Article From Jon Pritchett - Financial Meltdown Of Rangers!!

[chilledbear 16]

I cannot see this on the Forum. Probably controversial but some good points.

 

http://t.co/CY2tBDwU

[simplythebest 0]

It's a bit muddled, like talking about the SPL when we're not in it, costs have already been cut dramatically with the way the wage bill has gone down, and season tickets sales haven't gone down at all.

 

Bear in mind Bill Miller's plan involved SPL football and a CVA to merge with his 'incubator' company, obviously that would cost much more.

[Bluedell 5,342]

Some good points but a lot of inaccuracies as well.

[der Berliner 3,249]

What Can We Learn From the Financial Meltdown of Glasgow Rangers FC?

 

It seems hard to fathom how one of the 25 biggest football clubs in the world (ranked by Forbes in 2007 at #25 with a valuation of $194 million) could come so close to cratering into the abyss. At least it does until you really understand how the club got here. Much like the Greek and the French citizens, Rangers nation refused to take its medicine when it got sick. Years and years of mortgaging the future by stealing tomorrow’s revenues to pay for today’s ambitions were a big part of the problem. When you combine that with an organization that did not tie its expenses to it revenues or even construct any sort of internal metrics to measure the effectiveness of its staff or player wages, you can start to get a picture of how the mighty Rangers arrived at bankruptcy and how 140 years of celebrated footballing history was almost terminated. While there are many contributing factors that will be explored here, the evidence points to hubris as the primary cause. While television revenues in the SPL were becoming increasingly smaller as a percentage of turnover (8% for Rangers in 2011) and season ticket sales were declining every year (down to 37,500 from 44,000 five years ago), Rangers continued to rearrange the deck chairs on the Titanic. Clearly, Rangers believed their Titanic was incapable of sinking – simply too big to fail. Failing to acknowledge the global shifts and winds of change, Rangers continued to pay more than they could afford to players, managers and executives (£26MM towards wages on £35MM of revenue). Employee benefits and perks continued to grow – creating an unsustainable set of obligations for a club that was seeing revenues decline. (sounds a lot like the US Government today) Like so many before them, the answer was always to place a bet on winning football as the catapult over the morass.

 

The straw that broke the camel’s back emerged in 2011 when it was revealed that the club had been paying players via employee benefit trusts (“EBTs”) which enabled the club to inflate the player’s take home pay, and thus pay their players more and hence attract better quality talent. This aggressive use of EBT’s came crashing down like a house of cards when the UK’s equivalent of the IRS (Her Majesty’s Revenue and Customs) came knocking seeking over £75 million worth of unpaid taxes and penalties.

 

Are the Rangers a relic of the old business model or a harbinger of things to come? It is certainly true that Rangers are not the only club to have gotten itself way over the tips of its skis in the world of football. If you kicked a football across most of England and other European countries where the sport is dominant, you’d bounce off more than a few clubs that have struggled and who continue to struggle with huge, immovable debt mountains and obligations. In many ways, Rangers are a microcosm of what ails many parts of the Western World’s economy. The percentage of struggling and over-leveraged clubs has gotten so great that UEFA has passed a sweeping regulation that it plans to enforce beginning in 2013, which essentially requires clubs to operate without losing money. It is understandable how smaller clubs without the benefit of large season ticket bases, grand stadiums or winning histories could struggle to break even, but how does a club with more league championships than any other football club in the world get to this place? How did Rangers take 54 league titles, a 51,000 seat stadium, 40,000 season ticket holders and 5 million global followers to the brink of extinction?

 

The answer is by spending most of its time looking backwards into its glorious history rather than forwards into a future that required a major shift in business strategy. Like many formerly great companies, Rangers arrogantly refused to heed the warnings. In 2000, Sir David Murray infamously boasted, “For every five pounds Celtic spend, we will spend ten.” He followed through on that promise and the seeds were sewn. Rangers refused to recognize that in a global environment, new threats emerge rapidly and what you did yesterday doesn’t insulate you from competition tomorrow. When the battlefield changes, the battle plan needs to evolve or soldiers will die.

 

Before being sent to the Scottish Third Division this season, Rangers played in the SPL, the top level of football in the country of Scotland. There are 12 clubs in the league, but only two clubs have really mattered in terms of television viewership or attendance in the country. In 2011/12, Celtic and Rangers were responsible for 82% of all gate receipts for league matches and 94% of all television viewership of league matches. In other words, the other ten teams in the SPL were only responsible for 6% of the total viewers when you remove Rangers and Celtic. The average viewership of SPL games was 150,000 but the average viewership for Rangers versus Celtic was 900,000.

 

More fans fill Ibrox on a match day than all of the other SPL clubs (not counting Celtic) combined. This is not a league. This is two humongous clubs (now just one) playing with many woefully undersized, undercapitalized and overmatched clubs in a country of 5 million. It is not a fair fight. More importantly for Rangers, the Scottish Football Association and its member leagues are not capable of producing media revenues on the scale of most other countries.

 

In the aggregate, the SPL teams produce annual revenues of £125MM while the EPL produces annual revenues of £2.4 billon; the Budeslega £1.6 billion; Spanish League £1.5 billion; Italian Serie A £1.4 billion; The French League £1 billion and the Netherlands £400,000.

 

This is part of the problem that Rangers and Celtic face. The EPL has 20 teams – over half of whom have smaller stadiums and season ticket bases than Rangers or Celtic. However, the EPL has a global television deal worth £ 3 billion with SkySports and BT.

 

The SPL has a five-year £60 million deal.

 

For winning the SPL regular season, a club would receive £3 million in fees (in exchange for their media rights).

Forbes.com

 

Parts of it read like coming straight out of Pacific Quay's keyboards. Maybe I missed it, but I did not see the name Whyte anywhere in that report. How a mag of Forbes' stature can display our current situation based on EBT misuse et al is somewhat beyond me. I might likewise claim that Pearl Harbour never happened.

[Thinker 875]

Forbes.com

 

Parts of it read like coming straight out of Pacific Quay's keyboards. Maybe I missed it, but I did not see the name Whyte anywhere in that report. How a mag of Forbes' stature can display our current situation based on EBT misuse et al is somewhat beyond me. I might likewise claim that Pearl Harbour never happened.

 

Yeah, it doesn't seem particularly well informed about the details of our financial issues.

 

The general thrust of what we should be doing is true though: looking to the future rather than the past, living within our means, using up-to-date methods to run the business side of things properly, accepting that competing in Europe isn't realistic on Scottish football income.... I think we all know these make sense.

[forlanssister 3,050]

There's nothing earth shattering in there in fact it's basically just telling us what we already know and what many have been saying for long enough, "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

[chilledbear 16]

There's nothing earth shattering in there in fact it's basically just telling us what we already know and what many have been saying for long enough, "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

 

Some people don't seem to know this.

[BeardyGuts 6]

There was a few interesting comments:

 

I really hope we aren't paying Ally 20k p/w - "The club can’t afford to pay its manager over £1MM and then give every coach and executive premium healthcare, generous pensions, six weeks of vacation, exotic cars, free fuel, appearance fees and other perks."

 

Wow... paying directors to attend matches! That's a total disgrace whoever accepted that. - " The club can’t afford to pay directors annual fees to simply attend matches, socialize and run up a large food and beverage tab."

 

Hopefully this will change now we are our out of the JJB deal - "Despite being one of the top clubs in the world in terms of shirt sales, the club does not generate nearly as much profit as does Celtic – even though Celtic sells fewer shirts than Rangers."

Edited October 9, 2012 by BeardyGuts

[Bluedell 5,342]

There was a few interesting comments:

 

 

Wow... paying directors to attend matches! That's a total disgrace whoever accepted that. - " The club can’t afford to pay directors annual fees to simply attend matches, socialize and run up a large food and beverage tab."

 

The only non-exec director who got paid was John Greig. He got £1250 in 2009 and £15K in 2010. Quite a lot in 2010 but it's hardly going to break the bank.

 

Hopefully this will change now we are our out of the JJB deal - "Despite being one of the top clubs in the world in terms of shirt sales, the club does not generate nearly as much profit as does Celtic – even though Celtic sells fewer shirts than Rangers."

 

This shows an lack of understanding of the figures. Celtic reallocated some income into merchandising to make it appear that they earn more than us.

 

I think that you can take on board the high level messages, but wouldn't pay too much attention to Pritchett's detail. He obviously didn't fully understand things.

[thesins 0]

I think that you can take on board the high level messages, but wouldn't pay too much attention to Pritchett's detail. He obviously didn't fully understand things.

 

After reading that..kind of glad he didnt take over. Sounds like he was going to not spend much more than Hearts/Hibs and hire an American manager to get away from Western European influence.