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A tale of one city

Guest reviewer fl003* contrasts the differing fortunes of two London football clubs attempting to identify and predict future developments in the beautiful game

Sunday 11th May 2003. West Ham Utd, hanging onto Premiership status by their fingertips, have just drawn their last game of the season against Birmingham City 2-2. Unfortunately for them, however, Bolton Wanderers, the other candidates for the drop, have just beaten Middlesborough 2-1; this means West Ham are relegated to Division 1. Twenty years ago this would have been unfortunate but not a disaster. But in the modern game relegation from the Premiership is a disaster.

What has utterly changed this situation is the TV and sponsorship monies which have poured into the game. Out of West Ham’s total income of £42 million in the 2002-2003 season more than half has consisted of TV royalties. Gate receipts totalled £13 million and other commercial activities accounted for a further £7 million. Thus relegation has been a financial catastrophe for the Hammers (as it would be for anyone) their annual income being more than halved. That a team replete with such glittering talents, including full England internationals, England under-21 internationals, Scottish internationals and one or two outstanding overseas players finds itself relegated is something of a mystery; it speaks volumes about the way the club has been managed at all levels. But that’s another can of worms.

The club had reputedly run up debts totalling £60 million. Ground developments and a high wage bill (at £33 million p.a. the sixth highest in the Premiership) provide a partial explanation for this, but most West Ham supporters suspect this is not the whole story. This view is reinforced by the fact that in the previous two seasons the sales of Ferdinand to Leeds and Lampard to Chelsea netted a cool £29 million. Whatever the explanation for these debts, and the real story may never emerge, the management used the alleged indebtedness of the club as a justification for a wholesale downsizing, selling the clubs most precious assets - its class players.

During the close season the heart of the team was ripped out with Sinclair, Kanoute, going to Manchester City and Spurs respectively, Di Canio given a free transfer, and then the really painful part, Johnson and ‘Wunderkind’ Joe Cole going to join Lampard at Chelsea. The famous West Ham youth and coaching system which over the years has produced players of the calibre of Moore, Hurst, Peters, Brooking, Ince, Lampard, Ferdinand, and lately Carrick, Cole, Johnson and Defoe, is increasingly becoming a type of football stud-farm producing thoroughbreds for the bigger (i.e. richer) clubs. Of those last seven quoted only Carrick, and Defoe are still at West Ham. And speculation is rife concerning Defoe’s continued presence at Upton Park: it is an open secret that Alex Ferguson at Manchester Utd is very keen.

Apart from other developments in the game it was the Bosman Ruling** which has made it difficult for the middle-sized and smaller clubs to hang on to their better players. Spurs, for example, saw their outstanding England central defender Sol Campbell simply ‘walk’ to Arsenal when his contract expired for which they did not receive a penny. West Ham’s decision to sell Ferdinand to Leeds and Cole to Chelsea, both of whom only had short periods to run on their existing contracts made a sort of crude business sense when considered in this context. Effectively, therefore, the Bosman ruling has tended to exacerbate the polarisation which was already taking place in both British and continental European football. Everywhere there is emerging a super-elite of rich clubs from about three to half a dozen which are dominating all the domestic and European competitions. In Italy, the two Milan clubs, the two Roman clubs and Juventus, in Spain, Real Madrid and Barcelona, in Scotland, Rangers and Celtic, and in England, Manchester Utd, Arsenal, Liverpool and most recently, and interestingly, on the other side of London from West Ham, Chelsea.

At the end of season 2002/2003 the West London club were also looking down the barrel of a financial crisis. In attempting to break the Arsenal - Manchester United stranglehold on English football, they had spent heavily and were reputedly in debt to the tune of £90 million. Moreover, there were all sorts of irregularities surrounding Chelsea’s finances and also there were some rather ‘colourful’ characters in evidence. It was revealed for example that one of Chelsea Village’s - this being the company which owns the club - directors was a certain Richard Creitzman, a former director at Enron.

Creitzman almost certainly owed his position in the club to its new owner, Russian billionaire, Roman Abramovich, 36, reputedly the second richest man in Russia, who bought the club for £150 million in July 2003. Creitzman had been Enron’s Russian development director before joining Sibneft, the Russian energy company, which Abramovich controls, in 2001. Abramovich himself, was one of the oligarchs to emerge from the Yeltsin ‘shock therapy’ era when Russian assets were being sold off for a song. His big break came in 1992 when Boris Berezovsky, then the most powerful of Russia’s oligarchs, befriended him and then brought him into the inner circle of former President Boris Yeltsin. Berezovsky was to fall out of favour with the new Putin regime and claim political asylum in the UK. This he was granted and a recent Russian attempt at his extradition was to end in collapse. No matter, Berezovsky’s departure was Abramovich’s opportunity. Adroitly stepping into his masters shoes, Abramovich began building up his financial empire accumulating 80% of Sibneft, 50% of Rusal, the Russian Aluminium and Oil company, and 26% of Aeroflot, Russia’s national airline. He has since liquidated these last two holdings for £1.8 billion. An ex-governor of Chukotka, a desolate province in north eastern Russia, he has confirmed that he will not be standing as a candidate for governor again. In addition to buying Chelsea, Abramovich has also bought property in Knightsbridge and Sussex. There is much speculation that he is about to permanently decamp to the West.

Like most of the new Russian oligarchy there have been some rather murky chapters in Mr Abramovich’s past. In 1992, he was charged with misappropriation of diesel fuel, but eventually cleared. Abramovich’s takeover of Chelsea has also occasioned a probe by the Financial Services Authority (FSA) amid suspicions of insider dealing. Shares in Chelsea Village rose significantly before the takeover. An FSA spokesman said : “We’ve only just begun the process of looking at what might be suspicious trades and, if so, who the people could be behind them”.

Be that as it may Abramovich made huge funds available for new players; a spending splurge which exceeded £100 million. Chelsea are now essentially a world XI, where even the most talented players cannot assume automatic selection. Abramovich also owns an ice-hockey team in Siberia and has also expressed an interest in buying the Canadian National Hockey League club Vancouver Canucks.

What seems to be happening is that big money is recognising the investment potential of trans-national clubs which command the greatest TV exposure. Manchester United, up to now reputedly the richest club in the world, derive their income from their TV royalties, (domestic and European) branding, merchandising, sponsorship and gate receipts. It goes like this: Abramovich will sell the football to Sky and-or the BBC/ITV, and they in their turn will sell the audience to the advertisers, or in the case of the BBC try to improve its audience ratings.

East Side, West Side, could the difference be more stark. Yet in a sense this is the logic of de-regulated global capitalism. The rich lock in their competitive advantage, take the spoils, re-invest, strengthen their position … and so on.

This is a virtuous circle of cyclical and cumulative causation, to use a phrase coined by the famous Swedish economist Gunnar Myrdal. Meanwhile everybody else struggles to make ends meet. Many clubs will go out of existence; playing fields and facilities will be sold off. It is a sad day when one of the oldest teams in the world, if not the oldest, Notts County, is on the verge of going out of existence. Yet this is what County, after nearly two years in receivership, now have to contemplate.

The Chelsea phenomenon illustrates that football is now transmuting into a branch of the media/entertainments industry, with its principal target being sponsors and TV audiences. In this instance Chelsea Village have become a subsidiary in a global conglomerate controlled by Abramovich. The globalization process is thus reaching into football, reproducing the familiar core-periphery economic structure; haves and have nots. The global 20/80 society.

Needless to say the elite clubs are losing all connection with their communities. Chelsea Village, a foreign owned subsidiary, have virtually given up attempting to produce its own players, relying instead on outsourcing - buying ready-made products off-the-shelf, usually from abroad. This detachment from a national base will go further when a European super-league is formed. And this is surely on the cards. Football as we have known it is ceasing to exist. What future for the beautiful game? Here is as good a prognosis as I have seen.

‘ Football will gradually become much less of a participation sport, much more a mere form of TV entertainment. The Football Association will continue to see its role as helping the rich to get richer. At the top football will create more multi-millionaire, shareholders, directors, players and agents … The future of football is, therefore, much like that of every other industry governed solely by the free market. Like the retail food industry which now across the country has 4 superstores where everybody does their shopping … The banks, four major ones with some minor players … The Cinemas - a few multiplexes … Clothes - a handful of chain stores. In football there used to be custodianship; passing the beautiful game onto the next generation. But now nothing is more important than money. Football has lost its confidence, its heart, and despite the current boom, the atmosphere of the game, the participation, will dwindle. It will make a few people very rich and lose its soul.’ (David Conn - The Football Business)

So it’s goodbye to Notts County and hello to Abramovich’s All-Stars. But as the base of the game atrophies, its ramifications will reach all the way up to the top. In the end this Faustian-pact will be the death of the beautiful game.

** The Bosman Ruling

Jean-Marc Bosman was employed as a professional footballer by the Belgium club RC Liege. At that time players who were out of contract still commanded a transfer fee which would be set by their current club and such a fee would have to be paid for any other club requiring their services. In addition there was a strict limitation on the number of non-national players who could be fielded by any by any club. Bosman challenged this rule at the European Court of Justice which gave its verdict in 1995 - the Bosman ruling. From this point onward players who were out of contract could move to another club without a transfer fee, and also a club could field as many foreign players as they liked from within the region covered by UEFA.

* fl003 appears regularly on the West Ham eForum