Thursday, March 31, 2011

The full cost of relegation

The full cost of relegation has finally come to light after the publication of the club's accounts (well technically those for Newcastle United Ltd) for the season 2009-10.

Turnover fell by 39% from season 2008-09, down to £52.4 million. This fall was a result of the significant drop off in TV and media revenue, corporate hospitality, season ticket sales and commercial, catering and sponsorship revenue.

Interestingly though, there was a spike in gate receipts - as we recorded the fourth highest average annual attendance in England, despite being in the second tier.

While the wage bill was cut by 24% (largely through sales of high earners such as Obafemi Martins and Damien Duff), wages as a percentage of turnover rose 8% to a staggering 90.6%.

Hopefully this season, with significantly increased TV revenue, that percentage is rapidly on its way back down to a more manageable level.

What the figures also reveal is our indebtedness to Jabba, who continued to bankroll the club through interest-free loans.

The club, naturally, have sought to highlight this in a "Look at us, aren't we being the good guys here, you should be eternally grateful" kind of way while neglecting to add "Of course, we're in this position because we bought the club without carrying out due diligence and we got relegated because of the succession of terrible decisions we made in the boardroom"...

While it's true we do owe them some gratitude (because if Fat Fred had remained, I'm pretty certain we'd be in a Portsmouth-esque financial mess), they nonetheless need to remember that a lot of what has happened since Jabba bought the club has been of his own making.




Blogger Ben said...

In fairness to the club, it doesn't take into account immediate promotion or the sale of Rocky yet. But it does reveal just how precarious our situation was - despite slashing the wage bill, we would still have been a totally unsustainable operation in the Championship with that wages-to-turnover ratio if it hadn't have been for Jabba propping us up. Though of course, as you point out, it was largely Jabba who got us into the mess in the first place...

I wouldn't read too much into the gate receipts stat - I suspect there's a correlation between matchday ticket sales rising and season ticket sales falling. No doubt fewer people were prepared to commit for the whole season when (as looked likely when the Championship kicked off) we could well have been in for a miserable time - but as the season wore on with us playing decent football and running away with the league, more fairweather fans will have been swayed back towards attending.

11:48 p.m.  

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