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Martin Samuel on the financial 'crisis': It's bad owners who fail, stupid!
Published : 13 Jan 2010 01:45:01Rss feed
When we moved out of London, our high street had a rather good chain off licence called Wine Rack. It had plenty of personality; not as much as Oddbins, where the staff got to play their own music, so every Saturday you could make your selection to Chet Baker or Captain Beefheart, but Wine Rack still tried to be a cut above the rest. At the weekend ours was staffed by a music teacher and wine buff, keen to share his passion with whoever happened through the door. He kept a lot of interesting stock, too, including some bottles you would not expect to find beyond specialist vintners. Of course, that didn't last long. Freddie's not free: Ljungberg eventually cost West Ham and Eggert Magnusson (below right) £13m for 28 games and two goals Wine Rack became the property of a larger company, First Quench, and was gobbled up by a rapidly expanding business that also owned Threshers and Victoria Wines. There was already a Threshers in our town and there seemed little point having two stores in competition yet owned by the same parent company. Something had to give and no prizes for guessing what. So, no more eager music teacher, no more individuality. The final insult was that the Threshers was renamed Wine Rack, but with none of its previous character. It had the dull stock of a major chain and was staffed, not by enthusiasts, but by operators of cash registers with no connection to what they were selling. It is hard for a customer to compare the merits of various burgundies with a person whose drink of choice is a Bacardi Breezer. As a business model, this was an accident waiting to happen. The moment First Quench allowed its shops to become generic booze bins, with the distinctiveness and care taken out, it was always going to be crushed by the supermarkets selling the same big brands, with equal absence of expertise, only cheaper. In a recession, bad companies are the first to go and, while it took a little time, last October the inevitable happened and First Quench went into administration: 1,202 stores, 6,300 staff. This does not mean it is impossible to make a living selling high street wine: it simply means it cannot be done like that. We are often told that football is a unique business, but it is not really. There is complexity because two forms of success exist, financial and sporting, and they need to be balanced, but stripped down to basics it is not so different to the off-licence trade. There is good practice and bad practice: a way that works and a way that doesn't. Yet right now we are mistaking the failures of individual clubs for a malaise in English football as a whole. The folly of this age of excess is beginning to bite, it is said. No it isn't. The folly of having a succession of clowns in charge at Portsmouth and West Ham United is hitting home. The folly of saddling your business with excessivedebt is becoming apparent. The folly of telling concerned customers to 'blow you' by email at four in the morning is very clear. This does not mean the industry as a whole is failing. It means the smart survive, and the foolish, reckless or plain incompetent go to the wall. It was always the way. Leeds United went from boom to bust because a former chairman, Peter Ridsdale, took a £100million gamble on getting to the Champions League and lost. It was predicted that many clubs could follow but they did not. Football is bearing up reasonably well in the present climate. I know management consultants who have been declared bankrupt, I know builders who used to employ contractors by the dozen and are now back to laying patios with their dads. We needed a lead for an old Technics keyboard and, apparently, Technics don't exist anymore. Neither does the firm that makes the specialist batteries that operate our real-effect gas fire. More from Martin Samuel... Calming words of 2010 World Cup chief executive Danny Jordaan could be fatal12/01/10 Martin Samuel: Rape and murder are rife... to guarantee safety was deceitful10/01/10 Martin Samuel meets Wolves boss Mick McCarthy: 'Don't dare question my integrity'08/01/10 MARTIN SAMUEL: This avalanche of TV reports is freezing out facts07/01/10 MARTIN SAMUEL: Will Spurs be left at the altar again?15/12/09 Martin Samuel: Rafa, you are lucky to have won more than Souness13/12/09 MARTIN SAMUEL: What did you do when the ice was melting, Daddy?10/12/09 Martin Samuel: Giggs is the only star to pass my test of genius08/12/09 VIEW FULL ARCHIVE So it is not just football that stands trembling on the precipice; andthe clubs that are have themselves, not the system, to blame. We cannotkeep parcelling up the failings of individuals as if they aresymptomatic of the whole. Football has always been a marriage of sporting ambition and financial efficiency: misjudge either and you endup relegated or skint, and in extreme cases, both. That is whathappened to Leeds, and it looks likely to happen to Portsmouth, and perhaps West Ham, too. Those who have studied West Ham's books with a view to purchase fear that relegation would be the financial tipping point. The club do not have to sell their leading players in this January transfer window - indeed, to do so would be suicidal - but if they go down there would be a very real threat of administration. This is partly bad luck, due to the collapse of the Icelandic banking system that caught out more than a few, and partly bad business because this economic disaster coincided with the regime of Eggert Magnusson, a man who spent money like it was going out of fashion, and then found it had. Magnusson, who stood down from his position as executive chairman once his profligacy became apparent to owner Bjorgolfur Gudmundsson, had a touch of the Ridsdales in that his ambition was to make West Ham a Champions League club. Like Ridsdale, however, many of his decisions were irresponsible. Freddie Ljungberg was believed to be available on a free transfer from Arsenal, but Magnusson authorised a payment of £3m and wages of £85,000 a week, just to get the deal done quickly. After two mediocre years, West Ham reached agreement with Ljungberg merely to remove him from the wage bill: his 28 games and two goals cost the club an estimated £13m. Similarly, Portsmouth threw money at their problems before the owner, Alexandre Gaydamak, lost interest, or his nerve, and wanted it repaid. These small calamities are now lumped together beneath the banner of Premier League excess, but it was Magnusson's excess, Gaydamak's excess, to blame. Individual executives, individual companies have been caught out by the economic downturn; those with a poor structure or bad ideas. This is happening all over. We generalise that there is a banking crisis, but not every bank is in trouble: just those that have been inexpertly managed. Football is no different. The added problem is that we want it all ways. We lecture from the pulpit on the way down, having squealed with delight and encouragement on the way up. The Gudmundsson takeover at West Ham was widely celebrated at the time for deposing the previous regime, led by Terence Brown. Nobody foresaw the economiccollapse of Iceland and Magnusson was regarded as a safe pair of hands, the former president of the Football Association of Iceland and a close friend of Michel Platini. A real football man, apparently. Much like good old Harry Redknapp. Negativity was in similarly short supply in 2008 when Portsmouth lifted the FA Cup. On the contrary, everybody loved it, a small club with a grand history breaking the monopoly of the elite four with a popular English manager at the helm. If there were minor misgivings about trouble on the horizon they were drowned out by the celebrations. The truth is, we love the madness. When the January transfer window opened, next to pious sermons on the plight of Portsmouth could be found unquestioning reports of Birmingham City's £9m offer for Ryan Babel of Liverpool. Yet we know how long it took Carson Yeung to establish the funds to buy Birmingham. Is it then wise to stake so much on one player? Birmingham are enjoying a good season and it is understandable that people at the club should think with ambition, but what if the next month brings two or three injuries and form slips? What if extra investment does not result in progress? Could Birmingham become overstretched as quickly as Portsmouth and West Ham? And how much do we actually care if, short term, it makes the league more competitive and exciting to watch? Look at the debate around Manchester United to find the answer to that one. The Glazer family have bolted their massive borrowings on to the club and that is rightly regarded as a bad thing, but what is the big question at the moment? Why aren't they spending the £80m from the sale of Cristiano Ronaldo? Financial prudence go hang. What is it with these free transfers and wingers from Wigan Athletic? Come on, beardy, get splurging. Yet if United did, and if the debt went even higher, there would be another round of hand-wringing and moral outrage. The Premier League is vibrant because it is full of clubs with ambition, some that grow sensibly in an organic way such as Aston Villa, some that are flying pretty close to the sun. Yet business is like that. If anything, what is now being proven is that, for all its vaulting transfer fees and mind-blowing salaries, football is reassuringly normal. The recession will expose any flaws, just as it did with Woolworths, but the best will survive. Meanwhile, on November 27, 2009, Venus Wine and Spirit Merchants, a family-run concern of 35 years standing, bought the name Wine Rack and its 14 top stores, including the one in my high street. You never know, it might be worth a visit again: certainly for any passing followers of Portsmouth or West Ham, who are probably in greater need of the hard stuff than most. Stay out of court, McCabeWhat is the most charming character trait of Kevin McCabe, chairman of Sheffield United? Probably his sense of entitlement. Now he is planning a court battle over the decision of the 2018 bid committee to favour Hillsborough, home of Sheffield Wednesday, and not his own Bramall Lane, as a World Cup venue. I prefer United's ground, too, but we have to accept that if any body has the right to decide on World Cup stadiums, it is the World Cup organisers. And considering that Hillsborough, once a fine venue with a grand history, is now only associated in most minds with a tragic April afternoon in 1989, is this not an opportunity for renewal, a chance to give the place some fresh memories, untainted by human failure, frailty and loss? Hiroshima is the most football-centric city in Japan, but the World Cup did not go there in 2002 because the organisers feared negative association with its past. In doing so, they missed a wonderful opportunity, not to forget, but to allow the present in some small way to break free of history. This is what the World Cup could achieve for Hillsborough; always providing it can resist the self-serving machinations of the litigious McCabe. Well, that didn't take long. Just a few short days between Brendan Venter, coach of Saracens, being public enemy number one for his 32-minute attack on refereeing standards, and his reinvention as a concerned professional who has brought a number of important issues into the public domain. In football, he would be just another sore loser having a rant at the ref, because his team got done by Leicester in the second half. In rugby, he is opening up debate. A subtle difference, I am sure you'll agree. CONTACT MARTIN AT: firstname.lastname@example.org
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