• The Price of Going Down

    The price of going down is something I last heard discussed on a rugby club trip to Amsterdam*, but I've been asked to apply the same question to the Albion's perilous league position.

    Apart from the joy of a Sussex derby match at Crawley next season, and some 'new' grounds in the form of Chesterfield and Fleetwood
    for the nerds amongst us, what are the potential financial costs of relegation, should results continue to be as dismal as the past few months (and Derby was as insipid as it gets IMO).

    The Albion get their income from three main areas, matchday income, TV income and commercial sponsorship. All three of those are likely to be hit significantly if we drop to League One, so here's my analysis of the potential wallet lightening consequences for Tony Bloom if the worst happens. On the other side of the coin, there will be cost implications too. We will look at each of these in turn.

    Matchday

    In 2012/13 ticket income was 8.7 million, on the back of average crowds of 26,236. If we go down, it's reasonable to expect crowds to fall by about 10,000 (although knowing how Albion fans will follow a winning team, this could be overstating the damage if we storm the division) to 16,000. This is a decline of about 38.5%. I'm assuming the board would not be so daft as to increase prices, so ticket income would decrease to about 5.3 million.

    On top of that retail income would probably fall too, last year was 1.4 million, expect a similar decline, to 1 million. I'm assuming here that the club freezes season ticket and match ticket prices, there's a strong case for reducing them, if they try to increase them the people choosing the mannequins for the top of the Lewes bonfire next November will have a very easy decision to make.

    TV

    The Football League deal with Sky is skewed towards teams in the Championship. Last year (2013) the Albion picked up 4.8 million from the TV deal for finishing fourth, (Cardiff, who finished bottom of the Premier League last season, however earned 64 million, and sadly Palace 75 million). It looks as if in League One this will fall by over 90% to around 400,000.

    Commercial

    The Albion have negotiated some good deals with sponsors, the last figures we have show a figure of 4.2 million. They will however struggle to sell such deals when the Amex is half empty and the opponents are the likes of Rochdale and Scunthorpe, even with a redcurrant jus reduction on the menu in the 1901 lounge. If the club manage to generate 3 million they will be doing well here.

    Other income

    If we knock off a bit from loan players (300k in 2013) and catering (in line with the matchday decrease) then it's fair to expect a fall of at least 10 million, and this could potentially be more if we're struggling in that division.

    So in total income could be around 12-13 million, this figure is important, as we shall shortly see.

    Costs

    The club had a wage bill of 21.1 million in 2013, we have been told that this increased under Oscar, and indeed is even higher this season. so could be in the 23 million region.

    Under League 1 Financial Fair Play rules, clubs are restricted to a wage bill that is a MAXIMUM of 60% of revenue, which gives a figure of 7.2-7.8 million. Therefore the club would have to cut the wage bill by 13-14 million, or a decrease of about two-thirds. The current 'average' wages of an Albion player (which we've previously estimated to be about 9,000 a week) would have to realistically fall to about 3,000 a week. Still; not to be sniffed at, but a fraction of what some are currently on.

    This will upset estate agents and Range Rover dealers in Sussex, but probably not many fans. There are some FFP get-out clauses in relation to players on three year deals from relegated clubs, but we don't have too many of those in the squad (Baldock and Stockdale are probably exceptions being million pound plus signings), but even so there will be severe belt tightening taking place, and job losses aplenty (the club had 239 full time and an average of 572 part time matchday staff in 2013) .

    I'm assuming that players have relegation clauses in their contracts, and they were casually signed (no one thought we were likely to go down) by our bunch of underperforming matadors. If not, heads should roll. One very minor benefit of having so many loan players this season is that at least their wages will not have to be paid next year, irrespective of where we end up.

    Whether these relegation wage clauses apply to the boardroom too (director fees, including pension contributions, came to 800,000 in 2013), will be discovered in due course.

    Many costs will fall in line with matchday attendances, but others don't follow the fall in income, (lighting, ground maintenance, accounting, IT systems, cleaning the away dressing room floor before the play-offs etc.), so will be difficult to reduce.

    Conclusion

    Relegation will be painful for the club, in the sense that people will lose jobs, some will have to take pay cuts, and reset the coach sat-nav for Oldham and Bradford. It will be very painful for Tony Bloom. The club have announced that losses have been reduced and we have complied with last season's FFP target of 8 million, and should easily be achieved this season too with the sale of Leo Ulloa. What the losses would be in League One is open to conjecture, and a lot will depend on the ability to get rid of high earners ( *cough* Kemy) and any unnecessary costs (*cough* Kemy).

    Regardless of the magnificence of the Amex, the splendour of the new training facilities, and the best pies in the League, we will be all fur coat and no knickers if we go down. The kick and rush brigade of League One will relish coming to our ground, and will raise their games as we'll we seen as a great scalp. There's no guarantee of getting out of that division at the first attempt too, as the likes of Leeds and Forest know to their cost.

    It won't however be the end of the world, the club, or our ups and downs through the divisions.

    *50 according to our second team fly half.


    Comments 19 Comments
    1. Hamilton's Avatar
      Hamilton -
      Quote Originally Posted by El Presidente View Post
      Is this the right link?
    1. Creaky's Avatar
      Creaky -
      Income will undoubtedly drop significantly if we are relegated - that is a given. Even with the odd player on a long contract that we can't 'offload' player costs will have to fall dramatically in order to comply with League 1's equivalent of FFP.

      If I have read your figures correctly then in 2013 our 'income' was 8.7M from ticket sales, 1.4M retail, 4.8M TV payments and 4.2M sponsorship - a total of 19.1M. Again from your figures the wage bill for the same period was 21.1M, 2M more than income. Of course not all of the wage bill related to player payments but a reasonable estimate for them would seem to be about 16M.

      If we are relegated and your guesstimates are close to the mark we would have an income in the region of 12.5M with a maximum player wage cost of 7.5M, (60% of turnover).

      In summary then in the Championship we have income, (21.1M), less player costs, (16M), leaving approximately 5M, plus whatever TB has to inject, to cover all other costs.

      In League 1 the comparable figures would be 12.5M less 7.5M also leaving around 5M. However as you pointed out the other costs would also be cut so it seems reasonable to project a smaller loss if we are relegated than if we remain in the Championship.

      There is also one other important factor that has to be considered - the change in the FFP rules for the Championship. Instead of the 'allowable' loss of 8M in 2013 this is to be increased to an average of 13m per year over 3 years - it seems inevitable that if we do remain in the Championship and want to compete then costs in terms of player wages will increase to match other teams in the League.

      All in all financially I don't see that a drop to League 1 will cause the club to suffer significantly greater losses, (indeed they could well be smaller), than if we remain, (fingers crossed), in the Championship.
    1. chaileyjem's Avatar
      chaileyjem -
      When Wolves were relegated from the Champ to L1 in 2012/13 crowds fell from 21,662 to 20,818. ie: they went down by less than 1K. When Southampton were relegated from Champ to L1 in 2009/10 to 2010/11 their average crowds actually went up from 18,149 to 20, 108. These were both promotion winning seasons but a 10K drop in attendances whilst possible isn't necessarily the case.
    1. chaileyjem's Avatar
      chaileyjem -
      Loan Players reducing the bill ? There's a scenario where only Tex and Bennett remain as loanees at the club post January. (Gardner, Halford recalled, Bennett signed). Perhaps Bent on a further loan. We might even add to the squad in January with more permanent players arriving.
      Although obviously a few departures (O Grady, Holla ?, Toko ?) must be on the cards and some loanees might be used as replacements/strengthening but not sure that loanees are making much difference to the overall wage bill or overall that different to last years bill.
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by chaileyjem View Post
      When Wolves were relegated from the Champ to L1 in 2012/13 crowds fell from 21,662 to 20,818. ie: they went down by less than 1K. When Southampton were relegated from Champ to L1 in 2009/10 to 2010/11 their average crowds actually went up from 18,149 to 20, 108. These were both promotion winning seasons but a 10K drop in attendances whilst possible isn't necessarily the case.

      If you were at the recent Wigan game there were only 16,000 at the Amex. Agree that a successful season would minimise the attendance drop but there's no certainly of that happening. The fact that 7,000 STH chose not to attend a recent match is a huge warning sign to the club. I was in the North Stand right behind the goal, which is 100% STH and the eleven seats to my left and right were all unoccupied.
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by chaileyjem View Post
      Loan Players reducing the bill ? There's a scenario where only Tex and Bennett remain as loanees at the club post January. (Gardner, Halford recalled, Bennett signed). Perhaps Bent on a further loan. We might even add to the squad in January with more permanent players arriving.
      Although obviously a few departures (O Grady, Holla ?, Toko ?) must be on the cards and some loanees might be used as replacements/strengthening but not sure that loanees are making much difference to the overall wage bill or overall that different to last years bill.
      The point I'm making is that the loanees will be on good money, but those costs wouldn't have to be borne in L1.
    1. Rugrat's Avatar
      Rugrat -
      Wouldn't we also lose about 4m in so called 'solidarity' payments?
    1. Dick Knights Mumm's Avatar
      Dick Knights Mumm -
      Interesting analysis. Well done El Pres.

      Difficult to predict attendance for League One. For many people with kids - it does not really matter that much. For people happy with an afternoon out - it may not matter that much. Better to sell an afternoon with the prospect of seeing some Albion goals than the prospect of another miserable defeat. Of course - if we do bounce back - with renewed vigour and a some of our younger players leading the way - then it will be exciting.

      I am not sure the bounce-back will be as exciting if Hyypia is still at the helm though. More food for thought for Tony.
    1. Peter Grummit's Avatar
      Peter Grummit -
      Quote Originally Posted by El Presidente View Post
      If you were at the recent Wigan game there were only 16,000 at the Amex. Agree that a successful season would minimise the attendance drop but there's no certainly of that happening. The fact that 7,000 STH chose not to attend a recent match is a huge warning sign to the club. I was in the North Stand right behind the goal, which is 100% STH and the eleven seats to my left and right were all unoccupied.
      I don't think the NS is 100% STHs any more. The club has never (to my knowledge) announced the number of STHs this season as it is not a good news story. But judging by the availability of individual seats in the North, there has been some erosion there and elsewhere. Most speculation suggests we lost around 2-3k STHs this season.

      Because we have such a high proportion of STHs, though, the critical point is the renewal date which is well before we will know which division we will be in (March?). I share the view that a large number will choose not to renew. Just as gates have exceeded prior forecasts at the Amex, the JCL factor is very likely to be symmetrical in effect. Set against this, in income terms, aren't most 1901ers committed for a further season (5 year deal)? Speculation on the size of average total gates in L1 is very difficult - it depends how we do! But what seems certain is we will need to bring youngsters through from the Academy on a fast-track basis.

      PG
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by Rugrat View Post
      Wouldn't we also lose about 4m in so called 'solidarity' payments?
      That's included in the TV money. It comes under the heading of 'Football League Distributions' (I think).
    1. Julio's Avatar
      Julio -
      Quote Originally Posted by chaileyjem View Post
      When Wolves were relegated from the Champ to L1 in 2012/13 crowds fell from 21,662 to 20,818. ie: they went down by less than 1K. When Southampton were relegated from Champ to L1 in 2009/10 to 2010/11 their average crowds actually went up from 18,149 to 20, 108. These were both promotion winning seasons but a 10K drop in attendances whilst possible isn't necessarily the case.
      Both clubs with bigger core fan bases than us - interestingly Wolves' crowds were hepled by the club re-engaging with the fans and by Kenny Jackett picking players who wanted to play for Wolves. Facts are that our core base is around 7,000 - this is boosted by the Amex effect so possibly another 2-3,000 will come along as it's a nice place to go and watch football, as opposed to an undying love for all things Albion.

      Now, if we do fly in the league then the feelgood factor will return and bring back on a match by match basis some more floaters. If we ar*e around in mid-table then for midweek games against less well supported teams from further afield, it's very likely we would see crowds in the region of 10,000-11,000 and possibly lower. Now, when you compare this to other attendances of clubs around mid-table in league 1 this would look quite healthy; but quite a few of them have grounds which hold 15,000 or so. I often think %age of capacity is a much better indicator of how a team is doing, rather than the actual crowd number.
    1. chaileyjem's Avatar
      chaileyjem -
      Quote Originally Posted by El Presidente View Post
      If you were at the recent Wigan game there were only 16,000 at the Amex. Agree that a successful season would minimise the attendance drop but there's no certainly of that happening. The fact that 7,000 STH chose not to attend a recent match is a huge warning sign to the club. I was in the North Stand right behind the goal, which is 100% STH and the eleven seats to my left and right were all unoccupied.
      Yep. The empty seats at the Wigan game probably the most worrying thing about the 2014/15 season so far. And there's been plenty of em.
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by chaileyjem View Post
      Yep. The empty seats at the Wigan game probably the most worrying thing about the 2014/15 season so far. And there's been plenty of em.
      The performance at Derby was worse!
    1. Goldstone1976's Avatar
      Goldstone1976 -
      Quote Originally Posted by Peter Grummit View Post
      Set against this, in income terms, aren't most 1901ers committed for a further season (5 year deal)?
      All, I think. I took up my 1901 membership two years into the 5 year period and my commitment was adjusted to terminate at the same time as the people who had taken out membership at the start. I would assume that any other transfer-ins had the same deal. However, one would assume that the incidentals e.g. formal dining would drop significantly in L1, and also that many more more fickle members would seek to offload their ticket(s). They'd have to find a willing buyer though.
    1. GreersElbow's Avatar
      GreersElbow -
      I'm glad this has been put back up at the top of the site.

      Many are panicing about relegation because we'll be 2 leagues away from the premier league.

      Brings it into perspective.
    1. Tubby-McFat-Fuc's Avatar
      Tubby-McFat-Fuc -
      Great piece.

      Let's just hope Millwall do us a favour, and lose a game!

      I not even thinking about us going down..... yet! Might do come 2.30 Saturday though!
    1. Brightonfan1983's Avatar
      Brightonfan1983 -
      Quote Originally Posted by GreersElbow View Post
      I'm glad this has been put back up at the top of the site.

      Many are panicking about relegation because we'll be 2 leagues away from the premier league.

      Brings it into perspective.
      Certainly does. I've never really taken on board the financial minutae of promotion/relegation, but what made me look at the league table just now was to see where Cardiff, after trousering 64,000,000 last season, and I'm presuming whopping great zeppelin-esque parachute payments this year, are. They're 13th and Birmingham, one point below them, have a game in hand. Now that's perspective on the so-called 'promised land' of the Permiership.

      Jolly good read too El P.
    1. Prince Monolulu's Avatar
      Prince Monolulu -
      Not going down, this year at least.
    1. Blue Valkyrie's Avatar
      Blue Valkyrie -
      Would be an utter disaster.

      4 years worth of Championship losses for nothing

      4 AMEX years wasted, as well as at least one season in league 1.

      5+ wasted years
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