SPORT - City kickers

At 3.00pm this Saturday the English FA Cup reaches its long-awaited climax when Ruud Gullit and Chelsea square up to Bryan Robson’s Middlesbrough on Wembley’s hallowed turf. It may be the same trophy that did the lap of honour with Stanley Matthews and the late great Bobby Moore but it’s a very different game.

Back in 1992 a handful of TV money men met the boys in sheepskin coats and nothing has ever been quite the same. Whatever the outcome this weekend when the limited company in the red strip meets the plc in blue, the fans aren’t the only ones who’ll be suffering the ecstasy and agony. Football has become an ‘industry’ where victory is measured in goals, pre-tax profits and earnings per share.

The masters of satellite TV – in the UK, Rupert Murdoch – have recognised and skillfully exploited the audience’s almost insatiable appetite for live football. Surveys talk of over one million British households subscribing to satellite or cable for this reason alone. Hence the u734m, four-year broadcast deal BSkyB and the BBC signed recently with the 20 Premiership clubs. During the domestic season, you can watch a live match almost every other day. ‘Too much,’ FIFA secretary general Sepp Blatter said last week, warning that coverage was reaching saturation point and would damage the popularity of the game.

Meanwhile, the prospect of pay-per-view is looming, with fans buying the right to watch their clubs’ matches from home. Experience in Italy shows that the service is not always the success that broadcasters hope for and it is unlikely that PPV will have much impact outside the top-ten clubs in the Premiership. Nevertheless, growth in revenues from dedicated ‘match channels’ is still going to be one of the primary commercial drivers of the game.

Football for sale

Away from television, there has been a stampede of clubs (Spurs was the first in 1981) rushing to the City to gain access to much needed capital.

Indeed, Manchester United has been so successful on the stock market that European clubs like Lazio, PSV Eindhoven and Paris St Germain are all considering London listings.

‘When they saw United raise #16m by issuing only 3% of its shares recently, a shudder went through the European clubs,’ says one football analyst.

‘What they saw was tremendous buying power for very little effort.’

Although stocks have been quiet of late, the City has taken football to its heart. Leading the way is Singer & Friedlander’s Football Trust which aims to attract funds of around #40m. Fans make pretty decent punters, reckons Justin Urquhart Stewart, business planning director of Barclays Stockbrokers. ‘There’s the old maxim “invest in what you know”. Kids recognise what shops are good long before a City analyst does. Take Next’s recovery for example. And football’s the same.’

In 1872, when the FA Cup began, such a cultural change would have been unthinkable. But as fans become punters and power shifts to the City and the TV giants, the burning issue for the football companies is how to manage the aftermath of this change and how to find the best people to do it.

Club boards are legendary – for decades run by hands-off non-executive directors, there to rubber-stamp the decisions of autocratic executive chairmen. Chelsea boss Ken Bates is one who enjoys a reputation for driving hard deals and putting the organisation on his idea of a sound financial footing. He has not been without critics, stemming most recently from his reluctance to identify mystery shareholders behind Chelsea Village, the club’s holding company.

Many fans and detractors alike point to Bates essentially as the west London club’s saviour after he dragged it from the brink of ruin on becoming chairman in 1982. He may have been the right man for the job then but is he still? One City analyst tells of the time Bates entered a presentation, flanked by finance director Michael Russell and company secretary Alan Shaw: ‘Bates sat down, with these two either side of him, looking for all the world like a modern Fu Manchu.’

Truthfully, the old sheepskin coat brigade has largely had its day. Clubs are having to pay more than lip service to the reporting requirements and financial accountability that are the meat and drink of other publicly listed companies. Scandals like the George Graham alleged ‘bung’ affair and accusations of match-rigging against former Liverpool goalkeeper Bruce Grobbelaar, Hans Segers and John Fashanu still taint the game’s image.

But football is cleaning up its act.

David Buchler, senior partner with Buchler Phillips, comments: ‘If there were no City involvement, the process would be slower. It enforces regulation.

The Football League and the Football Association used to be the policemen of the game – their systems were, and still are, antiquated.’

Business leaders

Both within and beyond the Premiership, clubs are increasingly hiring established business figures to strengthen their claims to be professionally run enterprises, as well as to bolster their commercial skills. The Football League itself has just accepted a Deloitte & Touche recommendation that it should appoint a ‘commercially qualified’ chief executive and independent chairman.

In Scotland’s Premier division, chairman of Celtic is golf tours millionaire and chartered accountant Fergus McCann. He has drafted onto the board Sir Patrick Sheehy, the ex-chairman of BAT Industries, and the owner of London City Airport, Dermot Desmond.

Then there’s Aston Villa, which recently appointed former Deloitte & Touche partner Mark Ansell as finance director. It also lured Tony Hales, chief executive of drinks giant Allied Domecq and long-time Villa fan, onto the board as non-executive director. The club only failed to sign Bank of England economics director Mervyn King to a similar post after the Bank’s governor Eddie George vetoed the deal. In Division One, former Channel 4 boss Michael Grade fulfilled a fan’s dream when he joined the board of Charlton Athletic.

The fact that non-execs are supposed, according to the Cadbury Code, to act in a detached and objective manner seems to counter the thrust of these and other appointments. Not so, argues Peter Mead. Chairman of Millwall Holdings plc, and of the club itself, when it collapsed last year, Mead remains on the board as vice-chairman. He too is a fan who has realised a dream: ‘Some people in football say you’ve got to be cold about it and treat it just like any other business. I think they’re kidding themselves because you’re dealing with an obsession.’

A little over a year ago Mead announced the appointment of Graham Robson, former chief executive of food manufacturer Dalgety, as CEO to head the plc’s diversification into a leisure and communications group. At the time he said: ‘Most people would die for the level of awareness Millwall has.

I think people are intrigued. In the City Graham has had a very good response – much better than he might have expected from a relatively moribund public company with a two-and-three-quarter pence share price.’

There is a conspiracy of obsession – it touches not only the City but the media too. News of Robson’s appointment came through at the same time as ad agency Abbott Mead Vickers BBDO, of which Mead is joint chairman, launched its first ever rights issue. At u18m it was worth three times the then market capitalisation of Millwall. Guess which story grabbed the headlines?

The management role

Football is different from any other so-called subsidiary of UK plc.

And the new-style management brings to this industry what many others can only dream of – a true love of the organisations they’re employed by combined with heavyweight business nouse. The latter is essential if clubs want to succeed in a commercial environment.

Buchler says: ‘The big gap at the moment is that many clubs, although by no means all, are run as toy things. It’s not an exact science. Unless there is a mix and match between a publicly quoted football company and the management skills which go with the trading of that company you are going to have a lot of disasters in the future.’ He knows all about the need to sharpen up, as the corporate recovery expert who last month put together the deal which saved Millwall.

Buchler points to a classic example of the conflicts which can result when hard-nosed business types get their hands on a football club – the takeover of Tottenham Hotspur by Amstrad boss Alan Sugar in 1991. ‘Sugar has pretty strong views on off-pitch activities and over-priced players.’ It might not be everyone’s idea of how to run a football club but his priority has been to get the finances sorted out first and worry about the team later.

‘The fans don’t like it at all. They want him to fork out for players.

But what he’s tried to do at Spurs is run a tight ship.’ Buchler is familiar with this too because Sugar brought him in to sort out the entanglements with a number of marketing and merchandising schemes that could have cost the club its existence.

The irony is that, when done properly, spin-offs are a huge source of new revenue, dwarfing the declining importance of the turnstile receipts.

When Jurgen Klinsmann joined Bayern Munich, the story goes, the club sold 250,000 shirts emblazoned with his name. And, much to the chagrin of non-Reds, the pull of Manchester United is evidenced by sightings of replica shirts in New York, New Delhi and New South Wales.

The bigger English clubs have cottoned on to the pulling power of their brands and most are diversifying way beyond mugs and pennants. None has done this more successfully than Manchester United where gate receipts of u18.8m were just a third of total 1996 income. Off-pitch activities, excluding television monies, totalled u28.9m or 54% of club turnover.

Conference facilities, exhibition space at Old Trafford, catering for thousands in the dining suites -it all adds up.

‘There is no doubt that football clubs are becoming diversified leisure businesses,’ says Guy Feld, small companies analyst at stockbrokers UBS.

‘But you still need the management expertise to go with it. If management gets it wrong then the club can be in serious trouble.’ Millwall’s experience in the early days of telephone chat lines, long before its current troubles, is typical. The management failed to identify that the big money was in telephone sex, not fan gossip. It soon gave up on the venture. A foray into pubs was equally hapless. Theo Paphitis, the Greek-Cypriot businessman who is leading the Millwall restructuring, is now talking about making the club part of a larger company to exploit the New London Stadium.

A true model of nineties management style can be seen in Leeds United which was taken over by Caspian in August last year. Chris Akers, chairman of the group, which produces Sport in Question for Carlton TV, says the aim is to use football in the drive towards becoming a leading media, sports and leisure operator. There is no longer room for old-style execs.

CEO Robin Launders, ex-FD of Manchester United, was ousted from Leeds earlier this month. A spokeswoman described his negotiating skills as akin to ‘a bull in a china shop’.

Pushing forward

So what does the future hold for the English game? Most are agreed that the rich clubs will get richer and the rest will be fighting for the scraps.

Scoring on the pitch is still essential because from that it is possible to sustain ‘a virtuous cycle of success’. Indeed, the City may have been punishing Aston Villa for its indifferent play over recent weeks when it discounted the club’s shares by 3% on its stock market debut last week.

‘Clubs play well, they get good deals which means they can invest on and off the pitch, which means they can continue to play well,’ says Feld.

The flip side of this is, of course, the cycle of distress, as debt-laden Millwall found out. The massive fixed payroll costs proved to be the last straw when the team lost form and the City and fans lost patience.

Ten, maybe even five, years ago players like Ruud Gullit, the Italian duo Gianluca Vialli and Gianfranco Zola, all at Chelsea, and Middlesbrough’s Brazilian boys Emerson and Juninho would hardly have contemplated playing in the English game. But money is a powerful lure.

In the end, players wages may prove to be the game’s Achilles heel – even for those, like Chelsea, who take advantage of the Bosman ruling on free intra-EU transfers to offer high wages and signing-on fees at a much reduced up-front cost to themselves.

Diversification will undoubtedly smooth the off-season and loss of form bumps in cashflow but annual wage inflation, currently running at 20%, could still ruin the less well-off. ‘Those on the verge of promotion to the Premiership could be worst hit,’ says James Dow, partner in charge of the European football unit at KPMG. ‘They get caught up in paying big money players to stick with them.’

As to the really top teams, people are already predicting that a new breed of Super Club – generally seen as Liverpool, Manchester United, Arsenal, Newcastle and one from Spurs, Chelsea or Aston Villa – will join a European league. Feld says: ‘We believe the process will be pushed forward by TV and sponsors and that it’ll be reality within five to ten years.’

Don’t forget the supporters

It would certainly be foolish to underestimate the power of TV. BSkyB’s influence is clear. It can change the dates of fixtures to meet its needs, and it can alter the time a game is played. A number of recently televised live matches have kicked off at the very un-footballing time of 11.15am.

Bryan Robson, Middlesbrough’s manager, was frank about how powerful BSkyB has become when police refused to allow his team to play Spurs one Friday night not long ago. ‘If Sky had wanted the game on a Friday, it would have been different.’

But whether or not the FA Cup Final in ten years’ time will be the exclusive product of an American TV magnate, it is likely that Wembley will still echo to the roar of 80,000 voices that really have paid to view.

The only thing that could undermine a capacity crowd is too much change, too quickly. Football fans are emotional people. ‘The trick will be to generate money and not change the game too radically,’ says Deloitte & Touche partner David Young. ‘The alternative will be throwing the baby out with the bathwater. For the game and its finances to benefit, the football brand relies upon the supporters and there’s no point in alienating them.’

The profiles of Martin Edwards, Fergus McCann, Ken Bates and Chris Akers were written by Karen Buchanan, editor of football magazine ‘FourFourTwo’

KEN BATES: CHELSEA

Ken Bates has never had the easiest of relationships with the fans.

The Chelsea Independent fanzine calls him the ‘great dictator’ and bemoans the ‘Chelsea Harbourisation’ of the club. When compared to the virtually canonised Matthew Harding, with whom he fought a running battle for control before the latter’s untimely death, Bates’ image is tarnished.

Harding was the real fan who used to hold court in the local pub before the game. He was also the man who brought the good times back to Chelsea, both by buying the freehold of the club to secure its future at its home Stamford Bridge, and engendering a spirit and a passion, indeed a glamour, not seen since the heady days of the early 1970s.

But, despite his often outlandish comments, few of Bates’ detractors would argue that they owe him a huge debt of gratitude for keeping the club afloat. The next step now is winning a trophy.

Bates was brought up by his grandparents on an Ealing council estate and played for an Arsenal junior team as a boy. He made his fortune quarrying gravel in Lancashire and owns a diary farm in Buckinghamshire. He came to Chelsea’s rescue in 1982 when the club was on the verge of financial ruin. One pound famously bought him the chairmanship but that was accompanied by debts of over u1m and property developers who wanted to flatten Stamford Bridge.

Fans criticise the high ticket prices and Bates’ combative personality.

But his stewardship of Chelsea (although fans feel Harding was more responsible) has enabled the importation of such world stars as Gianfranco Zola, Gianluca Vialli and manager Ruud Gullit. Exciting football is at last being played again at the Bridge.

Bates has 30 million shares in Chelsea Village, a 12-acre site, whose share price at the time of going to press was 119p. Its interests include a wide range of leisure facilities connected to Chelsea and, in common with many clubs these days, the emphasis is on the football club as part of a ‘leisure and entertainment’ portfolio. Chelsea Village made a u2.9m loss after tax for the year ending 30 June 1996.

CHRIS AKERS: LEEDS UNITED

Chris Akers perhaps exemplifies the new breed of football club chairmen.

Certainly, as a softly-spoken 32-year-old, he doesn’t fit the brash, ego-driven fat cat image that’s lingered far too long in the game’s history.

But Akers, executive chairman of the media group Caspian and, since last year, chairman of Leeds United, is a driven man. He aims to turn Leeds from a sleeping giant of a club whose turnover is less than Manchester United’s profits into a multi-leisure industry attracting three million or so customers a year to a whole range of activities.

Akers gained a diploma in media studies at Watford College before beating off stiff competition for a job at Saatchi & Saatchi. Aged just 19, legend has it he put in 120-hour weeks before landing a job as media analyst at stockbrokers Grenfell and Colgrave. He was a hit, offering well-timed advice to sell Saatchi shares and buy Capital Radio.

From there he moved to Citicorp Scrimgeour Vickers in a similar role.

Then it was on to corporate finance at Swiss Bank Corporation where he formed a friendship with former QPR chairman Richard Thompson who invited him to replace him at Caspian (Thompson stayed on as executive director).

Together they started promoting the idea of a dedicated football TV channel to the Premier League clubs.

Akers went on to advise the clubs over the original u214m rights sale to BSkyB. He also set up his own consultancy with companies ranging from Adidas to United News & Media. He eventually joined Caspian in February 1996 buying 1.37% of the shares.

Akers sees Leeds United as the cornerstone for his plans to develop the club and adjacent site into a sports and leisure complex, using leisure, property and media partners as the way forward. He was able to convince the City to get behind his acquisition strategy because ‘our plans for Leeds go beyond managing a football club’.

Akers’ enthusiasm for his new project is boundless: ‘None of the other Premier League clubs have the development potential that Leeds has,’ he says. And, with few clubs able to survive on gate money and sponsorship alone, Akers is just one of a number of chairmen who are looking to maximise the resources of their footballing assets.

MARTIN EDWARDS: MANCHESTER UNITED

Educated at Cokethorpe public school and a keen rugby player, Martin Edwards was possibly the last chairman United fans would have wished for.

It’s a measure of the man that he’s long since shed his rugger bugger image and is revered for his knowledge and love of the club.

Edwards got six O’ levels and did a marketing course in Cambridge before joining the family butchers business in 1964. He worked his way up to become managing director of retailing with a u10m turnover and 1,000 staff.

In 1970, at the age of 25, he joined the board of Manchester United and, ten years later, succeeded as chairman on the death of his father Louis.

Edwards’ majority shareholding (once 50.6% and now believed to be around 15%) has withstood numerous offers from the likes of Robert Maxwell and in the 1989 season from the current chairman of Carlisle United, Michael Knighton. But fans worry that the flotation in 1991 has opened the door to potential takeover bids.

Like his father, 52-year-old Martin has always understood the commercial value of supporters’ fanaticism. Hence the Manchester United superstore, and now MegaStore, and thousands of items from Ryan Giggs duvets to Eric Cantona … well, you name it. It’s the commercial standard every other club aspires to (there’s now a EU lake of club wines). Figures for the six months to 31 January 1997 show a massive 68% rise in turnover to u50m, of which merchandising accounted for #17.6m, up 45%.

Perhaps conscious of his responsibilities as a plc chief executive, Edwards is cagey about the issues facing the game (pay-per-view is something the club is looking into). But he acknowledges: ‘Money is important. If you want to maximise the success of the team you need to have these structures (sponsorship deals, good merchandising, etc) in place.’

With a fourth League title in five years just secured everyone wants to be Manchester United. But as Edwards himself says: ‘I don’t think you ever really master the football industry because unlike a lot of other businesses you are only really as good as your results. I can set up all the structures and put the right people in place but it’s what happens on the field that really counts.’

FERGUS McCANN: CELTIC

Celtic was just eight minutes away from bankruptcy when Fergus McCann stepped in with #5m.

Since that day in March 1994, the club has come a long way.

The no-nonsense straight-talker, whose outspokenness has caused controversy, has overseen the biggest share issue in British football (u13m net of expenses), a four-fold increase in season tickets and the rebuilding of Celtic Park into a 60,000 all-seater stadium.

The day he arrived was a great one all round. McCann had already tried to buy the club twice, in 1992 and again a year later, but was shown the door both times. He’s a fan from way back – as a youth, he ran a Celtic supporters’ club. In the early 1970s, after studying accountancy at Glasgow University, he emigrated to Canada to run a golf tours company which he later sold for #8m.

McCann was critical of Celtic’s short-term planning. His priority was to regenerate a club which, while hardly a sleeping giant, was under-resourced and under-managed. Within a year his reforms saw turnover rise from #5.2m for the six months to 31 December 1994 to #8.5m for the same period in 1995.

Now, during the remaining two years of his self-imposed five-year tenure, he wants to restore the club to its place among the European elite (last visited in 1967 when Celtic’s Lisbon Lions lifted the European Cup). To achieve his ambition they need to play in a more competitive league: the current 40-club League set-up in Scotland (ten in the Premier) is, McCann feels, a situation of ‘constant subsidy and dilution’. He wants to see creative thinking from the authorities: either a team from Belfast or Dublin admitted to the Premier Division or a breakaway league.

McCann worries that money from outside sources such as TV is spread too thinly while players’ salaries are ‘rising alarmingly’. But football is now a ‘respectable part of the leisure industry’ and, as such, attracts lucrative sponsorship deals and the like. McCann aims to capitalise on this and Celtic’s large fan base by investigating pay-per-view TV and beefing up the club’s merchandising arm.