Can UK sport do the business?

Many British sports are a financial basketcase - look at the Premier League. It's time organisers and owners worked out how to make money, without killing the spirit of their game.

by Jim White
Last Updated: 09 Oct 2013

A couple of miles from Mount Kilimanjaro, in the midst of the Tanzanian countryside, at the epicentre of what might be described as the middle of nowhere, there is a bustling, busy roadside bar. Its name is proudly spelt out in bold red letters across the front: Old Trafford. And in case anyone missed the allusion, the name is flanked on either side by the crest of Manchester United, a sporting institution that plies its trade some 4,400 miles away, in post-industrial northern England.

Inside, the bar is decorated with red-and-white memorabilia and pictures of United superstar performers, from Eric Cantona and David Beckham to Wayne Rooney and Ryan Giggs. A replica of the English Premier League trophy sits behind the counter. This is a little piece of Salford in the heart of Africa.

'No, I have never been to the other Old Trafford,' the owner, Dominic, tells me. 'But maybe one day. And maybe one day Rooney will come here.'

Tanzania is by no means alone in its fascination with the institution that was founded 140 years ago as a diversion to prevent Mancunian railway workers from drinking themselves into oblivion. On a stall in a market in rural China, regulars can pick from a selection of replica United jerseys: red, white, blue and various shades in between - they are all here, suitable for all shapes, sizes and ages. In the Asian sub-continent, the Reds' recent defeat to Crystal Palace in the Carling Cup was reported on the front page of the Times of India. In Addis Ababa, huge screens are erected in the main square for live transmission of United games, as, in the crowd, gangs of football supporters ape the tribal rituals they have learned from watching the games beamed direct from England.

And United are by no means alone as England's sporting exports. Who could not fail to notice throughout the Arab spring the number of Liverpool, Arsenal, Chelsea and Tottenham shirts being worn by those kicking the backsides of dictators across the middle east.

There is no doubt that, in its global reach, the English Premier League is a huge success. Driven by the popularity of United and the others, the PL's pre-eminence is almost colonial in its muscularity. Unarguably the most prominent cultural export Britain has, bigger than pop music, bigger than the royal family, every weekend from August to May its tentacles are said to ensnare more than half the world's population in its irresistible grip. As the globe hunkers down in front of its screens to watch, there is only one way to describe the PL's astonishing visibility: it is our Hollywood.

And yet, despite being as well known across half the planet as Mercedes-Benz or Coca-Cola, despite having a relationship with its customers every bit as involving as Facebook or Apple, nobody should make the mistake of describing English football as a world-class business. Not if your definition of business includes such concepts as profit. When it comes to that sort of measure, our game is less global business triumph than self-destructive basketcase.

Take the last football season. True, between them, the 20 clubs that make up the Premier League earned in excess of £2.5bn from television alone; ticketing and related commercial activity accrued half as much again. However, in an act of inverse financial alchemy, they managed to turn such bounty into a collective loss of £484m. Manchester City, the least plausible of all the clubs in terms of profit and loss, totted up a deficit of £176m. This season, with City's wage bill now more out of control than a Labrador chasing deer across Richmond Park, the losses at Manchester's other club are heading towards £200m.

Only four of the 20 members of the PL actually posted a profit in 2010. And when you analyse the few who strayed into the black, in real business terms it is small beer. Take Wolverhampton Wanderers, which enjoyed a cheerful £9m surplus last season. Its turnover is no more than that of a single medium-sized, out-of-town Tesco superstore. Even Manchester United, the Premier League's senior marquee name, the sporting brand apparently better known across the world than all but Nike, turned over only £286m. That is not much more than half a dozen large megamarts. And most of what they earned disappeared to service the debt foisted on the club by its owners, the American Glazer family.

So much so that England's best-known sporting institution recorded a loss of £74m last year.

'We're seduced by its global appeal into thinking the Premier League is this vast financial giant,' says Simon Chadwick, professor of business strategy at Coventry University. 'In reality, it is a medium-sized enterprise, something that is neither big nor, in its constituent parts, particularly well run.'

The fundamental problem, according to Alex Fynn, the former advertising executive who first came up with the idea of the Premier League, is that English football has yet to work out how to monetise its reach. You can call yourself a fanatical Manchester United supporter, you can watch every match they play, celebrate every goal they score without entering into any kind of financial arrangement with the institution.

'Our clubs may be brands with enormous global recognition,' says Fynn, 'but they cannot convert that into profit in the way that, say, Nike or Coca-Cola can. Indeed, they mainly leave that to their commercial partners, which use the popularity of the football brand to enhance their own.'

Take the case of Aon, United's shirt sponsor. Talking of the effect Wayne Rooney's goal-of-the-season overhead kick against Manchester City last year had on Aon's business, the company's vice-president, David Prosperi, said: 'I had woken early in Chicago to watch the game, but Wayne's goal certainly made it worthwhile. Not only was the Aon logo extremely visible throughout the multiple global TV replays and photo images when it happened, but years from now, when the goal against City is shown time and again as perhaps one of the greatest of all time, you will still see the Aon name.

'With Manchester United having more than 330 million global fans and with every televised match having an audience on a par with that of the Super Bowl, we saw the opportunity for a dramatic increase in brand awareness for Aon by securing a partnership with the club, and moments like Rooney's goal against City only strengthen that.'

In other words, while United generates dreams, Aon picks up business.

So if football, this country's foremost sport, with a huge worldwide following and seemingly gushing revenue streams, can be dismissed as a minor player in international finance, what about the other British games trying to make their way in the world? How do they stand as businesses?

According to Adrian Moorhouse, the best-run sports in Britain are rowing, cycling and swimming. 'By well-run, what I mean is each has been magnificent in the past decade in turning revenue into success,' he explains. 'They are, if you like, talent factories rather than blue-chip businesses. They have proper systems, a singularity of thinking and have a good record of producing world-class performance out of their investment.'

What they don't do, however, is make money. It could be said all three are creatures of the state, relying heavily on the support of government funds and the National Lottery. And while cycling has been able to develop interesting and mutually beneficial sponsorship deals with the likes of Sky Television, it is by no means a substantial business. Nor, would its proponents argue, is that its purpose.

Even so, some of Britain's sports do generate money. The Rugby Football Union last season recorded a modest profit of £8.7m, while the England and Wales Cricket Board has seen revenues move on an upward trajectory: in 2006, income in the English game was £77m, by 2009 it was £93m.

These figures, though, pall alongside the real global heavyweights of sporting business.

'The truth is,' says Mihir Bose, author of The Spirit of the Game: How Sport Made the Modern World, 'if you want to know how to run a sport as a business, there is no point looking at the British model. You have to look to America. In the US, they know how to run a sport as a business. In Britain, all we seem to be able to do is perpetuate dysfunction.'

Bose has a point. As he spoke, the Rugby Football Union, custodian of Britain's second most popular team sport, was in the process of meltdown - never mind its small profit. Without a chief executive, with its most important management position, that of the national team coach, unfilled, with senior employees being punished for inappropriate behaviour and with an internal security system about as watertight as Jamie Oliver's kitchen sieve - if the RFU was a FTSE 100 listed company, its shareholders would have withdrawn support months ago.

The idea that such a demise could afflict the US equivalent of the RFU, the National Football League, is preposterous. Last year, on revenues of $8bn the NFL franchises shared a profit of $1.25bn, or roughly 125 times greater than that delivered by the RFU. Now that is what you call a business.

'There is a simple reason why US sport is run so much better than ours,' says Fynn. 'English sport is based on - to use the Americanism - "club-think". American sport is based on "league-think". What actually sells the Premier League round the globe are a couple of marquee names, principally Manchester United and Liverpool. And their interests are not necessarily the same as those of the other members of the league, and certainly not the same as the England team or clubs lower down the pyramid. The NFL is an entity that has long appreciated that the whole is greater than the sum of its parts.'

Paul Tagliabue, the former commissioner of the NFL, was fond of saying that his sport was the world's most socialist sporting institution in the world's most capitalist society. Among the NFL franchises there is an acceptance that the collective is all. In the NFL, all revenue from television, merchandising and related commercial activity is equally distributed among the members. New talent is deliberately disbursed to alleviate previous discrepancy in performance. Thus, the team that fared worse the previous season gets first pick of the new players coming through the draft system. Meanwhile, the colleges that provide the raw material for the game devote their entire purpose to developing the next generation of players, then hand them over for nothing.

'That is the complete opposite of the British system, where everything is geared to favour the big battalions,' concludes Fynn.

Indeed, English football, to take but one example, is an operation that, far from matching the singularity of the US model, is unable to identify its own priorities. The requirements and needs of the England national team and those of the constituent members of the Premier League are entirely at odds. And the members of the PL themselves have contradictory views on the way ahead. This autumn, Liverpool FC's chief executive floated the idea that his club should divorce itself from the collective bargaining of the league when it came to worldwide television rights and secure its own deal. After all, he explained, foreign viewers are far more interested in his club than they are in at least 18 of the other members of the league.

Intriguingly, like five other PL teams, Liverpool is under us ownership. The truth is, American sport owners, aware of the unwavering protective instincts of the whole in their own domestic leagues, have migrated across the Atlantic in the hope that they might be able to exploit England's fractured system for their own benefit. As yet, none of them has established a method for doing so.

'The difference between English sport and American is this: ours developed through custom and practice, it was based on the hobby,' says Chadwick. 'Theirs was established much, much later, to achieve commercial goals. Think about the way we run football in this country. The FA is set up to reflect the game as a social-cultural entity, not a business entity.'

Chadwick goes on to suggest that the American way of doing things may, in the 21st century, be overtaken by a new approach to sport: the Asian model. 'It began in 2008 at the Beijing Olympics, and it has been extended on through Dubai's relationship with sport, through Abu Dhabi's association with Manchester City to Qatar winning the right to host the World Cup in 2020. In all these we can see a new development: sport is being used by the state to brand the nation. In the Asian way, sport is recognised as a primary method of putting you on the international business map.'

Yet, even in the old world of Britain, there is one example of a sport that is more of a business than many a business. This autumn, Bernie Ecclestone, the presiding gnome of Formula 1, celebrated his daughter's nuptials by spending £12m on the wedding day bar bill. That is an indication of a man at the helm of a healthy business operation, all right.

The figures tell their own story of British motorsport's phenomenal commercial prowess. The annual turnover of motorsport engineering and services (MES) in the UK economy is estimated at approximately £5bn; 38,000 people are employed in MES, most in highly skilled, highly paid jobs; the total true worth of MES to the British economy is somewhere north of £50bn.

Some might say, of course, that it is not a sport with business pretensions so much as a business with sport attached. Motorsport has long been used as the research and development arm of the automotive industry. But the interesting thing is, even as that business has migrated away from its founding heartland to the US, Europe, Japan and now China, motorsport remains firmly ensconced in England. There may not be any volume car producers left under British control, but almost all of motorsport is.

'From Prodrive, through Red Bull, McLaren and Williams, along the M40 corridor, the entire business landscape is dominated by motorsport,' says Chadwick. 'It is not a sport based around paternalism, it is not a participation sport, there is no perceived social benefit to it. It's harsh, brutal, too. If you don't make money, you go out of business. Nobody rattles a tin when Eddie Jordan or BRM are in trouble. Yet it rolls on, ever more successful. It is cutting-edge, hard-nosed and absolutely vital to the British economy.'

And within motorsport's triumphant business success, there is delivered an intriguing question about what we want our sport to be. Many deride Formula 1 as not much more than a parade of advertising logos. But it makes a lot of Britons a lot of money. Football, on the other hand, is recognised as an activity enjoyed by millions, the health benefits it delivers to even its most wheezingly overweight participants incalculable. What is of more value to society? A sport that is an unequivocal business success, or one that makes an awful lot of people breathe a little easier and move a little less stiffly?

This question should be at the heart of our thinking in this the most significant year in a generation for British sport. As we host the Olympic Games this summer, should we be worrying about the cost or embracing the benefits? Or maybe just asking this: what exactly is sport for?

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