A number of differing strategies for football clubs are emerging
Man Utd are doing ok......Your not Man Utd, but if you developed a bit of style, a bit of glamour you can act like Man Utd. You get a squad of foreign stars, a flashy glamorous manger and you can sell those shirts, do all the corporate hospitality deals and raise ticket prices to GBP50.
So, Chelsea, what is going to happen when the glamour begins to slip? Your glamorous manager asks for GBP4million a year perhaps? Perhaps football will no longer be quite so fashionable and the corporate hospitality dries up? It is fine to may hay whilst the sun shines, but not at the expense of neglecting the fundamentals of the business.
Hitch your wagon to the digital tv star! Pay per view is coming and if we're ready we'll make a pile!
Everton is a big club but a small business. Any of the top 100 British companies could swallow a company of Everton's size without noticing it. Media is, however, big. And I do mean big. Major media corporations will spend hundreds of millions in an effort to launch new media and ensure that THEY control it. They may not succeed, but Everton cannot compete.
A secondary problem is the timing and nature of the digital revolution. Earlier in the decade a lot of companies spent a lot of money making sure they were in place to profit from the boom in non-games multimedia. The boom just didn't happen and a lot of companies went bust. The lesson is that you cannot build your business around a vague promise. By all means position yourself to take advantage if the development comes along, but make sure that anything you do at least breaks even. Everton TV must be made to pay NOW or disbanded. End of.
Also known as the "Newcastle", the proposition is that it doesn't matter if you spend spend spend to achieve success. Once you've achieved the success you're in clover, you can rake it in, you pay off all your debts and sit on the huge pile that's left over.
The problem is that you can't guarantee success even if you buy Shearer for GBP15m. And if you don't achieve success you find yourself in terrible trouble. Newcastle have just floated, all that has done is repair the damage. All that the rabid spending by Keegan achieved was the loss of control by Newcastle to the City.
Build your business on what you have, what you can retain, what exists now and what you can guarantee.
Football. Competing in domestic and European competitions
The playing of football creates a demand from TV companies. At present developed through the Premier league it produces direct income. It also creates a demand from individuals for admission to games, creating revenue from ticket sales.
Strategy priority one. Continue with the good work in developing players and keeping down tranfer costs. Ensure that training facilities and staff welfare are maintained
Nothing is needed to get TV money - they supply the infrastructure
In order to gain income from ticket sales a stadium is required. The primary method of exploiting the primary demand on Everton's primary activity is the stadium. I'm sorry about bringing this discussion down to an "ABC" level but we must be absolutely clear.
The primary commercial asset, number one with no buts, is the stadium. You can forget about merchandising, digital TV, sponsorship, catering. A football club's stadium must be its TOP priority
Strategy priority two: either redevelop Goodison or build a new stadium. (Now).
We have seen (Profitability - How Much Money is Everton Making) that the quality of Everton's performance is suspect in this area. I have recommended:
Strategy priority three: Critical review of the peripheral businesses.
You've now got a complex, diversified organisation. One where, although Everton have stuck to what they know, will push up conflicting demands.
Where you have differing income streams it is best to separately identify them it enables you to properly monitor the distinct
Where you have differing investment decisions, where the balance sheet is distinctive it is best to have separate businesses entirely. The business proposition of running a stadium is very different from that of running a merchandising operation. The stadium requires a large capital expenditure to produce a steady cash return. It requires maintenance stewarding. The merchandising operation, however, needs little more than stock for capital input and needs no maintenance but makes anything but a "steady" return. The merchandising operation must constantly update itself and its products. Its not just different markets, which would mean it was a different selling proposition, but also different capital, staffing and operational requirements. It makes sense, therefore, to separate out these requirements so that clearly focused decisions can be made. In effect this means:
Strategy priority four: the creation of different semi-autonomous businesses within the overall Everton umbrella.