Sunderland v Newcastle United - Premier League

We were warned.

Simon Kuper and Stefan Szymanksi’s book Soccernomics gave us some candid insight into football’s quirks and idiosyncrasies (mostly) off the pitch, including its notorious conservatism. One of the more memorable passages noted how several elite clubs still didn’t pay attention to small but vital details, like helping overseas players settle in quickly in their new locations as a means to facilitate their transition to a new team.

Many of us believe that in sports as in business, money naturally seeks out efficiency. After all, despite the enormous influence in luck in determining the success of one company over another in a particular market, success is also driven in large part from smart planning, good product development, and an intense focus on cost control.

So when we hear that the Premier League is the wealthiest football league in the world, we assume this is in part because its member clubs have been adept at exploiting all avenues of commercial revenue, retail and gate sales, and acquiring low-cost, high impact players. Clearly to be so rich, they must have been doing something right.

Except that football is not a conventional business. For one, the clubs aren’t selling a product; they’re playing football in a league. To that end, the Barclays Premier League proper has done some incredible work in negotiating on behalf of its member clubs its astronomical rights deal. Whatever you think of Richard Scudamore, the league has arguably been very good at exploiting its international popularity to the fullest extent possible.

So good in fact that of the 18 Premier League clubs that posted a breakdown of revenue by category for the 2011/12 season, 14 earned the bulk of their revenue from TV and broadcasting rights. Of those clubs, 12 earned more money in TV rights fees than all other revenue sources combined. I hope they all give Scudamore a nice bottle of single malt at Christmas.

To reiterate, this is money the clubs received from an agreed upon base/merit pay breakdown for a broadcast deal they didn’t play much of an active role in negotiating. The clubs did not market anything, employ any talent, develop any innovative business strategies to earn this revenue. It was simply handed to them by virtue of being in the top flight.

If you believe (as I do) that football is not a business in the conventional sense, there’s nothing really wrong with this. Clubs, after all, have historically existed to win football matches, not negotiate lucrative overseas commercial partnerships to maximize alternative revenue streams. Once upon a time, it was the job of the chairman who oversaw the club to ensure that it spend money wisely on good players and find a good manager who didn’t expect the boss to sign blank cheques on players. That most clubs “earned” the TV rights deal by staying in the PL should be good enough.

The problem is today the cost of maintaining a competitive Premier League first team skyrocketing. In fact, it’s nearing or has reached a competitive ceiling. Spending-to-win isn’t good enough for the vast majority of teams who aren’t bankrolled by infinitely deep-pocketed investors; in fact, it’s barely good enough for the tiny collection of teams “lucky” enough to be in that category.

Despite this, how these enormous TV rights revenues are spent is still in large part overseen by football coaches or football directors who know little more than how to get a player, an agent and a club representative in a room together at the same time. Newcastle’s bizarre decision to appoint Joe Kinnear as “director of football” is evidence that English football clubs may not be getting much smarter in how they address the crucial question of how to build a winning football club.

This is Kinnear’s role, in his own words (from the Guardian):

Asked who would have the final say on transfers, Kinnear said: “It’ll be me. What I’m saying is, between me, Alan [Pardew] and Graham [Carr, the chief scout], we’ll sit down and iron it out. If those two decide a player we’re looking at is not good enough, my ears will be wide open. It’s not a case of ‘like it or lump it’. If a close decision is to be made, though, and we’re running out of time and it’s something we have to do, whether that’s adding meat or beef to the team, or pace in wide areas, or someone who can guarantee us 20 goals a season, I will buy those players. I will take that chance once I’ve clarified that with Alan, that this is for the good of Newcastle.

“I’ll assess the transfer kitty with Mike next week once I’ve sat down with Alan first, find out what is wanted, who can be shifted out of the club – maybe we can get money back if we shift four or five of them – and then look at the targets.”

“…adding meat or beef to the team, or pace in wide areas, or someone who can guarantee us 20 goals a season.” No doubt the person to decide which players fit these depressing cliches will be Kinnear in consultation with Graham Carr (no word if Newcastle’s performance analyst Ben Stevens will play a role). This is an enormous amount of trust in one person for such a crucial undertaking. And Kinnear didn’t say anything about reevaluating the team’s overall approach to player development and recruitment, or first-to-market buying strategies that marked the club’s “French revolution” under Pardew.

None of this will come as a surprise to seasoned football supporters. But it does challenge the implied assumption made by opponents of UEFA’s Financial Fair Play’s break-even requirements for example that clubs have already explored all avenues in building a winning side beyond simply dumping more money than god into the transfer market.

It’s true that clubs like West Brom and Swansea will likely never be able to come close to securing the enormous commercial revenues of teams like Manchester United and Chelsea (although it’s not at all clear some of these clubs are doing enough to grow revenue in these areas). But I’m yet to be convinced that English or continental clubs have fully explored all options in ways to build a winning side beyond breaking the bank in costly transfers for so-called “proven” talent that proves to be anything but.