What Does Fairness in Football Look Like? Part 2: Corruption
Today, football is a 1.8 billion dollar global industry, but research at the University of Portsmouth is unravelling just how unstable the books are of clubs in the UK.
Cleaning up the game
Christina has a background in accounting and in the past has led investigations into fraud for big industries. But when she came to academia, she was able to unite this with her love of sport. She continues to coach today but is keen to be a part of cleaning up the historic bribery and corruption that has dogged football and its finances.
She says that the misplacement and mismanagement of funds mean that development and grass-roots schemes can suffer.
There are still so many issues in terms of conflict of interest, whistleblowing and confidentiality.
Where it might seem that there’s plenty of money to go around in football, it seems that it’s not necessarily going to all the right places. Christina’s been working with Dr Adam Cox to analyse the balance sheets of Premier League clubs across the last 30 years. They were surprised to see that despite increasing broadcast and rights revenues over time, there still existed a debt of £1bn!
All we needed to see was a drop of, say, 20 percent in those broadcast revenues in one season and 13 of the 20 clubs would make a loss that season.
Adam says a heavier reliance on broadcast revenues and the competitiveness of player spending is behind the overspending that leaves clubs financially unstable. He says the same problems are present in smaller clubs and those lower down the leagues. Even if clubs are sold with debt and saved, the suppliers and aligned services still lose out, and those relying on income face hardship.
What’s more, Adam suggests that clubs in a stronger financial position will be able to better support community activities.
How to make all sport fairer, financially
Christina’s background in governance and regulation has also led her to look at the systems and processes that can make a sporting association fairer. She’s also looked at the International Tennis Federation and says that transparency and accountability are key, from publishing up to date accounts to making stakeholders aware of how money is being spent and what decisions are being made. She says that monitoring and audits can also help deter fraud and other corruption.
There are loads of areas whereby you don't know what's happening within an organisation, which is supposed to be a public organisation that is supposed to be looking after the sport for everybody. And you don't have access to what's happening.
It’s not to say that recent strides haven’t been made to increase financial controls and increase transparency in the game, but Adam says more research needs to take place to find out what’s truly happening at all levels of the league. It’s hoped that this will help decisions and actions take place to make a fairer game for all.
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John Worsey: Thanks for joining us for Life Solved. I’m John Worsey and here at the University of Portsmouth we work on sharing amazing research, breakthroughs and cutting-edge science with the world. Much of our research is informing and exploring the way we live today, including our cultures and society. Today we’re returning to our conversation around fairness in football. The World Cup, Euros and Championships unite nations across the world, as well as communities, counties, regions and states. And it plays a crucial role in the cultural and economic identities that exist therein. But the financial state of football is far from healthy, and financial mismanagement or corruption can have devastating impacts:
Christina Philoupou: If a club goes into administration and their wages don't get paid, that is a problem.
John Worsey: This time we’ll reveal some surprising truths about football’s shaky accounting. Just how financially stable are the clubs at every level of the game? And we’ll ask how it might be possible to eliminate corruption for good. If sport can add to and amplify behaviours and attitudes throughout a wider society, the way it’s financed and regulated is absolutely crucial in making it fair for everyone, internationally. Dr Adam Cox and Christina Philippou share their insights.
Christina Philoupou: My name's is Christina Philouppou. I am a principal lecturer here and I'm my background is as an accountant (fun times), but most of my research revolves around the interesting side, which is sport finance and corruption. My kind of practical experience is around investigations in corruption and fraud and oil and regulatory investigations. And then when I came to Portsmouth, then I had to actually do some sort of research. I've always been a big sports fan. I've watched sport all my life. I've played sport all my life. I now coach sport, so it kind of made sense to put the two together. And it's actually been very interesting, but also rather depressing. I have to say.
John Worsey: Christina’s been unearthing a darker side to sport, in the hope that governance, policymaking and practises can be cleaned up.
Christina Philoupou: A lot of the stuff around bribery and corruption in sport is not happy reading, right? I mean, there's been quite a bit of movement over the years. So one of the pieces of research I did is I looked at policies between 2017 and 2020, and there has been some movement there, like positive movement. FIFA and tennis particularly have made leaps and bounds in terms of preventing corruption and bribery. But there's still so many issues in terms of conflict of interest in terms of whistleblowing, in terms of confidentiality. And ultimately, what that means is money comes out of sport that is supposed to go towards things like development towards things like grass roots and it goes into people's pockets.
John Worsey: Working with Christina on various projects is Dr Adam Cox. He’s also concerned with the economic and commercial practises that can impact the rights of sports people and their fans.
Adam Cox: I'm Adam Cox. I'm a reader in economics. My interest in sports economics really started off with taking a look at the way the Premier League collectively sells its broadcast rights, as opposed to allowing the clubs to compete against each other directly. And that really led very quickly into really interesting problems around competitive balance, restricting the number of matches on TV spending on players wages and then more recently into club finance during economically turbulent times.
John Worsey: Hold on one second, this is already going quite fast for a non-economist! Let’s start with broadcast rights. How does a broadcaster play a role in how clubs compete?
Adam Cox: One of the most important features for me was I was trying to get a handle on the reasons why the Premier League was collectively selling broadcast rights. And in doing so, it was restricting the number of matches that were shown on television in the UK live at the same time as matches. There was a real fear from the Premier League, but if you show too many matches on television, people will stop coming to the stadium to look at. So I started researching this as part of my PhD, trying to estimate the decrease in stadium attendance every time a match is broadcast, which turns out to be not at all. People are really those people are going to the stadium, are really keen to go to the stadium. Then I really wanted to understand how competitive balance works in that. So what I mean by that is if you have a very strong team winning every single match, every single week, does that just become boring to watch because the outcome becomes more predictable? So if you have more evenly balanced teams to start, then increase the demand to spectating. And actually, I found quite an interesting nuance where it differs depending on the type of person watching so whether they're watching at the stadium or the TV. And those going to the stadium really do prefer of the opposite to those on TV, so a much more balanced match between two closer teams tends to draw more of a crowd for television viewers. And those going to the stadium much prefer, even when they're more like their team is more likely to win or when there's an opportunity for a bit of a giant killing. And maybe, maybe so. Portsmouth beating Manchester United.
John Worsey: Fascinating insights into fan behaviour there, so surely where they choose to invest their attention is where the money is spent? Let’s get back to that piece of research Adam and Christina have been collaborating on. They’ve been looking at the resilience of club finances during the boom and bust of recessions.
Adam Cox: Well, finance was one of the things that really took me by surprise. It led me into looking at players wages.
Christina Philoupou: It's why I'm there. That's why I'm there, Adam.
Adam Cox: That's why you're needed.
Christina Philoupou: Adam and I have been doing some work looking at resilience. We're looking at various aspects of the finances now and some kind of research we're doing at the moment. And it all kicks up really interesting things that you would not see in normal industries.
Adam Cox: I had to the idea that the Big Six clubs, so the ones that feature towards the top of the Premier League season after season would be absolutely fine. And that's not what we found at all. In fact, only Arsenal out of those bigger clubs we found, according to our measures, to be really resilient to these economic turbulence. There were a couple of other clubs in there, but they were clubs you wouldn't expect, perhaps such as Coventry City and Derby. It was a really interesting piece of work because it laid out bare the finances of all the Premier League clubs over the period. And we started looking at the balance sheets going back to the beginning of the Premier League back in 1992. I knew broadcast revenues were really important from the work done previously, and they've grown significantly over this time period. But importantly, it's changed from around about contributing to about a quarter of a club's revenue being more like about 60 percent or so of club revenue. So there's a much greater reliance on broadcast rights revenues as opposed to commercial and matchday revenues than ever before.
John Worsey: That stat itself has been helpful for premier league clubs who saw an impact on stadium numbers a result of the pandemic.
Christina Philoupou: Yeah, you've got matchday revenue, which is the people going in, then the various kind of bits that kind of involved with that, not just tickets, but general. You've got broadcast revenue and then you've got the commercial side. So things like sponsors and and that aspect and those are the three significant revenue streams for football clubs.
Adam Cox: But even with this massive growth in revenues, we still see if you take a look over the Premier League's existence up to where we started, we stopped looking at the statements up to the latest fad at the time, which was 2018. There a collective debt of over a billion.
John Worsey: Yes, you heard that right. A debt of over one billion pounds is not a healthy sounding number for a game that generates enormous revenue and holds such a revered place in our culture. So what’s going on?
Adam Cox: Well, it is all to do with spending. It's, you know, there's been an increase in money coming in through broadcast revenues. So this is about how much has been spent. We're trying to get a handle on why and how people are spending.
Christina Philoupou: What we're sort of trying to look at next is sort of dive in a little bit deeper in terms of changes within the clubs and externally to see how those and of changes affect what's happening within the finances.
Adam Cox: Looking at club profit over that time period, every time a new broadcast deal was with was announced, a renewal of this broadcast, which happens sort of every three years or so, we saw this sort of small increase in profit and then a significant drop. And that's a feature of the nature of the way the league is organised. So it's through relegation promotion, which is a fantastic feature of football in the UK. There is this element of competitiveness and this desire to really overstretch financial resources in order to spend on players to perform on the pitch. And that's what we see through the work that we did is this overreaching of the financial resource as where we're going into an economically positive climate and the ability to whether that can be reined in. All we needed to see was a drop of, say, 20 percent in those broadcast revenues in one season and 13 of the 20 clubs would make a loss that season. And that particular one was the last season we looked at in our research and it changed the total, the profit from four hundred and seventy million profit, to a hundred million loss just by that blip in the broadcast revenues. So it could make a significant difference right across the board if we saw, for example, less people tuning into the television to watch football matches.
John Worsey: But there are barriers to fully understanding the details of individual club accounts, which is a challenge for this ongoing piece of research.
Christina Philoupou: All companies in the UK have to publish accounts and they have to basically put them into companies house, which is a repository and that's free. You can access the accounts. That's fine. The problem is one how accurate those accounts are because a lot of football accounts are not audited, which means there is potential that they're not 100 percent accurate. We don't know. We're assuming they're accurate. And then the other issue is there are a couple of clubs that fall short of their statutory requirements and don't actually file accounts when they should do. And then if you're looking kind of further down the leagues, if you're not making much money, you can take advantage of an exemption that exists in the law whereby you don't have to publish your revenue aspect. So you're what we call an income statements, all the money coming in and the money going out. You need to publish a balance sheet, but you don't need to have a breakdown of what traditionally was called a profit and loss account. So that also creates problems if you're trying to look at what's happening and get a full picture of where the money's coming from and going.
John Worsey: This issue also feeds into a wider piece of work that Christina is looking into. As an accountant she’s concerned with financial control problems like bribery, as well as the financial state within football as a whole. But her research also extended to other sports too.
Christina Philoupou: Rather than looking at clubs, I kind of looked at the the sport's governing bodies. So the ones at the very top of the pyramid that look after so the FIFAs of this world or the International Tennis Federation and things like that. And I did basically, I looked at two aspects. I looked at policies. So what existed there to stop to stop corruption of a financial nature? The other aspect is I interviewed loads of people on that, on their perspective. So I spoke to effectively three groups of people. I spoke to sports governance officials. I spoke to people that worked in sports. So people that worked in clubs and athletes and journalists and things like that. And then I spoke to anti-corruption specialists and I got all their views on what the problems are with regards to corruption in sport and how potentially we could move on. The standard stuff was around transparency and accountability. So there's loads of areas whereby you don't know what's happening within an organisation, which is supposed to be a public organisation that is supposed to be looking after the sport for everybody. And you don't have access to what's happening. What decisions are being made on what basis the decisions being made, whether the money's going to how the money is controlled. There's also massive issues around monitoring. So how do you monitor where the money's going to? And that kind of audit process. Lots of problems around bidding, which we've seen with various scandals in terms of who controls it? Is there any independence in the process, how it works and whistleblowing was the other big issue and that I suppose kind of links in back nicely with the financial stuff because that's a more general issue if you don't have somewhere where you can report things that are going wrong, whether that be that issues around the finances or issues around corruption or issues around fraud or, you know, then then that is problematic across the board. And we still have massive issues around that, around confidentiality of people who report who you report to. Because obviously, if you're reporting into and very often you see this in a lot of sports organisations, the basically the last word goes to somebody on the board or the council or whatever. And your reporting on that you have had some massive conflict of interest, you know, because if Adam has tried to report on me and he's reporting to me, then that's problematic. And unfortunately, you see you still see a lot of that in sport.
John Worsey: Christina says it’s not all doom and gloom though, and that organisations have shown progress in increasing transparency and accountability, as well as bringing in controls around bids for large sport events, for example.
Adam Cox: The problems that we currently see are not going to fix themselves in a free market. The clubs are not going to curtail their own spending because they're going to end up losing on the football pitch and they do that, they're in jeopardy of then losing the fan base, et cetera, et cetera, and potentially getting relegated, which means less future income. So we need some governance to step in. So it really paves the way to say there has to be some rules or some kind of governance that that really is the way forward. So I think what it doesn't do is tell you exactly how, but it does set the groundwork for it.
Christina Philoupou: Yeah, this and there's lots of different aspects to it as well. So you've got so in the UK, for example, you've got you've got the FA, which looks set over the national game and and grassroots. Then you've got the Premier League, the FL and the National League, who all look after themselves. There's gaps between them where, you know, certain instances can fall between the cracks. There's the issue of back to the kind of financial side of things. If people are regulating themselves, that that is a problem from a governance perspective.
John Worsey: And improved governance could be key in addressing these systemic issues to the game. In November last year the Department for Culture, Media and Sport published its Fan-Led Review into the state of football and found that as football has grown, its structures have remained stuck in the past. This report recommended improvements in governance as well as regulation and even proposed that a new regulator should be established. For Christina and Adam, the research needs to look more deeply into the finances of smaller clubs.
Adam Cox: Our work so far, just looks the Premier League and part through ease of access to the data, as in the financial statements. But really, we're seeing probably some of the more problematic issues with financial stability lower down the leagues. So I think there's a real big piece of research that needs to be done there, but that is currently kind of lacking, I think, still from an academic and even practitioner perspective. Few clubs have actually completely disappeared. So quite often, this type of work comes against the challenge of say, well, you just change owner, one owner in debt, walks away, sells the club a loss, perhaps to the next owner, but the fans are still still satisfied because they still get to follow their football team.
Christina Philoupou: Yeah, but all the suppliers and all the all the all the little guys that have provided those services lose out. That's the point. Every time somebody talks about an administration, they go well, the club's still standing. Yeah, but how many businesses have you put into into their own dire straits because you are not paying the bills? And you know, even with footballers, people talk about footballers like they're earning, you know, millions. And yes, if you're looking at the Premier League level, they are earning a lot of money, but you kind of go further down the leagues and there's a lot of people who are just making a living. And if they're not getting paid their wages. That is a problem.
John Worsey: Adam says there could be enormous benefits to our local communities in cleaning up the systemic financial issues of the game:
Adam Cox: A stronger financial position for each individual club might allow quite naturally an increase in their community activities, whether that be directly or through perhaps more elite clubs passing money down to lower leagues and grassroots levels. And that combined, I think, provides a really strong argument for the gaps in the research that we're talking about.
John Worsey: The pandemic also had a significant impact on equality in sports, as it did in many aspects of society. Back to Beth now. She explained how research the team has carried out shows how women’s football has been hampered by institutional actions taken at the higher level, exacerbating inequality. Working with Christina, Beth and Tom are about to release research on financial sustainability in women’s football.
Beth Clarkson: the findings from that have really highlighted the need to consider what the long-term sustainable plan is to address some of those issues, particularly things like short term, low value pay contracts. And so there needs to be some equitable solutions that really recognise the growing value that women's sport has. The long term sustainability is key to that because the pandemic is a long term issue now. And so being mindful of that, but also still making inroads into inclusivity, but also on top of that, really harnessing the growth area and potential of the sport.
John Worsey: The journey towards making football fair and financially fit for the present day is well underway. Thanks to research and investigations, we can understand more deeply the issues that exist, and how they are impacting people at every level, with every relationship to the game. You can find out more about research at the University of Portsmouth at port.ac.uk/research, and find links to all the studies we’ve mentioned there. If you’ve found this episode thought-provoking, we’d love to hear from you. Share it on social media with the hashtag lifesolved, or perhaps just send it to a friend. And if you have a moment, please do rate, review and follow this podcast on your app, so that more people like you can join the conversation. See you again next time.