European soccer trips over bad economics
LONDON — He is the face of modern Britain, inspirational leader of his country, a domestic icon with difficult international duties to consider. No, not Prime Minister Tony Blair. The man of the British hour is David Beckham, England's football captain, fashion pin-up, glam-celeb with popstar wife - and the world's best-paid soccer star.
For many in the Queen's Commonwealth, the future of Iraq has less relevance than this fundamental question: Will Beckham forsake Britain to play for Real Madrid, Spain's leading soccer club?
The $60 million transfer fee being bandied about for Beckham highlights the remarkable gulf that is emerging between England's football haves and have-nots.
In fact, with the exception of stars of Beckham's stature, the soccer market across Europe has endured a wretched couple of years. The "soccer bubble" has burst.
While Beckham milks his celebrity to the tune of as much as $20 million a year (by comparison, the best paid US baseball player, Alex Rodriguez, makes $22 million) at the richest club in the world, Manchester United, hundreds of lesser players and owners are foundering.
Less than 40 miles away from Beckham's home ground, the more prosaic professionals of Blackpool City are hanging up their boots for the summer, facing a summer recess on just $147 a week. Analysts say up to 20 of England's 92 professional clubs are threatened with bankruptcy, leaving hundreds of players facing uncertain futures as their teams struggle to balance the books.
Similar woes are heard in Germany and Spain. "Spanish football is in a state of collapse," said Gerardo Gonzalez, the president of the players' union, last month.
In England, even good players who were earning six-figure salaries not so long ago must now search around for a club to offer them a contract.
"The worst is probably over now," says John Moore, an analyst who covers the football industry for brokerage Brewin Dolphin. "But I still think as many as 20 football clubs could go under. In a perverse way, I hope that happens. The reality is that there was too much arrogance in football two or three years ago."
That arrogance was born of a startling boom in money chasing the sport through the 1990s. As soon as broadcasters realized that viewers were prepared to pay handsomely to subscribe to channels showing live football, they began plowing hundreds of millions into the game, buying the rights to screen matches. Naturally they were primarily interested in broadcasting matches in the English Premiership, which quickly became a football El Dorado, the richest league in Europe.
The league's total income spiralled from $277 million 10 years ago to more than $1.6 billion in 2002.
Just one season in the league is now estimated to be worth around $41 million in broadcasting money and other spin-offs to the average club. It also offers the chance to qualify for lucrative pan-European tournaments that are worth additional millions.
For many teams, getting into the Premiership thus became a financial imperative, and clubs began spending beyond their means to buy the players that could win them promotion. Player salaries spiralled.
One or two clubs managed to buy success. Many more clubs did not, however, and instead found themselves spending more than 100 percent of their revenues on player salaries alone. "Clubs like Leicester and Derby gambled and lost out, and both have been in [bankruptcy] administration," says Moore, noting that football is an unusually precarious business because income has become as unpredictable as match results.
"A player has a contractual liability for two to five years, but income visibility is only one year," he says. "This mismatch of income and liability is the danger."
The situation was aggravated when the "bubble" burst.
A slump in media and advertising caused by the overall economic woes over the past two years has sucked money away from the television paymasters who bankroll the game. One broadcast deal for the lower leagues collapsed, depriving smaller clubs of much-needed cash. The difference between the rich and poor grew ever wider.
When Sheffield United, a club on the verge of the Premiership, failed last month to win a playoff that would have brought promotion, its share price slumped more than 40 percent in a matter of minutes.
"There are four or five different layers of the professional game," notes Dr. Rogan Taylor, director of the football industry group at Liverpool University, and a government adviser on the sport.
"The top slice is one club and one club only, Manchester United," he says. "Then you have Arsenal and Liverpool in the next slice. Then you have the hangers-on in the Premiership. And then you have the rest who barely survive, if they are loved enough."
But Manchester United is indeed in a league of its own. Its latest annual profit figure of $56 million is several times larger than the total income of most clubs. Profits have been shrewdly reinvested in marketing and in buying the best players, though it also nurtures local talent.
Manchester United has won the Premiership more times than any other club, this season's triumph making it eight over the past 11 years. It has the largest ground, meaning it earns the largest gate receipts. It has the biggest sponsorship deals, with Nike and Vodafone, and the ritziest international tie-up, with the New York Yankees. It has the broadest fan base, necessitating off-season marketing tours, primarily in Asia.
And crucially Manchester United has Beckham - for now.
And yet the talk of "Becks" leaving has prompted speculation of how much the club needs its totem to perpetuate success. In Japan, 'Bekkamu' is the icon that makes fans buy Manchester United replica shirts. In southeast Asia, his is the face the fans recognize. When he breaks a bone, changes hairstyle, meets Nelson Mandela, or takes on Hollywood - all of which he has done in the past month - millions of people around the world instantly know about it.
"Beckham could survive without Manchester United, but he would be a different product," says John Williams, director of the football research unit at Leicester University. "He is like a pop star, and like all pop stars they want to conquer other markets," Mr. Williams says. "They get bored or feel they have done all they can in domestic markets. That seems to me to be what the Beckham industry is doing. It wouldn't surprise me if he played in the US or Japan towards the end of his career, but that is still five years away, so why not Spain and Real Madrid now?"
Others are not so sure that breaking up the magic of Beckham and United would work. "Beckham's iconic," says Moore. "Vodafone, Manchester United, and Beckham are a triangle of branding. The triangle works. You cut away one part of the triangle and maybe it wouldn't work."