Financial meltdown?

[binnsy]

People are also forgetting that our brilliant owner is running on club with a transfer policy different to virtually every club in world football,  credit in cash out!  How are we expected to rebuild the squad up, whether we go down or stay up,  if we are selling players on installments but our signings are been paid in full???

 

[Teasy]

Two words for you, parachute payments.

 

It helps but does not equal the direct & indirect money you make from being in PL.

 

Yeah I know, that was in response to fading star's post.  Basically I was saying that the saving I suggested on wages plus parachute payments could more then make up for the difference in TV money.

[Teasy]

Relegation would be a disaster. I'm not convinced we would come back at the first attempt and if we lose the Sky tv money we are fucked.

 

Even if we do come straight back, we would at best struggle to survive. Look at other teams who have gone down. Even the teams who have regrouped and are coming back (Birmingham, Wolves, Reading) will struggle next season. Worse still, look at clubs like Sheff Wed and Notts Forest

 

There's a big difference between us and the likes of Wolves, Birmingham, Reading ect.  Our revenue now is likely pretty close to matching all three of those clubs combined when they were in the Premiership.  If we go down and then come back up as you suggest our outgoings would be at such a small percentage of our incomings (Championship level wages ect) that we'd have a large excess of cash to keep us in the league and push us on, something none of the other clubs you mentioned would have.

[Mistle17]

Relegation would be a disaster. I'm not convinced we would come back at the first attempt and if we lose the Sky tv money we are f***ed.

 

Even if we do come straight back, we would at best struggle to survive. Look at other teams who have gone down. Even the teams who have regrouped and are coming back (Birmingham, Wolves, Reading) will struggle next season. Worse still, look at clubs like Sheff Wed and Notts Forest

 

There's a big difference between us and the likes of Wolves, Birmingham, Reading ect.  Our revenue now is likely pretty close to matching all three of those clubs combined when they were in the Premiership.  If we go down and then come back up as you suggest our outgoings would be at such a small percentage of our incomings (Championship level wages ect) that we'd have a large excess of cash to keep us in the league and push us on, something none of the other clubs you mentioned would have.

 

And Leeds, and Leicester.

[NE5]

I hardly know what to say.

 

Football is a business, isnt it

 

[womblemaster]

"I hardly know what to say. "

 

 

every cloud does have a silver lining then?!

[Slugsy]

So exactly how much are these parachute payments and what size are they compared to the loss of Sky money, other sponsorship cancellations and drop in attendence income when in the championship?

[GM]

could all be part of Ashleys master plan, to clear the decks of all the dead wood. Rid the club of its rot. start again, a painful process to get the mercenaries out.

 

Say if that actually is Ashley's line of thought on the matter, say he actually thinks that's the only way he can start afresh...

 

(a) what sort of calibre of player does that suggest he's looking to bring in?

(b) what sort of calibre of player will he actually be able to attract - with them knowing the set-up isn't exactly generous and they won't be well-remunerated etc?

 

I know the argument goes that he's a "pile 'em high, sell 'em cheap" bargain basement entrepreneur, but in terms of taking the club forward and nurturing it as a saleable asset, it doesn't really stack up.

[Teasy]

So exactly how much are these parachute payments and what size are they compared to the loss of Sky money, other sponsorship cancellations and drop in attendence income when in the championship?

 

They used to be £12 million a season I think but are now going up to £30 million for the start of next season.  I think Sky money is about £40 million, or it was for us last season anyway.  Match day income was £34 million last season.

[afar]

So exactly how much are these parachute payments and what size are they compared to the loss of Sky money, other sponsorship cancellations and drop in attendence income when in the championship?

 

They used to be £12 million a season I think but are now going up to £30 million for the start of next season.  I think Sky money is about £40 million, or it was for us last season anyway.  Match day income was £34 million last season.

 

There are a lot of indirect costs that you also need to factor in. Corporate deals will be renegoiated, there is less desire from businesses to be associated with a lesser league. Advertisement deals of course are much lower, with the same association issues. Match day income will nose dive, fewer bums on seats and lower prices. Less burgers, pies, chips, beer and programmes sold. Less merchandise sold, addidas and Northern Rock deals have probably got relegation clauses in them, new terms will be less favourable.

 

All in all, the parachute payments will not come close to bridging the gap between income as a PL club and one as a champ club. Fire sales and major wage bill reductions are absolutely necessary to ensure our survival.

[NE5]

I'm sure if Ashley can't sell the club we'll be an efficient 2nd rate club - like the Charltons etc of the world, which is what people harped on about emulating - in a few years down the line.

 

Bravo Mike lad, you cracked it.

 

 

[Teasy]

So exactly how much are these parachute payments and what size are they compared to the loss of Sky money, other sponsorship cancellations and drop in attendence income when in the championship?

 

They used to be £12 million a season I think but are now going up to £30 million for the start of next season.  I think Sky money is about £40 million, or it was for us last season anyway.  Match day income was £34 million last season.

 

There are a lot of indirect costs that you also need to factor in. Corporate deals will be renegoiated, there is less desire from businesses to be associated with a lesser league. Advertisement deals of course are much lower, with the same association issues. Match day income will nose dive, fewer bums on seats and lower prices. Less burgers, pies, chips, beer and programmes sold. Less merchandise sold, addidas and Northern Rock deals have probably got relegation clauses in them, new terms will be less favourable.

 

All in all, the parachute payments will not come close to bridging the gap between income as a PL club and one as a champ club. Fire sales and major wage bill reductions are absolutely necessary to ensure our survival.

 

Well yeah of course it won't, it doesn't even match the money from Sky never mind bridge any gaps from other lost revenue.  Still its a much better deal this year and will mean that should be go down we'll be down by say £30 million or so rather then £50 million+.  Which is the difference between being able to sell the big earners to make up the difference and having to sell everyone in sight to make up the difference.  Fire sales won't be necessary (if by fire sale you mean letting any player go for a small sum to get them off the wage bill).  IF we went down we'd still need to focus on selling/releasing the same players we were already (hopefully) going to sell/release, plus any players who refuse to stay on.  I'm talking about the likes of Geremi, Viduka, Duff, Smith, Butt, Cacapa, Owen, Barton, Gonzales.  That's nearly £30 million of wages right there.  Obviously we'd need to be much more aggressive in removing the five players in that list that aren't out of contract if we do go down.  So I'd agree with a fire sale for those specific players, but anyone else we should try to get the best fee possible.

[Guest fading star]

What about the existing operating losses?

[Teasy]

For next season I think losses are supposed to be down to £7 million (remember Lambias saying losses were £35 million last season, will be £20 million this season and then £7 million next).  Which Ashley will have planned to cover.

 

Either way its going to be important to drop the clubs outgoings by a similar amount to the loss in revenue.  I think if we can get rid of the players I mentioned, and of course sell the likes of Martins (who won't stay anyway) we'll have covered that drop.  I just hope to god we never have to find out!

[Guest fading star]

For next season I think losses are supposed to be down to £7 million (remember Lambias saying losses were £35 million last season, will be £20 million this season and then £7 million next).  Which Ashley will have planned to cover.

 

Either way its going to be important to drop the clubs outgoings by a similar amount to the loss in revenue.  I think if we can get rid of the players I mentioned, and of course sell the likes of Martins (who won't stay anyway) we'll have covered that drop.  I just hope to god we never have to find out!

Or about what we made from transfers this season. So presumably if we stayed up we’d only have to sell Martins and Jonas to cover our operating loss next year? If we go down -

 

£7m + £44m (TV) + fall in attendances + reduced advertising revenue. Hard to say how much it’ll take to cover that lot, but I don’t think £70m would be an exaggeration.

 

The parachute payments is £15m for two seasons I believe.  Which leaves £55m to be raised by selling stuff next season if we go down?

[Teasy]

There's no reason to make any connection between operating loss and selling players (well not planned losses that it).  We lost £35 million last season and didn't make a penny from transfers that year. The £35 million was covered by another loan from Ashley, its safe to say he'll have planned to cover this and next years losses similarly.

 

By the way where do you get the parachute payment info?  From what I read online in various places the payments started in 2006/2007 at £6.5 million over two years.  In 2007/2008 they increased to £11.2 million per year for two years.  I read today that those payments have gone up again for teams relegated in 2008/2009 this time to £30 million per year for two years (but I can't confirm that last bit anywhere yet).

[Guest fading star]

I didn’t. It’s was an estimate based on the same sources you looked at probably. I just upped it to be kind to Ashley’s business acumen.

[Teasy]

You might have misreading my post a bit, I said £11.2 million per season for two years.  That's the current deal as far as I can see.  But like I said I read its going up to £30 million per season, lets hope so if we do go down because £11.2 million a year won't fucking cut it for us!

[Guest fading star]

Source?

[Wallace]

A lot of the normal staff normally get made redundant when a club is relegated.  Wasn't a large part of the wage bill non-playing staff?

[Teasy]

Source?

 

First one is wiki, others are various forums of Championship clubs talking about it.  But I also just found a quote from Adam Pearson, chairman of Derby City:

 

Asked if the parachute payments for the current season had already been spent, Pearson said: "That is the case.

 

"The parachute payments are £23m – £11.5m a year in August 2008 and August 2009.

 

So it would seem it was slightly more then I thought, £11.5 per year for clubs relegated last season.  Like I said lets just hope it really has gone up again for clubs relegated this season, or instead lets just hope we don't get relegated so it won't matter!

[Guest fading star]

A lot of the normal staff normally get made redundant when a club is relegated.  Wasn't a large part of the wage bill non-playing staff?

It was, but I doubt that’s down to overstaffing the box office with highly paid ticket sellers. Or the customer service department, especially since they were laid off earlier this year. 

 

All the obvious corners have already been cut. The cream of the family jewels, already sold.

[Teasy]

A lot of the normal staff normally get made redundant when a club is relegated.  Wasn't a large part of the wage bill non-playing staff?

It was, but I doubt that’s down to overstaffing the box office with highly paid ticket sellers. Or the customer service department, especially since they were laid off earlier this year. 

 

All the obvious corners have already been cut. The cream of the family jewels, already sold.

 

Which creamy jewels are you referring to there?

[Guest fading star]

Source?

 

First one is wiki, others are various forums of Championship clubs talking about it.  But I also just found a quote from Adam Pearson, chairman of Derby City:

 

Asked if the parachute payments for the current season had already been spent, Pearson said: "That is the case.

 

"The parachute payments are £23m – £11.5m a year in August 2008 and August 2009.

 

So it would seem it was slightly more then I thought, £11.5 per year for clubs relegated last season.  Like I said lets just hope it really has gone up again for clubs relegated this season, or instead lets just hope we don't get relegated so it won't matter!

That would be good, but if Ashley doesn’t change is plan we’ll be here again next season. The squad needs strengthening and we need a proper manager, and we can’t have either unless he invests in the business. Restructuring the debts might save a few million in interest but it’s been of no use at all to the most important part of the business.

[Guest fading star]

A lot of the normal staff normally get made redundant when a club is relegated.  Wasn't a large part of the wage bill non-playing staff?

It was, but I doubt that’s down to overstaffing the box office with highly paid ticket sellers. Or the customer service department, especially since they were laid off earlier this year. 

 

All the obvious corners have already been cut. The cream of the family jewels, already sold.

 

Which creamy jewels are you referring to there?

I’ll give you a clue. It’s not the Shola shaped ones.