We’re frequently reminded that “football isn’t like any other business.” And, judging how some football clubs seem to operate, you could easily be forgiven for thinking that their respective owners, or CEOs, seem to take leave of any business sense they’ve acquired over the years.
Of course, as fans, we don’t often get to choose who owns or runs our particular team and, if we’re honest, most do not care who’s in overall control as long as the team is at least competitive where it matters most, on the pitch.
Having been under the same custodians for well over 20 years, City fans have become somewhat distanced from the typical turmoil often associated with ownership changes, which, more often than not, only tend to occur following some sort of financial meltdown off the pitch.
That’s not to say that City haven’t had their own “near misses” during the recent past. The collapse of ITV Digital in the early 2000s necessitated a public share offering to overcome cash shortfalls, while demotion to League One, only a decade ago in 2009, required some pretty cute negotiations with the banks by Messers Bowkett and McNally to fend off the pending appointment of administrators.
Even as recently as the summer of 2018, Stuart Webber was uttering words about the apparent precarious financial position the club was in and the need to raise significant funds through player sales to keep everything on an even keel.
Fast forward just twelve months and the prospects are somewhat rosier, caused by the imminent arrival of huge dollops of revenues from the Premier League’s mega domestic and overseas TV deals. Total revenues will literally rocket from less than £30m a season in the Championship, to north of £120m a year while in the Premier League.
Of course, a significant proportion of this cash influx is already effectively spent through existing contractual obligations. Beyond the obvious one-off promotion bonuses to players, there’s increased wages, new contracts, not forgetting additional transfers instalments now due to other clubs as a result of promotion.
The club has already stated that they’re not going to ‘do a Fulham’ – the brutal reality is we couldn’t, even if we wanted to. There simply isn’t the ability to write a blank cheque to cover financial shortfalls in the event of demotion next May.
And, while there’s undoubtedly an element of self-satisfaction to be had from having the club run properly as a self-funding business, there’s always a nagging question mark in my mind over what’s next.
The crux of the issue is that self-funding can mean completely different things and that’s wholly dependent upon which league City find themselves in. The problem isn’t therefore self-funding itself, but it’s the huge differences in TV revenues between the Premier League and the Championship.
Or, to look at it another way, if you drop £90m from the top line over a couple of seasons, relegation clauses in players contracts are unlikely to be sufficient in isolation – significant player sales will be required to cover the loss of revenues. Which highlights just how precarious football can be and just how quickly a position of apparent comfort can revert to something far less favourable.
All this may seem rather odd in the context of a club just about to commence on a Premier League campaign, but is it? The nub of the issue really isn’t whether self-funding puts the club at a significant disadvantage to its competitors, it’s whether the recruitment and the coaching set-up, which worked so well last season, can step up a level and take the club forward again.
The financial playing field has never been level, especially in the Premier League, for a whole variety of reasons; ranging from individual clubs’ locations, their levels of support, both domestic and overseas, their attractiveness to TV audiences, again both at home and abroad, individual commercial sponsorship deals and many other reasons.
Which rather begs the question; whether, or not, the respective owners of each club are really that important in the context of the Premier League survival?
Personally, I believe that in most instances, ownership is of relatively minimal importance in the greater scheme of things. Which, in turn, then begs a further question – whether using our club’s self-funding status to, for example, make changes to the membership scheme, really has a significant impact on our overall revenues to justify the changes in the first instance?
I suspect not.
But there’s perhaps more nuanced reason why, if the club continually uses self-funding as a reason to justify making difficult financial decisions, it may cause something of an unwelcome, at least from their perspective, backlash – it’s perfectly possible that City, with the benefit of a sustained period within the Premier League, and with the associated benefit of being debt-free, may actually appear far more attractive to potential overseas investors.
From a fan’s perspective, having been repeatedly beaten with the self-funding stick, they may actually decide that a potential change may be well worth a completely speculative punt.
No one is suggesting that running a football club is easy, but just be mindful of what may be around the next corner.
OTBC
A fairly mute point really while Delia sticks to her stringent conditions for investment. An Oil rich Sheikh would hardly tick the boxes required. Whether that’s a good thing or not comes down to individual choice I guess but crucially I think we all know where Delia’s opinion lies….
Dan, I’ve always suspected that there may be some outside interest if we’re in the Premier League, even if the necessity wasn’t absolutely essential then.
Agreed Gary, I doubt our club has ever been valuable as it is today. Debt free in the Premier League with all of the assets/talent tied to long term contracts and an U23’s set up that is now fully stocked with replacements for those most valuable assets.
Whilst the rhetoric from the club is that they are not actively seeking to sell, there will always be billionaires and investment groups looking for an investment. Plus, it could be made easy and palatable to the fans if for instance….. takeover happens after the transfer window closes, same structure is kept and does well, then sign a bigger name player for £20m (probably coverable due to the lack of debt and doing well in the league) then “if/when” we stay up keep the talent and add a couple of quality additions for a combined £40m because the majority would accept that our players are good enough to go again. All this and all the time taking the money out of the club to repay the investment of buying the club, yet you’d never read a tweet saying “Where’s the money gone?”
Promotion was achieved against all odds last season as nobody – given a choice – would choose “self financing” as offering a likely path to success.
I suspect if this coming season turns into a painful struggle against all the much richer clubs then the self financing model will be criticised as the limitations once again become clear.
However we must have some hope that a well run club investing a little money cleverly has a chance of competing against some of the richer clubs who waste tens of millions of pounds on poor transfers and wages.
Hi Pab
I think you’re spot on, I really do.
Good article Gary.
Pab, to me it’s always been a question of how you actually spend your money, rather than how much you actually have, as was successfully proved last season.
Did you ever consider that the self-funding model they are describing is actually more of a long-term process and that the planning that has taken place and the actions currently being taken are to provide the base for an ongoing rinse and repeat process?
Taking the decisions they are now and bringing in the younger players as we are doing, builds a base with two main options.
1. If we stay up and the end of this season we have a number of hungry talented young players to support many of the more seasoned ones that may just decide to stay with us for the next season while the additional funds earned mean we can further expand the playing pool as well.
2. If we get relegated we will have to sell many of the top names because we will no longer be able to support their wages and the young crop of up and comers will be the base upon which to build another tilt at the Premier League while ever increasing cash in the bank, even if only by a little.
And NONE of that would have been possible without the improved training facilities at Colney.
You are watching a masterful plan in action. It may fail, but the attempt is heroic. And as you watch it unfold, maybe you need to stop maligning Delia as she at least had the foresight and bravery to approve embarking upon this experimental and adventurous path that may just provide a template for other of the less fancied clubs attempting to match the big guys at every turn.
Time will tell I guess but I for one will enjoy watching it unfold while praying for success.
COYY
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I absolutely think self-funding is the model to adopt and applaud the club for continuing down that path.
Foreign models such as Germany and Holland are producing supporter owned clubs, well financed, well run and competitive.
This, for me is the sensible, pragmatic model. Webber clearly realises (and has proved ‘twice’) that you can be successful through better exploration of foreign, loan and youth markets. Clubs do not need to spend huge amounts on players.
Is Pogba £87 million pounds better than Buendía? Course not. In fact – if he hadn’t been sold he would’ve cost Man Utd nothing for the same player.
Roll on self-financing imho.
Great article – I thoroughly enjoyed the debate.
The self funding model (Sky funding model?) will have the support of the fans while things are going well and it’s been great that, since about October, there has been overwhelming support for the way the club is now being run.
Before October there were many demands that the club should look for outside investment. There were also suggestions that Delia and Michael were lining their own pockets and were only in it to be celebrity fans etc. These criticisms of Delia and Michael were obviously absurd, but if I had said that even a year ago I would have been called a happy clapper or told that I had my head in the sand.
It will be interesting to see what happens when we go through our next rough spot. The goodwill directed by fans to all things NCFC is not infinite. As a fan base we’re collectively patting ourselves on the back about the fact that the club are choosing a different way to be successful; I hope we remember what we’re saying now if we are struggling in 5 or 6 months.
As fans should we not simply enjoy the moment, next match, next month, the forthcoming season?
Win, lose or draw, top 10 finish or bottom three, we will remain fans of NCFC. After the great success and magic moments of the Mike Walker team in the early 90’s Robert Chase saw fit to dismantle the whole thing and take the money. The current high will be replaced eventually by a low, it has to be that way, always has and always will, whether we are well run and owned by lovely, genuine folk or some oligarch.
Personally I agree with the current policy and believe other clubs may look to follow our lead. Football is changing, technology will play an ever increasing role and live attendances may reduce, the women’s game will also become a bigger draw and of greater significance.
I’m just going to enjoy the ride.
I for one would hate to see massive investment from someone who has no affiliation to the club. Instant relegation would be a shame but the plan is there to sell our top players, at a good price and the youngsters are there to have a go again in the championship. Prices for our best will not be low because we are relegated, we will lose games because teams have more experience, not because they are better. In all honesty I think that there are a few teams we will give a good hiding to and then there are 6 or so that will take us apart through our naivety but that will become less as the season progresses. In short I can’t wait for Nozza to stick 2 fingers up the billionaires club that is the Premiere League.
I think ownership does make a difference….look at Man City or even Bournemouth and Wolves. Obviously owners aren’t on the pitch but in the case of the 3 teams mentioned they have provided a lot of money and appointed the ‘right’ people in management positions.
I wonder what does constitute a good investment opportunity – on the face of it NCFC fits the bill – in the EPL, no debts and a huge supporter hinterland with no other rival teams for 50 miles. I would have thought that an ambitious investor (or group of investors – after all Liverpool and Spurs are effectively owned by hedge funds) would see huge potential – expand the stadium to 40,000+ I’m sure it would be filled for most games (as long as the pricing is right and we stay in the EPL). The owner of Forest is planning to expand their ground to 40,000 and they’re not even in the EPL.
I have no idea what Delia’s conditions are for investment. It would be interesting to see what sort of money could be raised locally. The bond issue for the training ground refurbishment sold out very quickly to raise £5 million.
It’s of course very easy to have grand plans with other people’s money and it has often struck me that we should have speculated more to stay up in the EPL on past occasions.
Last season was so good not only because of the football we played but because we somehow held the high moral ground – having sold our ‘best players’ and bought ‘bargain basement’ replacements and because we are self- financing with local owners. We did it the ‘right way’. I think most fans felt really good about that – I know I did.
So…where now?
On a different note I’m slightly concerned that we haven’t bought any central defenders (apart from a replacement keeper) given our dodgy defence.
A very interesting article
It isn’t only the super-rich clubs that spend the money to stay up with no hint of self-funding.
Bournemouth have had 5 years in the Premiership and haven’t stopped spending. It has now been announced that they will be paying Wilson £100k a week, they are still waiting for approval of a new stadium to increase capacity to 20,000. Is their success due to their oligarch, premiership money or both?
Would City supporters like to be similarly funded as Bournemouth? Did they attract the funding as a successful club or due to its location near, Sandbanks in Dorset? We will never know.
Not many oil sheikhs or Oligarchs live in Norfolk and it doesn’t have an area like Sandbanks, so not much chance of any mega-rich football supporter just dropping in to watch a game.
Prior to the Premiership starting City survived in League 1 for a number of years and like most clubs of that era had depts and sold players to survive. Chase and South didn’t put their hands in deep pockets but relied on the banks and player sales to fund the club, so it really hasn’t changed that much – just the money required to survive. Even our great benefactor Geoffrey Whatling couldn’t have lived with the super-rich.
The City board will need nerves of steel this season not to be tempted to pull the trigger on the system which is proving against the odds to be succeeding. Would it be nice for outside investment? Yes. Are we in a position to attract investment? Yes we are. Will the Smiths look to get some in while retaining control? I don’t know.
Onwards and Upwards
OTBC
Alex B, Bournemouth’s owners got involved when the Club was in League Two. On the one hand they deserve credit for turning the Club around, but let’s not pretend that it’s been done on a wholly sustainable basis.
Would I prefer if something similar happened here – not sure I would to be honest.
Hi Gary
I was thinking the major share holder saved them in L2 but the bigger investment came when they were in the Championship.
As for a similar proposal for city I think it would work if the major share holder stayed on to help
I would say that the Bournemouth model is not unusual in the wider business world. Take over a failing business, pump money into it and make it profitable in a few years. The oligarch made the first part happen and the PL money made the second happen. Imagine a local pub with very low sales, a celebrity chef comes in to buy it, putting a lot of money into kitchens and recruitment of quality staff and has to cover losses until bingo we have a successful gastropub that is rammed to the rafters. That is how I see Bournemouth
We are not a ‘self funded’ club. We are a PL funded club, that’s our business model. Either directly by being in the PL, through parachute payments from the PL, or selling of players funded by PL money.
Every time we sit outside the PL our financial situation becomes unsustainable. There is no other single source of income, or combined sources of income, that keeps the club afloat.
Even now, with PL money due to begin, we’re taking out a loan (I believe 10M was the number reported) and increasing the cost of membership schemes because the last Championship season put us in substantial debt.
Quite why you have an issue with the phrase used by the Club to describe itself is puzzling?
As I’ve specifically mentioned, self funding can mean completely different things and that’s dependent on which league we’re in.
However, in reality, it’s very difficult to get an exact cash flow match on a year to year basis, not least because of existing contracts with players and the huge difference in TV monies between the PL and Championship.
Because it’s meaningless and possibly contradictory.. What constitutes ‘self funding’?
– Ticket sales and membership fees – The fans paying – Self funding!
– Sponsorship – Companies paying for kit, player, staff sponsorship – Self funding!
– TV money – Broadcasters paying to show our games – Self funding!
– Player sales – Sale of players both purchased and home grown – Self funding!
– The owners – Owners providing cash injection – Not self funding?
So basically as long as everyone but the owner puts in money, it’s self funded. The moment the people most intrinsically linked to the club provides money, it’s somehow not?
In every normal definition if something is funded by the masses it’s “Crowd funded/sourced”, if it’s funded by sponsorship it’s a “sponsorship” model.
Google “Self funding definition” and interestingly you get…
“provide the money for (a project or course of action) oneself.”
Hi David
Just now I’m more concerned with Zimbo’s knee injury than the finance but I’ll go as far as to say:
I am pretty positive Delia and Michael take nothing for themselves. There are a few folks around who suggest that they do (not on MFW but elsewhere) but I am not inclined to believe them.
I am no big fan of our joint majority shareholders – even if only because they ostensibly know nothing of football itself – but after (too) many attempts they appear to have it right this time around. That may well be down to the welcome influence of nephew Tom Smith, of course.
Their criteria for incoming investment is risible as in “it has to be somebody with local connections”. There ain’t nobody like that around and they know it and “trade” on it..
However I do know we are returning to the PL in magnificent shape and while I might not wish to praise Delia and Michael, I think Stuart Webber and Daniel Farke have proved absolutely magnificent for us.
Let’s enjoy the incipient season, hey?
The Club is an established business (not a new project) and therefore generates various revenue streams. That’s self funding in this context, but there’s plenty of examples of Clubs who spend far more than they’re naturally capable of, with additional funding coming from their respective owners, either in loans, new share capital or sponsorship.
“The Club is an established business”
You could have stopped writing there. Succinct, honest, easy to understand.
An interesting and well thought out article that has promoted sensible and reasoned debate. As one article said football is cyclical and lows will follow highs. However the current business model has an awful lot going for it. Harry Rednapp or Big Sam wouldn’t have a clue how to operate in our club and what a good job too. With High profile investors come unreasonable expectations and this particular era of joyous football and togetherness would soon come tumbling down. This season is about survival no mistake and if we achieve that then further investment under the “self funding” model will be available to put the next course of building blocks onto the very good foundations that have been laid to date. I urge our supporters to stick with the plan for the long term. We cannot compete any other way.
The likes of Harry and Sam are from another era and, personally, I think that the days of a manager doing everything at a Club are over. This approach resulted in too many decisions made for purely short term reasons.
I have always tried to make things simple in life, I view things as simply as I can. Well, I am a Norfolk boy.
To me, self-funded is simply not having a benefactor sitting somewhere the other of the world with a large pocket and cheque book. We know Delia and Michael have not got what is needed to enter that realm.
Of course, we are funded by TV, sponsorship, PL money and any other means to rake in the much-needed dosh. It is a business after all.
I love the way the club is going about its business – reward those who have got us there, plus a safeguard should a big, rich club come calling. The player gets a win and the club gets a win. What could be wrong with that?
Better than pissing £100 million up the wall and still get relegated. We have been there, not quite to that amount in one swoop, but too much for Norwich City to handle.
I am more than happy the Webber Way is working
A good look at the issue of self funding. As David points out, self funding realistically means fan funding, as we are footing all the bills.
Without the occasional dipping of our toe in the premier league, the model will swiftly come under increased scrutiny from supporters. The plethora of big ticket player sales in the last three years have all been as a result of premier league income enabling the signatures of quality players, sold on for vast profit.
To say that Webber and Farke performed a minor miracle last season would be a huge understatement given the background of player sales and lack of reinvestment. I wonder what the landscape would look like now had the season gone the other way and we had finished in the bottom half.
Thankfully that remains a hypothetical scenario and Webber and Farke have accrued a vast amount of good will amongst the fan base. Their work in building the club a lasting legacy should hopefully stand us in good stead in the next few years.
It’s an excellent point and well made that the support could soon tire of the penniless mantra should the opportunity of significant investment arise in time.
Our next foray into the top flight is virtually impossible to predict given the way we performed last season, way beyond expectations. Given that the majority of the squad are on an upward trajectory in their fledgling careers it is not unreasonable to hope for continuous improvement.
The nagging doubt remains – are Norwich City operating under a glass ceiling? Could moderate investment enable the club to reach its potential?