THE TRANSFORMATION OF FOOTBALL IN THE 1990s

FIG FACT-SHEET THREE: THE TRANSFORMATION OF FOOTBALL IN THE 1990s

The economic situation of British football has changed massively in the last ten years: what was a hugely under-capitalised industry at the end of the 1980s (that operated on very tight margins and often had to endure enormous losses) has been transformed into a multi-million pound businesswhere the maximisation of revenue and profit are key strategic objectives for clubs and associations alike. This factsheet offers some basic information on the key points of the transformation of British football in the 1990s, and highlights some of the important academic work conducted on the nature of the game. Authors' names in the text refer to the work highlighted in the bibliography.

Introduction

A distinction needs to be drawn at the outset between the new capitalist mode of operation in modern football, and the economic basis of the sport over the previous hundred-odd years of its history. All sport has been economic since the first fan was charged an admission fee to watch a game, since the first fences and stands were put up around pitches to prevent people simply watching fixtures for free from nearby fields, and since since the first players were paid professionally. However, in the last twenty years, the need to cover costs where possible (an economic consideration - discussed by Arnold 1991, Szymanski and Kuypers 1999) has been supplanted by a desire to raise as much revenue as possible, and generate profit wherever practical (a capitalist consideration). This has drawn on the systematic erosion of principles of cross-subsidisation within football, that previously offered routes of re-distribution of income from the large successful to theirsmaller, less wealthy counterparts throughout the League. These included levies on attendance revenue, for instance. Such re-distribution was based on a desire to protect the integrity of the entire professional structure, a concern that has been successively eroded in favour of the new free market economics of the game. This new conception of the professional game has led to new conceptions of how clubs should be financed, whereby each club is deemed to be responsible for itself and no other, leading to a splitting of the top clubs from the rest.

This shift, that has underpinned much of the transformation of football in the UK, was not accidental, nor can it be seen as simply an inevitable form of "modernisation" of the sport to fit wider social values and trends. The policies that have been pursued in the organisation of football in the 1990s were the product of a political/economic project deliberately aimed at generating revenue and profit, and of detaching the biggest clubs from the smaller ones. This was the logic behind the constant threats by the "Big Five" clubs in the late 1980s (Liverpool, Everton, Manchester United, Arsenal, Tottenham) to split from the rest of the Football League if they did not receive a greater share of TV revenues (Conn 1997). The path laid down is therefore best seen as the result of deliberate choices, that have proved remarkably successful in economic terms. Central to the transformation of the game was the arrival ofthe new business entrepreneurs in the game from the 1980s onwards: chairmen such as Doug Ellis at Aston Villa, Ken Bates at Chelsea, Irving Scholar at Tottenham brought experience of the non-football business world, new ways of thinking about the commercial and financial opportunities within the game, and new preparedness to work with commercial interests. These directors and chairmen brought a new attitude to the financing of the game, and brought knowledge and experience to the game that had previously been lacking and had not been sought either. Equally, the arrival of Sky TV and the hundreds of millions of pounds they paid for exclusive coverage of the FA Premier League, forms the starting point for the development of a much more sophisticated and developed football business.

Stadia

Within this context of new professional people being brought into the game, and growing pressures within the top clubs for greater shares of revenue, the impact of the Hillsborough disaster of 1989 gave a massive impetus to the development of the football business in the UK (Duke 1994). The requirementslaid down by Government following the Taylor Reports into the Hillsborough disaster for the redevelopment of football stadia lead to millions of pounds of taxpayers' money to pay for the removal of terraces from top stadia, and for general reconstruction of stadium facilities. While clubs did spend many millions of pounds of their own money, together with money received from the Football Trust for ground redevelopment, clubs were able to draw on Government help to create new stands and stadia up and down the country that offered the prospect of generating significantly increased revenues on both match and non-match days. Combined with the existing desire already visible amongst the top clubs to generate increased revenues and to keep more of the money tat was being earned, this lead not only to the sharp raising of ticket prices at top facilities, but also the development of new corporate facilities and other devices to attract new more affluent supporters to the game.

At the same time, the attitude of clubs towards revenue and profit changed dramatically: the previous decades had seen clubs operating as "utility maximisers" (Arnold 1991), that is functioning with the primary concern of winning trophies while seeking to perform as economically as possible. There was no attempt to maximise revenue or profit, and the structure and daily operations of clubs were geared not to commercial considerations, but to generating success on the pitch. This attitude has been progressively lost over the course of the 1990s, with not just the top clubs much more concerned to maximise revenue and generate a profit, regardless of success on the pitch. The most common strategy adopted to achieve this has massive diversification based around a new, proactive approach towards commercial opportunities. Progressively, top clubs have massively expanded the range of commercial features and facilities on offer to supporters, and expanded the range and scope of their commercial operations, especially in regard to the new facilities put in place in stadia as part of post-Taylor reconstruction.

The need to redevelop stadia coincided with the desire to increase revenue, leading to the construction of themed cafes, bars and restaurants, the sale of franchised outlets in some grounds (Liverpool FC has a McDonald's store at Anfield, for instance), expanded and enhanced visitor centres and museums, much bigger and wide-ranging club shops and "mega-stores", hotels and conference centres (an approach adoptedby Chelsea FC in the Chelsea Village, and Sheffield United at Bramall Lane, and a feature that was part of the original plan for the new national stadium at Wembley), and the development of much larger merchandise ranges. These new types of merchandise range from club badged motorbikes (as offered by Chelsea forinstance), club credit cards and mobile phones, and expanded leisurewear ranges, alongside the moretraditional flags, replica club shirts, scarves, household items etc. Not only has this contributed to a massiveexpansion in the revenue (and sometimes profits) of clubs, but it is part of an attempt to fundamentally alter the social meaning of the sport, moving it towards other leisure experiences: football clubs now view their"product" as being in direct competition to cinemas, home entertainment and other sporting events. Merchandise and other additional elements around the actual football are deliberately targeted at the new preferred demographic of supporter, the more affluent supporters, those who attend in families and the less"loyal". Those who attend games are increasingly constructed as "consumers" rather than "fans", driven by a desire for entertainment, rather than expressing a loyalty or strong personal identity (King 1997). This alsoextends to the creation of large-scale hinterlands of support for British clubs abroad, which are increasinglydeliberately targeted and created by top clubs (Nash 2001, Goksoyr and Hognestad 1999).

Part of this same project of maximising revenue and offering a new social meaning for the game have beenattempts to maximise the usage made of most clubs' key asset, the stadium. Whereas in the past, stadiawould only be used on match-day, and did not offer anything other than the football match, stadia at top clubs are being progressively moved towards six-day operations in an attempt to increase revenue generated, and to make the stadium a place to visit in itself. The stadium thus becomes a leisure and tourist facility in its own right, especially for affluent families with high levels of disposable income. The museums and stadium tours now commonplace at British stadia are examples of these objectives. Another reason to do this,in theory, is to release clubs' financial performance from dependence on the team's performance: by creating new fan-bases who interact with the club on the basis of entertainment, leisure and "lifestyle" choices, clubshope to create revenue streams that would not be overly affected by declines in the team performance: gatereceipts, sponsorship and advertising revenue, and television revenue all generally decline if a team is relegated. The new facilities at stadia can be advertised, and therefore hopefully used, regardless of the team's actual performances (such as hotels and conference centres).

Marketing and market research

As football clubs become more interested in specific target demographics, so marketing and market research have become increasingly significant. Football has radically shifted its attitude towards marketing: twenty years ago, football had no understanding of either the need or the opportunities presented by marketing, and had no desire to do so either. Football clubs have now developed increasingly more sophisticated forms of marketing, bringing in professional marketing expertise from outside the game, and creating dedicated marketing departments, that increasingly are taking over ticket departments as well. Increasing amounts of money are being expended on the development and sophistication of marketing departments, which are seen as increasingly important ways of increasing brand awareness, and advertising the club and its fixtures. Secondly, there have been moves towards developing regular forms of market research of the fan-base, often in conjunction with sponsors and other commercial interests, both to measure the popularity of existing policies and the prospects for new developments (such as ParPerView). The prime example is the annual Carling survey conducted on behalf of the FA Premier League, which not only detail how spectators view current arrangements in football, but how they would respond to certain new developments.

The Financial Revolution

The various forces at work in this transformation, the redevelopment of stadia, the diversification and commodification, the desire to maximise revenue and profit, have combined to create a totally new situationwithin the modern game whereby top clubs have transformed their economic and financial strength, and to draw on the massive hype and popularity of modern British football (fed in large measure by Sky TV) to become instantly recognisable, much-discussed and well-known brands. However the consequence of all the extra millions of pounds that have entered the game since 1992, generated by a massive growth in the value of sponsorships (Vodafone paid £30m to sponsor Manchester United from 2000 onwards), the value of advertising and the huge expansion in revenue received directly from TV (primarily from Sky, but also ITV), has been to increase on an enormous scale the gap between the top clubs and the rest of the English game: wages and transfer fees in the lower divisions have been dragged upwards, partly due to the massive expansion of wages in the Premier League, so placing significant extra financial burdens on precisely those clubs who cannot compete in marketing or advertising terms with the top five or six clubs in the country, precisely those clubs who have to work much harder to maintain an active and non-active fan-bases and precisely those clubs who generate less revenue in the first place due to the structure of the professional game. This has been fuelled yet further by significant speculation in the transfer market by Premier League clubs, prepared to spend tens of millions of pounds of players either to ensure that they remain within the financially-lucrative Premier League, or that they qualify for the even more lucrative UEFA Champions League. These trends were identified by Deloitte and Touche in their annual Football Finance review. The 2000 editionfound that:

• The turnover of the top five Premier League clubs was larger than the whole turnover of the seventy-two clubs in the Football League.
• The three highest Premier League spenders on player wages were greater than the entire wage bill of all the forty-eight clubs in Football Divisions League Two and Three combined (Deloitte and Touche 2000, page 11)

However, even within the Premier League, significant sums of money are lost every year: Deloitte and Touchefound that Blackburn Rovers had pre-tax losses in 1999 of nearly £8m, Everton of £10.8m, Liverpool of £8m, Leicester City of £6.1m and Sheffield Wednesday of £9.2m (Deloitte and Touche 2000, page 66).

The financial position of many clubs has not, therefore, actually improved, despite all the new finance injectedinto the game, as most of it is simply paid straight out again in hyper-inflating transfer fees and players' wages. Deloitte and Touche found that average wage costs increased between 1998 and 1999 across the PremierLeague by 29% (Deloitte and Touche 2000, page 66), and that nearly half of the operating profit (before transfers) of the entire Premier League in 1999 was generated by Manchester United alone. Profitability remains little morethan a distant objective for many clubs, and there are a number of British clubs either in administration or close to it(Hull City, Crystal Palace, Airdrie and QPR, to name just four in the last two years). Clubs like Sheffield Wednesday and Nottingham Forest FC (both relegated from the Premier League in recent years) are reported to owe over £15m apiece, while Everton FC are reported to owe £20m. Until wage levels are brought under stricter control (and this seems unlikely in view of the power of the players and their agents over clubs, and successive changes to the transfer system since 1995), most football clubs will remain relatively unprofitable, despite the enormoussums of money top sides can hope to generate.

While football is still a very small industry compared to wider capitalist industries in the UK (Premier League clubs generated £669m turnover excluding transfer fees in 1999), the financial position of the top division has beenchanged beyond all recognition since 1992, and future developments in the industry (PayPerView, primarily, but also the Internet) are expected by many to generate even larger sums for a select group of British clubs. The explosion in the financial aspects of the game has also brought with it a much greater need for professional skills at clubs and associations, in the areas of legal knowledge, marketing and sponsorship experience, accounting and financial control, administration and personnel skills. The commercial revolution has led to a huge expansion of the "back-room" staff at any British club, in order to facilitate the strategic exploitation of the commercial opportunities now on offer.

Media companies and the Football Business

These opportunities have also been recognised by a range of media companies, who have increasingly sought totake stakes in top British clubs. Granada own 9.9% of Liverpool FC, while Sky own 9.9% stakes in Leeds United, Chelsea and Sunderland; NTL own 9.9% of Newcastle United FC and Aston Villa. Sky also tried, unsuccessfully,to buy Manchester United PLC for over £600m in 1998. These stakes, and the combination of football clubs and media expertise and technology that they represent, are testimony to the enormous financial potential andinvestment opportunities that are still perceived to exist in the modern British football industry. While most of the revenue projections for PPV or Internet coverage are based on some questionable assumptions about take-up rate and the level that supporters would be prepared to pay, the expectation that these technological innovations will generate yet more millions of pounds for the game has drawn huge media companies even more into the heart of the football industry. How such developments will affect the power-balance of the game, the competitive balance of individual leagues, the social meaning of football, the ability of all social demographics to actively participate in professional football, and the rest of the British professional game is another matter entirely (Brown 1998, Nash 2001, Lee 1998, Nash 2000, Conn 1997). The fact that the transformation of the game is essentially contested territory, and has created winners and losers within British football, underpins the desire of the British Government's Football Taskforce to ensure that the commercial revolution in football is wedded to concepts of social responsibility, social inclusion, community work and anti-racist practices (Football Taskforce 1999).

Further reading

• Arnold T (1991) 'Rich man, poor man: economic arrangements in the Football League', Williams J and Wagg S (Eds.) (1991) Getting into Europe, London, Leicester UP, pp48-67
• Brown A (1998) (Ed.) Fanatics! Power, Identity and fandom in football, London, Routledge
• Brown A and Walsh A (1999) Not for Sale, Edinburgh, Mainstream
• Conn D (1997) The Football Business: Fair Play in the 1990s, Edinburgh, Mainstream
• Deloitte and Touche (2000) Annual Review of Football Finance, Manchester, Deloitte and Touche
• Duke V (1994) 'The drive to modernisation and the supermarket imperative' in Giuilanotti R & Williams J (1994) Game without Frontier, Arena, Aldershot
• Football Taskforce (1999) Report on Commercial Issues, London, Football Taskforce
• Goksoyr M and Hognestad H (1999) 'No longer worlds apart? British influences in Norwegian football' in Armstrong& Giulianotti (Eds) Football Culture and Identities, London, MacMillan.
• King A (1997) 'New Directors, Customers and Fans: the transformation of English football in the 1990s' in Sociology of Sport, Vol. 14:3, pp224-241

* Lee S (1998) 'Grey shirts to grey suits: the political economy of English football inthe 1990s' in Brown A (1998) (Ed.) Fanatics!, London, Routledge, pp32-50
• Nash R (2000) 'The sociology of British football in the 1990s: fandom, business and future research', Football Studies, 3:1, pp49-63
• Nash R (2001) 'Globalized football fans: Liverpool FC in Scandinavia' in Football Studies, March 2001 Volume 2:2, pp5-24
• S. Hamil, J. Michie & C. Oughton (Eds.) The Business of Football. A Game of Two Halves?, Edinburgh, Mainstream, pp82-111
• Szymanski S and Kuypers T (1999) Winners and Losers, London, Viking Press
• Taylor, Lord Justice (1990) Final Report into the Hillsborough Stadium Disaster, HMSO, London, CMND 962Football Industry Group, University of Liverpool, April 2001 This fact-sheet has been put together with the kind co-operation of Liverpool FC.