For anyone who was able to see Lord Sugar Tackles Football on TV a couple of weeks ago, I wonder if like me, you couldn't help but notice a certain irony facing the Premier League and the pub industry, and how comparisons could be drawn.
For those of you who didn't see the programme, let me give you a quick overview.
Sir Alan was looking into the finances of the Premier League since its conception and the changes that had come about with the marriage between the Premier League and Sky. Almost 20 years ago Sky changed the face of football forever with vast global televising of football and the monumental amount of cash that came streaming into the game.
Drawing similarities
Twenty years ago, pubcos were buying up swathes of pubs with billions of pounds in cash. Both on the face of it all good, but with hindsight both faced problems in the future.
There are 14 Premier League clubs with total debts of £3.5bn, two major pubcos with debts in excess of £6bn pounds. If more money than ever is coming into football, how and why the debt?
There's no surprise if I say they're spending more than they're getting, with higher player wages being predominately the problem, 91% in the case of one premier club.
For pubcos, debt repayment on falling asset values is eating the millions generated through rents and the tie.
Analogy to pubs
More and more pubs are available to lease. However costs, utilities, pubco beer prices, food inflation and rising wage costs are leading to margin erosion, so the cost of running a pub — like a Premier League club — is becoming unsustainable. Premier League clubs need the next year's TV deal to cover their overheads or the receivers are in. Pubcos have to keep rents strong and beer prices up or they'll have the receivers in. Bad news for lessees as the by-product is overheads are too high. Upshot: you'll have the receivers in.
To cut the programme short, Sir Alan's biggest point was that if costs from the top are not controlled and evolution does not take place, the Premier League moving forward is potentially doomed to failure.
As for the pubcos, there is the same message. Reduce pub estates, reduce debt, reduce the overheads and pricing structure for rent and the tie, and there won't be an industry lost. It will be leaner, stronger and a premier league of pubs going forward.
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