget your performance in the league does tend to suffer as a result Why do we talk about two different leagues? The Premier League in its creation established in the early 90s and the English Football League being a much bigger 72 team group. But what's the importance of the relationship between those two?

14:32I think that's the biggest question of all. Because clearly, right up until 92, we had one league, the Football League, which was the oldest, the biggest league in the world. But I think it was a bit stagnant. English football had been through major challenges in the 1980s. It was an unwieldy voting structure. It was really difficult to get things done. And I think we needed to make the break. We needed to form the Premier League in order to bring about change, freshen things. And really what we were creating was a new governance structure for the 21st century, which I would say has worked pretty well but what we weren't expecting and nor was it part of the plan was to establish an enormous financial gulf between the two so as I said the ability to rise and fall I mean it's pretty remarkable when you think about it that in the 30 odd years that we've had the Premier League.

15:46Six teams have been in it forever, but that means 45 haven't. More than three per place for the other 14 places. Man City haven't been in it forever, but the financial gap is now unbridgeable. So in the first year of the Premier League, 92-93, the turnover of the Premier League Limited was£45 million, which is a pretty small number in today's terms. It was quite a lot of money there but the turnover of the EFL was 34 million so there was a gap of 11 million the gap is now 3.3 billion and yet we're still expecting clubs to rise and fall without facing catastrophe so the gap is the bit that we've got to address you know again that first year EFL's turnover was 75 % of the Premier League's level.

16:47It's now 6%. Is that driven by media from the Premier League's growth? Or are there lots of factors that have created that chasm? It's largely driven by media. It's largely driven by media. Premier League has been extraordinarily successful in driving deals domestically and overseas, making more money overseas and domestically.

17:14and you know the relationship between the Premier League and Sky has been extraordinarily successful for both parties and if you go back to the 1980s which in my terms isn't that long ago I guess it is quite a long time ago but that's when we first had live football on television and it seems astonishing now, but the relationship between football and television was adversarial. So first live deal was 1982, 11 games a season, believe it or not. Second deal, well, 1985, we had the cartel in those days. It was ITV and BBC. They basically came into Football League together and said, this is how much we'll pay you.

18:03the infamous Robert Maxwell got involved in 1985 and said we can sort these guys out they need football more than we need them as a result of which there was no football on television at all for the first six months of the season television walked away and the football league then went back cap in hand did a deal at three million a year half a dozen games on television And then in 1988, well-publicized, what can best be described as a fiasco, BBC, British satellite broadcasting came together in a pretty revolutionary deal. Didn't get the rights in the end. They went to ITV in the end through a fairly unseemly process.

18:58But again, then it was 18 live games a season. it was 11 million a year and what had happened across those deals the formula for sharing the money changed each time so in 1982 all 92 clubs got the same amount it was about 25 grand that's how much the clubs were making from television 1985 50 percent went to the first division 50 percent to the rest 1988 75 went to the first division 25 to the rest but every couple of years there were threats of a breakaway there were rows the formula changed and I said that the relationship with television was adversarial so the biggest factors for me in the success of the Premier League have been the fact that we had a formula for TV sharing which has stood the test of time unchanged unchallenged for 30 years plus and the relationship with sky has been brilliant for the premier league and it's been wonderful for sky um the first chief executive of sky sam chisholm said the greatest corporate romance of all time growing together a real partnership using television not just to generate revenue but to promote to showcase the game um i think it's been a real model.

20:26And again, the fact that we've had stability has given the Premier League the ability to grow. But sadly, the Football League has been rather left behind. Is the chasm unfair? Or is it actually just the very nature of economics, which is demand, supply and price is an output of that? No, it is unfair because the issue is there have been a lot of competition law cases of late, which is a really interesting topic in itself. Many different challenges being brought. And there was the European Super League case in the European Court a year ago now. It's amazing how quickly these things come around.

21:09But what that reinforced was that collective selling is basically anti-competitive. it is a restriction um on competition and supply and it's justified on the basis that there is a public good it it's deemed by competition authorities not necessarily to be in the best interests of consumers uh they would much prefer a free-for-all which is not good for football and never something i would advocate but the way that you justify collective selling and the restrictions is on the basis that there is what the economists or the competition lawyers would call horizontal solidarity, which is the fair sharing within the Premier League, and vertical solidarity, which is the sharing downwards and the recognition of the whole pyramid.

22:05And the European court was particularly strong on that in terms of that was looking at UEFA, it wasn't looking at domestic competitions. but again it said you need to demonstrate horizontal solidarity and vertical solidarity so the horizontal solidarity within the Premier League is the fair sharing of revenues within because what you could do of course is to extend your logic and say well why don't the big clubs just keep all the money they generate the revenues well you haven't then got a fair competition but then given the relevance and the importance of the pyramid you have to look downwards as well You can't just look across the league.

22:43You have to look downwards. And bearing in mind the turnover of clubs, here's another stat. This is one I came up with last Boxing Day, believe it or not, which shows what a sad life I have. But just in terms of is it fair, is it the right thing to do, if you look at the 14 clubs who were in the Premier League last year who were the non-permanent members, On average, they had been in the Premier League for 13 years each, which means they hadn't been in the Premier League for 19 years each. They'd spent most of their time with the EFL. But if you then looked at the EFL clubs last season, and if you took the 14 of those who'd had the most experience in the Premier League over the years, so your Middlesbrough's, Blackburn's, Leeds, Leicester's, Southampton's, Bolton's, Wiggins, Porton's.

23:34Ironically, those 14 had also been in the Premier League for 13 years each. So we would say they had made just as great a contribution over the years to the growth and to the development of the Premier League. and yet the 14 in the Premier League for the time being last year got 1.8 billion from TV, 14 in the EFL, 90 million, 5%. So if you want a pyramid and if you want the ability to rise and fall then you have to have fairness. If you don't want a pyramid, if you want to have a Premier League with no promotion and relegation, guess what the value of that would be in a year or two with a sterile league you know that that that just that isn't going to work what percent of transfers do you think are good decisions versus bad i think in the normal group sincerely and i always say this if you have more positive than negative i see i think more positive than negative let's say like the 60 40 this is a good number especially because that's what i mentioned finally you are working with human capital you are working with emotions you are working with uh psychologically not everyone is made for playing in a in a club i always said that they're not good or bad players they are good players for a context they are bad players for a for for the same content so what do you think was the biggest mistake and what did you learn when i when you reflect back sincerely going against my own convictions.

25:12I have a theory in football that football is like a building. You have first floor, second floor, third floor, that. So if you are in seventh floor, you cannot take a player that is in the second floor because the gap is so big. And I always put two examples in my career. If Erling Haaland, is Erling Haaland right now is because he took very good steps each time. Molde, Salzburg, Dortmund, City. Wow. They are the right step each time. Another case that he arrived to the top, but with another pathway, it's Alexander Isaac. Because Alexander Isaac, he went very young from Mykapsodna, Scandinavia, to Dortmund directly without the intermediary step.

26:05He had to go to Willem Twain, Netherlands, then Real Sociedad, then Newcastle, then Liverpool to arrive to the top of the pyramid. But you have to do the step by step. Each time I made the mistake of not taking the right step of the players or taking the players from the right floor in the building is a huge mistake. I'm going against my conditions. So if you think about that same analogy, are you the seventh floor in your mind? Or are you the sixth? And I mean that with respect, but if you think about the right next step, everyone wants to end up at Madrid or Barcelona. At the end of the day, it would seem every boy's dream is to play the Bernabeu.

26:49Are you the sixth step? And how do you think about where you sit and where the right person to get for you is then as a result? for me I would like to position the club but this is something that you can do at the moment that you are very stable in Champions League to sell to the top of the pyramid but you need to play regularly in Champions League to do that we are starting to do that I don't know for example selling Luis Enrique to Inter Milan is something that we were expecting to sell a player to a top pyramid top club in the pyramid in this in this case for me it's very important to take the players maybe from the stage that they are upper you and the recruitment on opportunities in the step that is one step down or two step downs only from from you but it's very especially about being opportunistic and creating your talent at home I don't know right now in the team we have three players that we took very young they were educated through our academy system and arriving to the first team.

28:00This is one path. Another path is taking players from level up. Another one is opportunities in the level down. Which one works least? In my head, I would say that taking someone from Madrid and taking them down is the least likely to succeed you are taking level life for me it's about level and talent if you are taking a player from a level up obviously you are having a player that touch and plate in a level that is upon you and he can he can manage pressure and level better than the others if he has the right level for me football is about yes putting a collective putting them to be in a good mood everybody together but obviously life is life is about the level at the level of performance you are your internal level quality why can i ask you why do you think that is the case because just as a quick example like if i'm at real madrid using that example and i'm not quite being maximized and my potential and i have a club like marseille with a 65 plus thousand seat stadium and an amazing football heritage and i get the chance to play every week still in the champions league and i'm still young enough where i'm looking you know this is a really positive move for me in the future of my career that that's a good thing for me i would worry about egocentricity lack of team uh i came from madrid i'm better because i was at madrid or barcelona You know, I'm the star of this team.

29:36Hence the big transfer fee. And I am better than them. I'm taking your point. This rule, but at the same time, you need to feel that the player is coming with the right mentality, with the right hunger. With the right humility. Totally agree. I fully agree with that thing. But for me, psychological aspect is the key. You cannot put someone that is changing the balance because you have the... Your strength is the group. I so much respect the strength of the group that for me it's like any bad egg is worrying for me in that respect. You get promoted. Everyone obviously knows there's a financial improvement.

30:10But how much can you actually do to affect that kind of change when you move into a division in the short term? I think it can never be in the short term. The short term element of it is the recruitment of the first team players, in my opinion. The other term has been ongoing for a while. So when I took over at Bradford, we were looking at a five to six million pound business that was able to wash its face, but no longer able to compete if we're being serious. And was COVID helped because of the amount of solidarity money we were paid by the Premier League based on the size of the club. So centrally, we've received more money in COVID than we've ever received, probably since the Premier League days.

30:59I'm sorry, just to explain that, that's because of the grants. The grants, the Premier League grants, they did it based on the attendance that you've lost. So it was massive for us. And obviously, we didn't have the costs because there were none. There was no one there. So there were certainly very limited costs. so we're now running a pretty stable 8.7 to 9 million pound business in League 2 which we're pretty proud of that's an improvement of around 40 % plus 40 plus percent in revenue and operational turnover not transfer fees that have not the football lottery as we call it which is stuff you can't predict at the start of season we knew that so the view being League 2 was tougher for Bradford than League 1 in some regards because we're having to sell the dream at that point.

31:48You asked me about how you position it with supporters, but you're having to convince the supporters to come back to watch what they believe we shouldn't be in that division. And I share that belief, but you don't get to be in League 1 by believing you shouldn't be in League 2. That's what happened when we got relegated before my time. And I think we knew we had to arrive in League 1 with what I call a good start, a base plate of revenue. so before we sign a player where are we and we're comfortably in the black by some considerable margin before we sign a player but the point being is can could Bradford City so if I take you back to 2019 when the club was relegated budget of around 4.2 million which then was definitely playoff material back then huge names big wages relatively speaking not now relegated in last place disastrous season.

32:42From League One this is? From League One. I would say and I wouldn't want to mention other clubs so I'll just stick to mine. In my view the most unnecessary relegation in English football history without a doubt. How on earth could you be relegated with a budget like that? It's a crime frankly and it settles back years. You're carrying players, you're carrying all the culture is carried then into the next few seasons and it's really tough for the managers that came in and when you reflect on that it was going to be even harder for them I didn't really you don't realize how hard so you wind the clock forward and our start position is that number ish just under that number now there are clubs in that division whose start position is minus so when their owners are I think the word investing is a brave word I'm going to I wouldn't use that word when their owners are um help assisting to try and win if you like that i i want to present a business to my owner that he can see has got is worth putting that there and actually we're not a million miles away not we're at ground zero and we can't do anything so we've set about a growth plan which we're still on with you know now we need to see what where the next ceiling comes to essentially we didn't quite double it but 40 increase the business what can we do to increase the business commercially obviously it's a huge area ticketing huge area but all the areas every single department review them all we had wonderful people at the club when i when i took over who really cared about their club and they needed help you know we didn't we were under resourced and i wanted to add talent so we did we added lots of talent and those talent The talent has helped other people.

34:34Going back to the promotion day one last time, there's lots of photos from that day that mean a lot to different people. The one that counts for me is a photo that one of our photographers took from the back, the top of the main stand looking down onto the pitch. You have all the players and staff celebrating behind the billboards or whatever they call them. And all our staff, every single person, apart from maybe the ground safety officer was a little bit busy at the time. All on the pitch with their families and all the players' families. That, in a picture, is years of work from everybody. And I'm blessed because we've got super talented people who care.