Newcastle United’s relegation from the Premiership last summer resulted in a reduction this past season in the overall attendances of the Premiership.
In fact the Premier League suffered a 4% drop in attendance last season.
Deloitte has looked at the books of English clubs and report that most have survived the current recession quite well.
Newcastle United was seventh overall in the top clubs by revenue in season 2008/09, when we were still in the Premiership, and we would expect when the results come out for next season, the club should be even higher than that.
The Newcastle club is trying to take advantage of the many different revenue sources available to increase the overall revenue at the club, and most of those seem to be suitable – although renaming St. James’ Park is not one of them.
The current revenues at Newcastle, when we were still in the PL in 2008-2009 were around £100M, and we would look to see the figure rise over the next few seasons.
And with a reduction in total wages paid out, the Tyneside club should be able to make a profit and start repaying some of the many loans the club has active right now.
Newcastle’s wage bill at the time the club was relegated was officially £71.1M, and we all know the club owes owner Mike Ashley £111M on an interest-free loan.
Dan Jones, who is a partner at Deloitte, said today:
“When you factor in the recently negotiated Premier League overseas broadcast deals, which come into effect from 2010/11, football has shown remarkable recession resistance during these difficult economic times.”
“However, Premier League clubs’ operating profits more than halved from £185m in 2007/08 to £79m in 2008/09.”
“The challenge for clubs continues to be converting their impressive year on year revenue growth into sustainable levels of profits that allow for continued investment in infrastructure and talent.”
The Premier League clubs’ overall revenue increase of £49M was offset by an increase of £132M in wage costs.
That’s not good and is certainly not sustainable, and also points to decreasing profits in the PL. The total wage bill was more than £1.3B with record wages/revenue ratio of 67%, and that’s just far too high.
We would hope that Newcastle can keep the wage bill at less than £50M for next season and with £100M revenues that would make it around 50% foe the wages to overall revenue ratio – and it could be even lower than that.
Alan Switzer is the Director of the Sports Business Group at Deloitte, and was rightly concerned about the high wages/revenue figure:
“We expect wages growth to outstrip revenue increases again in 2009/10. This will further reduce operating profitability, a decline that cannot continue indefinitely.”
These figures point to PL clubs still paying out too high wages to their players, and they will need to curb that and also somehow grow their revenues.
Of course the restrictions introduced to European clubs by UEFA President Michel Platini will soon come into effect and and restrict clubs essentially from spending money they don’t have.
To have to force PL clubs to do that continues to amaze us – and it’s little wonder that over the last few years a number of English clubs have gone bankrupt.
We’re sure that in the future Newcastle will not be one of those, but it will also be a challenge for Chris Hughton to strengthen the squad this summer with little cash available, but we have every confidence that Chris can do just that.
Howay The Lads!!