Rangers newco: counting the cost of their demise

The shockwaves from Rangers’ fall from grace will resonate through every aspect of Scottish football – and beyond

Financial implications

The ramifications of sending Rangers to the Third Division were spelled out to the SFL delegates shortly before they made their fateful decision, and those ramifications are severe with a potential loss of between £16-17 million in sponsorship and television income. Under the scenario outlined by the SPL, the prize money each SPL club will receive at the end of next season will be less than 10 per cent of that which they received at the end of last season.

So Celtic got £2,957,000 for being champions last season and would have got £2,141,000 had Rangers gone into the First Division – but next year they would receive just £287,000 were they to win the SPL. For smaller clubs at the bottom end of the SPL who are already struggling, the implications are potentially disastrous: the second-bottom team would have received £870,000 last season; with Rangers in the Third Division that figure goes down to just £84,000.

Several of the smaller SPL clubs are run on such a shoestring that Rangers’ demotion could well put them out of business. Dunfermline, for instance, were unable to pay their players in February when Rangers failed to pay them £80,000 owed from a cup fixture. Motherwell have already stated that they face going out of business following Rangers’ demotion. Nor are they alone: heavily-indebted Kilmarnock, Dundee United and Hearts can all scarcely afford any reduction in income, while even Celtic have started cutting their playing budget.

The nub of the issue is the SPL television rights deal with Sky and ESPN, which is worth £80m over five years from 2013. The deal includes a clause which insists that both Rangers and Celtic must play in the SPL. The deal is now expected to be renegotiated downwards, or even be scrapped altogether, although there have been calls for First Minister Alex Salmond to use his much-vaunted influence with Rupert Murdoch to apply pressure to ensure that the deal remains in place (see page 1, News). The Clydesdale Bank’s £10.5m sponsorship of the SPL ends next summer, and the likelihood of a procession for Celtic (who are 1-33 to win the SPL with bookmakers) will make it even more difficult to find a successor.

Nor is is just all about sponsorship and TV rights. The loss of Rangers to the SPL will cost the average SPL club just over 2 per cent of its turnover through the loss of ticket sales for home games to Rangers. While clubs such as Hearts and Aberdeen will be relatively well insulated, the clubs with smaller crowds will be hit hard. Had St Johnstone not played Rangers in 2010-11, its turnover would have been down by 5.18 per cent; for Dunfermline that figure was 4.02 per cent and for Inverness Caley Thistle the figure was 3.39 per cent.

It is not just the SPL clubs which face financial hardship. The SFL clubs currently benefit from a trickle-down sum of £2m a year, which was agreed when the SPL was formed. This, however, comes almost exclusively from the television rights deal and the SPL sponsorship deal, both of which are now in question. The SFL clubs will not countenance a reduction in that sum, yet SPL sources insist it will be stopped if the TV and sponsorship deals come to an abrupt halt. We could yet see an ugly legal spat over this one, with the financial survival of a whole raft of SFL clubs at stake.

Social implications

The days when the shameful sectarianism which has become the rocket fuel for the Old Firm rivalry has been any secret are long gone. But will the disappearance of the Old Firm game from the calendar for at least the next three years do anything to remove the anti-social excesses which have accompanied the fixture? These are such that Les Gray, the then chairman of the Police Federation, last year called for the fixture to be banned on public order grounds after there were so many arrests after one derby that every police cell in Glasgow was full within four hours of the final whistle.

“It’s safe to say the police service dreads Old Firm games,” said Gray. “The policing of the game does not concern us, because we have got into a routine now, and it is very orderly and there are only a small amount of arrests at the game. But it is the murder and mayhem that follow after, in the pubs and the clubs and the homes throughout Scotland. That is the concern for us because it is now at the stage where we are finding it difficult to cope with the resources and also financially, bearing in mind that the police budget and all the public sector budgets are being cut back.”

Violent attacks increase ninefold on Old Firm weekends, and there has historically been a 41 per cent increase in domestic violence on Old Firm weekends. As well as murders such as that of 16-year-old Celtic supporter Mark Scott in 1995 which precipitated the launch of the charity Nil By Mouth, the sheer level of violence that accompanies the Old Firm match is such that Strathclyde Police incurred costs of £2.4m for the seven derbies played during the 2010-11 season, of which only £300,000 was paid for by the clubs, with the rest being spent on disturbances away from the two grounds. Nor are the police the only service stretched to breaking point by the Old Firm games: hospitals also suffer, with one widely-accepted estimate putting the cost to society of the games at £40m per season in terms of policing, prosecutions, hospital care and social services intervention.

Footballing implications

In the short-term, the most obvious effect of this week’s events is two divisions with the shortest odds in world football, with Celtic at 1-33 to win the SPL and Rangers 1-50 to win the Third Division, the shortest odds Ladbrokes has ever offered (it’s still drawn some business, with one punter putting £50,000 on both sides winning their respective leagues). Yet the effects will be felt in many other, more subtle, ways. With less money, each side in the SPL will need to reduce its wage bill, with young Scottish players likely to be the beneficiaries.

The European dimension means that race to be the best of the rest will also assume greater importance, with the obvious corollary that the league will be more even and games will assume a greater significance. Whether this will energise supporters – or convince Rangers fans from Aberdeen or Edinburgh, for instance, to follow their local teams – remains to be seen. The cups will also be less dominated by the Old Firm, with Rangers’ weekly playing standard meaning that they are likely to be uniquely vulnerable.

The removal of the Old Firm veto means that a pyramid reorganisation of the leagues can now be countenanced. Quite where the Rangers’ fiasco has left SPL2 remains difficult to tell. Although it is now clearly back on the agenda, such is the suspicion that it is merely a ruse to fast-track the newco back into the top flight that there must be grave misgivings about the willingness of fans and their clubs to look seriously at the whole subject in the near future.

Impact upon supporters

My colleague Andrew Smith referred to the way in which fans found their voice on this issue, and were mobilised via social media, as the “Supporter Spring”. It was a point well made: for all the talk of the absolute primacy of sporting integrity, the financial ramifications of a Rangers-free top league meant that many clubs wanted to let them back into the SPL; it was the fans who were having none of it, and it was their pressure and the threat of boycotts which backed their clubs into a corner. The same was true for the SFL clubs as fans began to communicate with each other – and their clubs – across social media and the internet.

Fans effectively seized power from clubs which were wavering and dictated events, with their absolute conviction that Rangers should be punished for misdeeds and that sporting integrity should prevail proving the driving forces. When ten of the SPL clubs voted against Rangers, many of them thought that Rangers would end up in the First Division, but the SFL fans had other ideas, with their clubs voting 25-5 to instead place the newco into the Third Division.

Such is the force of fan power that supporters have become emboldened and yet more change may come onto the agenda. The loss of the Old Firm veto over SPL regulations means that the top flight can now be overhauled in favour of the majority of clubs, while the clumsy attempts to woo SFL clubs with the promise of SPL2 looks to have backfired and, as Martin Hannan writes on pages 8-9, may even threaten the position of SFA chief Stewart Regan and the SPL’s Neil Doncaster.

Practicalities

So, how will the clubs in the Third Division cope? For most of them, the arrival of the Rangers hordes may not bring as big a financial fillip as they may be expecting because the costs of policing the Rangers games will be astronomical, especially where the local force has little experience of dealing with the Old Firm (such as Dumfries & Galloway police service) and especially at those grounds which will only be able to accommodate a fraction of Rangers’ travelling support. However, the long-term benefits of Rangers’ presence in the division will undoubtedly be felt in the increased interest in the clubs, which (leaving aside Queen’s Park, who play at Hampden) have crowds which currently average less than ten per cent of their capacity. The aggregate average attendance across the seven other Third Division clubs is around 3,250 (compared to a capacity of 27,832 plus Hampden’s 52,025). Of all the Third Division clubs, Queen’s Park and Clyde (who have a capacity of 8,029) will benefit most, with Queen’s Park confidently predicting a crowd of 20,000 at Hampden for the festive season visit of Rangers.

There is also the question of if – and how – the matches will be covered. As well as the lack of facilities for the large corps of 50 or so newspaper and internet journalists who follow Rangers to away matches, how or whether Rangers matches will be televised remains unclear.

Where does this leave Rangers/Green?

Undoubtedly in a better state in the short term, although the loss of key playing assets has also made the club balance sheet less attractive. Nevertheless, although a handful of top players have remained loyal to the club, Rangers will no longer pay 80 per cent of their turnover in salaries to top players and the costs of competing in the Third Division will also be far smaller than they would have been had they entered the First Division and been forced to recruit a whole squad of relatively expensive players. As it is, the cost of fielding a squad to blitz the Third Division will be a fraction of that they would have needed to spend to compete in the First Division.

However, Rangers’ income will be decimated. There will be no SPL prize money (which last year was £2,6m), no Sky money, no SPL sponsor-ship money, a reduced corporate hospitality market and no European competition. The club has also lost several smaller sponsorship deals, with one taxi company reportedly pulling out of a £70,000-a-year deal with the club.

But it is the impact upon gate and season-ticket receipts that will be the most profound. The average Rangers season ticket last season cost £450, yet the cost of most of the Third Division season tickets is £150, and the pitiful take-up of season tickets at Ibrox (said to be still in three figures) shows that fans have been biding their time. Crowd sizes at Ibrox, which averaged 45,000 last season, will inevitably suffer, too, partly because there will be few away fans. It seems certain that Ibrox will see less fans paying less money for their tickets.

However, it’s also worth bearing in mind that when Hibs went down to the First Division, there was no reduction in ticket prices and the crowds went up. The same scenario seems unlikely to unfold with Rangers, however, for whose fans winning holds no novelty value.

Although some costs will be reduced – notably policing and stewards for the Old Firm games – Rangers’ whole infrastructure will need to be radically downsized.

Nevertheless, Rangers were encumbered by an unsustainable debt burden and have for many years been running at a loss so, in an ironic twist, in the short term the lack of a huge wage bill may ensure not only that the club survives, but actually prospers. For how long it does so under Charles Green and his opaque coterie of anonymous directors is another story...