Geography
Portsmouth Football Club's rise and fall
Wed, 10 Mar 2010 14:28:00 GMT
Dr Andrew Ryder, of the Department of Geography, gives his assessment of how and why Portsmouth football club has gone from premiership to administration.
Portsmouth football club: a fable for our time
At the end of the 1980s, as communism collapsed in Eastern Europe, Portsmouth was a fading industrial city, suffering high unemployment and high levels of social exclusion. The state owned Dockyards, the historical mainstay of employment, had been scaled down, and many of their operations had been sold to the private sector. The city was an unemployment black spot on the south coast, and the future seemed bleak. Two decades later, the city had undergone an amazing transformation. Unemployment was below the national average, new shopping centres had opened, population was growing, and the city’s economy was based around a growing university, a thriving port, and several international firms.
Portsmouth Football Club was emblematic of this transformation, rising through the premier league to win the football cup. However, in keeping with the spirit of the times, the club itself became a commodity to be bought and traded and even asset stripped like any other large firm. The process started in 1992 when the single European Market came into being. Suddenly, national markets for football players were opened to European wide competition. Player salaries had been capped by the ability of national markets to generate revenues, but now, successful teams could poach the best players not only from teams in their own countries but from all over Europe. The result was a bidding war for players, and massive salary inflation. Consequently, for a team to do well, it had to generate more revenue. But, it was increasingly the case that revenue did not come from a local fan base, but from an international one. Moreover, the rise of private broadcasters meant that revenue was increasingly dependent on global - or at least regional - television deals, which meant that teams in the premiership could rely on a steady income.
Over time, income from broadcasting and television increased. Teams turned to recruiting players from outside Europe, which were cheaper than European players, allowing them both to contain costs and broaden the international fan base. Far from being just a local club, Portsmouth Football Club became an international brand. Successive buyers hoped to “grow” the brand and capitalise on it. Initially, this meant buying in more players. Even though this entailed substantial outlays, it was argued that over the longer term the club would be able to tap into lucrative television and marketing deals, and income levels would rise. The catch was that it had to remain in the Premier League. A buying war ensued, not just for Portsmouth but for all football clubs all over the UK. Compared to Manchester United, Portsmouth appeared to be remarkably good value for money.
Initially, the strategy paid off and the club was remarkably successful. However, like Bernard Madoff’s pyramid schemes, the club was living off borrowed money, and eventually had to collapse: player salaries far exceeded what the club was earning, and international competition for players meant that if the club cut salaries it would be relegated for sure.
As well as spending money it did not have, the club was asset stripped. The land around the club, and the football ground itself were sold separately from the club, which became little more than a brand, to be traded and sold. But, without the land and the ground, the club is little more than an abstract idea.
This is little different from the dot com boom, when people bought stocks in firms which had never made a profit, and never would, simply because they had good growth prospects. In the case of Portsmouth, the real losers were the fans. Football is a very localised sport, and teams cannot be moved around to different cities like tokens on a game board. Fans paid ever more for tickets and strips, but were increasingly disregarded as stakeholders of the club. Moreover, although the club will argue that they made a substantial contribution to the local economy, in reality they did not. Even in America, where team sports are extremely lucrative, local sports teams in the major leagues have contributed little more than 1/10 of one percent to local income. In the case of Portsmouth, fans came into the city and left. The club’s salaries were not spent locally, and although the club did hire some local businesses, most of the profits, and later most of the loss, were felt outside the community. There are few shops nearby, and no restaurants, and until recently there were no hotels. Sports tourism does not exist, although to be fair, the club owners did at one point announce that they wanted to move to Tipner and build a new sports and entertainment complex with shops and hotels, which might have generated between 500 and 1,000 new jobs.
Sadly, the demise of the club will affect the city in other ways. Although the club may have had little direct impact on the city’s economy, it had several indirect impacts. Portsmouth became an international name, appearing in people’s mental maps of the UK, Europe, and the world. Far from being a declining port city, it became a football champion. People discovered Portsmouth, and visited, and liked it. Businesses may have invested for the same reason. The club’s decline may be a blow to the city’s image and to city morale.
Ultimately, the club consists of its fan base. They are the reason for its existence. But, like the small saver during the recent banking crisis, the fans became increasingly irrelevant. Amazing salaries were paid to players who themselves became little more than game pieces in European football. Banks today argue that they need to pay their employees amazing bonuses or else they will move to other banks. In football, the situation is similar. But, fans (and savers) might ask themselves if lower salaries for football players (and bankers) would really mean that they would move on. Perhaps they would remain where they are, since a lower, but still high salary, is better than no salary as well. UK football has over-borrowed, particularly when compared to European clubs. The prices paid for clubs have been too high, and the need to generate income has become too great. Television rights are shared among too few clubs, making them ever more attractive to ever more distant investors. Perhaps Portsmouth will be the first in a trend, towards more realistic salaries and prices. However, it perhaps it will not. Only time will tell.