Show Me Someone Else’s Money

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Now, I’m not the financial expert in the Mudhuts Media empire, but even I know that making a £109M loss is not a good thing, but that is just what Man. Utd. are trying to tell everyone.

The Glazer family posted this loss yesterday, amidst claims from the club that it means nothing, as they still have £160M in cash in the bank. There are no details as to how much of the loss is attributed to the football club, and we could normally assume that the Glazers have other subsidiary company results included in the total.

But consider this.


That the club haven’t come out and said that other Glazer companies contributed to the loss, leads to suspicions that the other companies may have actually posted a profit, making United’s losses potentially greater than £109M. If that is the case, then £160M in cash, or not, it simply isn’t sustainable for any company, let alone one in a field as fickle and fluid as football.

 

For example, let’s say United did account for a loss of £109M, even given the supposed massive cash reserves, that loss has to be funded from somewhere. Either the shortfall is made up from the cash in the bank, or in the form of yet another loan, to be serviced along with the rest of the debt. Again, either way it’s unsustainable over any significant period of time.

It’s not unusual, of course, for a company to post a loss, even with substantial cash reserves. That way, they avoid much of the tax that they would otherwise be liable for in that financial year. £109M seems a lot, though, especially when taken as a percentage of the club’s annual turnover. The other side of cash in the bank is that it settles the nerves of creditors, who still see that they will eventually get all their money, and so don’t foreclose on the debt.

As an example, Portsmouth managed to ring up £120M of debt without anybody batting an eyelid. The crunch came when it was discovered that payers weren’t being paid on time. At that point, their creditors realised that there was actually no money in the club’s bank account, and that they had to claw back the debt quickly. This cause the entire club to come crashing down in a pile of someone else’s, already spent, money.

But surely United will always be rich, won’t they? After all, they have fans the world over, and probably take more through the various tills in a week, than Wigan Athletic do in a season. The problem, though, isn’t money coming in, it’s money going out. Assuming the first 11 are on an average of £70k/week, the annual outgoings on just 11 player’s wages is over £40M. Assuming an average of 75,000 per home game, paying an average £36, this comes to just over £51M. So, either United are paying the other 14 members of the first team squad an average of £15k/week, and the rest of the playing staff/club staff/coaching staff nothing, league games alone come nowhere near to paying the costs.

It’s true that the CL and other cup games will generate revenue, but it’s still difficult to see how gate receipts, alone, can cover the outgoings. In short, without TV money, even the “richest” clubs are in the shit. It’s easy to see why finishing in the top 4 is the holy grail for clubs who are, by now, heavily invested in player wages. Without the European income, clubs like United would be finished.

What this doesn’t – or shouldn’t – do, is cause any joy. Yes, United have fans who are pricks, after all we know Wigan is full of them, but that doesn’t mean that any club being in danger of collapsing is good for any of us. Football is no longer a working class sport, we know that. We may not accept it in the sense of liking it, but we know it nonetheless. The sport will, eventually, implode, that much is inevitable, and nobody knows what will be left at the end of it. Even now, in La Liga, you have a situation which mirrors Scotland, where two clubs dominate everything, and are so far ahead of the rest, that TV stations now only generally show games involving one of the two. We all know how Scottish football ended up, after years of that being the norm.

Who knows, now that our own Chairman is making regular noises about stepping down, whether Latics will survive a change of ownership for very long. We’ve been running at an operating loss for donkey’s years, as Jimmy has reported here more than once, and we know from experience that new owners expect more than goodwill and the freedom of a town as the return on their investment, but what does that leave?

We are long past the days when a local car dealer can make a success out of owning a football club, and all the world’s money now appears to reside in banks to the east of Istanbul. So do we accept that our future owners run Indian chicken farms, or Honk Kong casinos? Or do we hope that football comes to it’s senses before that decision has to be made? Either way, Manchester United, the world’s biggest football team, posting huge losses year on year should give us all something to think about.

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