Often Partisan

“There May Be Trouble Ahead…”

One thing that is certain with relegation is the end of the Premier League gravy train. Despite the new and improved parachute payments, it’s certain that there will be a fairly hefty hole in Birmingham City’s cashflow next season. There has been quite a lot of comment about how this is going to affect Blues, and I thought it might be worth looking at further.

Two of the better pieces I’ve seen online about us are this one in the Guardian by David Conn, and this one on the BBC website written by Matt Slater. Both tell a similar tale; that without the main Sky payments Blues will have a lot of cashflow to make up; that because of relegation Carson isn’t going to be able to sell any more shares in the club, and that this and the fact we have high wages etc could add up to a real financial crisis.

Let’s look at the facts. Firstly, it is true that Carson isn’t going to be able to shift any more of the “best effort” placing shares he had for sale in the holding company. These were to be placed at HK$0.20, and as our share price at close of play on Tuesday was HK$0.183, the new shares are now more expensive than the current ones. No one will buy new shares at a higher price when they can buy existing ones cheaper. It’s intuitive that share prices are going to remain low for the time being, so that’s an avenue of cashflow cut off.

Secondly, the income from Sky is going to massively decrease. In the 2010 accounts, Birmingham City took in £41.9million in payments from the media. The latest figures I’ve seen for this season were £39.8million (as we finished nine places lower than the season before). The parachute payments amount to £16million per year for two years, and then £8million per year for two years; which means a hole of £24mil or so in the income coming into the club. That’s nearly half of our turnover for 2010.

Thirdly, I’ve read reports in China that the fairly large deal we signed with Xtep to produce our shirts will have scaled down payments this year due to our relegation to the Championship. Throw in the supposition that our new main shirt sponsors will want to reduce their payment for the position of their company logo on our shirts, and you have to expect that our commercial income is going to be lower this year too.

Whilst wages are high, I’ve been informed by a reliable source that pretty much all the player’s contracts at Blues will have relegation clauses in them, so that will help bring them down. Also, it has to be noted that of our highest earners Aliaksandr Hleb, David Bentley and Obafemi Martins have already left the club. I would expect at least a couple of big sales to help ensure cashflow continues on a day to day basis, which would possibly take out another couple of big wages. It’s also worth noting that four players are likely to be released as out of contract (Phillips, Bowyer, Larsson and Parnaby), one has vetoed an option being taken up (Jiranek) and one has had his option declined (Bent). This too will save on wages.

This does mean that there is going to be some holes within the team – which wasn’t the biggest of squads anyway. How those holes are going to be replaced is going to be down to how deep Carson’s pockets are – and this is where the rub is. No one really knows how much cashola Carson has – we can speculate based on him rubbing shoulders with the rich and the famous at gala balls, or based on his £36million house he paid for cash five years ago – but there has been no indication whatsoever that he has got a lot of money to put into the club. Thus it’s easy to see why there is pessimism and talk of a club in crisis.

I’m going to hang my hopes on one thing, one thing that is consistently overlooked in the media, and that I’ve harped on about for a long time on here. The Chinese, as a business stereotype are long term planners. It’s not about making a lot of money quickly, it’s about building an empire over time. Part of that empire building is by making connections, by being able to draw on other people for revenue streams, for loans and whatnot. It’s intangible, and I can’t say for sure that it will be this way, but based on everything I’ve read about Carson in the Chinese media I’d say he is well connected. I’m hoping, and I must stress this is hope, not a material based fact, that these connections, that this guanxi will help ensure our long term survival.

I’m not expecting massive transfers in this summer; if anything, I think it’s going to be about bringing in cheaper players, younger players and looking for deals that will give us potential returns based on player’s progression. I expect there will be sales, but I’m hoping for more a “clearance of old stock” than a “everything must go”

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One Response to ““There May Be Trouble Ahead…””

  • Alan says:

    What an intresting and wellreasoned blog. Its a pity that our Local media particularly the BBC cannot their YTS reporters to come up with this kind of detailed logical reports.

    Look forward to more from Often Partizan

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