Lessons to be learned from Middlesbrough

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Wigan Athletic’s failure to win at Middlesbrough on Tuesday leaves them seven points short of the play-off zone, level on points with the north east club, but having played two games less.

“Before the game I would have taken a point” said Uwe Rosler, nevertheless disappointed with his team’s performance and their inability to play the high-tempo, high-pressing football he seeks.

But should Latics be expected to win at places like Middlesbrough? Do Wigan Athletic have any comparative advantage over a club like Boro?

Boro had been in the Premier League for 11 seasons before they were relegated in 2009. Their highest position was 7th in 2004-05 and the following season they reached the UEFA Cup Final. Founded in 1876 they have only spent two seasons outside the top two tiers of English football.

Being in the Championship has been a sobering experience for those in Rosler’s squad who have come down from the Premier League. Middlesbrough’s players must have felt the same when they came down, finishing in 11th place that year. Since then they have finished 12th, 7th and 16th.

There are a lot of big clubs in the division who are desperate to get into the Premier League. Some have been so desperate that they have thrown financial stability to the wind. However, Latics have an owner who insists on sound financial management, despite the criticisms aimed at him by some fans.

Is Dave Whelan right to run the club in such a manner?  Or should Latics go the way of so many other clubs who have dropped down from the Premier League and use their parachute payments to keep and attract the kinds of players who can get them back there?

Middlesbrough announced a pre-tax loss of £13.5m for the 12 months up to June 2012. Like Latics they have a millionaire owner – Steve Gibson – who has written off so many of their losses over recent years. In fact during that same period there were five other clubs who posted bigger losses than them. The leader was Leicester with an after-tax loss of £29.7m.

For some time now Gibson has been writing off close to £1m a month to keep Boro up where they are. With the Financial Fair Play (FFP) rules due to come into effect this clearly cannot continue. The loss announced last March was based on revenue of £18.1m, with only £4.8m coming from gate receipts.

There has been so much conjecture over the years over Wigan Athletic’s attendances. Up to this point their average league attendance has been 15,284 – down from the figure of 19,375 last year. This year they will play 23 home games, compared with 19 in the Premier League. If attendances stay at the current level the aggregate over the season will fall short of that last season. Overall match receipts for league games this season are not likely to exceed £4m.

In the last two seasons Wigan Athletic have made net profits, £4.2m announced in 2011-12 and £822,000 in 2012-13, when increased wages kept profits down. However, last year match receipts covered only around 10% total revenue of £56.4m. It is the commercial sector, dominated by the television revenues, that helped the club compete in the Premier League.

In the 2011-12 season only five clubs in the Championship made a net profit. Net losses amounted to a total of £158m, an average of £6.6m per club. Cardiff City made a loss of £30m last season in moving up from the Championship division.

Lessons learned at Middlesbrough show that a club has only been able to live beyond its means if it has had a rich benefactor. However, FFP is going to limit the ability of a club to survive in that way. Boro are an old club, with a strong fan base, but their short-term future is starting to look bleak.  It is their fifth consecutive season in the Championship, each year having made considerable losses, with promotion a dim possibility.

The dilemma for Wigan Athletic is whether to pump funds into a big bid for promotion or whether to go for financial consolidation. Maybe the compromise will be somewhere between the two extremes. The dip in commercial revenues compared with the Premier League is huge.

With a large squad and a number of players on high salaries by Championship standards Latics will have to use a significant chunk of their parachute payments to make ends meet this year. If they do not get promotion this season we might well see more of the higher wage earners move on in summer. The squad size will reduce now that they no longer have Europa League commitments.

If they stay in the Championship Wigan will have a comparative advantage over most of their rivals for a couple more years. However, each year more teams will be coming down from the Premier League with parachute payments in their pockets and the extra funding for Latics will have a finite lifetime. One only needs to look at what has happened to clubs like Middlesbrough to see what can happen.

Promotion to the Premier League is a priority for Wigan. The commercial revenues there would make it easier for them to survive financially. Rosler is going to have to look for bargains if they stay in the Championship. Given the aforementioned factors Dave Whelan will not be able to dip into his pockets in the same way he did in the past.

The balance sheet at the end of the year will make interesting reading.


Thanks to JJ of http://threeamigoswigan.com/  for this post. 

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