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Championship a "bubble waiting to burst"?

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Championship a "bubble waiting to burst"? Empty Championship a "bubble waiting to burst"?

Post by dyrewolfe Thu Dec 12, 2019 3:43 pm

At least, thats the view of former Wigan chairman David Sharpe.

Sharpe said the "only reason" the Whelan family sold Wigan to the Hong Kong-based company International Entertainment Corporation was because they did not see the "scary" financial situation improving.

"The Championship is not financially sustainable, it's a bubble waiting to burst," he said.

"It can't continue if the model is just having enough billionaire owners to keep funding it - that's a strange, crazy model because there are only so many people you can attract."

Sharpe, who took over Wigan from grandfather Dave Whelan in 2015, said the family were putting in "nearly £1m a month just to keep it going" despite having the fourth-lowest wage bill in the Championship.

He said he "would not be surprised" if in the next five years a Championship club entered administration and dropped out of the Football League like Bury did in August.

"There are Championship clubs chasing that Premier League dream and when the gamble doesn't come off somebody has to foot the bill and if they can't afford it, the club could end up in administration," he said.

"It's a real problem and it's only going to get worse - thank God we are out."

As a Boro fan, the bit I've highlighted in bold really strikes home.

Thanks to the magnet of the Premier League's TV money and especially now that even some Championship clubs are attracting the attention of billionaire owners, boards and managers are feeling like they have increasing licence to gamble, in the hopes of reaching the Promised Land. Fans' expectations can also get raised to unrealistic levels, leading them to start believing owners need to spend ever larger sums of money, in order to keep the club moving forwards.

Its not exactly a new phenomenon...just look at what has happened to clubs like Portsmouth and Bolton and a number of other unfortunates who have ceased to exist completely, such as Bury. However, I think the Championship has a greater financial disparity than the other lower leagues, thanks to the clubs relegated from the PL still benefitting from parachute payments for a number of years.

Not to mention potential investors often seeing Championship clubs as a nice "project" or vehicle to get into the Premier League, without having to shell out hundreds of millions, acquiring shares in an existing top flight club, or else conducting an outright takeover.

So at the top end (financially) you have the relegated clubs and those earmarked for promotion thanks to super-rich owners. At the other, you have the clubs with no rich backers, modest sponsorship, living within their means and who haven't got a hope of achieving promotion.

So far, so normal and no different to the other lower leagues (aside from the amounts of money involved).

However, back to the "magnet" of the PL, the relegated clubs usually feel like they should be able to immediately bounce back, so continue spending much as they did when they were in the Premier League. A major gamble, which doesn't always pay off. If they don't do it first time, well...they can always try again next season, thanks to the parachute payments.

Even if clubs take the other route, using the resources of a mega-rich owner, they can only do so as long as the owner feels like investing. There is always the risk of being left in the lurch, once they get bored. There are also the Profit & Sustainability regulations to worry Birmingham found to their cost. Though there are apparently a number of loopholes that can be exploited, given several clubs have run up higher losses and have yet to be sanctioned.

Anyway, in a nutshell, (TL: DR) Championship clubs racked up record losses last season, totalling over £300m. Only 5 of the clubs (who were willing to provide financial statements) showed a profit. All the rest had debts ranging from £200k to over £57m.

Despite the obvious risks, it seems clubs are still willing to spend ever more on transfer fees and wages. Just like the DotCom bubble, you have to feel this can only last so long, before more clubs either start tumbling down the leagues, due to severe cost-cutting, or end up going into liquidation.

And it seems the EFL doesn't give a damn either, saying its up to clubs to run their affairs properly:

The EFL told the BBC: "Club owners are fully aware of the current financial regulations in place and are cognisant of the risks that such an increase in outgoings can have on sustainability.

"Clubs, however, must be given the freedom and flexibility to strive for success within the parameters of the regulations.

"It should also be remembered that 'operating profits' are not the primary aim of most professional clubs, with owners opting to compete for success in what is an increasingly competitive marketplace."

Another worrying statistic:

Spending on wages in 2017-18 jumped by 11% from the previous year - an £83m increase, according to Deloitte.

Vysyble says more than half of clubs are spending more on wages than they make in income.

Deloitte say this gap between wages and revenue is likely widen further to what they call an "unwelcome record high" when the 2018-19 accounts are published next year.

Boro's spending on player wages jumped from over 50% of the club's income in 2016-17 to over 80% last season. Not because we've splurged on a lot of new players, but simply because the club's income has greatly reduced and we've not been able to offload players (many of the highest earners still having a couple of years on their contracts).

So...yeah... Thanks Sky, thanks oligarchs, thanks Premier League and everyone else responsible for creating such a lopsided financial model that rewards already-rich clubs, helps to preserve the status quo and forces other clubs to take massive risks, just for a chance at competing with them.

Also thanks to the agents and other unscrupulous characters who help inflate player transfer fees and wages to utterly ludicrous levels, which means that even the £170m TV money for promoted clubs doesn't look like a huge amount.

And before anyone mentions Bournemouth, Burnley and Brighton...remember that for every success story there are half a dozen or more clubs that go straight back down and often suffer financial hardship for several years, while they re-balance their squad and spending.

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