Legend has it than in the aftermath of the great Wall Street crash of 1929 a journalist conducting an interview with a veteran financier asked if it was still possible to make a small fortune in the markets. The money man replied instantly, “Oh, most certainly!” Thoroughly surprised the journalist posed his supplementary, “Really? How does one go about it?” “Well,” the banker responded, “first you start with a big fortune.” Something similar might be said of football clubs, by definition they are loss making enterprises. Those Rangers supporters who were persuaded to invest their money in the new club set up following liquidation more than two years ago have seen two-thirds of the value of their shares wiped out.
Professional football is an arms race for the best players with every penny of available capital diverted either directly to salaries and transfer fees, or indirectly to training facilities and scouting networks. Football finances are a balancing act: maximising revenue in order to maximise expenditure, and thereby purchase success. Making a profit is not only unattainable, it is foolish. Breaking even is the ambition, an ambition often unrealized. This is true at every level of the game, in every division, in every land, or at least it ought to be. The introduction of UEFA’s financial fair play rules were designed precisely to prevent this equilibrium being short-circuited by deep-pocketed Arab princes or Russian oligarchs.
What to make then of the pecuniary debacle currently unfolding at Ibrox? This can no longer properly be regarded as a mere crisis, but rather as it enters its third year must now be considered as the new normal. The present episode in the saga centres around whether control of the club should rest with ned-outfitter magnate and Newcastle United owner Mike Ashley, the most despised man to live in a city which is still home to Ant and Dec; or 41- times convicted tax-dodger Dave King, who seems in his time to have faced more counts than Peter Cushing.
The universally shared assumption throughout has always been that the new Rangers would inevitably rise to the top of the Scottish game, challenge Celtic for supremacy and make their way into European competition. This, it seemed, was a certainty, as immutable as the laws of nature. But what if we were all wrong? What if there is no way back for Rangers? For the governing bodies and the media who had traded on the Ibrox club’s popularity for more than a century the very idea is unthinkable. These, after all, were the people who argued for the new club to enter the football pyramid in the second tier rather than the fourth, an appeasement only halted by the mass-protests mounted by the supporters of other clubs.
The three year journey though the lower leagues was always going to be costly. The club would face massively reduced revenue: less TV income, reduced sponsorship premiums, fewer visiting supporters buying tickets, no European football, less corporate hospitality and so on. Unlike the minnows they would be facing in domestic competition, the Govan club has a massive infrastructure to support. The combined costs of Ibrox stadium, the Murray Park training complex, policing, scouting and youth teams are rumoured to amount to £8 million per year before a single pound is spent on player wages. In this context the £22 million raised in the 2012 stock market flotation may have been just enough to get the team through had it been combined with rigorous financial austerity. In actuality the money was squandered in barely a year, setting a new low in economic diligence, even for an institution which had been running at a heavy loss for two decades previously.
Even a brief examination of Celtic’s public accounts show that Scotland’s richest club is only viable at its current level if it qualifies for the Champions League group stages in at least three years out of five. The TV revenue of £20 million or so earned from qualification is around ten times what can be expected for a season in Scottish football. Without this and the £10 million or so generated by extra ticket sales and other bonuses Celtic simply couldn’t operate at their current financial level, a level currently best characterized in a European context as ambitious mediocrity. Even were another team to challenge Celtic at the top of the Scottish game, basic arithmetic demonstrates that if one team were to win the league and thereby gain entry to UEFA’s elite competition in three years out of five, the other would be limited to a maximum of two years out of five. Never mind the fact that even having won the Scottish Premiership, progress through the Champions League qualifying rounds is far from certain. Put simply, the finances of Scottish football cannot support two clubs operating at Celtic’s current level, and even supporting one is far from easy.
The distressed club is a loss-making institution with no credit line from a bank. It is extremely unlikely to win automatic promotion this season and in the event of a play-off would face a Hibernian team who humbled them with a four-nil hiding barely a month ago. Since then the Glasgow side has already been forced into player sales to help keep the lights on. The increasingly strong likelihood is that they aren’t coming up this season, and it is impossible to see how they could financially survive another season in the lower leagues. A new share issue is unlikely to be possible (it’s already been tried and failed), the well of goodwill poisoned by the behaviour of the board over the two years since the last one. A second liquidation is still possible, but would likely see Rangers mark 3 start out even more impoverished than Rangers mark 2, without even possession of their own stadium, the security over which would likely already have passed to Mike Ashley. David Murray first put Rangers up for sale in 2009, and six years later no credible buyer has come forward. It seems that the emergence of such a buyer is more unlikely than ever, meanwhile there are persistent rumours Ibrox stadium needs millions in overdue repairs and maintenance. The past two years have taken a toll on the former Rangers support, who are the only asset the club have, yet even they only now turn out in record low numbers. How much longer can they be relied upon to show up for lower league football or uncompetitive also-ran status?