FanPost

Aston Villa's Financial Picture


In news that should surprise no Aston Villa supporter, the Villa hemorrhaged even more cash in the latest financial reporting of Reform Acquisitions, Aston Villa's holding company.  Thanks to decreased spending in the summer transfer market from 2008 to 2009, Villa's losses were from £46.1m in 2009 to £37.5m.  Thanks to the continued investment, or some might say benevolence of Randy Lerner the club is in no danger, but in the medium term Villa will have to stop the bleeding to comply with the new Financial Fair Play rules.

Despite the continued losses, the clubs financial picture is not all that bad.  When Randy Lerner took over the club was in a somewhat similar financial situation that Everton finds itself in now.  They were ran by Chairman Doug Ellis, who like Bill Kenwright was not independently wealthy on the scale of an Arab Sheik or Oligarch, and did not have a vast personal fortune to underwrite a football club.  The analogy falls apart in that Everton has David Moyes as manager and Villa had George O'Leary and Villa finished the 2005-2006 season in 16 th place.

Randy Lerner bought the club right before the 2006-2007 season for a paltry £60m.  He essentially was buying a blank slate.  The team unquestionably needed investment, but this was a club that was the biggest club in England's second largest city, with a following and tradition that would be the envy of all but a hand-full of clubs in England.  His plan was and is that by fielding a more competitive club, and using his experience and knowledge to better market the club, to increase revenue and run the club in a sustainable way.  

Much has been made about Lerner's £200m investment.  Rest assured this money has been part of a plan, part of an investment.  Surely if he sold the club today it would sell for considerably more than £60m.  The first XI, is probably worth £100m alone.  The only way to ensure interest from fans, to pack Villa Park, sell luxury boxes, and increase sponsorship, and overall turnover is to field a competitive team.  In Sport Marketing it is the height of folly to market winning because nobody can guarantee results, but you can market hope.  In the O'Leary Era there was no hope.  This year notwithstanding Villa has been a club in the ascendancy, and that hope has energized the fan-base and helped the club's turnover to double in the Lerner.

In the short, to medium term the club still has issues to negotiate.  The wage bill is currently at an unsustainable 80% of turnover which is clearly unsustainable.  According to the Guardian article Lerner wants to get it back into the 60% range.  Hopefully the club can offload Steven Ireland, Stephen Warnock, and perhaps Emile Heskey and Stiliyan Petrov in the summer.  Nigel-Reo Coker, Habib Baye, Brad Friedel, Luke Young, Isiah Osbourne, Robert Pires are all out of contract.  That should help get closer to the desired wage bill without impacting the club on the field as Martin O'Neil's dead weight belatedly follows him out the door.  With the club only needing to add a goalkeeper,and a couple of defenders in the summer the wage bill should be lower next year.  With the specter of Ashley Young leaving as well, that could help finance those moves.

FxPro who had signed a record sponsorship deal with the club as their shirt sponsor, has opted out of the three year deal.  They are expected to stay on with Fulham as they have an advertisement on the roof of one of the stands at Craven Cottage which is visible from Heathrow.  Surely the SNAFU with Nike, and the resulting delay of the sale of Villa jerseys adorned with the FxPro logo could not have helped matters.  One of the perks of shirt sponsorship is having thousands of people who wear their club's jersey advertising for your company.  Villa will be looking for a new sponsor that will at least match what FxPro was paying.  Let's hope it's a cool logo like this on next year's kit.  I hope it's a beer company.  I'll let Kirsten and Aaron decide on an ideal candidate as their knowledge of beer dwarfs mine.

Birmingham is the second largest city in England.  The only other club in city limits is Small Heath, with Wolverhampton and West Bromwich Albion also nearby.  But as some newer, particularly American fans may not realize is that Birmingham is not nearly as affluent an area as London.  During the Victorian Era, when under the leadership of George Ramsay Villa dominated the Football League, and Birmingham England's industrial center.  The city has been hit hard by the recession, and over the decades as England has moved to a post-industrial economy.  Attendance has been strong, but there are empty seats at mid-week and cup fixtures, and if you frequent the club website you know the club is aggressive in packaging and discounting tickets.  Even with Villa Park full, Tottenham can still generate more match-day revenue since they play in London and can charge more per ticket just like the Yankees can charge higher ticket prices than the Tigers.  This should improve as the economy improves, but the club also is hoping that a strong campaign next year will cause supporters to dig a little deeper into their pockets.

I toyed with the idea of writing a post just on the NFL Labor situation and how this and how it could effect the club.  To really do it right I would have had to hook up my old hard drive from college, dig up old briefs, and do additional research.  Kristi Dosh, who unlike me is an actual lawyer and professional writer did a better job than I could in summarizing the possible outcomes of the impending lockout.  The only thing I'll add to her piece is that if this goes to court expect the NFL to lose.  Whether its litigation with the players like the McNeil v NFL or Mackey v NFL, or even with Raiders owner Al Davis the NFL is worse than Derby County in anti-trust cases.  If this is settled at the negotiating table, expect the NFLPA to fold.  This is the union that won free-agency in the Mackey case in 1975, only to give it back at the table in exchange for enhanced benefits.

Relating this back to Association Football, as Villains we should all hope that a deal is struck soon, or that the NFL plays without a deal.  Unlike the EPL, the NFL prints money, and all but the worst run franchises, or franchises that play in antiquated stadia turn profits.  The only reason a lockout looms is that the owners want to make more money, and they think they can break the union.  It's impossible to say that Randy Lerner is taking his profits from the Cleveland Browns to subsidize Aston Villa, clearly his largest asset no longer producing revenue can't be positive for Villa in any way.  Even in a work stoppage, owners will still be receiving their lucrative network TV revenue, so this should not be a catastrophe.  Still as Villains the sooner this ends the better.  Part of me believes that its possible that the January spending spree was done at least in part due to the uncertain NFL labor climate.

The club has also invested significantly in the academy.  As this is the most cost effective way of building a squad, the more young players coming through, they make less initially than veterans and don't require fees.  If they don't stick with Villa they can be sold off as well.  In all the club is still in decent shape financially as the money invested has been part of long-term a plan.

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