The business model that would give football clubs back to their fans

Football clubs are not normal businesses and should price tickets accordingly

Liverpool fans protest at an increase in ticket prices (GETTY IMAGES)

Football clubs are businesses. That view has been voiced a lot in recent days in the wake of protests by some fans of big Premier League clubs over rising ticket prices. Some say it out of frustration, complaining that clubs’ owners only care about the financial bottom line and are not minded to sacrifice a single prawn sandwich to alleviate the financial plight of ordinary match-going fans.

Others state it as a simple fact of life, arguing that despite Liverpool’s climbdown this week it’s bizarre to expect clubs to cut ticket prices to help fans – that’s simply not how businesses work. One might as well ask Apple to reduce the price of an iPhone because some people find it too expensive.

But is the premise correct? Are clubs truly businesses? There are reasons to be sceptical.

First, we should ask what we mean by “business”? If we mean an organisation that seeks to maximise profits then it’s not at all clear that Premier League football clubs fit the description. Some clubs do seem to be in the hunt for profits – particularly those with American owners, such as Manchester United, Arsenal and Liverpool. These owners are long-standing investors in US sports franchises. American sports leagues are surprisingly egalitarian, putting an effective cap on owners’ profits through equalising devices such as the automatic distribution of talented new players through a “draft” system and taxes on excess pay bills. These owners probably saw a golden profit opportunity in the relatively financially unregulated world of Premier League football.

Yet it’s hard to argue that the oligarch or sheikh owners of Chelsea and Manchester City, who owe their fortunes to oil and gas empires, put profits first. These clubs have a history of spending considerably more than their revenues in a desperate hunt for on-field success. True, they have commercial departments that seek out lucrative sponsorship deals, but the bottom line is clearly not these clubs’ primary focus.

That overspending by plutocrat-owned clubs in pursuit of glory creates what economists call “externalities”. It inflates the average price of players and forces all clubs to spend more to compete in the market for the talent. Such structural overspending eats into the potential profits of all the clubs in the league, much to the annoyance of the American-owners. That’s why these US-owned clubs were in favour of pan-European rules to peg clubs’ spending to their revenues.

Yet those rules have now been watered down. And the overspending doesn’t seem likely to end, even with an imminent £8bn windfall to the Premier League from broadcasters over the next three seasons.

Arsene Wenger, the veteran Arsenal manager and an economics graduate, recently predicted the additional TV money will simply result in still more wage inflation for players as “sugar-daddy” owners bid up the price of talent. This isn’t classical profit-maximising behaviour.

It’s also unconvincing to describe football clubs as businesses from the perspective of many fans. Brand loyalty exists in commerce. But there’s nothing comparable to a fan’s loyalty to a single football club.

Businesses don’t tend to have customers who will keep coming back forever, no matter how wretched the product. Most customers don’t pass on their loyalty for a product to their children. They do in football. Call them deluded saps if you want but the fact remains that for most fans this isn’t a normal business-customer relationship.

Yet, even if one accepts this, doesn’t the idea of capping ticket prices fly in the face of basic economics? Some have argued that, while demand for Premier League match tickets exceeds supply (as it generally does at the big clubs), it’s only right that the price should rise. Wouldn’t caps merely line the pockets of ticket touts and create an undesirable black market?

This objection is based on the misunderstanding that selling football is like selling groceries. The economics of football matches is rather more like the economics of pop concerts: rather than hiking prices to the highest the market will bear, organisers of such events often consider other factors, such as stadium atmosphere. Price out the more vocal fans, who may not have the largest disposable incomes, and the atmosphere will suffer, detracting from the experience for everyone. Even if football clubs were indeed pure businesses they might well rationally choose to forgo some upfront profit from match tickets for this purpose.

This objection also fails the empirical test. In Germany, clubs hold down the average ticket price with the interests of their budget-constrained supporters in mind, yet there is no significant black market in tickets there. Instead, fans are satisfied and stadiums are full.

Football clubs do, of course, have many business-like features. They sell experiences to fans in the stadium, viewers at home and merchandise to anyone in the world who will buy it. They are part of the entertainment industry. But, in some ways, clubs are also rather like mutual organisations or community assets. It may seem strange to accept this dual nature, but there is no contradiction here; no more than there is a contradiction between someone being an employee at work and part of a family at home.

This duality is the reality, whether or not their nominal owners (oligarchs, sheikhs or Americans) grasp it. And those characteristics change the expectations of fans about how the relationship should work.

The row that has arisen over ticket prices is not, ultimately, a problem of “business” or “economics”. It’s a problem of control.

The fans are quite right when they say clubs could easily use some of the windfall from the TV bonanza to enact a one-off cut in ticket prices. The fact that many clubs are having trouble agreeing to this is simply testament to the large distance between match-going fans and most owners.

Why do German clubs have low ticket prices? The answer lies in structure. It’s because the rules of the Bundesliga dictate that clubs must be majority-owned by fans’ groups. While they can have external investors and busy commercial departments, the fans must retain ultimate control.

If fans in the Premier League want a lasting solution to their frustration the solution is clear: they should be demanding German-style ownership rights over the clubs they support.