The loss of revenue due to the Covid 19 crisis is hitting hard and this means that the January transfer window is likely to see little money spent by Premier League clubs, here we look at the financial crisis and why it is hitting Liverpool & Spurs as well as Southampton.
Back in March last year when football was suspended, most people in the country including football clubs thought that it would be a short lived thing and that by the end of the summer life would be back to normal.
When the 2019/20 season was finally finished in June that still looked likely to be the case and with the case numbers dropping , some clubs started to behave like everything was normal and splashed the cash when the summer transfer window opened.
Tottenham Hotspur where one of those, they took out a £175 million emergency loan from the Government to do just that, they spent around £75 million in the window, only recouping around £12 million from Saints for Kyle Walker Peters, but they did spent big on covering the wages of Gareth Bale.
Bale is on loan but it is estimated Spurs are paying £250,000 of his £600,000 a week salary at Real Madrid, that means for the season Spurs are paying somewhere around £10 million in his wages alone, plus they have also signed Carlos VinÃcius on a season-long loan from Benfica for a £3 million fee and you can add a couple of million or so in wages to that total.
This was an example of how some clubs abused the system in order to still keep signing players whilst having no actual income from matchday revenue etc.
The old adage that clubs get so much from TV that they no longer need fans in the ground has been consigned to history, the TV money is still the biggest revenue earner, but the difference between the top & bottom of the Premier League is negligible, around £2 million per Premier League place plus the TV money.
Liverpool who topped the Premier League received £176 million in TV money, but that revenue dropped sharply once you go down the League, Spurs for Example got £155 million, Wolves in 7th £141 million and Saints received around £123 million, as one of the lowest earners.
Now you can see why the Project Big Picture wanted to let the likes of Liverpool carve up the TV rights. At the moment it is roughly worth £3.2 million per place to the teams
But to be able to sell TV money you need supporters, it is all about selling the show, packed grounds and razzamatazz, it is also about how much you can then earn on sponsorship, advertising and merchandising, this is what is pushing Liverpool & Manchester United ahead of the pack in earnings, they have a fan base who clamour to buy shirts & anything with the club badge or name on it.
But without fans going to the grounds clubs are losing money, they can't milk the fan base, Saints according to CEO Martin Semmens are losing £3 million a month, most of this is made up of ticket money, match day advertising and merchandising, but the club is covering it using a borrowing facility, it means that we will survive as we haven't spent it all on players, but we haven't got much cash to splash on transfers.
Saints are running the club as a business, what was the thing that most fans vilified is now the thing that is keeping us afloat.
Throughout the Premier League, many clubs are not in that position, some like Spurs have spent tax payers money on chasing their dream of winning more League titles than Portsmouth and equalling Huddersfield, others have cut their cloth, but if we a club who were running as a business are losing £3 million, what are the big clubs losing ? If our fan revenue be it the normal supporter or corporate revenue is flat, that is a far bigger loss to them than us.
Saints transfer window will be quiet, we are trying to offload Wesley Hoedt, but that won't happen till the summer and that will be a few million off the wage bill, we are unlikely to get any other players off the books for a fee, most of the deals done this window for us and other clubs will be loan deals or small fees for young players no first team ready.
This has been the picture so far with a third of the transfer window now gone,, there have been a total of 5 inbound transfers to Premier League clubs so far, of these only Amad Diallo joining Manchester United for £20 million plus add on's is a fee of any note, this deal was agreed back in October so United were obliged to go through with it.
West Brom have signed two experienced pros in their 30's for nothing, Arsenal have signed an out oc contract youngster and the only fee other than Diallo to change hands is the signing of Frederick Alves by West Ham, but the 21 year old will not have gone for much.
It should be noted hear that Amad Diallo is no relation to our own Ibrahima Diallo, I have seen some sites claim they are brothers, they are not, our Ibrahima does have a brother playing football but that is Abdul Lakhad Diallo who plays for PSG in France.
So we can expect little movement in this January transfer window, usually it is time for panic buying, but the problem this year is cash, most of the deals done will be loan deals or deal where a chain can be created where essentially cash does change hands, but it is generated by the sale of one player which in turn sees the selling club reinvest and the process continue down the line.
But I would be surprised if there is a higher fee paid than United's in this window unless Liverpool decide to pay big bucks for a central defender, to replace Van Dijk, but I don't see that happening, it is a short term fix so they will look to the loan market and someone is out there who needs the money and will loan out a first team regular for a few months to plug a financial gap.
You would hope that would not be Saints, the injury to Jannik Vestergaard might be a blessing in disguise in that it will probably rule out that transfer happening as Liverpool can't afford to wait, but had he been fit then a short term loan deal for say £3 million and taking another £1 million or so off the wage bill would have been an attractive offer for Saints at the moment when it seems that there is no prospect of fans returning to the grounds.
So this will be a much quieter window than normal, but there will be deals to be done, Saints will be looking to plug a gap or two through the loan market, a player out of favour somewhere but with a pedigree.
These are tough times for football clubs and if they are to survive then they have to tighten their belts, Tottenham Hotspur didn't tighten theirs last summer and borrowed big money from the Government, this loan is due to be paid in April, it is likely that date will be extended
But add to that around £525 million of loans taken out to finance their new stadium, most of that debt will remain in place until maturity ( varying between 15-30 years) and then will need to be paid off, but there is still an annual interest rate needing to be paid of around £15 million.
These figures do not include a loan from Bank of America Merrill Lynch (BAML), that was for £112 million on a 5 year contract with interest payments of around £3 million a year.
Whether any of that loan has been paid off using the Government borrowing is not known.
So if Saints are losing £3 million per month then what are Spurs losing and how long is that sustainable for.
Most football clubs assumed that this season would have been back to normal long before now, that has not been the case and the current situation is likely to continue and it could be next season before we get anything like back to normal.
I say this in every article like this, that football club's need their supporters at times like this, those that renewed their season tickets helped Saints through a sticky period, clubs like Liverpool get through because their fans did the same and they still have a global merchandising income that sustains them.
Saints do not have that, £3 million isn't a lot and as I said our situation has been helped by the fact that Gao could not get money out of China, so streamlined our operations, but it is still a £3 million loss and the club will take everything they can get to reduce that, whether it is Gillingham paying Tyreke Johnsons wages on a loan deal for a few months or £100,000 generated through fans buying merchandising, it all goes into the pot to see us through these dark days.