Phone hacking scandal: As the Murdochs face MPs, questions over the future of football funding

19th July 2011

With BSkyB having pumped billions into the sport – a strategy developed and doggedly pursued by Rupert Murdoch and his heirs and lieutenants, they may have some cause for concern using sport in Murdoch's word to kick down the door of pay TV.

Certainly some sports commentators are starting to discuss the impact of the scandal.

The Guardian's Kevin Mitchell raises the issue in today's newspaper.

He writes: "If OfCom gets tough with Murdoch and BSkyB is drawn into a wider debate on whether he and his son are ‘fit and proper' persons to run a public company, and if his American operation also comes under regulatory pressure, football will be driven towards a barely imaginable financial crisis."

Though News Corp has withdrawn its bid for Sky it is still a huge shareholder. At time of writing James Murdoch still chairs BSkyB though he faces opposition

This Is Money reports that senior independent director Nicholas Ferguson is to take soundings from major institutional investors before next week's crunch board meeting.

James's future is hanging in the balance following criticism over his handling of the crisis. The website also reports that the BSkyB is considering paying a huge compensatory share dividend of around £2bn.

Some believe BSkyB has invested sufficiently to begin to reap huge rewards. Others that it will have to continue to reinvest huge amounts to stay competitive in the provision of charged for sport and movies on television.

Here on Deadline.com Steve Liecthi, an analyst at Investec, is quoted as saying that "at no time since inception has BSkyB ever delivered on profits people expected a few years previously. The Murdochs keep ploughing cash back into the company, investing in high-definition or 3D. "Technology leaps that are required tend to hold back profit delivery."

But could a new management line up brought in by exasperated American and UK shareholders at either News Corp or more directly and significantly at Sky see a paring back of the huge amounts of cash put into British sport?

News Corp is facing a downgrade threat from ratings agency Standard & Poor's also reported on This Is Money. That would put up its cost of borrowing also restricting the firm's financial freedom of action.

Ultimately all these developments shrink the pool of money available for football and indeed funding the rich and famous lifestyles of footballers and their wives and girlfriends.

It may be of less concern to say Chelsea and Manchester City, two clubs supported by billionaires than say for Manchester United – highly profitable but also highly indebted though of course BSkyB once tried to buy Manchester United before the bid was ruled anti competitive. Here is a report from 1999's Independent. Of course, even indulgent billionaires have business plans and always claim to be determined to reach profitability one day.

There are also new rules from Uefa, football's governing body, being brought in which demand that clubs live within their means. What if the TV revenue fell too?

The Daily Finance's Martin Cloake explains the new financial regime here

The website reports that the wages to revenue ratio in the top division is 67%. The 2009/10 season ended with pre-tax losses across the 20 premiership clubs hitting £445m. Wages grew 5% to over £1.3bn. But from the start of the 2013/14 season, UEFA rules require clubs to break even.

It adds: "If they don't, they could face the ultimate sanction of being barred from competing in Europe, with all the financial and sporting drawbacks that would bring. The thinking behind UEFA President Michel Platini's (pictured above) move is clear, but what is less clear is whether it will achieve its laudable aim," he writes.

And of course there are always the words of former England captain Bryan Robson, admittedly when he didn't know he was being filmed, in a sting by Channel Four Dispatches.

Here is the Telegraph reports Robson saying:

"I disagree with people when they say football is a sport. When the Sky [TV] money came in, that changed. Football is a business."

The Mail quotes Robson's take on how to make money from football.

He told the undercover journalist that the key to making millions is to buy a club on the cheap, win promotion and then sell within a few years.

'Build it up from nothing and say it was worth £3million when you bought it and now you can sell it for £150m – that's great business by you,' he said.

Whether Robson is the best businessman in the world of football is up for debate. But the idea of football as a place to make easy money would definitely change if the Murdoch money dried up.

More information:

Here accountants Deloitte's sport business group reports on the state of football finances and suggests that cost control should be the new mantra.

On blogsite Soccerphile.com Sean O'Coner wants the Murdoch kicked out of football. He writes: "If football had any shame it would usher Sky out of the Premier League and ban News International from its press boxes, though pigs might fly."

And, the Dorothy Parker of our day, the Guardian's Marina Hyde calls on football's stars to join the hacking outcry.

But is that really in their best interests?

To receive our free weekly email sign up here.  

Leave a Reply

Your email address will not be published. Required fields are marked *