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Thursday, 28 March, 2002, 17:35 GMT
The business of football
Graph of players wages
The Football League is blaming ITV Digital for its financial crisis. But many clubs were in dire straits far before their lucrative broadcasting contract collapsed. BBC News Online's Briony Hale takes a closer look at the business of football.

Football's world is one where corporate logic flies out the window.

In fact, it's slightly dubious to class football clubs as businesses at all.

Businesses are driven by the need to make money and trumpet their profits to their investors or owners.

But all football teams care about is winning for the fans.

Mention the word results to footballers and the regular presentation of the club's accounts doesn't spring to mind.

And many supporters would be scandalised by the idea that their club is focused on the menial task of trying to make money.

Extreme wages

Last season, only 18 out of England's 92 professional football clubs turned in a profit, with many racking up heavy losses instead.

The reason for the financial squeeze on football clubs is not exactly a secret: the huge salaries paid to the stars have been spiralling ever higher and weighing down on the clubs.

1999/2000 losses
Premiership - 34.5m
Football league - 110m
Total English football - 145m
Last season, the wage bills of a third of division one clubs exceeded their revenues - a balance sheet which few other companies would dare present to their accountants.

But football clubs are allowed to run up debts - especially when facing the lure of promotion or winning the cup - in a way that most other companies would not even dream of.

Few options

The hyper-inflation of player wages has far outstripped any attempts to bring in the money.

One problem is that the commercial cost-cutting measures used by more traditional businesses are simply not an option for football clubs.

Red card at a QPR match
Many balance sheets get a red card
Mergers, for example, are not usually an acceptable option for fans, players or the management - as QPR and Wimbledon found out after a brief flirtation with the idea last year.

And institutional investors have largely sneered at the attempts of football clubs to raise cash on the markets.

Football shares are normally only bought by fans who value their share certificate in the same sort of way as their team's scarf.

Vicious circle

The main money-spinner - aside from the sale of tickets and merchandise - is broadcasting.

Whilst the once potentially lucrative contract to broadcast Football League matches has fallen apart, the showing of Premiership matches on television and online is still a healthy earner.

The recent events at ITV Digital have pushed the prize for reaching the Premiership beyond the realms of glory to real money.

But to secure promotion, many clubs feel they have no choice but to make the expensive player purchases that land them in so much debt.

For a game all about winning, that sounds suspiciously like a no-win situation.

The X factor

Of course, there's one other factor in the financial equation of football clubs - the wealthy benefactor.

Watford Chairman, Elton John
Elton John is a generous football donor
It seems to be something of a status symbol to own a club and to dutifully cough up for new players when things aren't going well.

Watford's Elton John and Fulham's Mohammed El Fayed are amongst some of the most high profile examples of football club donors.

But the whole financial landscape has changed in recent years.

10 years ago, the cost of keeping a third division club going was about 150,000-200,000 a year - an acceptable price for many local businessmen.

Now it costs 500,000 a year for a third division club and 750,000 for division two, according to consultants Deloitte & Touche.

Britain's millionaires are going to have to dig deep to save football.

See also:

27 Mar 02 | Business
ITV Digital goes broke
26 Mar 02 | Business
Man Utd profits sound warning bell
26 Mar 02 | Football
A contrast in football values
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