true faith : BRIDGING THE GAP

by • July 3, 2017 • News, UncategorizedComments (7)1001

true faith quiz.

Question – Twenty years ago, which club generated the highest income? Barcelona, AC Milan, Inter Milan, Chelsea or Newcastle?

Answer? Newcastle United!

Honestly.

Hard to believe I admit but it’s a fact.

In 1997/8, Newcastle had the 5th highest turnover in the world. Since then not even Tiger Woods has seen such a spectacular fall from the world’s elite.

The world has changed since then. We’re no longer competing with the best in terms of our turnover. In fact, last season we generated less income than parochial giants Bournemouth and Watford.

And income is key to the success of any club as it generally drives what a club spends on players. So is it possible for Newcastle to get back amongst the world’s rich list like those halcyon days in the late 90s? Well, it would take a minor miracle.

Why? Because we have fallen so far behind in the last twenty years that we need snookers.  We’ve been lapped not just by Europe’s Ferraris but by the football equivalent of clapped out Fiat Pandas.

This article will look at just how far we have fallen in such a relatively short time, the reasons why and what we can do to edge our way back into the world’s elite.

And to be clear, if we ever want to compete again on a consistent and sustainable basis to match Benitez’s ambitions for the club, we HAVE to increase our income.

Ok, let’s look at where we are now. When I say “now”, I mean at the end of 15/16 (our relegation season) when the latest income figures are available.

To be fair, this gives a better indication of our income compared to last season when we were without the Premier League TV money (hence generating less income than Bournemouth and Watford).

First up, a comparison against other Premier League clubs (the club denoted in green reflects their envy for their local rival’s premier league status).

Premier League commercial revenue 2015-16

And then against the rest of the world taken from the Deloittes Rich List?

Deliottes rich list 1-11 2014-15Deliottes rich list 11-30 2014-15

9th highest revenue in England and 21st highest in the world. On the face of it, doesn’t look too bad does it?

But we need to get beneath the headline figures to see how NUFC’s power to generate income has diminished over the last two decades.

Firstly, we need to understand how that income is generated. It comes mainly from three sources – gate receipts, commercial revenue and broadcasting. The table below gives NUFC’s income breakdown over the last ten years.

NUFC income from the last 10 years

Like all Premier League clubs, we have become increasingly reliant on TV income. Our % of income from this source has doubled from 30% in 2007 (22% in 1998) to 59% now.

Why have Premier League clubs become so reliant on broadcasting income? It’s down to the centrally negotiated deal with Sky. It was huge in 15/16 and got even huger in 16/17! (see table below).

Distribution of Premier League funds 2016/17

Whilst the more successful clubs take the bulk of the TV income, the distribution is quite even (certainly compared to countries like Spain). The difference between top and bottom is a relatively small £57.3m. To increase our broadcasting income we simply need to finish higher up the league. Simple eh?

The TV deal with Sky means English clubs will always have high income compared to other historically bigger and more successful European clubs (that’s why the likes of Sunderland made the world’s top 30 ahead of the likes of Ajax).

NUFC, like all other Premier League clubs, have grown their broadcasting income hugely. It’s not here where we’ve failed so miserably over the last 20 years (primarily because the growth in TV money has had nothing to do with Ashley, it’s been negotiated by the Premier League).

It’s the collapse in our relative match day and commercial income (which we ARE responsible for) which has seen NUFC plummet down the revenue league table compared to our rivals.

Let’s look at our Match Day income.

Premier League commercial revenue 2015-16

5th highest average attendance. 8th highest income in England. We’ve now slipped behind West Ham following their move to the London stadium. With Spurs move to their new stadium, we’ll slip even further behind.

Under Ashley, by standing still, we’ve actually gone backwards.

When he took over in 2007, we had the 2nd highest average attendance and were generating nearly £10m more in match day receipts (Newcastle outsourced their catering activities in 2010 which meant lower income but lower costs too so we’re not quite comparing like with like).

But putting that to one side, it’s clear that our match day income has at best stagnated under Ashley.

It can be argued that NUFC’s ticket pricing has kept match day attendance to an affordable level for a predominantly working class support but it has also seen NUFC fall miles behind other clubs with similar or smaller attendances.

But my view is that a balance needs to be struck. Whilst keeping ticket prices down is commendable, it’s going to make it impossible to compete with the London and Manchester clubs like we have done in the past and Benitez demands now for our club.

If NUFC can’t increase the capacity of St James’ Park (and Ashley has never shown any ambition to do so) then to increase our match day income we need to be smarter on our ticket pricing, both for supporters and corporately.

This doesn’t mean a universal rise across the board but having a price mix that optimises our income.  This will mean some supporters, and local businesses, paying more.

And this brings us to the final source of income – commercial revenue.

Premier League commercial revenue 2015/16

The story is exactly the same here. Ashley has failed miserably to grow our commercial revenue over the last ten years. In fact it has actually reduced. As with Match Day income, other clubs have caught up and passed us.

The reason? Our brand under Ashley, particularly with two relegations, has become so toxic that sponsors will not pay the top money to be associated with us as they do with other clubs. Stands to reason.

As with all other forms of income, our commercial revenue will only improve when the team improves. It’s a virtuous circle.

Summary

We asked the question at the start of this article how the club could increase their revenue, bridge the gap so to speak, between ourselves and the clubs which had caught us up since 1998 and then raced ahead of us.

We can tinker around the edges here but my view is that ultimately to achieve this in any meaningful way, we need a change of owner.

Contrary to popular belief, Ashley does not subsidise NUFC. We are a self-sustaining club. Unlike other clubs who rely on sugar daddy owners, we don’t need or rely on Ashley’s personal wealth for our day to day operations.

So apart from his interest free loan to the club, all we get from Ashley is his famed business acumen and contacts to increase the revenue of our club which should allow us to compete financially.

And here Ashley’s been a catastrophe, an utter disaster. He’s shown that he is incapable of growing match day and commercial revenue.

There was talk recently about NUFC being taken over with some supporters stating that they’d rather stick with the devil they know in Ashley (a warped form of Stockholm Syndrome I’d suggest).

But I can’t help but wonder exactly how new owners could possibly be any worse.

Putting aside the relegations, the abject product on the pitch, the starving of transfer funds, the Sports Direct Arena naming fiasco, the appointment of a series of disastrous managers – it’s the collapse in our income which is his biggest indictment in my opinion.

All the other listed failures would likely to have been avoided if he had raised our income over the last ten years. If new owners were to buy Newcastle, they may be able to improve that.

They could hardly do any worse.

Andrew Trobe

 

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7 Responses to true faith : BRIDGING THE GAP

  1. Doogs says:

    This is my feeling of Ashley. I find it difficult to discuss NUFC with other NUFC supporters as I am called a doom monger due to my reasoning of what is happening at the club under Ashley. It feels like Rafa as coach is blinding people from what a turd we have in Ashley. I feel the biggest thing that Ashley has done is to convince the fan base that we can never challenge the top 2 / 3 / 4 / 6 / 8 now. He has diminished supporters belief so much that a potential signing of an average Arsenal left back is assumed to be an incredible signing. We one of the only clubs in the premier league not to spend over 20 million and have sold Cabaye, Gini, Sissoko and Carrell for over that amount. He has turned NUFC from a team and support of dreams to the walking dead just waiting for our next relegation. A new owner would be welcomed by me with open arms, however Ashley will be stupid to sell. He has increased his loan amount in January for no reason that was never challenged by any journalists. He did it just so that someone must pay over 350 million to buy Newcastle, which would almost double his investment in the club. The man is a dirty business man and the quicker he is out of the club, the better for me.

    • Andy Trobe says:

      I’ve written for TF for a few years and was initially prepared to give Ashley the benefit of the doubt as he inherited a financial basket case in 2007.

      Ten years later we’re profitable but have gone backwards in terms of competing at the highest level. I agree with you, he’s sucked the joy out of supporting the club.

      What would sting even more is if, after the abject failure of the last 10 years, he sells the club for a profit.

  2. Colin Mccabe says:

    In terms of commercial you also have to account for the lack of cash coming in through Sports direct non payment of advertising and also has their shady owning of the online store been fully explained?

    • Andy Trobe says:

      Indeed.

      Much is made of his interest free loan to NUFC but that has to be offset against the free advertising for Sports Direct. Whilst weve been largely woeful during Ashley’s tenure, his Sports Direct share price has ballooned making him a very wealthy individual.

      Whilst I don’t expect him to subsidise NUFC with his personal wealth (although many others have done so), I would expect a level of competence that would mean the club avoids being relegated twice in ten years.

      Ashley provides neither.

  3. P jobson says:

    This particular scenario was seeded years ago on two fronts:
    I) ten year frozen season ticket deal. While many bought into this, it is fairly obvious as the only (known) club doing this, we’d fall behind attendance income streams of other clubs that don’t. And were unlikely to catch up, how many would stand a £200/year increase to do so?
    Ii) potential effectiveness of the non-purchase of replica kit etc. Many like me have not put a single penny into the club on anything other than a ticket for the duration of Ashley’s reign. Look around St James today compared to 10 years ago, not that many shirts on show.

    Tv money was always likely to increase and for now it has, were it to dry up, we like every other club had better have a contingency, and it doesn’t look too good for us in the figures presented above.

    • Andy Trobe says:

      Agreed.

      The price freeze was commendable but as I mentioned in the article, a balance has to be struck if we are to remain competitive.

      The TV money has masked our failings to increase the revenue that Ashley has responsibility for – match day and commercial. It will be exposed when last season’s accounts are released.

  4. Peter Ward says:

    And still there are people who can’t see this man has been a total disaster for the club- in every way.