Season 2011-12 Fan Articles
Is it time to be co-operative?
By Shaun Sparke :: 13/09/2011
30 Comments (»Last)
Back in February this year, this report was submitted to the government from co-operatives UK, regarding football governance. I can?t recall whether this was covered on here at the time of its release but now seems like an opportune moment to bring this report back into focus given the recent debates on here regarding the lack of people willing to invest in Everton FC.
For those who haven?t got the time to read through the report, it basically champions the idea of a fans co-operative taking over the ownership of football clubs. Now this is not something new and I am aware that it has been mooted many times on here and other websites... but, with Bill Kenwright openly admitting that there is a distinct lack of billionaires, millionaires or even moderately rich entrepreneurs showing any interest in buying or indeed investing in Everton FC, if he or the other board members are serious about trying to find an answer to our current financial plight, then every avenue must be explored ? and this includes looking into the feasibility of a fans' co-operative.
Whether the board have invested any time at all on this possibility and then immediately dismissed it as unworkable is something I am not aware of. However, if they have not, then maybe it would be prudent for them to do so. Can it work? Yes, of course it can if there is enough will but, probably more importantly, if there is enough fan interest. The best current example available that it can work is Barcelona.
A recent article I read in the London Evening Standard explained how Barcelona turned themselves around, not by finding a billionaire owner but by turning to the fans for support. I have reported the main theme of the article below.
Barcelona doesn't have a Billionaire owner, its own rules and structure prevents it. And yet it has been the team that everybody seems to aspire to be. So, is it possible that their fan ownership model could work in the Premier League... and more specifically at Goodison Park?
A few years back, Barcelona?s president ?Laporta? was elected on a reform agenda on the back of a fans protest. The fans called themselves the Blue Elephant group ? not quite the Blue Union but our shirts do have a white elephant printed on the front. Oh isn?t irony wonderful sometimes?
Laporta and his supporters were concerned at poor performance and at rumoured plans to convert the club into a private company, akin to what we have at Goodison at the moment. This could have seen Barcelona saddled with massive debts.
One of Laporta?s first acts was to replace virtually the entire management team with top-class professionals, many of them drawn from outside the football industry. His management paid particular attention to improving financial controls and marketing. Between 2003 and 2009, turnover increased from £108.2 million to £384.8 million. Barcelona has been profitable since 2003-04, and has repaid virtually all its historically-incurred debt.
Perhaps Laporta's genius was the way in which he worked with the mutual structure's potential weaknesses in traditional business terms, and turned them to the club's advantage.
Barcelona could not raise finance through a stock-market flotation or a private capital injection. It can only raise money by tapping its fans. Club membership between 2003 and 2010 was almost doubled to over 170,000, via what it called The Big Challenge (El Grand Repte). Members were recruited all over the world. It went on to aggressively sell them club merchandise, a practice it still pursues. It may have been aggressive and some of the membership probably found it a little tough at times to fulfil the extra financial burden, but I bet none of them where complaining when the European cups and domestic titles landed at the Camp Nou.
So should Barcelona?s success be taken in isolation? Last year Terry Duffelen penned this piece in his blog Pitch invasion, in which he outlines how fan ownership is utilised in Germany. He explains that the basis of the German model is the 50 + 1 rule whereby a minimum of 51% of the club must be owned by club members. This still allows for considerable investment opportunities for private business to invest while preventing them from having overall control of the direction of the club. A Bundesliga club board is made up of delegates selected by the shareholders. That way the supporter membership associations (or Mutterveiren) have a direct say on the management of the club.
The benefits to this method are clear; the fans would have a real voice at boardroom level, there would be no more cancelling of AGMs, no more secret exclusivity deals regarding the club relocating to a retail park outside of the city ? that is of course unless the fans wanted that to happen. In short, we would have a say in how the club was run.
I am aware that both Man Utd and Liverpool fan groups have recently spent some considerable time in trying to sell the idea of club ownership to their own fans without any real success. It pains me to admit it, but both these clubs have far larger worldwide fanbases than ours, and if they couldn?t attract enough interest then how can we?
Well, we are not just any other football club and just because others can?t do it doesn?t mean that we can?t. For long periods of our history, Everton have showed the way. Goodison Park was once the envy of the rest of the country, we were the first to try undersoil heating, our attendances were historically always greater than Liverpool?s, we were THE club on Merseyside and, until the arrival of Alex Ferguson at Old Trafford, we had won more titles than our illustrious but over-hyped neighbours down the East Lancs Road.
I am no accountant and there are fans who read this website that will no doubt be able to punch holes and find flaws in my basic arithmetic here but let?s take a little leap of imagination. If Everton Football Club announced tomorrow that it was seeking to recruit 50,000 members and each one of those members was going to be allowed to have a vote to elect a club president or a board member or two so they could have representation on how the club was run, would you be interested?
How much would you be willing to pay for an annual membership? I am not talking about season tickets here, there are many fans worldwide who cannot attend the games but would love to be able to contribute to the running of the club. Lets say the club asked for a figure of £500 per annum. That would create revenue of £25 million. If the club targeted 100,000 members then obviously the revenue would be doubled or they could ask for a membership fee of £1000 per annum and that would have the same result. Using the German method of 50 + 1, this might help Everton become more attractive to a potential investor knowing that the fans could virtually wipe out the club debt within a couple of years.
Incidentally, the £25 million raised by 50,000 fans could have secured the Albert Dock stadium. Did anybody ask us if we wanted to invest? No, I don?t think so. Maybe the board could have tried, who knows ? we might have said yes!
Now, going back to the Barcelona model, those fans are then targeted to buy club merchandise which in turn increases club revenue proportionally. It seems a little like fan exploitation doesn?t it? The thing is though, you wouldn?t be just a fan, you would be an owner of the club, responsible for investing your own money and having a say on how it was spent.
My main problem with this argument is that I am aware that many fans, especially in this city of ours just don?t have the financial means to fork out that kind of money each year. A lot of us are scratching out a living the best way that we can and see our wives, children and charitable donations as priorities for our income ? and nobody is going to argue against that.
Many fans can just about afford to turn up every other week and struggle to buy season tickets even with payment plans. However, do we as Evertonians really love the club, or are we happy to let somebody else love the club and use their money so the rest of us can bask in the glory if we ever manage to win anything again? Either way, I think the club would do well to at least explore the possibility of fan ownership. I am up for it. However, I just need to find a decent excuse to explain to my kopite wife where £500 has gone from the savings account!
Reader Comments (30)
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2 Posted 13/09/2011 at 14:17:00
And you have only got yourself to blame for marrying a Kopite!!!
3 Posted 13/09/2011 at 14:11:33
4 Posted 13/09/2011 at 14:59:59
I'd definitely part with £500 or even a £1000 ? if the money was going into such a venture. As someone who has chosen not to spend anymore this year, it doesn't mean I wouldn't be willing to support the club in another way.
I think you could offset the prices of season tickets to "owners" so to make it more attractive/attainable. I agree it's a lot of money for the average fan but I actually believe there's a fair amount on blues who dont attend games who would be willing to buy a few grands worth of shares.
Aside from the obvious organisational issue (deciding and electing representatives). The key problem is still our current board.
a) Would they even be willing to discuss such a proposal (I wouldn't expect such a dynamic idea to fit with them).
b) What kind of price would they put on their holdings (and would BK insist on some position of authority)?
But I agree many clubs throughout Europe prove it works.
6 Posted 13/09/2011 at 15:24:23
Shaun.
It looks good on paper but Everton are not in the same league as Barcelona - image, support and structure within their local community (presently EFC has almost no say within their local council).
Additionally, like everyone else on the planet, Barcelona FC want to give a good picture as to what they actually owe.
The following is from TotalBarca:
"There is also a big discrepancy regarding FC Barcelona?s total debt (in millions of Euros) between Barcelona AGM (30), Barcelona accounts (202), English media (350), and Rosell?s campaign (489) before the presidency changed."
7 Posted 13/09/2011 at 15:41:05
The other way to look at it is that the current equityholders at Everton have chosen to finance the club using debt (rather than equity), which needs to be repaid on exit (or at least reflected in the purchase price).
Let's say a co-operative could raise £40m (£800 for 50,000 fans). This would enable the current owners to sell their shares for £1 and walk away from the club leaving it debt free and able to start again in a financially efficient manner.
Food for thought.
8 Posted 13/09/2011 at 15:39:14
I personally think if you managed to get 10,000 from the local area/matchgoers you would do well, but would double that with fans from around the world.
20,000 People paying £500 would see us owning half the club within 4 years at the estimated sale price of £80m, something that I would love to see.
It's about time our club found it's way back to being the innovators of English football.
10 Posted 13/09/2011 at 16:34:27
11 Posted 13/09/2011 at 16:40:36
The big thing is how do Everton increase revenue coming into the club? That is for any new owner/investor. If the fans did own it, and didnt manage this, then we would be no better off. All of the money that was coming into Everton would be going out again, with no surplus that we could reach for should we need/want it.
I, like im sure many other fans, feel I give enough to the club in return for the very basic, which is allowing me entrance to go and watch 11 Everton players play football against the opposition.
Also, Ebsfleet United did this didnt they?
12 Posted 13/09/2011 at 17:42:41
Barcelona works because they have the worldwide market to appeal to. We don't even take advantage of Cahill, Howard or Chang's market for fans.
100,000 shirts at £40 a go in these countries would equal £40 million pounds. Take away any costs for this, add August's transfer cash and we have a debt free club in theory. I bet you will find an asian with a chang in hand with a United top on though!
13 Posted 13/09/2011 at 18:12:39
14 Posted 13/09/2011 at 18:10:04
15 Posted 13/09/2011 at 18:10:04
16 Posted 13/09/2011 at 18:21:12
I've supported Everton for more than 50 years and would be more than happy to contribute to such a scheme. 1K would be no problem,so a poll sounds like a good idea.
The big question is of course would the present board be willing to discuss such a scheme?
17 Posted 13/09/2011 at 18:36:50
18 Posted 13/09/2011 at 19:33:38
19 Posted 13/09/2011 at 19:28:48
20 Posted 13/09/2011 at 20:32:08
IPS legislation has a number of unique attributes that make it an ideal form for community initiatives.This is such a massive paradigm shift, there is no way the current regime could come to terms with it. They have to be persuaded to step down and walk away. But that will only happen if they admit to a low valuation of the club, and a consequent loss of the investment.
26. The legislation governing the IPS legal form ensures democracy is enshrined and the protection of members' rights - whilst it is possible to state a company should be one member, one vote this can be overturned by the members. An IPS has to be one member, one vote - regardless of the number of shares owned. In an IPS members have the right to appoint and dismiss directors and determine the affairs and rules of the society.
Whereas, back on Planet Mail, where luvvy Bill gushes to Martin Samuel and he laps it all up, the paper last week listed a selling price of £100M.
22 Posted 13/09/2011 at 22:06:31
The £25 million raised by Barcelona fans is a drop in the ocean and although it gives them a say they still have very little overall say in the running of the club.
I'm interested in the German model but that only came about because the whole of their league pretty much went bust. We'd have to raise a hell of a lot more money at the moment to get rid of either Kenwright or the likes of Earl and Green from our board.
23 Posted 13/09/2011 at 23:22:36
24 Posted 14/09/2011 at 02:17:03
Shaun, the day of the Blue Union interview Bill was having a meeting that evening with a potential buyer, and then just last week he had meetings with another 3.
That's 4 potential buyers in the space of 2 weeks according to Bill. And how many has he claimed previously?
Doesn't sound like a lack of interest in buying / investing to me. I wonder what could be the stumbling block to having that interest realised?
25 Posted 14/09/2011 at 02:22:21
When Chelsea were out here they were sponsored by Singha too and there were pictures and banners of them everywhere.
Our own sponsor Chang though has nothing Everton related in the local market at all.
26 Posted 14/09/2011 at 05:41:29
I also think that Kenwright has the majority of shares and would never let go of those until he got exactly what he wanted for them.
If enough Everton fans go together and buy shares than we could put even more pressure on the board. Trust Everton sounds good but I dont belive they have established themselves yet? Have they?
27 Posted 14/09/2011 at 06:44:42
But after Blue Union the chances of getting another word in Bill's ear (if he is in charge) or actually talking to one of the Organ Grinders themselves is next to fuck all.
'They' don't seem to want to listen and, apart from the Elstone and Ross party line, want to say even less.
Crisis? what Crisis?
They are in the bunker ordering non-exsistent divisions to fight to the last man. Poor Plan A and no sign of a Plan B...
I will back Trust Everton as much as my mearge purse and Wife allows and no doubt will many others, but it is at best a medium term 5+ years thing.
If say, 50,000 legally bind themselves to pay '£x' for 5 years there is some sort of equity in it for the bank(s) and we have some clout on the strength of our lump sum at the end... a bit like a mortgage only not or something ? that's what smart arse bean counters are for, to put it into bank-speak.
28 Posted 14/09/2011 at 08:43:37
However, the price they are currently asking is clearly above market rate as there are plenty of willing purchasers of the club for £1.
If I had my house on the market for 12 years without so much as a single credible bid, you'd have to conclude that I'm asking too much for it.
Ergo, the club is worth something in between £1 and what the Board are currently willing to recommend.
29 Posted 14/09/2011 at 10:11:26
30 Posted 14/09/2011 at 11:08:32
There are a number of factors to consider, not least that the value of sponsorship deals, even for 2nd/3rd tier sponsors for the likes of Man U and Chelsea is far higher than Everton's is currently worth. That's not to say it can't be increased.
Overall I'd say Chang have been a good partner for us. That they've used it to launch or boost brand profile in UK and Asian markets is entirely what they should be doing. The CSR stuff they've done with the club in Thailand is also positive PR.
But the fact remains our current shirt deal is worth around £2.6m p.a. Man Utd's deal with DHL to sponsor their training gear is £4.0m p.a. With the global appeal of the PL rising year on year, and us being one of about 7 clubs ever-present in the PL, we did all start from the same page in that regard.
I'd argue that it's us and Villa (irrelevantly the only 2 of the 7 to be part of the original 12 league teams) that have failed to build on the overseas appeal that the Prem brought in.
31 Posted 14/09/2011 at 11:31:14
For me the debate is split into 2:
1. Does collective ownership make sense. How have other clubs fared? I dont have specific cases to hand, but if I recall a fewer lower league clubs initially thrived but soon ran into problems when there was a need for additional capital.
That said, it might be an interim solution. Owners step down, interim board appointed, Fans collective raises enough cash to keep the debt collectors at bay. Then the interim board seeks a buyer.
Could this happen? Well, depends on valuation...
2. Valuation. Richard Lardner raises an interesting point. What is the equity value of the business? GBP 1? or GBP 100m? I would offer a different perspective. The balance sheet points to the former.
BK ofcourse would say that the balance sheet does not reflect the true value of the club. He mentioned for example that the players were actually worth GBP 150m for insurance purposes (an odd measure, because in theory I could get life insurance for GBP 100m as long as I paid the appropriate premiums) which presumably if we factor into the balance sheet produces a positive equity value.
So BK is suggesting that the market value of the club is much higher than its balance sheet value.
He may be right, but I have my doubts.
Its obvious this Board does not have the means (or willingness) to invest in the playing squad, and if the club continues to receive pressure from the creditors, more players may be need to be sold. Even if players are not sold, what if there is a long term injury to a key player, weakening the squad?
If the squad weakens, will we be in a position to finish in the top 10? Unlikely.
What will happen to our revenue streams? They may decline, as lower league placings and less TV money roll in. We may be able to reduce our salaries, thereby stabilising losses, but if the club is trying to offload players to cut the wage bill, will the squad have a value of GBP 150m? I am not sure.
My point is, the current capital structure of the company is unsustainable, especially as major investment is required, and therefore there is a case to say BK walking away with a pound in his pocket is a good deal.
Will he do it? As Michael Kenrick suggests, probably not.
However, what is certain is that unless the likes of BU dont continue to exert pressure, the club will remain in a financial straight jacket, with a dead weight attached, trying to stay afloat.
Its not an option I want, and so I would be prepared to put 1k in a Fans Collective. Its got to be worth a shot.
32 Posted 14/09/2011 at 19:18:02
Most people reading this would think that they could never affored £500 or a £1000 per year. But I reckon everyone has shite in their attik. Everyone has shite in their basement. Everyone must have shite in their garage. It can all be sold at a car boot sale.
How many weeks (sundays) would it take to amass £500. Think of the dvds at £2 a pop that we never ever watch anymore. What about the new borns clothing, the tools, the funiture that the council will charge US to be taken away. Granted this is a small step, but I've not read this so far. It can be done.
So ok, it happens for the first year, then what? Stuff, materialistic shite is bought year on year. So, after six months it's obsolete, then sell the shite. Every car boot sale i've ever been to I see the same faces selling the same shite week in week out. It works for them why not us.
What I'm saying is that a long journey has to start with a single step.
Whatever Barca is now, and I think Real Madrid is in the same boat, (funny how those two teams are in the CL) they must have had to start somewhere. Look at what they are today. I know it must have been a difficult situation for them in the early years and if we were to do this, then these years that these clubs went through and not now, would be worth a lot of research.
Dont forget it's not only our kids, but our soon to be Grandchildren that will benefit from a scenario that Shaun has outlined.
Also, when a bank is owed money, then they have the right to call in that loan anytime they want. So, it's not BK who we should have the focus (great band) on, but Barclays. It's not how loud we can speak, but how loud our money will shout !
Good stuff Shaun,
COYB
This must surely (shirley) be the first step for all those who love our club but think that they dont have the money to do what you are proposing.
33 Posted 15/09/2011 at 02:17:03
But then Chang sponsor so many local teams and different sports here the Pattaya Dolphins are better known than Everton.
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1 Posted 13/09/2011 at 13:55:59