Newcastle United and one of the greatest blunders in football history
Posted on January 8th, 2015 | 64 Comments |
There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.
Said Brutus in Shakespeare’s Julius Caesar, and so it was with Newcastle United when they missed football’s greatest tide, leaving themselves bound in the shallows and miseries of mediocrity ever since.
To elaborate, in 1997-8, in the early stages of the biggest ever growth in football finances, Newcastle United were the fifth biggest football club in the world according to the Deloitte and Touche ‘Football Money League’ for that season. To make it seem even more unreal when we look at Newcastle United today, they were slightly ahead of Louis van Gaal and Bobby Robson’s Barcelona, who the Magpies had beaten 3-2 in the Champions League at St James’ Park that season. They also made the FA Cup final, after finishing as runners up in the Premier League for the second year in a row and signing the world’s most expensive player in the previous season. However the signs were already there, they also finished thirteenth in the League that season, the club lost some great players, Les Ferdinand, David Ginola, Faustino Asprilla and certainly not least, a 36year old Peter Beardsley. Kenny Dalglish was then sacked early into the next season and things were to get even worse under his successor, Ruud Gullit.
Since then, the other big clubs in that class of ’98 have won a total of 156 major trophies including 13 Champions Leagues, an average of over 17 each. Newcastle have won 0. Juventus have been the next least successful with a mere 9 trophies, and Bayern Munich the most successful with 30. The decline that followed Newcastle’s high watermark at the most crucial time in the development of football finance has certainly been the biggest blunder in Newcastle United’s history, and they’ve made a few. With the potential spoils available, it was also one of the biggest blunders in football history. In this piece I intend to explore it further.
|Deloitte Football Money League 1997/98.|
|1 (2012/13: 4)||Manchester United||£87.9m|
|2 (2012/13: 1)||Real Madrid||£72.2m|
|3 (2012/13: 3)||Bayern Munich||£65.2m|
|4 (2012/13: 9)||Juventus||£55.3m|
|5 (2012/13: 25)||Newcastle United||£49.2m|
|6 (2012/13: 2)||Barcelona||£48.6m|
|7 (2012/13:10)||AC Milan||£48.5m|
|9 (2012/13: 7)||Chelsea||£47.5m|
Looking at what the other teams in that list have achieved since, it is a shocking reminder of how things could have been at Newcastle United at a time when it was far more achievable than it is now. What only took tens of millions back then takes hundreds of millions now and a club needs a Sheikh or an Oligarch to upset an established order which, importantly, was largely set during this period of growth. Seven of the other teams in the list (Manchester United, Real Madrid, Bayern Munich, Juventus, Barcelona, AC Milan and Chelsea) are still in the most recent top ten fifteen years later, and nine are still in the top twenty – Liverpool have slipped two places to 12th and Internazionale to 15th due to poor league form recently and a consequent failure to qualify for the Champions League. However, as well as being the only one to have won no trophies, Newcastle United are the only one to have slumped out of the top 20 completely to 25th. Below you can see what those teams have achieved in terms of winning major domestic and European trophies since that time.
|Trophies won since beginning of 98/99 season|
In the chart below, we can see a more graphic representation of Newcastle’s stagnation. The gray bars represents Newcastle’s position over the years on the football rich list.
The red lines represent Newcastle United’s turnover, with the black ones representing the average turnover of all 20 Premier League clubs.
The yellow and orange represents competition in Europe with orange being the Champions League. The Intertoto Cup isn’t included.
Finally, the faded bar and gray line at the end shows where Newcastle United SHOULD have been in 2012-13 if they had only progressed, not like Barcelona or Bayern Munich, but just at the same rate as all twenty Premiership teams have on average since 1997/98. This shows that they would have had a turnover of around £177 million in 2012-13. That would have put them 13th on the football rich list in 2012/13, somewhere between Tottenham and Liverpool. As it was their turnover was actually £95.9 million and they were 25th after narrowly avoiding a second relegation in four years.
Unfortunately, detailed data of the Football Money League for 00-01 and 01-02 just didn’t seem to be available anywhere, but I managed to dig out all the other information.
So where did it all go wrong for the Magpies? As you can see above, the team faltered badly under the (mis)management of Kenny Dalglish and Ruud Gullit. The squad was ripped apart by Dalglish in short order, and discipline went under his successor, Ruud Gullit. Bobby Robson eventually managed to restore them to the Champions League and the top ten elite, with the club managing to keep pace with the other Premier League clubs overall. As you can see in the chart above though, that all changed in 2003/4. In a world where other teams continued to grow every year, Newcastle just stopped and have stood still for over ten years since. In 2002/3, Newcastle United’s turnover was £96.4 million, ten years later it was actually slightly lower at £95.9 million. If you think of all the increases in Premier League revenue streams since that time, it is pretty staggering.
Looking back, 2003/4 actually looked like a very good season indeed by today’s standards. With Bobby Robson, the club finished 5th in the Premier League and reached the semi final of the UEFA Cup. However they should have qualified for the Champions League after finishing 3rd the previous season. A shock defeat to Partizan Belgrade in the qualifying game left them in the lesser European competition though with big financial ramifications. This piece from the Guardian gives an account of that second leg, estimating conservatively that the club lost at least £10 million. You can double that in today’s football money, so it was like losing £20 million in one penalty shootout.
It was a key moment which brought and from that point on it was almost nothing but decline. Bobby Robson was sacked amidst rumours of a lack of control in the dressing room the next season and there were to be no more Champions League appearences. Robson almost had to move a mountain to get Newcastle United as far as he did, but that defeat proved just one hurdle too many, and was a loss which seemed to be something of a tipping point. But there was something else.
“We have to be responsible. We take money out of our communities; we’ve got to put something back. I hope that pure greed does not take over and ruin everything.” – John Hall on the floatation of Newcastle United PLC.
That was exactly what happened though, and it was John Hall who was right at the centre of it. Greed might not have been the only factor in Newcastle’s decline, but it certainly helped. Hall and then Shepherd did build two stadium expansions at a combined cost of at least £70 million in 1992 and 2000. John Hall’s declining Cameron Hall benefitted hugely, but it stayed with the club as debt while John Hall and Freddy Shepherd milked the club all they could with help from Hall’s son, Douglas and Freddy’s brother, Bruce Shepherd. By 2004, the salaries they paid themselves went up to almost 29 times what they were in 1999 when the club was floated. That wasn’t even the larger part though, as the salaries were dwarfed by the multi-million pound dividends they paid themselves every year too. Freddy Shepherd put it best when he said “We’re not ashamed to take a dividend out.” It was estimated by the now deceased nufc-finances site that they trousered a total of £44,817,451. All the while though, the shares in the PLC were falling, as you can see in the chart, it fell from £1.40 when on floatation in 1999 down as far as a mere 20p in 2003. Bobby Robson recalled this moment after took over as manager in 1999:
“I said ‘is there money?’ and they said ‘not a penny’. A little later they found me £500,000 and we bought little Gallacher.”
Though Robson put them back on track on the pitch, the huge wages and the even huger dividends, not to mention other questionable practices that further milked the club kept on coming.
If Robson was the first big rally against the declining trend, then the somewhat unexpected Glenn Roeder revolution in the second half of the 2005/6 season was a second, lesser one. When Roeder took over after Graeme Souness was sacked in February 2006, the club was floundering again. However a remarkable record of 10 victories, 2 draws and only 3 losses in the final 15 games catapulted Roeder’s Magpies to seventh at the end of the season, and a place in the UEFA Cup via the Intertoto Cup. As you can see in the chart, this raised the club briefly, but the retirement of Shearer, a declining squad and a bad run of injuries finished that off and Roeder was sacked for finishing 13th the next season. A series of disastrous big money signings under new manager Sam Allardyce followed, and then came the club’s biggest nightmare to date under new owner Mike Ashley, the chaos leading to relegation with revenue falling through the floor. In Ashley’s first five full years, the club brought in an average of £83.2 million, for the five years before that it was £89.4 million.
After the club’s resurrection back to the Premier League thanks to Chris Hughton, he was promptly sacked and Roeder’s achievement was eventually equalled by the equally unexpected Alan Pardew. This time it hardly seemed to make much difference to the club’s revenue though, and the club were almost relegated with the same manager the next season. Ashley was milking the club just like the Halls and the Shepherds, only in a different way. Relegation apart, one significant loss under the ownership of Mike Ashley has been a large fall in commercial revenue due to the club being used as a free publicity vehicle for Ashley’s larger business interest, Sports Direct. You can see this in the image below, the 2012/13 Deloitte list with a breakdown of major revenue streams. If you look at the commercial revenue figures in comparison to the two closest teams on the list, you will observe that Newcastle United’s is less than half that of closest club, AS Roma, and less than a third of the next closest, Hamburg SV. The difference is tens of millions every season.
(Please note that the figures are in Euros)
To borrow one of Derek Llambias’s favourite sayings when he was the Managing Director of Newcastle United, that would put several new players on the pitch. I wrote a piece on the subject using the same figures from the 2011/12 season in 2013 called “Newcastle United’s commercial revenue is only half what it should be“. With the serious problems of Newcastle United’s main sponsors, Wonga, it could even be that the club will be looking for new shirt sponsorship sooner than it thought too. The big losses in commercial revenue have been compensated for a little by the club making some big money profits on players such as Andy Carroll, Yohan Cabaye, Mathieu Debuchy, Demba Ba etc, which seems to be Ashley’s model for the club going forwards.
I would like to wrap up with some kind of comforting final thought, some spark of optimism which could be kindled for the future. Sadly though, there doesn’t seem to be any evidence of that at the moment.