In the last few years, there has been a media frenzy around the subject of fan buyouts of football clubs, but how realistic is this proposal? Is it always really the fans that are behind them?
One of the earliest recent examples of a fan buyout scheme was when the web-based venture MyFootballClub purchased Ebbsfleet United Football Club.
On November 13th 2007, it was announced that the website MyFootballClub had entered a deal in principle to take over the club, with approximately 27,000 MyFootballClub members each paying £35 to provide a £700,000 takeover fund, which would see them all own an equal share in the club.
Early the next year, in January 2008, MyFootballClub members were given the choice to vote on whether to proceed with the takeover, and returned an overwhelming "Yes" vote, of 95% to proceed. The deal was ratified at an Extraordinary General Meeting of the club's board on February 19th of that year.
However, things did not run smoothly. After one year of ownership, a majority of MyFootballClub members failed to renew, and as of March of this year, two years after the takeover, only 800 out of 4000 members have continued to pay membership fees, in a year that saw Ebbsfleet relegated from the top division of the Football Conference.
Despite the obvious lack of success of this scheme, it whetted the public appetite and generated a media frenzy of speculation concerning other clubs. So much so that even British politicians got involved, with the Labour party making specific commitments to fan ownership, and the Conservatives announcing that they were working on proposals to give fans a greater voice within football.
But how realistic is this?
One of the clubs that has repeatedly cropped up with relation to fan buy outs is the English premier league side Liverpool Football Club. So, how realistic would a fan's takeover be of the club?
Well to answer that question, the first thing we have to do is to define what a fan is.
Liverpool's average attendance last year was 42,864, which is 94.4% of capacity. It can be argued that includes away supporters. However, it can also be argued that with an increase of ground capacity, and Liverpool having a desire for a new, larger stadium, that the figure could be higher.
But I think it's safe to say that the figure gives us an indication of a ball park figure for Liverpool supporters, willing to pay regular monies, to support the club of around the 50,000 mark.
Now let's take a look at the Liverpool finances.
The current owners of Liverpool FC, the duo of George Gillett and Tom Hicks, bought the club in a deal worth about £200 million in 2007, but the pair would obviously want to see a return on their investment. So, the club is now valued at closer to £500 million.
With Liverpool’s debt levels at £237 million, and with an annual interest bill of £36.5 million, should the owners sell for £500 million or more? Then in order to build the new stadium plus finance a new takeover, Liverpool could well be left with debts of over £1 billion, leaving interest payments of closer to £150 million.
Can the fans afford this?
Well, returning to that 50,000 mark, if we're to be realistic here, we have to accept that a large percentage of those supporters would neither be willing, nor financially able, to contribute to such a scheme.
Also, if Liverpool supporters wanted to keep it as a genuine fans' buyout rather than as a fun Internet hobby, similar to the failed Ebbsfleet experiment, that would put ownership into any random person's hands (including mischievous fans of rival clubs). Then, it has to be accepted that the total number of serious investors would be somewhere between the 10,000 and 40,000 mark.
Let's look at how much that would cost each individual.
If a supporters' takeover scheme could attract the interest of 40,000 fans, then to service the projected debts would take an annual payment from each fan of £3,750. However, if it could only attract 10,000 fans, then it would require annual payments of £15,000 per fan.
This is before other costs, such as raising funds for player transfers and wage bill increases, all of which leads me to ask, is there really 40,000 supporters out there ready, willing, and able to spend an extra £5,000 per annum to support their club? On that same note, are there really 40,000 wives that would permit them to do so, knowing that those debts could increase just as equally as they could go down?
In fact, it should be added at this point that UEFA are introducing new rules to limit the amount of debt a football club can have. So, that's even more money each fan has to find, quite possibly into five figures on an annual basis.
I am willing to suggest that you won't find 40,000 fans, willing to commit to pay such large sums of money on such a regular occasion. So, as the fan base willing to invest dwindles, one can assume that the costs will rise, and I contend that such a scheme really isn't viable.
Liverpool football club isn't the only club to have been caught up in this recent spate of fantasy football with stories and rumors of fan takeovers. As just down the road, at Old Trafford in the city of Manchester, a similar story has been rumbling along with the Red Knights.
Two years before George Gillett and Tom Hicks, bought Liverpool, another American takeover took place when the Glazer family bought Manchester United for £800 million, and very much mirroring the Liverpool case, the club soon found itself saddled with enormous debts.
In the case of Manchester United, the figures are even more astronomical with debts at the club's parent company Red Football Joint Venture increasing to £716.5 million in 2009, and the current value of the club being well in excess of £1 billion.
Step forward, at this point, the Red Knights, marketed as a collective of fans, coming to save the day, but how true is this vision?
The Red Knights group has since shelved their bid.
Some might ask does it really matter, but my answer to that is yes, it does matter. It helps to explain the reality of this situation, and to educate fans to what's going on and to what they might be supporting.
As I said, the Red Knights group was marketed as a number of powerful and wealthy Manchester United supporters there to save the club, and it's certainly true to say that some of those who were fronting the deal are genuine wealthy Manchester United supporters.
But it's also worth noting that some of the money that was earmarked for the takeover was not coming from the same source, and because these funds would be investment funds rather than supporters' monies, as some believed, it wouldn't rule out a further takeover of a similar kind to the Glazer family takeover.
That's quite interesting because during the Glazer families takeover of the club, when their hostile bid was being rejected, they sacked a number of board members and brought in new replacements, whom they hoped would help smooth through the deal. Jim O'Neill, who is now part of the Red Knights group, was included in those new appointments.
Had the Red Knights not shelved their deal, this could have left O'Neill in the interesting position of having assisted with the Glazer purchase of the club. Then, the Red Knight purchase of the club and possibly a future takeover of the club would leave him a three time winner and as a man who made a considerable profit on repeated sales of the club.
So how realistic are these fan takeovers?
Well, we saw with Ebbsfleet that if the investors lose interest, the club can find itself in difficult times. We saw with Liverpool that when we do the math, football is still a very expensive game, and at the very highest level, despite the romantic notions, it's still beyond the reach of the average supporter. We saw at Manchester United, that whilst it's possible to whip the fans up into a frenzy and to convince them that it's a fans affair, things are not always what they seem.
I think what we've witnessed in recent years has been very sad. We've seen too many clubs willing to forget their roots and to sell their souls, and I think in many cases, this has lead to a disconnect between the clubs and the communities that made them. However, I think we also need to be aware that there are no quick fix solutions, and the romantic option isn't always a practical one or even a realistic one.
I think that the biggest lesson to be learned here is that the right time to act, the right time to protest, and the right time to resist these changes is before the big bad new owner takes over.
Don't wait until a few years later when you wake up and realize all those promises were just sweet talking, and that you were merely seen as a commodity for exploitation and a means to generate a profit.
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