Season 2011-12 Fan Articles

Evertonomics

By Matt   Traynor  ::  07/05/2012   33 Comments (»Last)

Away from the football, there?s been interesting debate about ownership, new grounds etc. A couple of years ago, I was doing a bit of research when I happened across income stats for clubs in the major leagues in Europe, and it got me thinking about how this applies to Everton, and what it means for the future.

First off, I need to point out this is just about income. How the club spends its money on transfers, wages and other operating costs is another debate. The fact that some of this income is already borrowed against is also not relevant here. There are three broad categories for income:

• Matchday (includes season tickets, match tickets, corporate hospitality, catering, programmes etc)
• Broadcast (includes all money paid by the EPL for domestic, overseas TV rights, and live game fees and final place prize money)
• Commercial (includes all advertising, sponsorship, merchandising and general licensing amongst other things)
  
  

Broadcast

Looking at broadcast, I?ve written before about the distribution of EPL TV money, and it?s my belief it is the fairest across Europe. Last season, the team at the top of the TV money league (Man Utd) earned 1.54 times what the team at the bottom of the money league (Blackpool) earned. In Europe, the nearest fair league is the Bundesliga (2:1) whereas in Spain it?s 12.5:1. In this last example, clubs negotiate their own deals, and basically Real and Barca use a company called MediaPro and get a load, and everyone else gets scrapped. You can be sure that the likes of Liverpool would love this, as one means of compensating for not being in CL by tapping their overseas market for more cash. They already made noises about changing the overseas portion payment structure, and were loudly shouted down by everyone (including Man Utd!)

The next package of TV deals for 2013-14 is out for tender now, and I?d expect the figures to be broadly similar, but the pot increasing slightly. I also expect the EPL to use the same distribution formula so 50% to clubs, 25% based on live UK appearances, 25% in league placement. The increase in live games shown should lead to an increase in the minimum guarantee of appearances (currently 10) if they are to maintain this equitable distribution, but they really couldn?t increase much beyond 1 extra game!

We have no real control over this, other than to keep voting for the status quo in terms of the overall deal, and keep the league placements high. Last season we were only on 13 times, Man U were twice that ? but the new kids on the block, City, were on 24 times.

Matchday

We?ve talked a lot about attendances, why they?re declining etc, and this year, for the first time in a while, there was an increase in early bird season tickets for the 2012-13 season. It?s a tough call but, depending on what the economists at EFC reckon, the elasticity of demand model predicts that a small increase in season tickets will lead to a certain reduction but overall revenue will be broadly the same, if not up slightly. That?s the theory.

Whilst it?s normal to do promotions for the early rounds of the cups etc, Everton have been doing a lot more with league games. Before Christmas, they offered purchasers of tickets for the Norwich game a Swansea ticket at half price (it was a midweek game just before Christmas, so office party, last minute shopping territory). I am not sure what other promotions (other than kids tickets) they?ve offered during the season, but it suggests to me that they?re aware of the discretionary fan, but they need to guard against doing this too much or the 'value for money' argument for the season ticket is eroded (especially when balanced against the finance benefit of collecting funds up front).

In terms of corporate hospitality, it?s been years since I experienced it, but I think the main problem is a lack of space for facilities. The number of boxes is small (8?) and they currently go for £45k a season. Outside of that are various lounge facilities that offer varying degrees of pre-match Food & Beverage. The fact that houses on Goodison Road are being rented and used as matchday lounges (including for Anfield) suggests this is an area that Everton are missing out on, and there?s nothing that they can do.

In-stadium refreshments are doubly difficult at Goodison due to the limited circulation areas, and as a revenue stream are insignificant anyway.

Commercial

Recent years has seen the range and value of sponsorships and other commercial involvement increase substantially. I believe in large part this is down to the increase in the overseas broadcast of the league. I had the figures for sponsor values for last season, and it was telling that the majority of the teams are sponsored by overseas brands (even more so this season). The only major British firm sponsoring is Standard Chartered, and their main area of business is in the Middle East and Asia. The tie-in between sponsor value and broadcast is apparent when one considers that part of the value the clubs offer is in brand exposure, and this is backed up by media value reports from live games that break down in $ value how much the media value is worth. The company that does this has a proprietary system for calculating this, using discounted advertising rates, and is accepted industry-wide.

For Everton, I?m not sure how much the deal with Thai Beverage is worth. Last published figures put it around £2.8m per annum, but others have claimed there?ve been extensions etc and it?s now worth around £4m pa. Notwithstanding the long relationship with them, there needs to be a rethinking of this. The likes of Liverpool, Man Utd, Man City and Chelsea now command £20m per annum from the club sponsor. Man U now get £4m pa from DHL just to sponsor their training kit. Whilst I?m not comparing Everton with any of them, the fact that we have now been overtaken by the likes of WBA and Villa (significantly) suggests we are under-performing. Uefa can investigate Etihad?s £40m shirt/stadium naming rights pa deal all they like, they?ll struggle to rule it as ?un-commercial? given their ludicrous pricing for Champions League sponsors. Arsenal are now glad that their Emirates deal is into the latter stages (although at the time it broke new ground).

In other leagues, the stand out differences are found in the Bundesliga. I?d love to know how this evolved, but their whole business model seems to be commercial-led. They don?t get the same money for broadcasting, and they are able to keep matchday tickets in the £10-15 region.

General

I?ve said for a long time that Everton are too dependent on broadcast revenue as a proportion of total turnover. If you look back over the club accounts down the years, I?m sure the majority of any increase in revenue (net of player trading) is down to increases in this area. Now I?m not saying this isn?t true for a lot of clubs, and I?m not saying it?s a bad thing; I?m questioning whether we are under-performing in other areas. I don?t have any fears for the long-term future from this (in the sense I don?t think that the pay-TV market is going to collapse... obviously relegation would be different!)

Clearly Everton will point to the Stadium for the lack of traction on matchday and commercial fronts, and they are largely right. Goodison during its evolution was pioneering in many ways, but there has been no significant investment since before the advent of the Premier League. A new or redeveloped stadium would have to look very different (at least under the skin) to be able to meet the many needs and be fit for the next 100 years. A new stadium would allow the club to increase its yield per customer (and this needn?t mean an increase in season ticket/matchday pricing); rather they would be able to offer a far more differentiated corporate hospitality product, to a far greater number of clients. The space/facility needs of the press (including international), TV, police, medical, officials and players is vastly different.

I know for many that the EPL represents all that is wrong with football today and, in a lot of instances, I would agree. However, we are where we are ? trying to compete in a league that has long left the Everton tradition and values behind ? so what can be done? I agree with the Board of Directors that the stadium question is key. I just don?t agree that a new stadium has to be led by a retail partner. I also think that our poor performance in commercial and matchday revenue will only begin to be addressed with a new stadium. That?s why I think new owners ? not investors ? should be a priority. Right now, this poor performance is a good thing in being able to sell the club. It is these opportunities to increase football and non-football revenues over the long-term that will attract buyers. A pre-pack stadium in an out-of-town retail park would scare them off almost as quickly as Bill?s alleged asking price.

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