THE BREAKDOWN: Celtic Complacency Exposed, Return of Christian Horner & Is Horseracing Sport’s Biggest Business? (E10)

20:15Charlie:I mean, some people would say the real idiots are those of us who actually try and bet on horse racing. Let's call it the beginner's guide. The beginner's guide. It provided me with some really good context to then what you've been sending me on the side. And giving some people who I'm sure will, like me again, see the front facing and the nice shiny end products of these Cheltenham Festival weeks, but not understand the actual story behind the scenes and how racing has developed in this country and globally. I think that would be a really good start. Yeah. OK. So horse racing in this country divided into two parts, one of which is called National Hunt Racing.

20:50Charlie:That's jump racing called National Hunt because it really comes out of a structure underneath it, which is a hunting, fox hunting background, even now to this day. So effectively, you'll have the individual hunts throughout the country. Those hunts will put on things called point to points, which are amateur jump racing. And some of the some of the horses, but most of the jockeys and the trainers then come through point to point racing up into professional national hunt racing. So what you'll see at Cheltenham, large numbers of certainly the jockeys, in many cases the trainers, and in some cases the horses themselves, have come through effectively the hunting, point to pointing, up into the racing scene.

21:31Charlie:That's jump racing. Jump racing is really a British and Irish thing, French to a degree as well. Flat racing, which is the global form of racing, which is racing without obstacles to jump over, is the sort of the mainstay globally of the sport. And it's horses who race over fences for obvious logistical reasons have had their testicles taken off, unless, of course, they're a mare, unless they're a female horse, which doesn't apply. But the majority of them are male horses who we call geldings, which means that they've had their testicles chopped off, which of course then means that post their racing career poor chaps they don't have much of a stallion breeding career to come for obvious reasons the flat horses on the other hand do and the very top flat horses who win the most prestigious races can go on to become stallions and what what that means is that basically they live the dream that they live their very best life, their dream life, all of our dream life, they get transported around the world, what we call covering mares, copulating with mares.

22:44Charlie:And the very top stallions might cover 400 mares a year. So effectively, they become businesses in themselves. Now, a stud farm, one of the big stud farms, might have 10 stallions, all of whom are covering three to 400 mares a year. But each individual stallion is its own business line. And the very top ones, each individual copulation might cost the owners of that mare£120 ,000, something like that. So if you imagine, if you multiply£120 ,000 by£400 ,000 and then think that the stallion career might last 15 to 20 years, what you're looking at here is a sporting entity, which is roughly the same value as a Premier League club.

23:27So the top stallions are worth as much as a smallish...

23:33Charlie:A smaller Premier League football club. So if you then look at a breeding operation of which the biggest and the best in the world is Coolmore, the Irish sort of monster, the behemoth, which bestrides our global racing, which is overseen by a sort of legend of the game called John Magna, who originally was in partnership with Robert Sankster, who was the pools tycoon from Liverpool, who really sort of those two changed a lot about racing during their time together before Sankster died. you know the total value of coolmore as a breeding operation would be multi-billions multi multi-billions so it'd be one it'd probably be one of the most valuable sporting entities in the world now flat so those the progeny the offspring of those matings are then sold as yearlings so that's when they're effectively one year old or coming out to be one year old through the sales ring at the orchard at the equine orchard houses around the world I'm guessing they're marketed as like this horse's dad is next.

24:33Charlie:Exactly right. Exactly right. And that's how the auctioneer will sell the horse. He'll say, you know, he is by so-and-so, which is the stallion, out of so-and-so, which is the dam. That's the mother, effectively. And the pedigrees of the mother and the father will be traced back through several generations. And the mating of different bloodlines with each other is the science. And that's why so many super smart people, data analysts, et cetera, work in the bloodstock industry, trying to work out exactly what bloodlines should be blended together to create horses that are either sprinters or middle distance horses or longer distance horses or even jumps horses.

25:08Charlie:They can, you know, because you have to breed jumps horses as well. So the bottom line is, is that this is a massive multi, multi, multi, multi, multi billion pound dollar, Aussie dollar, whatever it might be, industry, because flat racing goes on all around the world and each jurisdiction is competitive against each other. So the reason I've given that long run up is to pinpoint that last bit. Each racing jurisdiction is competitive against the other, both in terms of where the breeding happens, where those horses get sold to, who those horses then get owned by and where they race, which country they race in.

25:46Charlie:So which country can realistically say we have the best flat horses racing here and we breed the best flat horses because these are massive taxpaying enterprises as well. So the whole thing is a very, very big industry. British horse racing has a fundamental problem in terms of its competition against the other major global jurisdictions. jurisdictions, most of the other global racing jurisdictions have their betting in-house through a tote, which is basically a betting system which is owned effectively by the racing industry or owned by the government on behalf of the racing industry, by which the profits that are made out of betting on horse racing go back into horse racing in the form of prize money.

26:32Charlie:The larger the prize money, the more likely it is that the top horses race there. The more likely it is, once the top horses are racing there, that the breeding operations we'll be supplying into that country on a regular basis and so on and so forth the whole thing goes round and round in this country we have bookmakers we do have a tote which is very much there but it's smaller and that does cycle money back into horse racing to a greater degree but the bookmakers which comprise the the lion's share of betting in horse racing in this country most of their profits stay with the bookmakers and a small amount of their profits is siphoned off by a government body called the levy board into something called the levy, which is profits of the bookmakers taken to then be put back into horse racing in the form of prize money.

27:18Charlie:Okay. Last year, that amounted to about just over 100 million pounds. Right. So it sounds like a big number. But if you looked at the level of betting in this country, in another country, that number would be 300 million. So effectively, UK horse racing is missing out on 200 million. If UK horse racing did have a tote system, we would be the most powerful racing jurisdiction in the world, right? Because the number of tracks we've got, the amount of prize money would be huge, and so on and so forth. But there is very, very significant competition. And I want to highlight in particular Hong Kong.

27:54Charlie:Hong Kong, and therefore now also bits of China as well, racing is overseeing by something called the Hong Kong Jockey Club, which is a British creation. In fact, you know, when I was young, we lived over there. My dad was a member of the Hong Kong Jockey Club. It was a traditional British institution, which was then handed over during the handover of Hong Kong to the Chinese. The Hong Kong Jockey Club was also handed over. And because of the passion that the Chinese and Hong Kong Chinese people have for betting, the revenues of the Hong Kong Jockey Club are, I mean, I think we've mentioned before that sometimes numbers can just become here's a big number and here's a big number.

28:31Charlie:but I want people just to focus on this number. The revenues of the Hong Kong Jockey Club are£32 billion a year. Yeah, I couldn't quite believe that. £32 billion a year in revenue. I'm still not sure I do believe it. They bet more in one evening of racing at Happy Valley Racecourse in Hong Kong than we do in the whole of Royal Ascot. So what does this mean? Now, not all of the money that the Hong Kong Jockey Club makes goes back into price money in Hong Kong. Otherwise, it'd be totally absurd. But a good chunk of it does. And the result of that is that Hong Kong is one of the jurisdictions where owners, wealthy owners in that pathway now increasingly buy a lot of the better horses from Britain to go and race in Hong Kong.

29:19Sorry, just on that before you move on. We've been talking about the NFL and the Premier League and 20 to 25 billion revenues for some of the America's sports Premier Leagues. you know 10 to 12 billion total revenue yeah and you're saying the hong kong jockey club has 30

29:34Charlie:it's it's it's the most it's the most profitable and probably the most powerful sporting organization in the world wow so they have formed a joint venture with the tote and the big race courses over here in the uk and a few other of the big race meetings around the world called world pool and that itself so when effectively what that is a mechanism which enables punters in the rest of the world to bet into our tote during the big British meetings, the numbers involved on that are just utterly extraordinary. I mean, when you see the difference between the betting revenue on a race in which the Hong Kong market is engaged and not engaged, the difference is just absolutely vast.

30:12Charlie:So the point is, is that these other racing jurisdictions, and Australia is also a very well funded racing jurisdiction, and America also very well funded. You know, France has its own totalisators to tote system so parry mutual so it's also a very well-funded racing jurisdiction so effectively what we're looking at here is that although britain has the most historic races the epsom derby and the guineas and so on and so forth because the sport started here in 1750 effectively a lot started actually before then but really started getting codified properly codified in the in the 1700s we're looking at a situation where gradually british horse racing is being um is having its lunch eaten by the other racing jurisdictions and that 100 million levy pot that we were talking about um is let's call it the pie and the fight over that pie lies at the heart of what has now become a revolution or a counter-revolution or a civil war in british horse racing that erupted last week a very quick bit of bit of history here until 1993 the Jockey Club ruled and controlled horse racing in this country and always had done.

31:24Charlie:The Jockey Club is basically an aristocratic gentleman's club, which is dukes and earls and so and so, supplemented by some of the other people who have made money and have come into racing subsequently. But this is basically the ultimate, ultimate posh members club. And the Jockey Club not only is itself a club with their own clubhouse in Newmarket and so on and so forth, but it also owns race courses including most of the big race courses in the uk so if we think about cheltenham is owned by the jockey club aintree where the grand national is is owned by the jockey club newmarket where the guineas is is owned by the jockey club epsom where the derby is is owned by the jockey club and then you've got a small number of so-called big independent courses which although they're not owned by the jockey club are owned by people who either are in the jockey club or who are very close to the jockey club so effectively so goodwood is owned by the duke of richmond and so on so forth york is controlled by the york racing committee but if you look at the york race committee members of the jockey club on the york race committee chester likewise newbury is a little bit different because it's been a listed company but again you look at the board of newbury and it's quite jockey club adjacent so almost all of the big courses there is actually one exception which is doncaster but putting that to one side almost all of the big courses are owned or controlled by either the jockey club or people close to the jockey club.

32:50Charlie:Then you have the smaller courses, the less notable courses, the ones that run what we call the volume. So the kind of races that happen every day and every evening that keeps the betting shops going, they are mostly owned by a company that used to be called Arena Racing, is now called ARK, which in turn is owned mostly by the Rubin family, who I know both of us know, the family. And those are courses which non-racing aficionados may barely have heard of. So you're talking about Lingfield, Wolverhampton, Southerl, these types of courses. Now, the important thing to understand is that in the meritocratic sort of atmosphere of the 1990s, the jockey club was persuaded to give up control of horse racing, and it passed to something called the British Horse racing board and the british horse racing board was basically a committee made up of the various different stakeholders in racing so you had representatives of the race courses you had representatives of the horsemen the jockeys and the trainers and so on and so forth you had representatives the racehorse owners association you had some technocrats you had one or two non and the idea was all these sensible people will get around the table and they'll knock heads together and rather unlike the crusty old jockey club everything will be well it's been a disaster an absolute disaster at that point the jockey club still retained control over disciplinary measures but in 2007 they were forced to give that up as well to create what's now called the bha in effect either controlled or effectively veto controlled by the race course association and the race course association is in effect or has been in effect controlled by the small race courses.

34:33Charlie:Why? Because there are more small race courses than big race courses. And rather like with FIFA and IOC, the voting goes on one vote per course. So in other words, the fact that ARC Racing has 16 courses, which is the largest group, means that effectively ARC Racing has had a stranglehold on the RCA, which has then had a stranglehold on the BHA. And effectively what happened last week was the Jockey Club finally leaping out of its crusty Chesterfield in White's club and saying right that's it we've had enough we are going to start rattling this cage very very hard now why wouldn't there have been a weighted association previously because if you do have these key events the biggest horse racing meets in the country happening sporadically then you have underneath it racing events going on maybe more like you said the arc type things it would make sense surely in that system to ensure that the top of the sport has a certain amount of weight and control over the broader, should we say, community part of the sport.

35:35Charlie:Yeah, I mean, look, you're absolutely right. If you actually look at successful sports, successful sports are basically run in one of two ways, either through a benign dictatorship or through a collective of the leading entities or performers within that sport, or sometimes even a combination of both. So if you look at the moment at which Formula One goes from being an absolute shambles to becoming a machine. It's when Bernie Eccleston, who himself had been a team owner, got together with his fellow team owners and said, right, make me into a benign dictator and I'll make you all rich. And that's basically how Formula One happened and was successful.

36:09Charlie:But let's also look at the situation of English football. English football was an utter shambles and was the fifth in Europe, the fifth biggest league in Europe until the 1990s when the biggest clubs decided, right, we've had enough of this. Now, what have they had enough of, Charlie? What they had had enough of was being part of the Football League, which was 92 clubs, where each club had one vote. So that's when the biggest five or six clubs got together and said, this is ridiculous. It's the tail wagging the dog. We're being told how to run our sport by, you know, some clubs in the fourth division, who frankly can barely even tie their shoelaces up in commercial terms.

36:48Charlie:Don't know what they're doing. Now, this is where last week happens. And I just want to explain what happened last week to give the trigger of all of this. So the British Horse Racing Association, which has been the shambles for a long time, a new chairman was appointed to lead it, a guy called Charles Allen, Lord Allen. And he has a storied business background, used to run ITV, etc., been chairman of various big companies. And the idea was that he would be able to come in. Finally, the big corporate bigwig would come in and would calm everyone down and then push forward and say, this is the direction we're going in.

37:25Charlie:And his idea was, right, I've got to clear, we can't run this by committee. This isn't working. We need an independent board of bigwigs and experts and this type of stuff. And of course, that independent board will listen to the various different stakeholders, the different race courses and so on and so forth. But fundamentally, the independent board will decide what's best. So you're going back into benign dictatorship, right? Which is how sports need to be run. I was going to say, that sounds sensible to me. Right. But the Racecourse Association effectively said no. The Racecourse Association said under that system, we would no longer maintain our stranglehold on British horse racing.

38:00Charlie:And in particular, and this is the key thing, how many fixtures there are. The Racecourse Association, which as I said, is dominated by the small courses, want to have as many fixtures as possible because they then sell those fixtures to the bookmakers and they get media rights revenue for that money coming in effectively, even if very few people are actually turning up to those fixtures, even if in terms of the big scheme of how much people bet on horse racing in this country is massively weighted towards the bigger meetings. Effectively, that alliance between the betting shops and the small courses was what's keeping a stranglehold on the entire industry.

38:35Charlie:So Alan, having been told he couldn't have his independent board, resigned, having only really been in post for six months. he resigned this then led to a massive eruption from the jockey club saying that's it the race course association doesn't speak for us we're now going to speak for ourselves and then arena background briefing well you know let's see how that one goes in court so this is this is heading for a massive blow up and before i ask you what you think happens to me everything that you've said we have a thriving sport in this country that shakes off a lot of money yeah it seems like that there doesn't need to be this friction.

39:13It seems like there's a very normal and natural place for these organizations to sit. As I said, you have something servicing a particular level and then you have something servicing what we could refer to as like an elite level, like a Premier League product.

39:24Charlie:There isn't enough pie to do both, Charlie. The problem is there isn't enough pie to do both. In other words, for the jockey club's courses to be competitive with the big meetings around the world, the big tracks around the world, they need most of that levy money to put into prize money to make sure the best horses come here, which then keeps the bloodstock industry afloat here. The small tracks, they need that money because without that money, they've got nothing because they don't have any ticketing attendance much. They don't have much else going on. And, you know, arc racing, this is its business model.

39:56Charlie:Its business model is crucial. And it's not, you know, it's not an insignificant business arc racing, which has annual revenue of, you know, pushing towards 100 million a year, call it 80, something like that. And kicking off profits depends on what's happened during the year, depends, you know, obviously during COVID things weren't so good and all this type of stuff. But let's just say for sake of argument, kicking off a profit of around about 10 million a year, something like that. So you've got a business there, which is a 100 million pound business, just as an operating business. But don't forget, it also sits on amazing real estate as well.

40:30Charlie:So the total value of Arc Racing, it is itself in sporting terms, quite a big business. So they are going to fight to protect their position very, very hard. And the Rubens, who own ARC, are not known for being shrinking violets when it comes to business. They're very strong, powerful business. By some measure, the most wealthy British family actually living in Britain, non-tax exile British, which is admirable, by the way. So for their own commercial reasons, they're going to protect their position. The Jockey Club, which is trying to make sure that British racing can compete on the international stage, has made it quite clear now that they're going to go on the warpath and really try and attack this situation.

41:06Charlie:So all I can say is this is going to be, it's almost certainly going to end up in court, in my view. I'm going to do the very dangerous thing and say, if you were in position to influence, from everything that I've heard, I want to understand how this could play out or how this plays out in the best interests of the racing industry from those that are working in it at the top to those that are going and enjoying it as punters. What's the solution that really needs to happen to fix this? What are the themes, Charlie, that we have pursued in the last two months of doing this podcast when it comes to successful sport?

41:43Charlie:Scarcity, clear narratives, absolute clarity about when your flagpole events are and how to build buzz around them. Do you remember we used NFL and Formula One as being great examples? Now, let's just say for the sake of argument that as with NFL and Formula One, let's just imagine this is never going to happen. But let's just imagine that horse racing picked out its 20 biggest events of the year. Horse racing would be a much bigger sport in this country if they did that. Because if they only asked the general public to focus on the Grand National, the Derby, Cheltenham, Glorious Goodwood, etc., etc., etc., the big famous meetings that everyone can understand and build up to, etc., it would have an amazing profile in this country.

42:27Charlie:Effectively, it's drowning in mediocrity. It's drowning in dross. there's far far too much there's way too much racing way too much low grade racing i have got no problem with this type of sport going on by the way they knock themselves out have as many fixtures as they want but the question is is should it be subsidized effectively by the top end that's the question okay it's fascinating um i'm very much a student of this so understanding a little bit more about it and how it fits into our country and the world's sporting ecosystem It's going to play out over the summer. And as I said, I think it's going to get very ugly.

43:04Should we move on to something else? Something that we've also been keen to do for quite a long time. We have. And the reason we have is Scottish football.

43:14Charlie:Scottish football. I think the reason we've been excited to do it for a long time is because we've actually got an exciting title race in Scotland. More exciting title race in Scotland than in England. Well, exactly. Sorry, Arsenal fans. Sorry. Yeah, well, it comes back to the, hey, they play boring football, but they win, don't they? So it's acceptable for now. For the first time in many, many, many, many, many years, a team other than Celtic and Rangers look like they could win the Scottish Premier League. Hearts are currently top of the table. Hearts have 63 points. Celtic have 58 points. Rangers have 57 points.

43:49And even Motherwell are sneaking in with 53 points. So only 10 points off the lead. Now, to anyone that follows football, they will have a very good grasp of the fact that Celtic and Rangers have dominated Scottish football for many years. 1984, 1985 was the last time a team other than Celtic and Rangers won the SPL. And it is no coincidence that the person that led them to that was the great Alex Ferguson. that led who to that? That led Aberdeen. Aberdeen. Sorry. Aberdeen who last won

44:20Charlie:a club from outside of Glasgow, last won the top flight. 40 years ago. We're talking about 40 years ago now. So I mean, you'll remember this. Obviously, I won't. It was a good few years before I was born. I don't remember it at all. So we're talking about a huge amount of time. Now, we also talk about, when mentioning what the themes are about what make good sport, competitive balance is crucial. It feels like a big moment for Scotland. It feels like an opportunity to throw a lot more eyeballs on something that traditionally has maybe struggled to do it outside of the area, outside of the region.

44:53Yet you still have two massive clubs, global clubs, competing at the top of this league. So I don't want to diminish that and we won't because we're going to start having a look at the business of it. But what we also will talk about here links back to what you were just mentioning with the Jockey Club, because one of those talking points could come round to the fact and ask the question, have Celtic, and you could pull Rangers into this as well, have they become complacent with their position at the top of Scottish football, assuming that they will continue to dominate and continue to win? And has that provided an opportunity for clubs like Hearts, like Motherwell, like an Aberdeen to attract some outside investment, plug in some of the great work going on in a few of the smaller clubs in other leagues who have started to build profile and compete at the top and really challenge this old firm dominance?

45:47Charlie:So your question is, effectively, has the old firm of Scottish football become complacent? Yes. Do you want the short answer or the long answer? Give me the short answer. And then you'll get the long answer afterwards. Yeah, exactly. I knew that. So the short answer is yes. The long answer is also yes, but needs, I think, a lot of context and also some slight differentiation between Celtic and Rangers. So Rangers has been for 20 years now what might be described as a financial shit show. It actually, after several years of lots of problems, they actually went bust, bust, had to start again and still called Rangers.

46:27Charlie:but effectively a new entity. And they were made to start again in, was it the fourth division? I mean, quite extraordinary. It was quite extraordinary. You were seeing one of the biggest clubs in the world play at stadiums which could barely fit 2 ,000 or 3 ,000 people in. They sort of fought their way back up to the Scottish Premier League, as you'd imagine they would do because their revenues, you know, they get 50 ,000 a week at Ibrox, their stadium. So, of course, their revenues were going to propel them back up to the top division. And they sort of, by hook or by crook, because they still weren't on totally firm footing, I would say, from a financial perspective, they eventually ended up winning a league under Steven Gerrard a few years ago.

47:05Charlie:But then they sort of got themselves back into difficulties again. Finally, they were bought out by the 69ers group a year or so ago. So that shares ownership with Leeds. Sharing ownership with Leeds. And now they have some stability. They have a good head coach. They are now starting to be able to build again. But effectively, really, for this century, for most of this century, Rangers has been a shitshow. So during that time, Celtic has dominated Scottish football. So we talk about the old firm dominating Scottish football. But in the 1990s, that was often Rangers. But in the last 20 years, it has been Celtic.

47:49Charlie:But largely by default. Largely because Rangers weren't on the scene. And because none of the next rank of Scottish clubs, Hearts, Hibs, Aberdeen, probably be the next three biggest clubs in Scotland, had really managed yet to get their act together and find a way, as you say, has happened in other countries, of competing against a complacent Celtic. So they just carried on. They have revenues a quarter that of Celtic and therefore wage bills a quarter that of Celtic. So effectively, every season was, right, well, Celtic are going to win the league by 15 to 20 to 25 points. This is when Rangers were out of the league.

48:27Charlie:And various other clubs are then going to fight amongst each other for who comes second, third, and fourth, and who therefore gets access to the European places. And that's the key, isn't it? You mentioned revenue there. I mean, the reason they haven't been able to compete is because Celtic have been so dominant commercially. And you're looking at revenues last year. And it's also important to say Celtic is a public company. It is very important. So that forms part of the story that's about to come. And we'll explain that. But just from the financial perspective of getting a little bit of clarity around numbers, the numbers that have been released show Celtic last year generating 143.6 million in revenue.

49:0033.9 million of that is profit after tax. They have a 77 million cash position in the bank.

49:08Charlie:Celtic, unusually for football club, make a profit every year. So what they do is they make a profit of 5, 10, 15, 20 million, and then they stick it in the bank. So they've now got a cash balance, I believe, of around about 90 million pounds, sat there in the bank, just put their revenues in perspective, 150 odd million. Bearing in mind they don't get any English Premier League TV revenues, the TV revenues in Scotland are tiny. So reported figures are about 4 million if you win at SPL. Do you remember when we were talking about rugby last week? That's about the same as rugby. About the same as rugby.

49:42So their total media deal is about 35 to 40 million a year for the league.

49:46Charlie:Charlie, what that tells you is that Celtic's native revenues, i.e. the ones that are not to do with TV revenue, are massive. I mean, there are Premier League clubs that don't do a lot more revenue than that with the TV deal, with the Premier League TV deal. If Celtic had the EPL deal, and then if they had the additional commercial sponsorships that would come off the back of being in the EPL. They'd be doing 300 million a year? More. 350 million, 400 million a year. So they would be in that top echelon of England. Absolute minimum. Right? So Celtic is huge. One of the biggest clubs in the world.

50:25Charlie:53 ,000 season ticket holders. And around 10 ,000 strong waiting list. And that's in about 60 ,000 capacity, correct? And it's a 60 ,000 capacity stadium. So it's like 90 % of your stadium, pretty much. Right, it's season two. It's guaranteed revenue. Right, it's guaranteed revenue. But also on top of that, you've then got a massive waiting list as well. So we're going to come back on to that because it is really, really relevant. It's relevant in talking about how complacent that they have become as a business. So as you say, they are a listed company. They are on the stock market. And they had a successful period under a man called Fergus McCann, who really turned the club around in the 1990s.

51:02Charlie:He was the owner, I think, from around about 1994 to about 1999, something like that. And during that period, Park Head, Celtic Park, got transformed into what, by the standards of then, was a modern stadium. Up until then, it had been typical old crumbling terraces and all this type of stuff. In the 80s, it was famously run by a board that was nicknamed the Biscuit Tim Board, because they used to hide all the receipts and petty cash and biscuit tins. That's how tin pot the whole thing was. Fergus McCann came in. He modernized it. And he sort of coagulated the shareholding, maneuvered the shareholding with the assistance of a guy called David Lowe.

51:41Charlie:Now, just keep that name in your head. Celtic fan from a finance background. At that point, a young man helping Fergus McCann organize the club to enable it to become a modern club with it being a listed entity. So Fergus McCann was one of many shareholders. he was not the owner in a way that English football would understand. Fergus McCann's ambition to take it public was to raise money to avoid potential bankruptcy. Is that correct? That's right. Exactly right. That's when he took over. So at that point, it's crucial because at that point, loads of Celtic fans bought shares in behind McCann.

52:15Charlie:So McCann then turns the club around with the help of that money. Parkhead gets rebuilt into being a modern stadium by the stands of 1996, whatever it might be. mccann then having become having done his job and done what he wanted to do moves on and the club is then effectively a just a listed company but a new guy comes along and starts to build a position as we call it in listed company world right so he starts to increase his shareholding gradually and gradually gets towards 30 which starts to give you certain rights and that man's name is dermot desmond an irish billionaire and for those listeners or viewers who don't know celtic has a very strong link to Ireland because it represents the Roman Catholic half of Glasgow, which included many originally immigrants from Ireland who moved to Scotland to work in Glasgow in times gone by.

53:05Charlie:Glasgow Rangers represents the Protestant half of Glasgow. So Dermot Desmond's an Irish billionaire. He comes in, he builds this stake and becomes the biggest minority shareholder with, at the time, around 25 and then 30 and now 34%. But bear this in mind, it is only 34%. That then gives him a seat on the board as a non-executive. But in theory, the rest of the board is meant to be balanced. But here's the rub. Here's what happens next. A large chunk of the shareholding is in the hands of Celtic fans. And as the years go by, many of those Celtic fans either pass on or lose interest in the details of their shareholding.

53:49Charlie:It's something which they put a share certificate on their wall, whatever it might be. And they are not actively participating fans. So Dermot Desmond's 34%, effectively, because most of the Celtic shareholders are fans who don't turn up to vote at meetings, effectively, Dermot Desmond, his 34 % gives him some degree of control. It gets him past the 50%, particularly if there are one or two other sort of more significant-sized shareholders who are behind him. So for the last 20 years, Dermot Desmond has effectively controlled Celtic despite only owning 34 % of it. And also, contrary to other owners in football, not that he is the owner, he's the biggest man on the shareholder, of course, he's never put any money into the club.

54:32Charlie:He just owns a shareholding and the club makes a profit every year. So there's no need for anyone to be putting money in because the club is simply profitable. So should we use that as a time to basically talk about that complacency point? Because the fans have been very unhappy about the situation for a long time. So the negativity is normally generated by the fact they're not competitive in Europe. So all these years when they've been winning the top division, they've also been failing in the Champions League. And so the fans are looking at that going, how can this be? Because we have a guaranteed title pretty much every year.

55:03Charlie:Yeah. And that is our moment to push ourselves forward. That's our moment to push ourselves into the environment where we are competing against other top teams at the top table of European football. This year, they didn't even qualify for the Champions League. They didn't even make it to the group stage. They got beaten in qualifying by what Celtic fans would call a Diddy team. Well, yeah. Okay. Now, let's put them in context in terms of their European status. So they are unfortunate in not being in a major European league with big TV revenues. Either unfortunate or fortunate. Unfortunate because they don't get the revenues.

55:35Charlie:Fortunate because it means they can win most years. Okay. But mostly unfortunate. It is what it is. There are other clubs in Europe who are of that type. Massive clubs stuck in a league which probably isn't quite the right size of a league for them to be in. Let's just pluck out two. Ajax Amsterdam and Benfica. Two other massive globally relevant clubs with huge histories. All of whom have won the European Champions League or the European Cup. because Celtic, don't forget, won it in the 1960s, won what's now the Champions League in the 1960s. So these are massive, massive globally relevant clubs in leagues which don't really enable them consistently to compete because of the lack of TV revenue.

56:14Charlie:But Ajax and Benfica do find ways to compete in European competition. By hook or by crook, very good academies. Buying and selling players well, making sure that you've got your global merchandise operation up and running, making sure that your stadium actually can accommodate all of the people who it needs to accommodate because you need every penny because you're not getting the same amount from your TV deals, right? Now, bear in mind this 90 million quid that sat in the bank. Meanwhile, Ajax and Benfica and Sporting Lisbon and so on, Porto, etc. are spending everything that they've got, mostly pretty responsibly, but they are spending everything they probably want to try and keep pace with the European top table and Celtic are putting all their money into their biscuit tin again over here.

56:56That's the fans' gripe. The fans are looking at this and they're saying... But they're right.

57:00Charlie:They're totally right. Because unlike in other clubs, you know, I can be quite, I don't know, I can be quite dismissive of some fans. Oh, the owner should spend more money. In this case, they're not asking any owner to spend more money. They're saying the money that we, the fans, generate, we want to see that money put on the pitch or in the stadium. And we'll come on to the stadium in a moment. Because at the moment, we're spending all the money and it's been stuck in a biscuit tin. Why? Now, if you look at the stadium, for instance, So even if you were to say, right, but we don't want to just go and spend lots of money on players because that's bad business, whatever it might be.

57:32Charlie:We want to use that money as a proper business would do to grow the business. Let's go back to the stadium. The main stand at Park Head is the antiquated one. And there are plans, and it's relatively straightforward to do. I don't know if you've ever been there, but it's a big site. I mean, it's not one of those stadiums which is hemmed in on all sides. If you used your 90 million quid in your biscuit, Tim, simply to knock down the main stand, complete the big wraparound and build a really proper big main stand, your capacity could go from 60 ,000 up to about 85 ,000. Could Celtic accommodate 85 ,000?

58:12Charlie:Absolutely, yes. If Celtic did have 85 ,000 in every week, would they then start to be able to, like Benfica and Sporting Lisbon, start to push and compete at that very top level? Absolutely yes. Are there other things they could be doing? Absolutely yes. Could they be having a small multi-club model where they actually start having another club somewhere on the continent which they bring players in from Latin America and Africa and cycle them into Scotland to then sell to the bigger market? Absolutely yes. There are all sorts of things that could be done to enable Celtic to compete at the top table, not actually by risking anything, simply by using the 90 million quid that's in the bank.

58:46Charlie:And Charlie, to emphasise this further, can we bring the wage burden to it? Because we talk about the percentage of wages that theoretically should be spent. And we've often criticised for overspending. But then when we had Spurs and we talked about where they had maybe fallen short recently. 45%. 45 % saying they needed to invest more. Well, this is far worse. So the gold standard is, bear in mind, the gold standard of wages to revenue percentage is 50 % to 60%. 50 % being on the low side, 60 % being on the high side. Spurs at 45 % are on the low side, but they are paying off a big mortgage on their stadium and they do spend a lot on transfer fees.

59:17Charlie:Celtic, Charlie, are at 30 million. reported figures and please you know these are reported figures of 30 million pounds a year that is what they spend on their wage bill now remember revenue was 143.6 so keep the numbers round and you're talking about 20 percent they're spending 20 percent of their revenues on playing wages and then they're turning around to their fans when they get knocked out by a diddy team in the qualifying competition for the european champions every season and say well it's because we don't have enough tv revenue we can't possibly compete or second bit we need to keep reserves because if we don't qualify for Europe, then we don't make our 30, 40 million a year.

59:53And so they're using it as an excuse to protect that money rather than an excuse to be ambitious.

59:57Charlie:I think ambition has become this thing. Certainly, as with me, it's almost like a swear word because it's almost code for what your club does and just wazzing cash everywhere for no reason, right? What I'm talking about here is simply responsible stewardship. Responsible stewardship says that if you have room to grow your business and you have available capital, which is currently earning 3 % on deposit, you use that money to grow your business because you have a massive waiting list and because you have a huge diaspora of fans who, if you were able to get tickets at Parkhead, the guys, the massive numbers of Celtic fans in Boston and Chicago and these types of places, who would come.

1:00:32Charlie:But at the moment, not so easy for them to get a ticket. So effectively, this is a farcical way of running business. So where it has landed up is that a group of of Celtic smaller shareholders led by David Lowe, the guy who helped Fergus McCann 30 years ago sort out the original listing of the business and the recapitalization of the business. He and another couple of his associates have put together something called Celtic Supporters Limited. And this is basically to start bringing together all the small shareholders into one block so that they can start to effectively enact a boardroom coup is what we're looking at here.

1:01:09Charlie:okay that's now that they're talking about getting to a point where they can have enough to block stuff at board level so north of 25 percent in reality i think what you're looking at here is to be able to place enough pressure on the dermot desmond board to effectively enable a takeover of the club is this a is this a great opportunity to take a club private or do you think the risk and and the impact of it existing in an ecosystem like scottish football where you can have a fantastic asset but let's say the surrounding environment doesn't allow you to make as much money as it does being part of another one of the major leagues do you think that will hold it back from a from a real like private ownership type model it feels to me like a mixture of the major block of fans because it's profitable everything's possible okay it you don't need to have that typical type of owner just splashing money in every year you're able to be the fans effectively are able to be a bit choosy about it than that.

1:02:05Charlie:If I was then, what I'd be looking at is to effectively go to a private equity company and partner with a private equity company to buy out Dermot Desmond's stake at some point. Doubtless it'll be quite a rich valuation by that point. And effectively operate with a balanced board backed by private equity with proper non-execatives running a sort of structured way and say, right, we've got a growth plan here. And effectively, the private equity business can then see a roadmap with that growth plan to in seven years time, we can exit our stake either by, you know, relisting or whatever it might be, or by the sales to another product, your business, whatever it might be.

1:02:38Charlie:But as long as the fans, the broad shareholder base kept control of the overall situation, so there wasn't one dominant owner. They don't need a dominant owner because they're profitable. So I think that they are in a unique situation. I think it's one of the most interesting business situations in world football right now, because you've got a mixture of an amazing sporting brand. You've got the immediacy. You know, we said earlier on how it was not qualifying for Europe or for the group stages of the Champions League, I should say, to be more precise. Not qualifying for the group stages of the Champions League, which has preempted moments, individual moments of frustration against the Celtic board in the past.

1:03:13Charlie:That is nothing compared to what is going to happen if they don't, if Hearts beat them to win the league this year. I was going to say, if in one year you don't qualify for the Champions League group stages and you don't win the SPL while sitting on 77 to 90 million in the bank, plus 147 million, 143 million, sorry, in revenue. It's going to be chaos. Absolute chaos. If you bear in mind, Hearts' wage bill is 10 million. And Celtic's, which by the way is much less than it should be, is 30 million. And Hearts' 24.5 accounts show 24.4 million in revenue. Right. So Hearts is basically the size of a large League One club in English terms or a small championship club.

1:03:53Celtic at 150 million is the size of a small Premier League club.

1:03:58Charlie:even without any big TV revenue. So effectively, in terms of sporting surprise, because the delta between the spending patterns, it is the equivalent of Leicester winning the Premier League. That's the difference. Three times. It's a three times difference. So the big six, let's say, are spending$300 million or$350 million on wages. The smaller end of the Premier League spending$100 million,$120 million on wages. So it's 3x. so it is the equivalent of one of the smaller members of the Premier League beating all the big six to win the Premier League that's what Hart's that's what this Hart Celtic upset would mean I know it doesn't feel like that down here to us but that's what it is is it any coincidence that the greatest friend of revered modern football ownership Mr Tony Bloom is now a major fixture in this Hart story as he owns 29 % of the club as of last year yeah so Tony Bloom the Brighton owner and also the owner or part owner of Union Saint-Gilois in Belgium, has brought his famous data analytics model to Scottish football.

1:04:59Charlie:And this is the moment that has lit the touch paper. Because until Tony Bloom got involved with Hearts and gave them the tools to outperform the lesser lights in Scottish football, the Aberdeen, Hearts and Hibs, since Aberdeen happened to have probably one of the greatest managers of all time as their boss in Alex Ferguson, those three clubs, Aberdeen, Hearts and Hibs, have not found a way to exploit the complacency or the chaos in the old firm at the top. But now it looks like Hearts have. And the current state of the table is, I think they're five points clear. 63 points at time of recording for Hearts, 58 points for Celtic.

1:05:3457 points for Rangers.

1:05:36Charlie:So they are five points clear of Celtic and six points clear of Rangers. We're probably talking, I can't tell you exactly, but let's say eight to 10 games to play. So they are in pole position. The deal's not done. Clearly the deal's not done. but it's that which is providing it's the touch papers while Celtic were still winning the league and winning it easily every year the board could still say to the fans what are you complaining about? We're winning doubles and trebles almost every single year. So Charlie, in a really weird way though could this be one of the best things that collectively happens if Hearts did win?

1:06:08Definitely, definitely. So while it may be a disaster inside Celtic what this does when we go back to the beginning of why we're talking about it and why we're excited about it is because there's intrigue that's been added to this league that hasn't had any.

1:06:20Charlie:I think it's great for Scottish football to at least have a light shone on it for a bit. No harm in that. And that's great. And it might also enable some other owners to look at the league and think, well, do you know what? Actually, the entry price is lower. You can still compete and you're playing at Parkhead and Ibrox every season, twice because we play each other home and away, home and away. So, you know, we're playing now on a regular basis. It's something that might be done. Yes, I can see all that. but actually oddly the main beneficiary of Celtic not winning the league this season I think will be Celtic powerful let's see let's see quickly not quickly it's been really interesting the F1 season that we talked about last week what did you make of it Charlie you know what I enjoyed it the Australian Grand Prix I enjoyed the Australian Grand Prix I enjoyed Max Verstappen coming out afterwards saying it was like Mario Kart I then just did a quick check on when Max Verstappen finished and he finished in seventh i would quite uh like to know if max had the same feelings if he had finished top yeah george russell said he loved driving the car funny that's almost like there's a link between uh winning races and being happy with the cars uh no in all seriousness i mean max said that because he said that the boost button essentially was a bit like a mushroom in mario kart which if you've ever played the game you'll understand what that is but it was less about should we say the technical elements associated with being a top driver now i mean you take that all with a pinch of salt of course as i've just said but what it did do is in those first few laps to anyone that was watching it I mean the lead was chopping and changing it was going back and forth quite often what we've seen historically is even if one of the top drivers hasn't been on pole you know it's only really a matter of time probably before they chase down unlikely pole position leader they get ahead and once they're ahead it's very very difficult to get ahead of them now this is the first race of a brand new season of new regulations what I said to you I think as well yesterday was what I'm interested to see is the teams that were at the top will they continue to develop and be as good as they were that weekend are some of those teams that finish just short let's say a McLaren and a Red Bull going to improve as they get more familiar and more use of these cars are some of the teams that finish right towards the bottom the Aston Martins that we mentioned last week the Cadillac which was well off it Williams had a very bad weekend you know will they be able to improve and find a way to get further up that leaderboard I I think it asked lots of really interesting questions.

1:08:39It was very interesting to see Audi do really well on their first weekend. They got Bortoleto, their Brazilian driver, got a ninth place finish. So, you know, for a first run out for them, a brilliant result. But it's very easy, isn't it, to be negative about these things because it's change. And we know that sport doesn't necessarily always embrace change. Often for good reasons. Exactly. But, you know, I enjoyed it and I thought it was a good first run out and outing. This isn't going anywhere, right? So let's just put that there. These regulations are going to be here. The cars are going to be like this, whether we like it or not.

1:09:10So let's try and form an opinion over the first few races

1:09:12Charlie:of how we think it's going to improve or not the sport. But behind all that... I mean, there was a lot more overtaking than historically there has been. There was. And if you go back 10, 15 years, one of the big complaints about Formula 1 was that there wasn't enough overtaking. Certainly on some circuits, almost no overtaking, which was a really fundamental existential problem for the sport. So to see that, I can't remember the exact numbers, but the amount of overtakes was significantly up on what has historically been the case. So that has to be a good thing in terms of offering moments in the race of excitement throughout the field, not just the front of the field.

1:09:55Charlie:Those two teams, Aston Martin and Cadillac, being that far, I mean, when we say that off the pace, I mean, off the pace to a level that I'm not sure I've ever seen before. What has come out alongside this, which is why we're back on it, really piqued the interest, didn't it? Because it was the old click-baity title for us of, oh, Christian Horner's back. It's a great drive to survive sort of storyline, isn't it? It is. It's brilliant. Toto Wolff and Christian Horner renewed their rivalry. So go on, tell us the story. So reportedly, Alpine has a percentage of its team up for sale. So just making sure we get this right.

1:10:35Alpine, I think it was in 2023, sold 24 % of the team to Otro Capital, which was a private equity house. And part of that group that bought that 24 % with Otro included people like Rory McIlroy and Rob McElhenney and Ryan Reynolds. so we had a few celebrity stardust names coming in alongside uh you know big capital that put a 900 million valuation on the team which in 2023 everyone was going wow you know isn't that incredible 900 million for a team that's towards the bottom of the grid at the time um now it's supposedly valued at about 1.5 billion so in just three years you've seen a 600 million increase you know for this as an asset the rising tides of a conversation in formula one has has obviously

1:11:18Charlie:massively boosted the the alpine position and now otro are looking to exit it and therefore there have been a number of rumored bidders for that percentage the other half well not the other half the rest the 76 percent that isn't owned by otro is owned by renault so they renault want a partner to come in and toto wolf and christian horner supposedly are fronting two bids to compete for that percentage that obviously has a brilliant undertone to it because it plays into what every Formula One fan has enjoyed for the last few years and that's a great rivalry between two of the sport's most successful team principals.

1:11:53Now Toto Wolff's idea would be to buy that and I'd be careful how I frame it but really what it would be is it would most likely look like considering Alpine now uses a Mercedes power unit it would look like the second team of Mercedes on the grid a bit like what Racing Bull looks like to Red Bull. If Christian Horner was to come in this is fresh capital yeah this is a different type of ownership but christian horner will front that bid yeah so the interesting discussion point that comes out of this is not just the return of christian horner but it's also the discussion around the influence of formula one teams and and of having really four cars on the grid not two which to many including zach brown when daniel ricardo stole the fastest lap off lando norris to basically stop lando getting the the one points that the fastest lap would get and therefore helping his championship championship charge against max verstappen racing bulls looked like they were supporting their more senior team so they're supposedly tightening some of these regulations around whether teams can have two teams or not if christian horner yes it would pair christian horner in a way yeah with the mercedes and toto wolf now whether this is true or not obviously the media have loved it i wonder

1:13:09Charlie:And how long that contract lasts for and how long Christian Horner would want to have Mercedes engines in a car that he was responsible for. It's great for racing fans because I don't know how you feel. I think whatever you think about him, having Christian Horner as part of the sport. I'm a big fan. I'm a big fan. It's good for the sport. I'm a big fan. I think he is both. He's a personality and sports need personalities. They need people who put themselves out there, who put their necks on the block, who sort of say stuff, do stuff, move and shake stuff. I think if the whole thing, if I was to say one thing, with a lot of these big car manufacturers being so heavily involved in Formula One, which has happened at various different times in the past, sometimes what you're in danger of losing is the independent teams with their independent team principal, who is allowed to say what he thinks because it's basically his team.

1:14:02Charlie:whereas when you're in a bigger corporate entity you've got pay masters higher up who are you know watching over your shoulder making sure that everything's done in a more corporate type of way and for me the paddock really needs christian horner as that kind of like quite brazen sort of you know extrovert sort of powerful voice who actually will speak his mind and will be somebody who you know sometimes puts other people's nose out of joint but who is just absolutely determined to win on his own terms. I'm a big fan. I'm a big fan. And I felt, you know, I totally understand why in modern era terms he came under pressure for the reasons that he did.

1:14:41Charlie:But I felt that given his, the length and success of his service, I felt it was a bit unfortunate that he was sort of drummed out in the way in which he was. Yeah. Do you think that Red Bull having two teams, that's per se, on the grid, do you think that is an unfair advantage? I just think it's a bad idea for the sport. In what way does it help? It helps Red Bull. It helps Red Bull. But in what way does it help the sport? Now, if you go back 20, 30 years, there was some times when it was worried, you know, there was a worry about whether Formula One could fill its grid because it was so expensive that actually, you know, it was a time, I think Bernie was still running the sport because at the time you had Red Bull and then you had Toro Rosso, now Racing Bull.

1:15:21Charlie:And I think at times it was almost, well, rather have another team from the same team than nothing. rather at least be able to fill out the whole grid you know uh is it ideal no but you know let's just do it anyway we're formula one in such a strong position now and we're formula one teams franchise is going for such huge amounts of money like if you were to offer an expansion franchise to fresh capital who would then come in in their own way i i think it it brings doubt and suspicion on certain moments it limits because in reality the second team will never be competing right at the very front of the grid.

1:15:58Charlie:So it limits the number of teams who are really aspiring to get there. It creates slightly strange situations in the driver, sort of in the driver situation as well, where they're being used almost as training seats to push on the forward. Whereas sometimes actually there's a very experienced driver who the sport needs on the grid who then can't get a seat. For me, it's a no. I get it, but I don't like it. Vettel, Ricciardo, Verstappen all came through Toro Rosso. Yeah. So they all basically worked. they got the chance to prove themselves when we were in a car without the same pressures and then Red Bull when they felt they were ready step them up I mean that's an unfair advantage to a lot of the other teams you then look at what Mercedes would be able to do here you'd imagine that would be an appeal to Toto would he have put Antonelli in a second team first probably could he have then brought someone else in to have a proper charge yeah maybe it appears like conflict you know that is completely unnecessary and really doesn't need to happen so go Christian Horner go Christian Horner we want him back in the paddock when we want more competition not less competition go Christian Horner fantastic brilliant Charlie thank you so much that was a really really great look at horse racing and a great first dive into Scottish football as well so I think breaking new ground breaking new ground is always a good thing and I hope you enjoyed it so thank you very much and we'll see you next week thank you thank you as ever for tuning in to another breakdown I don't know about you but I learnt a lot there seems like the Hong Kong Jockey Club is doing okay for itself.

1:17:26I loved our first dive into Scottish football. Can Hearts see it through? That's the big question. As always, thank you for tuning in and please keep the comments and engagement coming. We'll see you next week.