Newcastle United face a financial catastrophe

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http://www.telegraph.co.uk/sport/football/...l-disaster.html

Newcastle United face a financial catastrophe should the club fail to retain Premier League status. Alan Shearer's rescue-mission continues on Monday night when Newcastle take on Portsmouth at St James's Park, with owner Mike Ashley and his advisors knowing that failure could prompt the most dramatic decline since Leeds United went into free-fall. It is understood that at no stage in a chaotic and troubled season has the club budgeted for relegation, meaning Ashley will again have to dig deep to soften the fall, or contemplate a quick sale to cut his already considerable losses.

It is unclear whether Ashley has the will or the means to continue subsidising the club after suffering losses as a result of the downturn. He has spent more than £230 million on Newcastle since buying it, and crucially for any potential buyer an interest-free £100 million loan is repayable to him on demand should the club change hands. This may prove a significant impediment to a sale.

Life in the Championship could be devastating for a club grown accustomed to Premier League means during an unbroken 15-year spell in the top division. When Sunderland were relegated two seasons ago revenue fell by 30 per cent, and it is not unreasonable to assume a similar reduction on Tyneside.

With income falling and the millstone of a £70 million wage bill for a squad made up of overpaid ageing stars, unproven youngsters and unimpressive imports on long contracts, the prospects are bleak.

The bare facts of life in the Championship are chastening. Last season Newcastle recorded turnover of £99 million, £41 million of which was media income courtesy of the enhanced Premier League Sky deal. Even if relegated the club should turn over more than £85 million this season, with media revenue no lower than £ 30 million.

By contrast Championship clubs will receive around £ 2.5 million in broadcast revenue next season, at least times less than Newcastle’s current income, though it is a significant increase for clubs in the second tier, who will enjoy the fruits of an increased TV deal of their own enhanced by the BBC taking 10 live matches.

Newcastle would also receive a parachute payment of £11.5 million from the Premier League, and expect to pick up a high number of facility fees for being shown live on Sky or the BBC. Last season these were worth £60,000 per game and may rise.

Even on the assumption that at least five Newcastle home games were shown live that would still only push total media and parachute revenues to a little over £14.3 million, less than half of their current level.

Match-day revenue, worth £32 million last season, would also be hit hard. The last time Newcastle were in the second-tier in 1992-93 the average home gate at an undeveloped St James’s was 28,424. It remains to be seen whether the Toon Army’s fabled loyalty survives relegation, but already there are signs that attendances are wobbling. The average home gate this season is 45,964, down on last season and well short of the 52,000 capacity.

Even if it does hold up corporate revenues will take a hit and commercial income, worth £27 million last term, would also suffer as companies paying Premier League rates sought to renegotiate.

Add the unresolved £8 million compensation claim brought by Kevin Keegan and the need to pay off Denis Wise, Joe Kinnear and potentially hire a new coach - Steve Bruce is top of the list to replace Shearer should he walk away - and cost-cutting will have to be drastic.

With a 33-strong first-team squad compiled by four different managers lacking both balance and re-sale value the outlook is bleak. When Leeds began their fall from grace they at least had young players such as Rio Ferdinand, Harry Kewell and Robbie Keane to help recoup losses. The Newcastle fire-sale promises to be less attractive.

There are some straightforward cuts to be made. Michael Owen, who takes home 10 per cent of the wage bill, and Mark Viduka are in the final year of contracts and would together cut £9 million in wages.

Nicky Butt, Damien Duff, Alan Smith, Kevin Nolan and Joey Barton are all on around £3 million-a-year and are tied in beyond next season. While they may attract some interest, they are unlikely to recoup the £23 million spent recruiting them.

Obafemi Martins £10 million) will have some admirers, but Jonas Guttierez (£9 million), Xisco (£5 million) and Fabricio Coloccini (£10 million) are likely to depart at a loss with Premier League managers all-too aware of their failings.

It is a dismal prospect for supporters who have never allowed their expectations to be tethered by circumstances but should the worse happen, the reality check will be unavoidable.