Mike Ashley – A Cuckoo in the Magpie’s Nest

Where's the money gone?

Where’s the money gone?

I’m a football fan. When it comes to Newcastle United, that is all I should be. My concerns should be about players coming in, players going out, and the football being played on the pitch. With a little bit of managerial chopping and changing every now and then, tactical debates with fellow Newcastle fans, and discussions being held over a pint about how this season was going to be the one where we finally win a cup.

I am no longer just a football fan.

What Mike Ashley has successfully achieved is to make pseudo-accountants out of many Newcastle United fans. Instead of pointing to silverware as a barometer of progress and success, many Ashley-ites are pointing to balance sheets and figures as a means of showing how ‘better off’ we are under Mike Ashley. In response to this, I’ve had to take a more keen view on the numbers side of football, and look into whether Mike Ashley is indeed ‘good’ for Newcastle United.

He’s not.

What? But we were leaking money and Ashley steadied the ship. We are making a profit as opposed to making a loss before he took over. We would have went into administration, liquidation, (insert nonsensical financial word-ation here). We would have done a Leeds, or a Portsmouth, or a Coventry or a Rangers. These people repeat these utterances, and as the old adage goes, throw enough s**t and some of it will stick.

I challenge any fan to categorically prove that we were in danger of administration before Ashley took over. To save you time, I will assure you that you cannot, but you are welcome to try.

Also, is Mike Ashley actually good for business? There was an excellent article in the Mag yesterday written by Mark Jensen where he draws comparisons with the relative financial situations of both Newcastle United and Tottenham Hotspurs. If you wish to see the full break down, I would suggest you read his article, as I am only going to draw reference to one aspect of the article.

We have been constantly told that we cannot compete with the top 6 (or even Southampton apparently) on account of the fact that our commercial revenue is so low. Our famous stadium was renamed on account of improving commercial revenue, as well as our association with Wonga (the sponsorship deal is reportedly lower than Virgin Money, so make sense of that if you can). So needless to say, a little bit of scrutiny needs to be put on our commercial revenue.

Before Mike Ashley bought the club in 2007, Newcastle United’s commercial revenue was a very healthy 27.6 million pounds. In the space of 6 years (the entirety of Ashley’s tenure at the club) he has overseen the demise of our commercial revenue to a relatively paltry 13.8 million pounds. How has he allowed this? Is it because we are only a mid-table Premier League club? No, because in the 2006/07 we finished 13th, in the 2005/06 season we finished 7th, and in the 2004/05 season  we had finished 14th, so by no means were we an established top half side at that time, yet we were able to bring in nearly 30 million pounds in commercial revenue.

You could make the argument that the position we are in now, is very comparable to the position we were in then – not an established top half side. Many people criticise Freddy Shepherd and Sir John Hall, and that is your right if you wish to do that. They may have spent too much money on poor players with inflated contracts, but it would also appear that they were much more adept at bringing commercial investment into Newcastle United than Mike Ashley is.

You could also entertain the more sinister approach. Newcastle United is 100% owned by Mike Ashley. The full accounts are not published. He is not an idiot. Is he really much worse than Hall and Shepherd at getting commercial investment? If you deem the answer to that question to be no, then where has that money gone?

I’d also like to make a point surrounding the issue of making profits and whether this is demonstrative of Ashley being good for Newcastle United. We have been making profits/breaking even in the past few years, which is always good to see, but ask yourself, how have we managed this? Comparisons to where we were before Ashley took over, and where we are now is necessary. In the years 2006-2013, turnover has increased by 6 million pounds. We make nearly 10 million pounds a year less in ticket sales, we make nearly 14 million pounds a year less in commercial sponsorship, yet we make nearly 30 million pounds a year more through television. By doing nothing, Ashley has increased turnover.

As Duncan Bannatyne quipped – turnover is fantasy, profit is reality. In our last available accounts, it shows that we made a profit of 1.4 million pounds. While under Shepherd and Hall, we were making relatively substantial losses (20 million pounds+) on account of player purchases and high wages. So we are in the black. How has Ashley managed this? In the same way he managed it with Sports Direct. Buy an ailing brand, strip it to the core, buy cheap, sell high while keeping costs down in the process. It works for retail businesses (just look at the growth of Sports Direct share prices between 2007 and 2013) but it does not work for football clubs. Yes we may be making a profit (a slight profit) but one could argue that given how television revenue has increased dramatically in the last 6 years, Newcastle United have in fact contracted as a club, and the only reason we can make a profit is due to the fact that we are simply operating in the Premier League. Not exactly as sound a financial footing as many Ashley-ites would have you believe is it?

Alan Pardew was quoted as saying that we did not sign another striker in the summer as it would have put us into our overdraft. So what? You’re a multi-million pound company, not a hard-up student! Since when has it been an accepted view that football clubs can only function if they are in the black? It is nonsense, and some Newcastle United fans are buying it. Football is an economy unto itself. Perhaps there is a day where that bubble bursts and all that is left are the well run, financially self-sufficient teams. When that time comes, we have a pretty good shout of winning the Premier League, but in the mean time, we are simply not seeing investment, growth or progress in our club in order to satisfy the interests of one man, and one man alone – Mike Ashley.

Mike Ashley has an easily discernible plan – Newcastle United owe him money (129 million to be exact) and he will play the long game if he needs to. He has already taken 11 million from the club to repay his own debt, and intended to take a further 18 million this year, but thought better of it. One could make an educated guess that with the payment of the lucrative television deal, Ashley will once more pay off some of his debt which he has offset against the sale price of the club. With the market value of the club around the 180 million mark, couple with Ashley’s debt attached to the club, it would appear that the asking price for Newcastle United is over 300 million pounds.

No one in their right mind will buy Newcastle United for 300 million pounds.

So we’re in an unnatural arrangement. Many fans argue that Ashley doesn’t care what we think and will happily stay at the club until he can recoup every penny of what he is owed. His furious response of banning local journalists following the recent Time4Change march, coupled with his decision to ban NUST from future fans forum meetings, seems to indicate that he cares a little more than some would have you think.

Could more fan pressure force Ashley’s hand? Only one way to find out.

To surmise, I think a more critical view when analysing the figures could lead to some difficult questions being posed and that is what Newcastle United fans need to do. If he is going to make pseudo-accountants of us all, then at least let’s do it properly.

In the mean time, I am looking forward to the day when I can just be a football fan again…

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2 comments

  1. Firstly, this articles header has provided some light amusement for me. On my tab it reads “Mike Ashley – A C…”

    Well played Firefox, well played!

    The Mag article was a good read and I would echo your thoughts that anyone who hasn’t read it yet, does so soon.

    It does raise questions, although it is only a snapshot in to the accounts. I think some will dive to deep in to the issue, when really the points / questions are simple.

    1) Why has our commercial revenue nearly halved when other teams has increased?

    2) Looking at the matchday revenue decrease, does it not highlight to you the importance of keeping your fan base happy? People go on about how great it is that the club lowered ticket prices, and on the face of it I can understand why. However, they have only been reduced and capped as they have as Ashley alienated most supporters and this was a desperate attempt to lure people back. It worked, but it has ultimately cost the club.

    So, how does one go about asking such questions without fearing they will be silenced? What are you hiding Ashley and what are you so scared of?

    Time is running out, change is upon us. You could even say it’s Time4Change.

    Like

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