Now you see it, now you don't... How the Premier League makes £150m prize disappear

The Weekend Dossier

Either Hull City or Watford will today be promoted to the Premier League. Their accession will be accompanied by the claim that this is worth around £120m to the club, a sum made up of the “reward” for finishing bottom of next season’s top flight, plus four years’ parachute payments. Add the spin-off benefits of increased gates and admission prices, sponsorship deals and merchandising, and promotion could be worth as much as £150m.

Except it is not. That is the increase in a club’s turnover, but not in what a normal industry would describe as “profit”. The reality is most of this income will pass through the club like, in Alan Sugar’s immortal phrase, “prune juice”, going straight into the pockets of players, and thence to  agents, bookies, Bentley dealers etc.

Hull have been here before. Their promotion in 2008 was hailed as being worth £60m. Their revenue certainly mushroomed, almost quintupling from £11m to £51m in their first season in the top flight before dipping back slightly to £47m as they suffered relegation. In their first season back in the Championship, bolstered by £16m parachute payments, revenue was £27m, hugely up on their previous season in the division. They have subsequently received a further £24m in parachutes, which has helped finance this season’s promotion push. Should they fail to go up they will receive a final £8m next season. Totalling their income growth during their two-season Premier League sojourn, and the parachutes, Dean Windass’s winning goal in the 2008 play-off final appears to have been worth around £120m.

Which makes one wonder why the club was on the verge of bankruptcy in late 2010, when Assem Allam rescued the Tigers out of gratitude for the way Humberside took in his family after he escaped persecution in Egypt four decades ago.

Reaching the Premier League is like taking a job in London, the extra costs in many ways offset the increased income. Much of Hull’s windfall was illusory. In 2006-07 the Tigers’ wage bill was £7m. A year later, boosted by promotion bonuses, it was £15m. During two seasons in the top flight wages were £34m and £38m respectively. Bringing in new players on fat contracts meant when they found themselves back in the Championship it was with a wage bill of £21m, treble that in the last non-promotion-winning season. It has remained at a similar level – Allam has admitted it is more than £20m this year. So that is a total wage bill from 2007-13 of around £150m.

How much lower might Hull’s wage bill have been had they not gone up? In 2006-07 they paid £1.3m more in salaries than Bristol City, the team they defeated in the 2008 play-off final. It is a reasonable assumption that had Hull not gone up their wages would have increased at a similar pace. Between 2007-13 Bristol City’s wage bill has been an estimated £90m. It is reasonable to assume Hull spent about £50-60m more than they would have done without promotion

But that is not all. Challenging for promotion, and attempting to stay up, required investing in better players. Hull made a £15m loss on transfers on the four seasons from 2007-11. They also paid much higher agents’ fees while in the top flight.

So between the wage increases and the transfer spending Hull’s promotion was not, in fact, worth £120m. It may have been worth as much as £40m but even that seems wildly optimistic as they lost £6m in the second Premier League season, and £20m the following year. Indeed, so heavily did they spend attempting to gain and maintain Premier League status the Tigers were around £40m in debt and facing a winding-up order before Allam stepped in.

Then there is Blackpool who in 2010, famously, did not go out and spend heavily in fees or wages on the likes of Jimmy Bullard, but operated on a strict budget and refused to pay agents. The Tangerines’ income also quintupled upon promotion but although wages rose rapidly they remained less than 50 per cent of turnover. This should, in theory, have enabled sorely-needed investment into the club’s infrastructure.

Bloomfield Road does have two relatively new stands, but one was embarked upon before promotion and though the East Stand was built as a result of going up it is a temporary structure boasting pillars that interfere with the view.

Meanwhile talk of a new training ground to replace Squire’s Gate, described by former manager Ian Holloway as a “horrible environment to work in”, remains just talk and it is very clear this season not much cash has been invested on the playing surface. Where did the money go? Well, £11m was paid to Owen Oyston, the majority shareholder, via his company Zabaxe. Aside from reviving interest in the club, within and without the town, the legacy from Blackpool’s season in the sun appears elusive.

Not everyone wastes the jackpot. Swansea City have recently submitted plans to increase capacity at the Liberty Stadium from 20,500 to 33,000 and are also investing in two new training facilities, one in conjunction with Swansea University. Like many, they are ploughing cash into their academy. Furthermore, one study estimated that the Swans’ debut  Premier League campaign brought a £58m windfall to the area including creating or safeguarding more than 300 jobs.

So reaching the Premier League can be a boon, but only if the new money is spent wisely. The difficulty is spending enough to stay up, and reaping the long-term benefit, but not so much the club is put at risk should it go wrong. It is, admitted Allam recently, a difficult balancing act. Should Hull be promoted, he said, “the wage bill will easily rise to £35m, then you need to spend probably £30m on new players. From this year clubs will receive about £70m but you are spending all of your money.”

Five Asides

1. Censorship is still alive and well on Planet Football

Newcastle United this week joined clubs as varied as Manchester United and Crawley Town in banning reporters this season. This petty act would be anathema in American sport, where there is acknowledgement that the messengers may sometimes be irritating, but they sell tickets and TV subscriptions so access is enforced. Richard Scudamore won another reward for the Premier League’s commercial acumen this week. It was richly deserved, but for some reason the “best governing body” award at the sports industry shindig again eluded football’s various rulers. 

2. Why McCarthy’s salvage job is Championship best

As the Championship concludes who is manager of the year? Malky Mackay, who instilled belief into a Cardiff side which kept falling short? Gianfranco Zola for finding a winning blend from such disparate ingredients? Both are worthy candidates, as are Steve Bruce and Gus Poyet, but step forward Mick McCarthy who picked up an Ipswich side which was shipping goals and transformed them so effectively he can relax in the sunshine at Turf Moor this afternoon. Meanwhile Wolves, who sacked him a year ago, are on the brink of League One.

3. Luiz emerges as shining light of Benitez’s tenure

What will Rafael Benitez’s legacy be for Chelsea, other than, probably, a new European trophy and an elongated honeymoon period for his successor? The reincarnation of David Luiz as a deep-lying, ball-playing central midfielder with an eye for spectacular goals seems a parting gift even his most one-eyed opponents should appreciate.

4. Homeboy Bellamy setting a new trend?

Craig Bellamy regards winning promotion with hometown club Cardiff City as his “greatest achievement” It raises the question, who could follow suit? Will Leytonstone’s David Beckham take Orient into the Championship? Might John Terry lift Dagenham & Redbridge into League One? And when Bellamy retires, maybe Gareth Bale could be persuaded to take his place?

5. Football’s family tree could begin with you

Been into the attic yet to root among the cobwebs? Checked out the family tree? Grilled granddad? The Football Association is still searching for the descendants of the men who founded the association 150 years ago. Five-star treatment awaits the lucky relatives. See http://bit.ly/18io7v5

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