As the two giants of Manchester United and Manchester City fought it out for the Premier League title at the weekend with multi-million pound players on the pitch and full crowds in the stands, you could be forgiven for thinking that the English football game was in rude good health.
But across the border we have seen Glasgow Rangers, one of Scotland’s most successful clubs, go into administration. There have been casualties in England too. Recent casualties in England have been Portsmouth and Port Vale and during the last ten years Leeds United, Derby County and Crystal Palace have all gone into administration. The clubs in the lower divisions are fairing no better and there is a long list facing acute financial difficulties.
How can this be? Broadcasting rights are booming and it costs a tidy amount of money these days to buy a season ticket or a seat for a game.
The answer of course is players’ wages. With each team wanting to win at all costs, an arms race has occurred in players’ wages.
According to Deloitte the Championship clubs are spending £4 for every £3 they make.
Trouble is approaching fast. The fee for broadcasting rights for the Championship 2012/13 season is 25% lower than for the current rights. Clubs that win promotion to the Premier League should survive with TV rights forecast to rise above £3.6 billion. However those TV rights are not payable to clubs that have just won promotion for three years while those that drop out of the Premier League can still claim media rights for three years.
UEFA, clearly alarmed by the situation, is to introduce Financial Fair Play rules for the 2014/2015 season. The idea is that clubs will not be able to spend more than they receive in total revenues.
With super-rich owners of Premier League Clubs, one has to ask whether this will spawn an entire rules avoidance business.
In football, just as in the Eurozone crisis, Germany’s fiscal responsibility could be the model to follow.