Review of ‘The Price of Football’
The Price of Football by Kieran Maguire is an excellent book for anyone who wants to understand how money impacts the game of football. You don’t have to be an accountant to understand it. If you can understand the author’s Twitter account, ThePriceofFootball, you will be able to comprehend the book. And there is a very handy glossary of accounting terms at the back.
The book starts with an explanation of financial reports, with chapters on the balance sheet, the profit and loss account and the cash flow statement. Maguire mentions that the Championship is the most problematic division in English football and 18 of its 24 clubs made a net loss in 2017/18. He then goes on to discuss the money that is paid out for players and income from tickets, broadcasting and sponsorship. The section on the cost of players mentions Birmingham City’s failure to put a relegation clause in Zigic’s contract. There are also chapters on trend analysis and ratio analysis of club accounts and methods of working out the value of a football club. For me, the three most interesting chapters were on financial fair play (FFP), ownership models and red flags.
I had thought that the FFP rules were just designed to prevent clubs from getting into financial difficulties because they can’t pay their debts, The book points out that this is a cash flow issue, not always connected to profit, and asks why the FFP rules impose profit control methods. It suggests that by restricting wealthy owners from spending too much on players’ wages, the rules limit their ability to compete with the existing elite clubs. Birmingham City is mentioned as the first club to get a points deduction for its breach of profitability and sustainability rules.
The ownership chapter is called “Ownership models: love, vanity and insanity”. It outlines five kinds of ownership:
- The local fan made good, with Dean Hoyle of Huddersfield and Tony Bloom of Brighton given as examples.
- The butterflies, who move from club to club. David Sullivan and David Gold are the examples of this as they sold Birmingham City so they could buy West Ham.
- The trophy asset, bought by a wealthy owner to add kudos, recognition and glamour to his standing. Roman Abramovich buying Chelsea is the example of this type. One possible downside to these owners is that they may want to have their say in the playing side of the club.
- The flipper is an owner who buys a club hoping to make a profit by selling it. Portsmouth and Leeds are examples of clubs who have had such owners.
- Fan owned/member clubs are those in which fans have some share in the ownership. The history of such clubs is mixed.
The chapter ends by noting that “The biggest investor in a club is usually the fanbase, most of whom commit themselves emotionally to supporting the club for a lifetime”. It also provides examples of good owners: Andy Holt at Accrington Stanley and Mark and Nicola Palios at Tranmere Rovers.
The final chapter is on red flags, things to look out for when examining club finances. These include late submission of accounts, submitting pared down accounts, changing the financial year end, complicated club structure and hiding interesting information in footnotes. Maguire provides a case study of Derby County to show how some of these issues “can combine to provide a layer of fog over the finances of a club”. He writes that some clubs provide excellent summaries of their financial data but finishes his book saying that it is concerning “that too many clubs use creative accounting, legal loopholes, delaying tactics and sleight of hand when reporting their financial affairs, as this only reinforces the view held by many fans that some club owners are acting in their own interests rather than for the long-term benefit of the fans and local community.”