Alec Pearson: Sky Sports deal won’t solve SPL’s problems

IN THE midst of an economic crisis, the announcement that Sky and ESPN are to invest £80 million into Scottish football over the next five years has been universally heralded as the salvation for the Scottish game. Announcing the deal, Scottish Premier League (SPL) chief executive Neil Doncaster stated the SPL is renowned “for its drama and excitement”.

However, a research project conducted at the University of Glasgow’s Business School found that leading figures in Scottish football saw the game as boring and felt fans were losing interest. Far from being the salvation of the game, evidence suggests that the Sky and ESPN investment may act as a sticking plaster on deeper-rooted problems. The facts suggest a decline in the product, club revenues and attendances since the inception of the SPL in 1998.

Scottish football is dominated by the Old Firm but we are about to enter uncharted territory. The longest gap between non-Old Firm league title wins stands at 27 years, spanning 1905, when Third Lanark won the league, to 1932, when Motherwell were crowned champions. If either half of the Old Firm wins in season 2011-12 we will match that 27 year gap, with little prospect of a meaningful title challenge in the foreseeable future.

Analysis shows that Celtic or Rangers have won the Scottish Premier Division and SPL titles 32 times, out of a possible 36, since 1975. Aberdeen was the last non-Old Firm winner in season 1984-5 and few clubs have managed any sustained pressure on the Old Firm since. Hearts owner Vladimir Romanov’s investment has proven unsustainable, but Hearts are the only team to have split Rangers and Celtic since the inception of the SPL. Looking at the average league position of those non-Old Firm teams that have competed in every SPL season is instructive, since it clearly shows the gap between the Glasgow giants and the rest.

There is an evident need to increase the competitiveness of the league for three reasons. First, it holds the interest of non-Old Firm fans who may actually have the prospect of competing to win trophies. Second, it is likely to help Scottish clubs in European competition by ensuring tougher, more competitive games, as preparation for the rigours of European fixtures – the early qualifying-round exits of recent seasons suggest this problem is worsening. The third benefit is a wider pool of talent being made available to the national team.

If the question is competitiveness, the answer has often been league reconstruction and the recent impasse at the SPL suggests that this remains a contentious issue. However, evidence shows previous attempts at a structural solution have had little effect. Since 1975, the top division has undergone six structural changes, each of which was intended to increase the competitiveness of the league or to appease the demands of satellite television. Interestingly, Doncaster revealed that one of the conditions of the new satellite TV deal was that “Celtic and Rangers remain part of the league” and play each other four times a season. Whilst this has helped secure short-term revenues, what are the medium term consequences and is more money the answer?

The introduction of the SPL coincided with a boom in satellite TV broadcasting of games. When the SPL/Sky deal began in 1998, a number of SPL clubs overspent and some went into administration. Today, some SPL chairmen and directors argue that, over the long term, satellite TV has actually reduced revenue available to SPL clubs. Ticket sales, unlike for other leagues across Europe, are the SPL’s most important revenue stream. With ready access to live English and European games, the relative poverty of our domestic game is being exposed.

Negative perceptions of the product and increased choice of alternatives have meant a marked decrease in average attendances. A recent report by PricewaterhouseCoopers showed, in the 2009-10 season, 18,277 fewer fans attended their team’s home matches than the previous season. This resulted in a £10 million reduction in the SPL’s aggregate revenue. From the 1998-9 to 2009-10 seasons, average attendances are down 13 per cent.

Critically, substantial TV revenue available in the early years of the SPL actually lowered league competitiveness based on the final points gap between league positions i.e. first and second, first and third. Clubs, predominately Rangers and Celtic, spent vast amounts on new players, which they could not afford.

Conversely, in today’s market, SPL clubs can no longer afford the top-quality players of other football leagues across England and Europe, yet SPL competitiveness has gone up based on the final points gap. Whilst this may be a good thing, the perceived standard of football being played has dropped. The SPL satellite TV deal is minuscule compared to the riches available to the EPL or La Liga, and as a result clubs continue to struggle to generate a basic operating profit.

Robert MacIntosh, Professor of Strategy at the University of Glasgow, thinks that the real problem facing Scottish football is holding the attention of the next generation of fans. MacIntosh says: “The worry is no longer that there are buses leaving from all over Scotland which drain support from the natural catchment of other teams, the real worry is that younger fans, brought up with wall-to-wall Champions League football and FIFA 2012, won’t see our domestic game as anything like as attractive as following one of a handful of global teams such as Barcelona.”

The research I conducted looked for possible answers to these difficult circumstances. Clubs need to think creatively about their own strategy and to operate within realistic budgets. Ten years ago, commentators and academics warned SPL clubs that unless steps were taken to develop and adopt a new professional approach to expand revenue streams, there was a chance they might be severely exposed and therefore unable to survive in a changing and dynamic environment. Only now are some clubs beginning to address these challenges.

One theme is developing closer links with the community, yet there is limited evidence this will deliver significant improvements. When similar strategies were deployed by clubs in England and Denmark it took many years to see the rewards. Far from having a long-term perspective, many clubs are not properly planning for the execution of new ideas or even searching for them in any structured way.

In my research, I was fortunate to interview a sample of SPL chairmen and directors, and to explore the business strategies applied within their clubs. The majority of club chairmen and directors run their own successful businesses; however, with their own business interests to cater for, it appears the vast majority run their football club on a part-time basis.

There were differing views on how best to develop strategy within clubs and a number of SPL clubs either didn’t have a strategy at all or had one which omitted key elements of an effective business strategy. Many suggested this stemmed from a lack of resources and capabilities within clubs. When asked if they perceived themselves to be a business, some SPL clubs believed they were and believed the development of a business strategy would help their club. Others suggested they were there for entertainment and that developing a business strategy was “unrealistic”.

Bringing some strategic thinking skills to the table might help football clubs break out of the silo mentality. It might also help clubs to focus beyond the days or weeks ahead and to engage in serious analysis of the environmental changes occurring around them. Considering the state of the game, I believe it is pertinent that clubs work closer together to find a collective long-term strategic solution to the problems affecting the game today.

• Alec Pearson has just completed an MBA at the University of Glasgow Business School