Is football on borrowed time?
Events on either side of the Irish Sea have cast a shadow over the beautiful but profligate game
The lurking dangers stored up in complacency during the Premier League's world-conquering boom have finally broken to the surface.
Portsmouth, at the bottom, have had their share of TV money withheld as they stagger towards court to contest a winding-up order. At the top end of the table, Manchester United, who still make more money than any other club, launched a plan to borrow £500m to part-refinance the £700m debt loaded on to them by their American owners.
The time is drawing to a close when the Premier League can convincingly maintain their laissez-faire approach, in which the clubs, cherished by fans for generations, are simply commercial companies, available to buy and sell by anybody without a fraud conviction, from anywhere, with whatever plan.
When Lord Triesman, the FA's first independent chairman, tried in October 2008 to persuade the Premier and Football Leagues into stronger moves to protect against "pitfalls" among which he identified "debt mountains" and "cavalier ownership", he was relentlessly trashed by the Premier League.
"I don't think anybody who is rational can look around [in the economic downturn] and think they are immune," Triesman warned, estimating that English professional football was £3bn in the red. The debt mountains are owned, and therefore the clubs are owned, by either financial institutions some of which are in terrible health, or very rich owners who are not bound to stay, or not very rich owners who are also not bound to stay . . . I think this poses very tangible dangers."
In response, Richard Scudamore, the Premier League's chief executive, who was paid a £1.537m salary package in the year to July 31, 2009, including a bonus of £745,566 for negotiating the TV rights, defended the "responsible" approach of his paymasters.
"Our clubs are all heavily regulated but they've also got directors and owners who will assess the level of risk of their overall debt," Scudamore said. "This is at the top of clubs' agendas and I think they are managing it responsibly."
Events since include financial restrictions at debt-laden Liverpool, a £72m loss for 2007-'08 declared by West Ham, who were repossessed by a broke Icelandic bank, overspending at Hull City and questions about whether several clubs are viable "going concerns" without investment from owners. These lend perspective to deciding which was the shrewder assessment, Triesman's or Scudamore's, of the state the game was in. Scudamore has spent the past few months notching up lucrative new international television deals in countries where the appetite to watch the Premier League appears to be ever-expanding. With £1.7bn already in the bag for the 2010-'13 domestic rights from Sky and the BBC, the Premier League expect to equal or even better the record £2.7bn deal for the 2007-'10 on which the clubs are currently feasting.
That in itself signals the question being asked not just in Britain but around the world, as Portsmouth's plight and United's dispiriting debts have garnered global attention. How has the world's richest league, with the most lucrative TV deal and some of the most expensive match tickets anywhere, whose clubs have become merchants of football and exploiters of their own 'brands', generated such financial carnage?
All the clubs script their own soap opera, but as time lends patterns to the spate of takeovers in which mostly British owners sold out to mostly overseas buyers, certain categories are becoming clear. Portsmouth's financial state is the most alarming since the 'live the dream' meltdown at Leeds in 2003.
Portsmouth won promotion to the Premier League in 2003 having been backed by the Serb-US businessman Milan Mandaric, and were then taken over in January 2006 by Sacha Gaydamak, an Israeli-Russian who was 29 at the time. The club have stayed in the top flight, but have never expanded Fratton Park from its 20,000 capacity, the smallest in the division, and so have not been able to accommodate more fans, and earn more money. They have no training ground of their own and until 2007 did not have a youth academy.
When Harry Redknapp was manager, he assembled a side that won the FA Cup in 2008 and featured at various times David James, Sol Campbell, Glen Johnson, Sylvain Distin, Niko Krancjar, Pedro Mendes, Sulley Muntari, Jermain Defoe, Peter Crouch and Lassana Diarra. He achieved this by massive overindulgence, to pay those players their huge wages.
The club had gobbled up all the TV millions that Scudamore and his consultants had dutifully reaped for the clubs, and still managed to lose £17m in 2008, and £23.5m the year before. Was the FA chairman wrong to warn this could not go on? Was Scudamore right in October 2008 to say the debt was being managed responsibly?
The excessive spending was being absorbed by borrowing from banks and by Gaydamak himself, who was putting in his own money, as loans. After the economic crisis hit, Standard Bank called in a £35m loan: they did not want it rolled over, with the interest serviced, they wanted their money back.
Gaydamak, the backer, is said by his advisers to have experienced financial problems of his own and to have tired of the bottomless demands of owning a Premier League club. So he stopped pouring money in and suddenly Portsmouth's debts were no longer sustainable. For three months running their wage bill, despite the mass sale of all the star names except James, was not paid on time. Revenue and Customs have slapped in a winding-up petition for unpaid PAYE on the players' mammoth wages, Faraj cannot secure bank lending, and the fans marched in protest against this reality yesterday despite their game against Birmingham being postponed, which is rather harsher than the dream they lived.
Most other Premier League clubs are in this same category: despite the wealth they have generated, and football's resilience in the recession, the majority overspend on wages, and rely on owners' money to keep them solvent. Some of the owners are still English, even hometown men such as Dave Whelan at Wigan, and Peter Coates, whose bet365 Group has invested in Stoke City's robust recent rise.
Liverpool and Manchester United make unlikely partners in a debt-laden category of their own, giving unsuspecting football fans a crash course in a common financial practice: the leveraged buyout. The Glazer family at United, and Tom Hicks and George Gillett at Liverpool, did indeed borrow huge money to buy the clubs, then loaded the debts, and the responsibility to pay the interest, on to the clubs.
Of the top clubs, only Arsenal are making a profit without significant outside investment from an owner. But that happy position, and the promise of Arsene Wenger's blooming side, are compromised by the takeover threat from two battling investors, the American Stan Kroenke and the Uzbek-Russian Alisher Usmanov.
At the root of all this is that English football's boom has not been managed with a care for the future. Unlike clubs in Germany, 51 per cent owned by their supporters, or the famous member-owned Barcelona and Real Madrid, English clubs are companies, up for sale. The European governing body, putting detail into the gut instinct of president Michel Platini that all the debt and sugar daddy investment is not sustainable, have dictated that from 2012-'13 no club that runs consistently at a loss, or relies on a benefactor, will be allowed compete in Europe.
While the Premier League's ownership lottery has allowed clubs to beam in the glow of popularity, Platini, who learned his football in post-match hubbubs in his father's bar in Joeuf in north-east France, has called a halt. We cannot, argues Uefa's football man, carry on like this. Observer