James Cooper
Hello and welcome back to the podcast that's doing things abit differently by providing a truly independent voice amidst all the noise togive you the inside track on makes the business of elite sport tick. This isSport, Structured. What sets this pod apart is the cutting edge research that'sbeen carried out by Leonard Curtis providing validated sets of financial dataplus professional commentary for major sports all in one place. Basically, it'sall the facts and figures you need to know from the people who know whatthey're talking about and backed by Leonard Curtis, who more than 30 years ofexpertise in recovery and turning businesses around. Leonard Curtis were thefirst ever company to profile cricket and rugby union in this country. Now,they're dipping their toes into the world of football with the first everreport into one of the most exciting leagues anywhere, the Championship.Alongside me to pick through the headlines and market leading data here in theUCFB broadcast studios in the shadow of the Wembley Arch are two men who livedthe dream by being paid to play elite sport and another who's a world-classtalker on the mechanics of elite sport. First off is a man who was the 1,173rdfull England international. That's 1173. He played for seven different clubs,was once West Ham's most expensive signing at more than £12 million. He wrotethe foreward to the latest Leonard Curtis report. But sadly for Matt Jarvis, healso spent four years in the wrong part of East Anglia playing for NorwichCity. Alongside Matt is one of the Sport, Structured team and the manresponsible for the Leonard Curtis business of sports series. He toorepresented his country playing rugby union for England's under21s and stillcan't believe how much money there is in kicking a round ball as opposed tocarrying an over one. Lovely to have Alex Cadwallader back with us. Andfinally, another one of our regulars and the man who's been crunching thechampionship numbers for almost a decade. He's the new provost of UCFB and oneof the country's leading academics when it comes to sports business. ProfessorRob Wilson, welcome back. So, that's our attacking front line. Our XG certainlylooks promising. It's time to tear into the relentless chaos of thechampionship. This is the Sport, Structured podcast with Leonard Curtis. Well,Matt, welcome to Sports Structured. Delighted to have you here with us. What wetend to do is start with a kind of question talking about the health of thechampionship or the health of the sport that we're looking at from naught dyingman to 10 superman. Where does a championship lie for someone who's played inthe championship and knows football like you do?
Matt Jarvis
Yeah, the championship is amazing. Um it's relentless. It'schaotic. It's it's everything you want from a fan's point of view, but from aplayer I I would say it's it's around an eight, a seven and eight. Um justbecause the Saturday, Tuesday, the relentlessness of playing week in week out,two games a week, uh the repetitiveness of believing that you're going to gointo every game winning. Um but the reality is it's it's quite a a difficultleague to to get out of to start with, but also just trying to keep consistent.So I'd give it a seven or an eight.
James Cooper
Alex, looking in from the inside, I mean, blimey, the richesare there, the wages are there. State of play naught to 10.
Alex Cadwallader
Um, I'd probably say near a six or a seven in terms of whatyou potentially can make out of, let's take it from an owner's point of view oran investor's point of view. There is a lot of jeopardy and there are somenightmare scenarios, but there is the big golden goose at the end of it if youget it right. So, for me, it's a six or seven because, you know, it's not athere's not real clear trodden path to getting where you want to and there's alot of risk in doing that.
James Cooper
Rob, you co-authored the report. I think you you did anoriginal report back in 2017 that looked at the championship. So, you've beenkind of mulling things over for almost a decade. The figures have probablychanged. Has the health of the championship changed?
Prof Rob Wilson
Not especially. The there's a few more zeros kicking aroundhere and there. It was really fascinating listening to Matt and Alex therebecause the reality is what we always talk about or rather look at from anacademic perspective is what's that relationship between sporting performancewhat it's like for a player or for for a club on the field and then thefinancial performance how they structured off it and how do those two thingswork hand inhand with each other and what Matt's just kind of talked about isthat relentless pursuit of sporting performance but in order to deliver thehighest outcome for your sporting performance variable you need that reallykind of high, tight, resilient structure. What the championship really offersis that unpredictable, very hard competition. It's going to put eyeballs onscreens without question, but but it does so at a huge economic and financialcost to some of those clubs that are involved. And we'll get into the into thedetail of all of this later on, I'm sure, but the the numbers are bigger, therevenue profiles are bigger, but the spending is also much much bigger as
James Cooper
Yeah, just picking up on that, I know Matt talked about thechaos of the of the championship. Is that chaos off the pitch as well?
Prof Rob Wilson
Yeah, look, as a general rule, the championship finances areokay. There's a huge amount of revenue going in. It's almost a billion poundsworth of revenue as a league. Um, but wages will often outstrip revenue andthen depending on the club that we're looking at will determine whether or notthat club is really struggling. uh drawing a business plan to become much morefinancially sustainable and therefore less competitive on the field or theymight have a parachute payment and they'll blow everybody else out of thewater.
James Cooper
Matt, what surprised you in terms of the report? I mean,yeah, the figures are are impressive. We've got a situation where it's almost abillion pound league and and yet you've got kind of financial not irregularity,but you've got a huge wage bill. Um so there's revenues there, but there's alsolosses as well. Dramatic figures.
Matt Jarvis
Yeah. I think for me the biggest thing I knew I knew what Iwas probably going to find when you get the report, but actually seeing it innumbers, you know, when you see that a team with parachute payments is fourtimes more likely to get promoted than the other teams, that's a huge, hugebenefit. Um, and as I mentioned about, you know, you going into every game as aplayer believing you're going to win and that changes whether you've lost onthe weekend and you're going into a Tuesday night. But then when you see thethe numbers and you think four times more likely that is a big differentiatebetween the two. Uh so that was probably the the surprisingness of actuallyseeing the number.
James Cooper
So from a players point of view is it important to find ateam that's benefiting from play from parachute payments if you're in thechampionship or does it provide a motivation for those teams that haven't gotthe
Matt Jarvis
I think as a player you I I mean I wouldn't have eventhought about looking at parachute payments. You're looking at the manager.You're looking at style of play. you're looking at uh the team and how it'srun, I think, rather than the financial side of it. Um you're definitely goingto be looking at wages and structures like that for sure, but in my mind, I'dbe looking at what how would I fit into that team? How does that team looking?When I first went to Wolves, Mick McCarthy was building a young team that wastrying to get to the Premier League, but with all players that were hungry thathadn't been in the Premier League. So, we all had a similar goal. We all wantedto strive to get to that, you know, to get the golden goose as it was to go andplay in the Premier League for our own personal beliefs, but also as a group.So that has an incentive and that what makes people have their change of mind.
James Cooper
We talk about the spending and a lot of those is on transferfees which just had a transfer window. Do you laugh at some of the the figuresand valuations that are being placed on players? I mean 12.75 million for yousuddenly that's 50 million, 60 million, isn't it?
Matt Jarvis
70 80. Um yeah, [clears throat] it's ridiculous. Honestly,it is ridiculous. So, I don't know how it can keep going up, but the problem isteams are willing to spend it and once they're willing to spend it, then that'sthe going rate. So, and unless that changes and teams are actually going to goout and say we can't spend that sort of money on a player, which how can in myopinion, I don't know how any player could be worth over 100 million. That'sit's ridiculous. But now, you know, Man City bought three midfielders about 100million. So, the teams are still going to pay it. Um it's just it it doesn'tfilter down as as well into the championship. You know, clubs are still able tospend money, but on figures like that that is just ridiculous.
James Cooper
Do you laugh at it from a business point of view, Alex? Andbecause it is just spend, spend spend spend spend, isn't it?
Alex Cadwallader
It is. And at the moment, it is being mirrored by thecurrent valuations in some of these clubs. And you know we've had discussionsespecially sort of Rob and myself as to are we getting to a stage where thevaluation of these clubs is getting to the top as in if you look at the currentstakeholders I would often say who have you next got to sell to because at themoment the valuations aren't really based on a traditional model i.e. profit.You know, it doesn't really happen in football. It's almost
based on the your enhanced capital value. But when you'vegot the likes of Jeff Basos, um sovereign states, big corporations, the largestprivate equity players out there, they don't really have someone else to sellto. So, we're going to start to see it to actually calm down a little bit. It'sstill seen as a really safe haven for money to uh be invested in as opposed towhat else is going on in the world. But at some point I do feel a bit ofreality as to how people get the return on these monies on the investment isgoing to happen and that will start to filter down to you know the assetswithin the asset and ultimately you know that is what sport is becoming it isasset driven you know I've got I put some money into this club can I trade itfor more in two or three years time and I know fans don't really love thethought of that and um players you know I think Matt's being quite honest, youknow, you do see yourself as a bit of an asset that can get traded, but thesame way when you asked Matt, you know, are the are players looking at the clubthat they should join. Matt's dream was to play in in the Premier League and toget cap for England. So, you do as a player look, how can that happen? Ideally,I'd love to do it with some really good tightnit tight group of friends at mylocal club. That would be fantastic. But in reality, you know, imagine if, youknow, Michael Carrick rings up a player at, you know, somewhere else, come andplay number nine for me, they're going to jump at that chance because they'rein the Premier League and they can achieve their own personal goals.
James Cooper
The Championship's not made a profit in the last 10 yearsacross the league. Are you going to come back and tell me that sometimes debtisn't a bad thing?
Alex Cadwallader
Um, no, it's not necessarily a bad thing because you arestill looking to grow and as provided you've got the shareholders, the ownersprepared to fund that and they are all looking and I think one of the issueswith the parachute payments is it encourage people encourage owners to reallygamble because if they know if they get up there even if they get relegatedthey're in a better financial position. So no debt isn't a bad thing. It is allover every industry. Um, it's just being able to manage it and service it andhaving a a bit of a sustainable plan behind it.
James Cooper
Rob talked about doing stuff almost a decade ago when peopleare talking about parachute payments as kind of a new enemy. It's it's an enemythat stayed there. What's the answer if we don't have parachute payments?Because the competitive balance of the league is is really really importantthat starts being impaired then the spectacle starts to suffer as well, doesn'tit?
Prof Rob Wilson
It does. Um, I mean let's go back to some economic basics,shall we? So professional sport is built on the concept of uncertainty ofoutcome. So when Matt's team is playing Alex's team, we don't know what theresult is going to be. So that makes us interested in that fixture. We pay ourmoney to go and watch it live or we pay our TV subscription to watch it on thetelevision. Hopefully it packs out. The TV broadcast is happy. The sponsorshappy. These guys score one each and then somebody scores a last minute winner.That's what we buy when we're consuming professional sport. And I wasreflecting on some of what Alex was saying there. One of the reasons why we'restill seeing investment into professional sport and into football in particularis because there is still a bit of headroom for some of these valuations.There's still a bit of untapped revenue potential. Look at some of the workthat Neil Joyce does at the customer lifetime value group and there's a hugeamount of revenue being left on the table in North America for instance that'sstill untapped and we might get into Wrexham in a minute. um you know why havethey been such an interesting prospect and how are they going to then move movethrough the championship with the wealth they're getting but to come back toyour question parachute payments were always designed as a mechanism if we goall the way back to the advent of the Premier League that when the PremierLeague was established two clubs were not getting into that first competitionso they constructed a means of financial compensation if you like for the twoteams that were old first division that wouldn't be part of that founding groupof 22 clubs uh back in 1992. Obviously, the Premier League then became a 20club league. So, you had a couple of additional clubs dropping out. So, theparachute payments went up a little bit and it was always designed as a we'llsoften the landing for you, hence the term parachute payment because you'regoing to have player wages, you're going to have some uh transfer fees to keeppaying. We don't want you as a club to go out of business. But they were quitemodest in the context of the whole revenue profile. Players weren't being paidthe sorts of sums that we see today. Even in relative terms, they weren't beingpaid the sorts of things that we see today. But as the TV deals grown, so toohas the parachute payment. And it's now become so large that a single year'sworth of parachute payment to a club in the Championship will exceed most ofthe revenue profiles of the clubs without uh without that aren't in receipt ofthem, which means that you can keep hold of players that were once in thePremier League. You can pay a bit more on transfer fees, and you are thereforemuch more likely. So now let's go back to my opening. If clubs are much bigger,they are naturally going to be more likely to win. Competitive balance says themore we spend on player wages and salaries, the more points we will generate onthe field. So the gap between the haves and the have nots, if we put it in thatcontext, is growing. Four times more likely to be promoted. What we haven'treally spoken about there is how much less likely you are to be doublerelegated. And although I put my hands up, it happens. We always get outliers,don't we, in in any data set. Um, so the parachute payments in my view are nowjust too excessive. They've distorted the integrity of the competition and weneed a new methodology for it. Now, that would be twofold in my view. I'm not alawyer for the for the record. Um, but the way I would do it is I would say,right, we're spending 300 million a year on parachute payments, which is giveor take what comes down from the Premier League because remember it's over athree-year period. I'd take that 300 million and I would distribute it moreequally across every team that's in the Football Championship, but I would alsoput a mandatory relegation clause in every player contract in the PremierLeague. And without meaning to sound crazy, that relegation clause probablyneeds to be somewhere between 80 and 90% of that player wages so that the wagesthat are then offered in the championship are commensurate with the revenues onoffer in that division.
James Cooper
Matt, you were nodding your head until he talked about payerwages. [laughter]
Matt Jarvis
Yeah, I was I was going to say we we all had um relegationclauses, but it definitely wasn't that. It's 25% was was normally, but againthe I suppose the situations is now the wages have gone up. So even the 25% nowyou're still paying an obscene amount of money in the championship, but I'm notsure players will be too willing to sign on that dotted line for 80 90.
Prof Rob Wilson
And I should just qualify as well. So when we talk about a arelegation clause that large we're talking about those that are earning the bigbig you know 125 grand a week that of course is the media reported figure butso many players are on significantly less than that aren't they let's face itso I think you'd have to have some sort of scale where you know players thatwere earning a little bit less by comparison their relegation clause might beslightly different and of course I did say I'm not a lawyer so I'm sure[laughter]
James Cooper
no you covered that off really really well I'm trying tokeep Matt happy as well can you see some sense in in in changing how theparachute payments might might work. Not necessarily taking it out of theplayers pocket, but but making it more fair for other teams in the Championshipbecause there could be at one point nine teams of the 24 um that have parachutepayments.
Matt Jarvis
Yeah, absolutely. Um that's why I said I I sort of knew whatwe were going to find, but actually when you see the numbers, four times morelikely to get promoted if you've got parachute payment, that's that's a big bigask for the other teams to to actually really put something together. So yes,there is something in that. How that works, I'm I'm really not sure becauseit's not just the players wages. It's what it does to it. I've been relegatedunfortunately. So I've seen what it happens to a club, you know, staff get, youknow, because players are on a lot of money. These staff members that get letgo and they're on.
James Cooper
But that's the story that no one tells, isn't it? You know,when it decimates a club.
Matt Jarvis
it does. And it takes everything out of the club. Theplayers are obviously you have players that want to stay. you have players thatwant to leave and the club will have players that they want to leave and thatthey want to stay and it's not as easy as everyone thinks to get players in orout of the door. Um because contractually they can sit or if they want to gothey'll try and force their hand. But it's it's the impact that has for therest of the club. You know, the fan base, the the people at work in thekitchen, you know, there's there's everyone that's included that's been on thatjourney that's helped the whole way to get up. Then when you get relegated,they all get let go. And that's that's another impact that no one really seesin in a club and you all you see is the the players and the the the I supposefirst team staff that that it impacts but actually it impacts everyone in thein the whole club.
James Cooper
Alex, are we swimming in crazy waters? Bearing in mind youyou come to this from a rugby background. Uh and we we look like we'rerewarding failure almost.
Alex Cadwallader
Um no, not I don't think we are. What we are trying toachieve is something that may well just be impossible to do. If you look at thethe Premier League and the Championship, we don't have anything else acrossglobal sport that operates with that relegation promotion model. You know, wehave the NFL, everything in North America and you know, IPL. So, you don't havethat jeopardy that suddenly your revenue can be cut by such a large amount andtrying to get that balance right is a real struggle. And especially it's insort of the British psyche that we want a club to be able to come from the verybottom to get to the very top and give them that ability as opposed to having aclosed shop. You go and speak to the majority of our owners in the PremierLeague and they are all I think most of them now they have the majority are USbacked. They would love to have a bit of a closed shop. It's much more stable.they know what their what their costs are going to be and they be able topredict their revenue but we're nowhere near being able to accept that at themoment whether we ever get there or not. Um and you know Rob says he's not alawyer but even an accountant you can't come up with a simple solution to dealwith that because you know whilst we say well we don't want the the players totake a massive cut
James Cooper
says the former player
Alex Cadwallader
says the and I fully understand that and they all they'llend up doing so if you're going to give me a 25 um uh 25% relegation clauselet's start with my basic salary 25% higher initially and that's how thesethings work but ult if your revenue is going to drop by 40% that's got to comefrom somewhere and you know your outgoings are player wages. So it it's a realdifficult balancing out and there isn't a a simple solution. Um, and the otherbit that sort of I've sort of, you know, flagged before is that the the carrotof the Premier League is bigger for a Championship owner because you've got theparachute payments. Uh, and therefore, you know, we'll come on to it and oftenI look at the the Derby County situation. You look at sort of Mel Morris andwhat he put into that club and he was a play off final away from taking his hislocal team to the the Promised Land. lost that final then ended up because theyhad regulation um in place in breach of you know uh transfer embargos pointsdeductions so on and so on and you look at that and think that person has putin almost 200 million into his club and he's probably one of the most you knowhated people in derby but ultimately is that because of the structure we havein the championship in the championship allowed that to happen or you know Idon't think he's a bad person you know he chased something and didn't quite getthere because of the bounce of a ball and that happens. But the structures wehave then meant, you know, the punish the punishment was pretty severe andDerby had to go through what they went through,
James Cooper
which walks us very nicely into squad cost ratios. Um, noteasy to say. Um, but as opposed to profit and sustainability rules. So, therules have all changed this season in in in line with the Premier League and inline with UEFA. Good rules, good changes, positive changes, Rob.
Prof Rob Wilson
So, good question. PSR financial regulations more generallyare always going to have their critics. One of the biggest issues of of any ofthose financial regulations is the impact that it has on competitive balancebecause the big clubs that have got this historical sustained revenue profileare where they are and the ones that are trying to come through that are muchmuch smaller are where they are and the gap is very very big. And one of thebig criticisms of financial fair play PSR S what was it called whatever it wasin the championship before that and now the SCR rules are going to be thatactually you maintain the status quo through those regs. So your own car.
James Cooper
So So it's a different label to the same system.
Prof Rob Wilson
[clears throat] At its absolute core, the purpose of thosefinancial regulations is to make sure that clubs are financially sustainable.And I don't think Alex or I would probably sit here and say that's not a goodthing because those businesses need to be financially sustainable. They need tobe structured in a way that allows them to grow at a level of growth that theywant to produce, but critically that the selling price is higher than the costand they can pay your debts as they fooled you. And if you can do those twothings, you've probably got a business, right? So the structure is reallyimportant and the regulations are designed to try and force, massage, help thatstructure. The critics though will say that stops our spending. We can't docertain things that we want to do. We therefore can't compete. The squad costrules that have now come in are a little bit more flexible I think than thelikes of PSR FFP, but actually they will only serve to support those thatalready have because they're a percentage of your revenue. So, and we'retalking about the Championship most broadly here, but if you just look at thePremier League for instance, your Liverpools, your Manchester Citys, yourManchester Uniteds, your Arsenals with the biggest revenue profile are allowedto spend 70 or 80% of that revenue on their playing talent. Well, 70 or 80% of700 million to go back to the 90% pay cut thing is a lot bigger than 70 or 80%of 150 million. So, the gap is going to get bigger in my view. Now, Alex wassaying something really interesting there about the the investment and thejeopardy and the lack of promotion uh sorry, the lack of relegation uh andpromotion in American sports and you sort of protect the group and the theleagues work really well and you get a different winner and all the rest of it.But culturally, we don't want that in European sports. Now, what's been reallyfascinating to me is the number of American owners that are now looking atChampionship and Premier League football clubs because we almost have thatclosed league system because of the financial regulations that have beenimposed. So, you speak to most American owners of a Premier League club. 10years ago, they were petrified of the relegation out of the league because therevenue would drop so significantly. Now they pretty much know that if yourrevenue profile is 350 to 400 million you're not getting relegated. Andsimilarly in the championship there's a level of upside. So if you can get oneof those middle tier clubs that can compete on a data basis let's say and getinto the top group and then end up in the Premier League you rewards can bemassive.
James Cooper
So, in many ways, Alex, we're going to get Premier League 2,aren't we? In terms of opportunities with with the the rewards of PremierLeague One on offer of those people who are willing to take the gamble.
Alex Cadwallader
Yeah, potentially. Yes. And that's, you know, somethingwe've always got to be slightly uh alive to. And we're, as Rob says, we'retrying to protect the things that make these leagues so valuable. And we'llcome on to it. And you know, one thing we often sometimes forget is that thePremier League isn't just a competition amongst themselves. You know, they'reactually competing against other sports, other leagues. And you know, theserules uh I believe start to model UEFA's rules. But then in terms of, you know,spending your uh tax regime in these different countries do make a difference.And as Matt will probably tell you, the players often uh as I understand it,they just say, well, what's my net income going to be? And you know, in certaincountries, they it's a different approach than we have in the UK with imagerights, so on and so on. And and we'll come on to regulation when ultimatelythe the Premier League and all the teams there in the Championship, you thechampionship still wants to be the number fourth highest supported league inthe world. But if you put too much regulation in and too many barriers and thenlet the Saudi league come through where you know they actually let's grow thegame. Let's go and sign the superstars. Um you know are you actually defeatingyourself? You know if you ask Matt if you how many of the world's top superstarplayers have signed for a Premier League team in the last five years you'dprobably argue mainly only Haaland. The rest of them you know Arsenal tried toget two superstars this year and weren't able to do it. you know, when wearen't at a stage where we're signing the best and one thing we'll come on tois that a lot of the new fans actually follow players as opposed to teams. So,Mbappe at Liverpool would change the league dramatically, but we don't havethat.
Matt Jarvis
I was going to say I I just want to bring it back to the thechampionship with regards to a player and a fans perspective. I think thejeopardy and the can you get into the playoffs? Can you get promoted? Are yougoing to stay up? Are you gonna relegated? I think that's the whole thing thateveryone loves about it.
James Cooper
And there's no VAR.
Matt Jarvis
And there's Well, yeah. I mean, that's a huge plus thateveryone's enjoying, but I think that's the whole thing that everyone lovesabout it. You know, it's two teams going out every single game, both thinkingthey can win, and realistically both can. Uh, but then you've got this otherside of it, which is in behind the scenes that there's the financial side ofit. But with regards to playing and as a from a player's point of view, youdon't think about that. You think of obviously your own wage and you think youthink about can we win this game and yes is the answer and then you go throughto then you have to recover and the financial bit comes in because because ofit's so relentless in the championship you play Saturday and then when it comesto Christmas time it's even worse but players would much rather play games thantrain and if you've got the financial backing that you can then have a squad of15 players that [clears throat] are not making, you know, if you make asubstitute, that substitute's coming on and making the team better, that'swhere you're winning financially because a lot of these clubs have a good maybeeight, seven, eight players, then they've got a couple that are okay. And butthese other squads that have got more money to bring these players or keepthese players, they're bringing on a top player that's coming off the benchthat's making the impact when people are struggling after a Saturday, Tuesday,Saturday game. They're carrying knocks. they can't recover as quickly as otherpeople are able to rotate their squads.
Prof Rob Wilson
I don't want to contradict myself with what I'm about tosay, but listening to you there, there is something really visceral about beingin the heat of the moment and the and the player and the team chasing thatvictory and chasing that success. That's what we want to see as fans. And Idare say, I mean, you're doing a lot of work at the moment at West Ham, aren'tyou? So, West Ham season last year was dreadful. And I did a a session for theUniversity of Cambridge at the stadium just before the last game before theygot relegated. And you could just tell everybody was just down. It had been areally rough season. Yet they go into the championship season.
Matt Jarvis
Season tickets.
Prof Rob Wilson
Season tickets are up because the likelihood of winning isincreased. The feel-good factor will be there. And lots of fans actually justwant to see their teams win. And if you really push them, you know, do you wantto watch them losing in the Premier League and getting battered by some ofthese really really big wealthy teams or would you rather be that slightlybigger fish in the smaller pond in the championship and and bring bring somesuccess to the to the area?
Alex Cadwallader
I often think the championship is almost the litmus test forwhat we want football to be as opposed to everything else that's going on inthe world and you know the investments going into sporting teams. This is thesecond division in England, but it is still one of the most followed,passionate,
James Cooper
the best, second best league in the world.
Alex Cadwallader
Exactly. And it and and it but also it has investors inthere that want to take it to the Premier League. It has others that are local,are happy where they are, want to provide for the community and so on and soon. So there's massive tension across the league. The parachute payments add toit, but as Matt says, and and the fans and the viewing figures are all stableand all strong. So what you don't want is this sport to become to become amarket where assets are traded and it forgets actually what it was. There's somuch heritage and tribal. Yeah. Absolutely. And it but also if you can if youcan find a way it's a horrible word to monetize that and sell it more then youhave something more new more unique than everything else uh out there.
James Cooper
In terms of you when you when you're traded as a player it'sall about data. It's about Matt Jarvis's data. Did you do your due diligence onthe people that were owning you?
Matt Jarvis
Uh yes and no. Um to a degree because it all depends oncircumstances as way. You know when when I moving clubs uh first time fromGillingham to Wolves was I was desperate to I played at the level thechampionship. So I was desperate to get back there. Um there was a few clubsthat are interested but my actual turning point was I went and met Mick McCarthy.So I met the manager and he spoke to me about what he wanted. So that instantlychanged my my made up my mind sorry to go and sign for that manager and thatclub. Um so there's there's loads of different you know again differentscenario going to West Ham again I just played for England. I was playing inthe in the Premier League. I wanted to stay in that league. West Ham was a is ais a huge club. Um so that opportunity came that way. So there's differentscenarios and that's where players will it depends what's going on in thatmoment. You will do your research because you don't in my opinion people do andthat's where agents come into it and that's a completely different conversationbut players will look and see what club are hopefully available to them andthen you will see where you fit in the best because you're not going to go tosomewhere where if I'm a winger um and they've already got three wingers andI'm still going to that club or how am I going to play every week? you know,you want the team to sign players, but don't sign player in my position becauseI want to play, you know, that side.
James Cooper
So, with that in mind, but how do how do you look at theproject at Wrexham? And I'll ask all three of you. A. we're all parents, so wehave sons and daughters who are taking fandom maybe differently. They'relooking at social media, looking at what's online. But from a players point ofview, is it chasing the biggest salary or is it chasing the adventure to besomething part of something huge potentially?
Matt Jarvis
I think now it's trying to, you know, be involved insomething and get the wages. I think if you look at it from an early point,they were very clever in the way that they did it. They were in the NationalLeague. They were buying players that were miles better than the standard ofthe National League. But because of the I suppose the owners, the journey, thestory, they were able to and the finances because they were on a lot higherwages than they probably were in the league ones that they were in before. Butthey they add to it and because of the success that helps if you have apositive outcome on it because loads of teams have done it before. They try andgo for it. They sign players on big wages. It doesn't happen. You can'tguarantee success. But what they have done is they've done well with theplayers that they've signed. They've got to the next level. They've thenrecruited again. They've got to the next level. And with all of that comes theowners, the story, the American side of it. I think you know reports was like80% of it from uh the US, you know, outside of the UK. Incredible. That'sanother way of getting revenue in and it gives play like I've been out toAmerica quite a lot um with working within football and it you ask them oh whydo you support this team and they say oh it was the first team I saw on tellyand that's their reason or it was a nice shirt and we they got that. So you canget the hook and if you've got someone like Ryan Reynolds that's going to beable to go out and broadcast that, you've got the hook straight away and thenit's about can then the team perform on the pitch and then go up the leaguesand do well.
James Cooper
It's been interesting because the report talks about thisand and people trying to do a Wrexham. So you've got Snoop Dogg at Swansea, yougot Tom Brady at Birmingham, uh you've got another NFL player at uh Burnley J JWatt. Is is is is that just a kind of shadow system or or a Wrexham?
Alex Cadwallader
I don't I don't think it's anything new. It's you know yessome uh US uh players former sportsman that have the means to do that and wesee you know LeBron James investing into Liverpool but you know the start ofthe Wrexham journey could have been very similar to Knotts County
Matt Jarvis
with Sven Goran Erikson
Alex Cadwallader
so sol Campbell money coming from wherever and it [laughter]didn't quite work out. So it's it's not uncommon. I'm sure they're discussingsomewhere and everyone that invests in football is, you know, nowadays wantsthere to be a story and so on and so on. So yeah, I think it's something that'salways happened. Um, and obviously they've managed to do it well and managed toto pull it off, but it'll be a combination of things. It isn't, you know, it'snot really a real clear path. It's, you know, picking your your the club, um,engaging in the community and, you know, getting some relatively quick successand having a having a plan to deliver as opposed to, you know, just claimingyou're going to do something and not having having ulterior motives thatactually, you know, the training ground probably looks like a quite good sitefor a supermarket in three years. So, you know, we can probably get it at a bitof a value, put some debt on it and uh sit back in in in the background andwait for that to happen, which we've seen with, you know, up in Bury was thatsomething, you know, similar took place, but it happens across all sports. Youknow, we saw it with um you know, Wasps and and Worcester Warriors that the themotives of the of the owners weren't necessarily can I take this club on thisfantastic sporting journey.
James Cooper
But I mean, you explain how the revenues work. Wrexham havehad a really clever way of increasing the revenues and maybe increasing theirspending power and their punching power.
Prof Rob Wilson
They have um we need to make sure we clip Matt Jarvis, thefootball club CEO, because that answer was really revealing about thatincremental development that clubs should go through. And I'm sat here, I'msure Alex was as just nodding because actually that's the sustainable, thesmart, the careful considered approach to build a legacy for a for a sportingentity or a football club in the context that we're talking about. Um,Wrexham's fascinating. Where I'd go with that is every club has got a unique bitof history and heritage. It has its own intellectual and cultural fabric. Isaid I wasn't a lawyer earlier, nor am I a sociologist.
James Cooper
Or a poet?
Prof Rob Wilson
Definitely not a poet.
Alex Cadwallader
Golfer?
Prof Rob Wilson
No, absolutely not. Um, but all of those clubs are sounique, right? And because they're unique, they will all be have an opportunityto tell a story. And what we're looking for, I think, as consumers of sport insome way is what's the story with that organization. And what Wrexham have doneby virtue of uh of Reynolds and McElhenney is brought a bit of Hollywood glitzand glamour to something that was unglamorous. Um, you know, an ex sort ofmining town in Wales and they've put them on the map and they've sweated someof their networks. And I was talking to their previous CEO and fin and and the financedirector not so long ago and the connection that they were able to buildbecause of that relationship. You know, all of a sudden they find themselves ina top floor uh office building in New York with one of the world's biggestmarketing agencies to propel the Wrexham story. They sign a deal with DisneyPlus. They'd generate a documentary. So what Matt was talking about there isright I now see Rexom on the television not just a football game becauseactually the football game could go either way but oh that's really interestingwhat's Ryan Reynolds doing there or how are they activating or where's theshirt where can I buy it so Rexom selling more shirts in the US than somePremier League clubs right now um you mentioned fandoms earlier you know we areincreasingly following particular players or managers so all of that comestogether in a story um whether or not we'll see more professional athletesinvesting is up for debate and Alex has talked through where some of thathappens. There'll be a lot of return on investment potential with some of that.But I would always encourage the clubs to look at their story and how they canthen leverage that story.
Alex Cadwallader
Yeah, I' I'd just say Wrexham just learned from a lot ofthings that happened previously. You know, I remember I love watching I thinkit was the Barry Fry Peterborough documentary. The content on that isfantastic. Brilliant. But you know, it didn't it wasn't put into a new market.it was on ITV4 or whatever it was back then. So, you know, they've just takento it taken to a new market with their own profiles. They were able to take itto the US, but also if I said to to Matt, you know, here's a pot of cash. Canyou build this club from here? You know, he'd have a very sensible plan ofdoing it. You know, Wrexham didn't do something crazy. They didn't suddenly tryand go and sign Sol Campbell and Sven Goran Erikson. They did it in a in a waythat we all would have thought was sensible. Um, so it's nothing new. It's justthey had a route to a new market, learned from what else had had happened andand have managed to maximize that opportunity.
James Cooper
I just want to get the three of you's opinions on the on thegovernment regulation. So the independent football regulators in anyone who'splayed football or football is dear to them, I think kind of thinks leave usalone because you don't know what you're talking about. Is there [clearsthroat] an element of that or is there an element of thank goodness we'regetting the help we need?
Matt Jarvis
Um, I will go from the players point of view. I don't reallythink that that comes into it. I think from a player, you're thinkingobviously, can I earn the money I can for my career? Can I go and get to thegrace land in a in a team that's all wanting to push to one direction? Can wego as a team and can we live and enjoy that moment? You don't really thinkabout the financial fair play from a club. I think everyone wants to think thatthe clubs are really looking after the players and the players are so loyal tothe clubs. I don't think that's ever been the case. But I also think thatthere's such a short window for everyone. I think as a player you, you know, Iwas managed to get 18 19 years playing professionally. I think that's going tocome down and down and down because there's so many younger players comingthrough that going to start their careers earlier that are then going to finishtheir careers earlier because again, when I first started out, players thatwere 32, 33, everyone wanted to sign them. Now there's no resale value. No onereally wants to bring in the older pro because they cost too much. You want tobring in a young player that will be on a little bit less that you can try and moldand get to be a player to then sell for a profit. So I think everything's goingdown and down. So players will be a little bit more focused on themselvesrather than the financial fair play of the club.
James Cooper
Politics tells us that regulation is what we need. You workin a regulated environment in terms of banking and in terms of the legalsector. Is regulation desperately what football needs or is it desperately whatwe don't need?
Alex Cadwallader
I think it's not the the magic pill that will fixeverything. Regulation provides a structure um that you the legislators willput in place to deal with what they think the the uh industry needs. So yes, wedo a lot of work with you know the FCA SRA and the premise there really is tolook after its customers and make sure our clients uh assets are dealt with inan appropriate manner. But it doesn't prevent bad actors. It doesn't pro preprevent, you know, some poor management having some pretty dramatic effects.And I think what I often point back to is you would imagine the regulator, theindependent regulator will be abide by the rules of of of the land where wherewe sort of trade and aren't going to allow something to breach that. But thismainly came about because of the European Super League and there was big uproarabout these um owners looking to you know change the fabric of football wasactually there been subsequently there's been a ruling to say when UEFA andFIFA tried to stop that they didn't have the power to do that. So theindependent regulator now isn't really going to go against what is illegal. Sothat's the main premise for what we wanted the regulator to to achieve. Well,actually, I don't think it would be able to stop that because it's already beenruled that FIFA and UEFA aren't allowed to do that. You're creating a monopoly,which is goes against obviously, you know, um, the legislation. So, it bringswith it challenges, but it does provide a structure. You shouldn't not I don'tthink we should not have one, but it's not going to necessarily fix everythingyou want.
James Cooper
Rob, you're nodding and you're shaking, and I guess you'realso glad it's not your you that's doing the job.
Prof Rob Wilson
Uh, yeah, I suppose I am. I've got some friends, colleaguesthat working for the independent regulator and they are I think the first thingto say is they're really smart people. One of their head economists is a supersuper smart guy. Um but I agree with Alex. I don't think regulation is the uhis the silver bullet to solve some of the financial issues we've seen in thegame. I think we will always get bad actors. There will be owners and directorstest and somebody will pass that test with flying colors and then might becomea poor owner. I mean, I saw that firsthand at Sheffield Wednesday. And I knowSheffield Wednesday fans can't stand me when I say this, but Dejphon Chansiriwas not a bad owner when he took over. He could have done a lot more tounderstand what he was buying. He could have taken more advice about how he wasrunning that club, but he also put in about 170 million quid and he's walkedaway with nothing. Um, a variety of different economic conditions can totallychange how an owner is suddenly able to or not to do something with thatparticular football club. Regulation won't solve that in its own right, butfinancial discipline within the club will. And I think that's where theregulator can help with some guide rails and will influence behaviors thatshould be happening. But if you ask me what powers is the are the regulatorsactually going to have, I think they'll probably stop teams from changing thecolor of their shirt. I think they'll stop teams from changing the name on thebadge. And I think that'll be about the sum total of the power. And weshouldn't forget that because it is effectively government funded. It will havea budget. A proportion of that budget will be spent on legal costs. And withoutbeing brutal, a number of clubs in the Premier League and in the Championshipwill have bigger budgets than the independent regulators will to challenge someof these cases.
Alex Cadwallader
Yeah. And and yeah, that's a great point. And you know,again, these are just allegations, but if you look at one of our most prominentuh boxers that's um hoping to take part in a massive fight um in the not too[snorts] uh not not too far away. you know, he was um he apparently testedpositive and then took the regulator to court and challenged it and claimed,you know, that it was due to uncrated bulls meat that he he ate. Butultimately, he had a much bigger legal team than the regulator. In the end, theregulators ran out of money. You saw something similar with the UCI and LanceArmstrong. You know, one one has got bigger bigger pockets than the other. Butthe thing I'd always say, having sort of tried to save businesses, investmentbanks, law firms that are regulated, bringing the regulation in actually makesit harder. You've got more things to deal with and you've got a little bit ofdrafting that someone very smarts put in place and six years later practicallyit prevents you being actually be able to save that business. Um, so those arethose are some of the real practical challenges. And it and the other thing I'dalso flag is that sometimes it can create a bit of a lack of accountability forthe clubs in the leagues because they will just look, so well that's theregulator. He they should have been doing that. Why didn't they do that?Whereas actually you really want the clubs to be doing it themselves and notjust relying on a regulator to check that you know Matt Jarvis is getting hisyou know5 million pound 10 goal bonus in the appropriate way
James Cooper
or not getting his 95% deduction.
Alex Cadwallader
Yeah, exactly.
Prof Rob Wilson
Just on that, the point you've just made there, people arenot talking about. So this regula the regulations that come into sport orfootball in particular mean that you have to have compliance officers and youhave to have people reporting back on some of these details and doingsubmissions around what your PSR or CSR value should now be. Matt made thepoint earlier when you drop out of the Premier League, everybody goes, right?So we're talking about relatively small medium-sized enterprises without a workforcethat is able to deliver what the regulators are probably going to ask for. Soinadvertently by establishing an independent regulator for football, we arealso putting on an additional cost to all those clubs. And remember that theindependent regulator works across the entire system. We've talked aboutChampionship clubs today that might get to about 80 90 million a year ofrevenue. Premier League up at 700 million. What about a League 2 team thatmight be generating six million a year? Do you sign two, three, four, five, sixplayers to try and get yourself out of the division or do you hire a financialcontroller that can do your independent regulator submission?
Alex Cadwallader
It's actually taking it back to my day job. I think the lastappointment we had over a um a e-money provider getting too technical in thefinancial sector. The reason the regulator stepped in is because theircompliance team wasn't at the level that they wanted it to be. The business wassound, but the compliance team weren't ticking the boxes. The regulator steppedin, appointed us, and we had to deal with it. So, you know, you've got toalways be, as we've just said, it's not the silver bullet that's going to fixeverything, and it won't mean that suddenly Sheffield Wednesday would have beenbought by Jeff Bezos if the regulator have stepped in earlier.
James Cooper
I want to finish off with one question to all of you. Wheredoes the championship go in the next 10 years, Matt? Is it bigger, better,richer, bolder, or are we going to see people fall off the Apple kart?
Matt Jarvis
No, I think it'll be I think it'll be very similar to how itis now. You're still going to be chasing that dream. You're still going to haveclubs that are desperately clawing their way to try and get to the top. You'regoing to have clubs that are run well that are going to suffer because theywon't be able to get to the top. They will still be running it really well, butthey'll always be that mid to low end of the championship. And I think it willstill be as exciting and as still as supported by fans around the world becausethat's their team. They are tribal to that team. They'll get their kids tosupport that team. They'll be going to their local club to watch theirfootball.
James Cooper
Alex, what do you think? Will regulation sustain what wehave? Will it change what we have?
Alex Cadwallader
I think it's still going to be driven. I think the ambitionof the owners will continue to increase and I think we'll have more and morepeople seeing the championship and league one teams as an asset that they canget an enhanced return on in the next three to five years.
James Cooper
And Rob, a lot of it depends. Sorry, Matt.
Matt Jarvis
I was I was just about to jump in. The only the only thingthat's going to change in the next 10 years is actually I think is the gapbetween the championship to the Premier League is only going to get bigger.Yeah. Because you've seen it in the last however many years until last year.The three teams that get promoted are the three teams that get relegated.
James Cooper
So it's important the championship remains in the footballleague structure and becomes the best of the football league rather thanPremier League 2.
Matt Jarvis
Yeah, definitely.
James Cooper
And Rob looking at that longevity over the next decade. Alot of it's coming come down to the kindness of owners still even inside thenew rules because we look at it I think the 85% is is is the ratio that we'relooking at but there's then the freedom for topups from owners. So the biggestpockets going to win aren't they?
Prof Rob Wilson
In my view yeah I can't see a different landscape in 10years. I think we'll still talk about revenues going up costs going up wagesprobably outpacing revenue growth. the odd club fall into financial difficulty.So, needing to give Alex and the Leonard Curtis team a call to help themrestructure and make sure they stay in the right in the right place. Um, but Ialso agree with Matt. I think the gap between the Championship and the PremierLeague is simply going to get bigger and bigger and bigger and that's where thethe key battleground will be for me.
James Cooper
There's so much inside the 80 pages. We've only just kind ofscratched the surface. I know in further podcasts we'll be looking at maybe theWSL. We'll be looking at digital footprints, but for now, gentlemen, thank youfor talking about the championship so openly and so honestly. Thank you.
Alex Cadwallader
Thanks James.
James Cooper
And that's it for another episode of the Sport, Structuredpodcast with Leonard Curtis. Hopefully, you'll agree we do things a little bitdifferently. Yes, there's informed conversation and debate, but it's backed upby cutting edge research and data, plus recommendations aimed at growing longerlasting and more sustainable sport for years to come. Leonard Curtis latestreport into the championship is available now. But thanks for being part of theSport, Structured podcast.
Disclaimer: The content of this podcast is intended as commentary and opinion on matters of public interest in the sports industry. While we make every effort to ensure accuracy, figures, statistics and financial data referenced may be based on publicly available estimates and could be subject to error or change. Nothing in this podcast should be taken as a statement of fact. If you believe any information is inaccurate, please contact us at rob.venables@leonardcurtis.co.uk and we will endeavour to correct the record promptly.
