Clubs feel the pressure as losses mount

Soccer clubs could be staring financial ruin in the face as the pressures to succeed encourage them to spend above their means and player wages spiral ever higher, figures suggest.

Tottenham Hotspur, Chelsea, Leicester City, Newcastle United and Leeds United have all unveiled losses to the London stock exchange in the past month.

Only Manchester United and Sunderland were able to report a profit, largely as a result of stadium expansion schemes which substantially boosted gate receipts.

Spiralling wages and transfer fees were blamed as the major factor in the worrying state of the clubs' finances. For most clubs player wages account for more than 50 percent of revenues.

Manchester United -- still the richest club in the world and up to 10 times bigger than their premiership rivals in terms of market value -- are an exception with a 39 percent ratio.

But even they are looking at a much higher figure next year after this season's record buys Juan Sebastien Veron and Ruud van Nistelrooy, and with David Beckham yet to conclude his contract negotiations.

Gerry Boon, head of Deloitte and Touche Sport, said in a recent review of soccer finance that wages were football's greatest challenge.

"Those warnings are even more relevant now. A viable future means spending what you can afford. Managing your long-term wage bills is the key to financial strength," he said.

In Scotland many clubs are suffering the further problem of falling match attendances.

Six out of the Scottish premier league's 10 clubs in the 1998/99 season saw below 60 percent occupancy for home games, partly as a result of increasing ticket prices and a glut of televised matches, said a PricewaterhouseCoopers report on Thursday.

TV BOOM OVER

The situation is not about to improve, according to Sunderland chairman Bob Murray.

Murray said money from television deals was set to reach a plateau while gate receipts would come under pressure just as player wages threatened to spiral even higher.

"We are very concerned about the pressures and see revenues for premier league clubs flat three years down the road," he said this week following Sunderland's financial results.

Television income has soared in the past three years on the back of lucrative media deals. Last year BSkyB and ITV paid well over one billion pounds for the rights to premier league matches.

At least 20 million pounds filters down to each premier league club in a season -- a huge bonus for newly promoted clubs but a massive loss when teams are relegated.

But with media companies now struggling with the effects of an economic downturn and seeing rapidly declining advertising income, this figure is unlikely to be matched when the rights bidding comes around in three years' time.

TAKING MEASURES

Most clubs are aware of the financial tightrope they are on and are taking measures to address the issue.

Money from shareholders is no longer a lucrative option. Football club shares have tumbled in the past months as investors shun the industry and new funding opportunities are being sought, while clubs try to rein in costs.

Many are reducing squad numbers and have recognised the value of investing in youth academies to bring in new players rather than paying out large sums for more experienced foreign players.

Manchester United are a fine example of such a scheme with David Beckham, Ryan Giggs, Nicky Butt and Gary Neville all products of their youth academy.

Newcastle halved losses last year by cutting the size of their squad to 38 from 50 since Bobby Robson took over from Ruud Gullit two seasons ago.

"Bobby Robson identified the squad and we worked hard to make sure costs were sensibly controlled. The easiest thing in football is to keep signing cheques," chairman John Fender said.

Newcastle are already reaping the benefits of their recent youth scheme, with players such as England under-21 Shola Amoebi progressing to the first team.

Spurs, who were taken over by leisure company ENIC last year, have recently concluded an eight-month review into their business.

"We have outlined two significant investment initiatives which will be high priorities, the Spurs Academy and the development of the stadium," said chairman Daniel Levy.

With gate receipts still accounting for almost half of income, stadium expansion can drive profits -- as Manchester United and Sunderland have shown.

But ground redevelopment needs heavy investment first and Chelsea and Leeds have taken out long-term bonds to help their financing.

Chelsea, who racked up annual losses of 11 million pounds, unveiled total debts of almost 100 million after the revamp of Stamford Bridge, which now houses a 291-room hotel, five restaurants, a banqueting hall and a travel business.