Sunderland's latest financial accounts explained after £9m operating loss
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00:00 [MUSIC]
00:10 Hello, James and Phil here from the Sunderland Echo.
00:23 Today we're gonna be bringing you something a little bit different.
00:25 We're gonna be having a look at Sunderland's most recent set of accounts.
00:30 We know there's a head coach search ongoing, the upcoming transfer window,
00:34 and the under-21s are in action in their Premier League Two playoff quarterfinal.
00:39 That is against West Ham tonight.
00:40 We won't be talking through any of that today.
00:43 That'll come later, hopefully.
00:44 But Phil, we thought we'd drill down into some nice financial things.
00:47 >> Yeah, well, I think at the moment we're waiting for significant developments.
00:53 I think would be the word to say on sort of the new head coach and
00:56 the retained list and all those sorts of things.
00:58 So it seemed like a good moment actually to dip into something that I think is
01:02 always a big talking point.
01:03 And I think it's also a really interesting time to kind of take stock and
01:07 have a look not just at Sunderland's financial position, but
01:10 also kind of what we've learned about how they're operating under this ownership.
01:13 Because I think after two seasons in the championship,
01:16 there are so many questions about, questions like ambition, sustainability,
01:20 how close is Sunderland to get into the Premier League?
01:22 Can they get to the Premier League under this model?
01:25 So it felt like while we've got a little bit of a breather,
01:27 while we wait for things to really start to open in terms of next season,
01:31 that it might be nice to, and
01:32 interesting to sort of have a chat about what we've kind of learned.
01:36 First thing to say obviously is this is the account for
01:38 Sunderland's first season back in the championship.
01:39 So the way the accountant report works, it's a year behind.
01:43 So this is for the season that ended with Sunderland's defeat of Luton in
01:48 the play-offs and the final, but it still tells us a hell of a lot, I think,
01:52 about sort of where the club's at and where it's headed.
01:55 Yeah, absolutely.
01:55 If you want some reading alongside this podcast or after this podcast,
01:59 Phil covered Sunderland's accounts for last season, as he's just mentioned.
02:03 That's the period that comes out every year.
02:06 It's always a year behind.
02:07 That's over on the Sunderland Echo website as well.
02:09 I think Phil would both point towards Chris Weatherspoon, who has a probably
02:12 far deeper understanding of finances in general than we could both ever hope to,
02:16 but is good reading as well.
02:18 He also presents it really well on Twitter and it's really easy to digest.
02:23 Absolutely essential reading.
02:25 Definitely go and find Chris on Twitter.
02:28 You'll have all the information you need in a really, like I say,
02:32 easy to understand, easily digestible way.
02:34 And what we'll be doing is picking on some of the threads of that, really,
02:38 and trying to place it in a bit of context about where the club's at.
02:43 Indeed.
02:43 So just looking at the accounts, when you sort of read them,
02:46 you go through them, the headline that sort of jumps out straight away is that
02:50 Sunderland made £9 million in losses.
02:54 That was up from their last season in League One, as you'd expect.
02:57 Now on the face of it, Phil, you read that and you think,
03:00 "Oh my God, £9 million.
03:01 That's a lot of money."
03:03 In terms of the championship, though, it's not actually that uncommon.
03:05 And I think Sunderland rank in the bottom five, actually, for losses.
03:09 Just explain that sort of picture, because it's sort of a wider trend,
03:14 isn't it, in terms of the championship being a bit of a money pit, really?
03:18 It is a money pit.
03:19 There's no other word for it.
03:20 I think kind of the story of these accounts, really, is that Sunderland's
03:25 revenues from going from League One to a championship club meant that they
03:30 benefited from a bit of extra TV money, a bit of extra ticket revenue,
03:34 these kind of things.
03:35 But that was significantly outstripped by the extra money they had
03:39 to spend, essentially, on wages.
03:41 Not just players, general staff as well, but obviously, predominantly players.
03:45 So that's basically a dilemma that all championship clubs face.
03:50 The revenues that they draw from the TV deal does not match what they need
03:55 to spend on wages to compete with the teams who are benefiting
03:58 from parishion payments.
04:00 And that is where we've seen so many teams in recent years get
04:03 into huge financial trouble.
04:04 Reading, Derby are probably the two main examples.
04:08 There are clubs who've spent really heavily and managed to get promoted,
04:11 which meant that those problems never came past Bournemouth
04:14 are an example of that.
04:15 But that is obviously a huge risk.
04:17 And so, nine million pounds is a huge loss.
04:20 Certainly would be a huge loss to me if I lost nine million quid,
04:23 and I suspect most of our listeners.
04:25 But the reality is, in the championship context,
04:28 it's a relatively solid set of results.
04:31 It comfortably puts them in the bottom half.
04:34 It was a long, long way off being one of the biggest losses in the division.
04:37 And so, in a strange sort of way,
04:40 you know, Sunderland are relatively stable financially,
04:43 I would suggest, for the level.
04:44 But I think it does just go to show it's the important context
04:47 in terms of when we judge words like ambition,
04:50 and we should always expect Sunderland to be very, very ambitious at this level.
04:53 I'm not suggesting that for a second.
04:54 We should expect the club of Sunderland size to be pushing
04:57 towards the top end of the division.
05:00 But the reality is that ambition at this level means writing off
05:04 a huge amount of funds in the hope that it will enable you to get to the Premier League.
05:08 But obviously, there's no guarantee.
05:10 And if you don't do that, you can begin to see why the levels of money
05:13 that you're losing can cause you a world of pain.
05:15 So I guess what this shows us, it's just what a difficult dilemma
05:18 championship clubs have.
05:19 How far do you push it in order to try and get to the Premier League?
05:23 How far do you push that risk?
05:26 I feel very split, Phil, on that issue that you've just mentioned.
05:30 A lot of fans would say that you need to speculate to accumulate.
05:34 A lot of fans are quite happy for Sunderland to be run within the means.
05:38 The caveat to that is it would be great if Sunderland could capitalise a bit more
05:41 on their commercial revenue.
05:42 We'll come to that in a second.
05:44 But Ipswich have shown maybe that you do have to spend a little bit of money
05:48 to get out of the division.
05:49 They've done marvellously well.
05:51 On the flip side of that, look at Hull City, who've missed out on the playoffs.
05:54 And now all of a sudden, their owners are making a few rash decisions
05:57 and a little bit of concern.
05:59 So it is such a fine tightrope.
06:01 And we've seen really when a club like Sunderland gets into a lot of debt,
06:06 in terms of the Ellis Short days, yes, he wrote that debt off.
06:08 But it also came with a cost further down the line in terms of Sunderland's
06:12 parachute payments being promised to Madrox.
06:14 So I can sort of see both sides of the argument.
06:17 What do you think this tells us about Kierilu and Dreyfus
06:20 Juan Satori's intentions at the club?
06:23 Well, I think that what we expected in the first season,
06:27 back in the championship, was when you put their sort of results
06:30 into context of the championship clubs,
06:32 they weren't anywhere near one of the top spenders in the division,
06:36 as you would expect, because obviously you have three teams
06:39 who've just been relegated, so have parachute payments coming into the club.
06:43 You also have another three or four who are still in receipt of parachute payments.
06:47 So it may not be at the same level as those three relegated clubs,
06:49 but they still have that advantage.
06:51 We did see probably that Sunderland were a little bit more ambitious
06:55 than we might initially have thought in their first season back in the championship.
06:58 So their wage bill actually grew fairly significantly.
07:01 I suspect that's a combination of factors.
07:03 One is obviously staffing levels going up a level means,
07:05 you know, you increase your staffing.
07:07 One is players that they obviously brought into the club, lifted the wage bill.
07:10 But I suspect what we also saw was a lot of players already in the squad
07:13 saw their wages increase, whether that was being handed new deals
07:16 because of their progress, or whether it was pre-existing clauses
07:19 in their current deals that were automatically triggered by promotion.
07:23 So what we should say is that Sunderland's wage bill very much placed them
07:26 within the mid-table category in terms of they were right in there
07:30 with the teams who were spending at a level where
07:32 they weren't competing with teams at the top.
07:34 But you would look at it and think, well, they would expect a mid-table finish
07:37 and hopefully push towards the top end of the table if they can.
07:40 We know that after the season, Christian Spiegel confirmed that internally
07:44 the target being a top-half finish.
07:47 And while it undoubtedly significantly overachieved,
07:51 I think that this probably did show that there was a relative level of ambition.
07:55 I'm not saying he had the irregular spending as Ipswich did
07:58 over the last 30 months to go straight back up,
07:59 but there was a relative level of ambition.
08:01 What's going to be really interesting is when we throw this forward to next year
08:05 and we see the accounts for this season, is will the wage bill have grown?
08:10 Because I think a lot of fans would turn around and say,
08:12 well, do you know what? I actually think pound for pound that team that played Luton
08:16 was a stronger team than the one that finished this season.
08:19 And what I suspect next season...
08:21 Also got rid of a lot of the older players who might have been on a bit more money as well.
08:25 Exactly. So it'll be really interesting to see how much that wage bill has grown.
08:29 If it has, I think there'll be a very interesting debate about whether
08:32 Sunderland have kind of got value for money in terms of, as you say,
08:34 moving on those experienced players who are performing pretty well.
08:38 And what I expect it will show is that Sunderland significantly
08:41 underachieved this season and finish in 16th.
08:44 So the accounts certainly tell us what we thought was that Sunderland
08:48 are not sort of an Ipswich or a Hull who...
08:51 I know Ipswich haven't spent a lot in the way of fees this season,
08:55 but in terms of wages and also the fees and wages that they spent to get out of League One
08:59 meant that they were spending pretty heavily all round.
09:02 So Sunderland are definitely not one of the biggest spenders in this division.
09:06 That's true.
09:07 But we shouldn't probably fall into the trap of thinking they're one of the very smaller
09:11 spenders in this division, because that's absolutely not the case either.
09:14 And that's kind of what these set of accounts have kind of underlined for us.
09:19 Where the question is, is exactly what you say,
09:22 is in terms of can the money that's starting to come in from player sales,
09:29 and we'll move this forward a little bit, because I think it's really relevant to this point,
09:33 which is that these accounts don't cover the deadline day business.
09:38 So the sales of Ross Stewart and Lyndon Goudge aren't included in these accounts.
09:46 Now that obviously will make a significant difference to Sunderland's financial position.
09:50 Also not included are the acquisitions of Reeson, Pembele and Adil Al-Shish on deadline day as well.
09:57 So that'll obviously offset the Stewart money a little bit.
09:59 But broadly speaking, you would expect to see that Stewart money make a significant difference
10:03 to Sunderland's accounts the next time they're released.
10:05 And the really interesting question is,
10:08 it's kind of clear that Sunderland are going to have to, as you say, speculate to accumulate,
10:12 especially in positions like Stryker, where we found they found it very, very difficult
10:17 to find those sort of gems, if you like, that they got Ross Stewart,
10:21 that increasingly feels like a bit of a one-off.
10:23 And it feels as if they are going to have to...
10:26 It increasingly feels like it is going to cost a bit of a premium, really,
10:29 to get that quality in those positions.
10:32 And a big question, I think, moving forward is,
10:34 is the money that starts to come in from the sale of Stewart,
10:37 maybe it'll be a Jack Clark this summer, who knows?
10:39 Maybe it'll be a different player.
10:41 Will that allow them to sort of close the gap?
10:43 And at the moment, I think that's where the big question mark lies,
10:47 going into this summer window.
10:50 And we knew this already, Phil, but it does really underline that
10:54 this way of doing things, this model, is based around ultimately player sales.
10:59 And I don't mean player fire sales.
11:00 I mean probably selling one player a summer for big money
11:05 and reinvesting that.
11:07 Yeah, well, I think one of the really interesting things
11:09 about these accounts is there's two sides to it.
11:12 One, I think it does underline that if there isn't going to be
11:15 persistently significant cash injections in the ownership,
11:19 and they are putting cash into the club, these accounts, again,
11:22 sure, they are putting money into clubhouse losses,
11:24 but it's not just the level of some of their owners in the division.
11:27 That is just a fact.
11:29 And so it underlines the importance in that context of, for example,
11:33 a Ross Stewart sale, which we expected eventually to earn something
11:37 between 8 and 12 million, depending on certain add-ons and what have you,
11:41 in terms of closing that gap.
11:43 The other thing that's really interesting from these accounts
11:45 is they make a huge point.
11:47 These accounts come with some notes from the board, if you like,
11:50 which I would recommend any fan to go and read.
11:53 Last year, when the accounts were released,
11:56 they basically revealed their plan to get to the Premier League
12:00 and what is now another two seasons.
12:02 And this one, they make a big point in saying how they really want
12:05 to target increased commercial revenues.
12:08 So they clearly feel, reading between the lines,
12:11 that at the moment, the club is not set up to maximise
12:15 the revenue it can get off the pitch.
12:18 I don't think that's any surprise to any Sunderland fan who has gone
12:21 to buy someone a shirt for Christmas or a birthday
12:24 or got some merch for a loved one and has found that experience
12:27 quite frustrating.
12:29 So I think these accounts underline that they see that as an avenue
12:33 where, obviously, it's not going to make up the level of losses
12:36 we're talking about, but something that is really important
12:39 to the business plan moving forward.
12:41 And we've already seen, obviously, the Hummel deal,
12:43 and the Fanatics deal, to see Fanatics take over the retail side
12:47 of the operation.
12:48 This is obviously a really key part.
12:50 Trying to tap into that almost...
12:53 Trying to think of a better phrase for it,
12:55 almost like US brand marketing,
12:59 is something that they see as a really important part
13:02 of how they're going to try and push the club a little bit closer
13:05 to sustainability in the next few years.
13:07 Obviously, David Bruce was confirmed as the new Chief Business Officer,
13:11 I think was the title he was given last Thursday or Friday.
13:13 And it seems fairly clear to me that this is going to be
13:15 a massive part of his remit, given his experience with the MLS
13:19 and in American sport.
13:21 It seems like something to me that I get the impression
13:23 Kirill really wants to push, because he feels that's something
13:28 where the club's kind of being left behind a little bit at the moment.
13:31 And we knew that. We talked about it a lot.
13:32 When the new regime and new ownership came in,
13:35 the focus was, we have to get out of League One.
13:39 So the investment was primarily put into the playing side,
13:42 not just in the players, in all the stuff that goes around the players,
13:45 the analysis, the data, the scouting, the recruiting team
13:48 that was rebuilt.
13:50 It has been a significantly longer process to start rebuilding
13:54 the off-pitch stuff.
13:55 And I think everyone who follows something or supports something
13:58 has come across that at some stage.
14:00 They've seen that rebuilding, if you like,
14:03 whether it's through ticketing frustrations,
14:05 whether it's through shop frustrations, whatever it is.
14:08 So it's interesting to me that they're almost setting a stall out here
14:10 to say that this is something that we're going to really step up
14:14 over the next couple of years.
14:15 And it's going to be interesting to see how much,
14:17 how good they make on that pledge and just how much we actually see
14:21 that investment and whether we see a significant impact on that going forward.
14:26 It's funny, isn't it, just to go off on a little bit of a tangent.
14:28 But so while I was listening to you speak there,
14:31 I was sort of thinking, you know, it's great that this fanatics thing is coming now,
14:35 this Humboldt deal, all of this sort of stuff.
14:37 And I hope that boosts the commercial revenue.
14:39 And I think it's definitely an avenue that needs exploring,
14:41 but why is it then taking them so long?
14:43 But then when you said the priority of getting out of League One,
14:46 it sort of made me think of Birmingham City in a way,
14:49 and their American owners have come in and they've decided to change a lot
14:52 and promise a lot as well.
14:53 And ultimately, they've ended up actually going backwards on the field as well.
14:58 And it sort of feels like that was the main priority of Sutherland's ownership
15:02 when they came in.
15:03 You could argue that they've gone significantly backwards on the field
15:06 in the past 12 months, but it seems like that's always been their primary focus, Phil.
15:11 And whether you agree on the timescale or not,
15:14 now they're getting around to some of the aspects of the club
15:16 that have been a little bit neglected over the years.
15:19 Yeah, and obviously one of the significant things that has happened
15:22 since the period which these accounts cover is obviously,
15:25 we know that there's going to be a huge investment in the stadium and the line.
15:29 And that's going to have a significant impact on the club financially
15:32 because of the scale of works that is actually required
15:35 to refresh the stadium and line and bring it back up to where it needs to be.
15:39 So that's going to be a significant, I don't want to use the word drain,
15:42 because that's probably a little bit dramatic,
15:44 but that's going to have a significant impact on the sort of accounts
15:46 that we see in a year or two years time.
15:49 So I think you're absolutely right.
15:51 And it also raises another interesting question, I think,
15:54 as well as when we talk about those commercial revenues
15:56 and all these kind of things.
15:58 Well, that obviously depends on an element of fielding factor.
16:01 Oh, absolutely.
16:02 If you want your fans to be hyper engaged, spending their money,
16:08 which they are very happy to do when they feel enthusiastic,
16:12 when the product's good.
16:13 And when I say when the product's good,
16:14 I don't just mean the literal product, as in the retail and all those kind of things.
16:17 Of course, that's very important.
16:19 But they need to feel engaged with what's happening on the pitch.
16:22 And that's where there's this really interesting balance,
16:24 which is what we keep going back to.
16:25 Where is the financial balance between investing to put a team that can compete
16:30 at the top end of the pitch, playing a really aggressive,
16:34 good to watch style of football that will ensure that your ticketing levels remain
16:38 where they are, which remain absurdly high, really,
16:41 given the relative lack of success over the last decade.
16:44 And it also makes people feel engaged in a way that they then want to go and spend
16:48 their money in and sort of invest in the club, if you like.
16:51 So again, that's a really interesting question for me in terms of, you know,
16:55 I think we know that some of them want to do things sustainably.
16:58 They're not going to invest rashly.
16:59 They're not going to invest in a huge way.
17:02 But it's at what point do you then begin to threaten what you really need,
17:07 which is that kind of unity, if you like, or that buy-in is maybe a better word for it.
17:11 And I suspect this season or over the last 18 months,
17:15 maybe that balance hasn't quite been there, I think is probably fair to say.
17:20 And that represents a really interesting sort of challenge going forward.
17:25 Yeah, it's ironic, isn't it really, Phil, that you talk about the enthusiasm
17:30 and relying on that for commercial success.
17:33 It's a year ago today since Sunderland beat Luton Town in the playoff.
17:37 First leg semi-final at the Stadium Flight,
17:38 Ahmad with that lovely goal coming back from a goal behind.
17:41 And the enthusiasm around the club at that point,
17:44 whereas the commercial offering wasn't too good and these changes have come,
17:48 maybe it's a little bit too late in Sunderland fans' eyes.
17:50 I'm sure they'll see the benefits eventually.
17:54 I guess, Phil, as well, and we are going off pace a little bit here.
17:57 We'll come back to the accounts in a second.
17:58 But I guess a lot of Sunderland fans would argue that incremental investment is good.
18:04 You're walking before you can run and all that sort of stuff.
18:07 But you look at maybe the opportunity Sunderland had last season
18:10 and the squad they had last season, the division, the way it was last season.
18:13 Had they just turned the dials a little bit further around in January, perhaps,
18:18 or maybe even the previous summer, then Sunderland could have had a real chance this season.
18:24 It's what ifs and maybes, isn't it?
18:26 But I guess that, as you say, is the balancing act that Sunderland are striving to find.
18:31 Yeah, it's a funny one, that, isn't it?
18:33 I mean, I think the business in last summer window,
18:37 not the summer before last, when they came out with the A1.
18:39 Yeah, it was good.
18:41 I think it was a pretty solid window, wasn't it, in terms of adding Ahmad,
18:44 although he came in and took him away from the get-go,
18:46 and adding Ellis Sims up front with Ross Stewart.
18:49 Pretty unlucky, to be honest, not to get Nathan Broadhead.
18:52 I know there's always a lot of discussion about Nathan Broadhead.
18:54 I think people forget that they did actually agree a deal to sign him permanently.
18:59 Broadhead decided not to take it at that time.
19:01 By the time January then rolled around, it was a very, very different deal,
19:04 because Ipswich had entered the equation.
19:06 We all have a sense, I think, of how aggressively they were spending that time.
19:10 So I think that's an important caveat.
19:11 The January one is definitely a different one.
19:14 You know, Gelfart was a significant signer.
19:17 You know, we shouldn't forget that.
19:18 He was one of the more expensive loans coming down from the Premier League at that time.
19:23 The idea was for him to play with Stewart,
19:25 which obviously would have been a very different proposition.
19:27 But you're absolutely right in what you say,
19:29 and it's going to be a debate, I think, you have next January.
19:33 It's going to keep coming round, you know,
19:35 is what is the balance between pushing it that little bit further?
19:38 Listen, if Sunderland had pushed the ball out,
19:41 maybe it would have always gone to Ipswich.
19:43 So maybe it's a little bit moot.
19:44 But let's say theoretically, if Sunderland had gone to the level
19:47 they had to at Land Keef more in January,
19:49 you know, maybe they would have snuck in the playoffs.
19:51 And then who knows?
19:53 The flip side of that is maybe they wouldn't.
19:55 And maybe then they would have finished 10th
19:57 and they would have eaten up a huge amount of their budget on a strike
20:00 that was then going back to his pair on club.
20:03 So there's no really easy answer, is there?
20:06 I think that's the top and bottom of it.
20:09 There's two aspects to it, really.
20:11 One is that it feels as if there needs to probably be a slight shift
20:16 in certain areas of the pitch where I think the Argonne have to invest.
20:19 I think that's obvious.
20:20 The other thing is, is the major issue this season, as we've seen,
20:24 has not just been investment.
20:25 It's been that the decision-making hasn't been as good.
20:28 That's really what these accounts show.
20:30 Because although Sunderland did spend relatively well at this level,
20:34 they overachieved because they made good recruitment decisions.
20:37 They picked up Ahmad, who other teams weren't particularly interested in
20:40 because they hadn't worked at Rangers,
20:41 but they were able to spot the talent and put them with a head coach
20:44 who gave them loads of confidence.
20:46 They made good decisions.
20:47 Tony Mowbray was an outstanding appointment.
20:50 And I think if you and I could hold our hands up and say
20:52 we weren't really that fussed at the time,
20:54 after Alex Ney had left, perfect manager for the squad in the situation.
20:57 Do you know what I mean?
20:58 So they were able to bridge some of that gap through shrewd decision-making.
21:02 This season was the opposite, where actually, you know,
21:05 they were, I would imagine, we'll see when the accounts come out next year,
21:08 but I would imagine they were again spending at a mid-table level,
21:10 possibly up a mid-table, but they made bad decisions
21:14 that then meant they underachieved.
21:15 You know, obviously the way a decision to sack Tony Mowbray,
21:19 when they did, and then bringing Michael Bale.
21:22 So while definitely, I think everything we've seen
21:26 shows the need for ongoing investment,
21:29 what we should also say is these accounts show us the value
21:31 of good decision-making and that more than anything
21:33 has been the problem this season,
21:35 that decision-making has not been at the level
21:37 that we'd seen it at in the previous 18 months.
21:40 - No, absolutely.
21:42 A couple of quick talking points to run through before we wrap up.
21:46 A lot is said about financial fair play, Phil.
21:49 What is Sunderland's situation of,
21:52 it's sort of the go-to answer, isn't it, on social media
21:55 of why clubs in the Championship shouldn't spend more,
21:58 is the financial restrictions,
22:00 and that obviously you don't want to fall afoul of that.
22:02 We've seen, you know, points deductions,
22:04 not only in the Championship, but the Premier League as well.
22:07 So it's an issue across football.
22:09 How does Sunderland fit into that?
22:12 - Yeah, the reality is, is that compared to most of their rivals,
22:15 Sunderland's financial fair play position is incredibly strong.
22:19 So the current rules in place limit Championship clubs
22:23 to earning 13 million,
22:25 losing 13 million pounds a season over three years.
22:28 So basically your last three years of financial results,
22:31 you can't lose any more than 39 million
22:33 or you're in breach of the regulations.
22:38 Now, obviously we don't have these years' accounts
22:40 because they're not publicly available.
22:42 So we don't know exactly what the position is now
22:44 because it'll be based on what Sunderland have made or lost this season.
22:47 But if you look at the last three years that we do have on record,
22:50 we can see that they're very comfortable.
22:52 They lost 9 million last year,
22:54 which is well under that 13 million.
22:55 They lost 5 million the year before,
22:58 which is well under the limit.
22:59 And I think it was a loss of around 11 million the year before that,
23:02 which was also COVID impacted.
23:04 And there were certain exceptions in place for that.
23:07 So Sunderland are way, way under the level, the upper limit.
23:12 And that's even before you bring in that COVID season.
23:14 So there's absolutely no two ways about it.
23:18 Sunderland could invest a lot more in the playing squad if they wanted to.
23:21 Financial Fairplay currently is not a concern to Sunderland.
23:26 And the wriggle room in wages and fees is absolutely there.
23:30 I know what Sunderland's argument would have to be
23:32 was that it would only make two or three bad,
23:36 sort of 5 million signs if you like, on big wages.
23:40 And all of a sudden, those losses increase very quickly,
23:42 and then you are in trouble.
23:44 But the facts are very clear
23:46 that they're in a comfortable Financial Fairplay position.
23:48 We don't know how long those actual current regulations
23:52 are going to be in place
23:53 because people will be aware from following the Premier League
23:56 that they're planning to vote in a new set of regulations,
24:00 which will be based on turnover.
24:02 And basically, it'll be back to the old system
24:04 that Sunderland had in League One, where you're capped.
24:08 What you can spend on wages can only be a certain percentage of your turnover.
24:11 Now, we expect once the Premier League vote to bring in their new rules,
24:16 the Championship will also have a vote to bring in new regulations.
24:19 So I expect maybe not for next season,
24:22 but the season after, I think we'll be operating
24:24 with a different financial regulation anyway,
24:27 whereby Sunderland's turnover becomes even more important
24:29 because what they can spend is based on that.
24:32 That again, underlines why all that commercial stuff is so important,
24:36 because that's going to be building the ceiling
24:38 from which you can then invest in your wages.
24:40 But in terms of where Sunderland are right now,
24:42 going into the summer window,
24:43 if Kieran Wan-Satori decided they wanted to go that way,
24:47 you know, the room is absolutely there to invest in the squad,
24:50 that much is very, very clear.
24:51 Just spitballing here, Phil, but which financial system
24:55 do you reckon benefits Sunderland the most?
24:56 The way it is now, or if we went back to a sort of salary cap
25:00 sort of rule that we had in League One?
25:02 Because I remember in League One, that was the argument, wasn't it?
25:04 That under the current rules in League One,
25:07 Sunderland should have been doing a lot better
25:09 because the turnover was so much greater than any League One club, really.
25:12 But in the Championship, a little bit more of a level playing field.
25:15 There's rivals in there obviously, Leeds this season and stuff like that.
25:18 There are, you know, big beasts in the Championship as well as Sunderland.
25:21 Well, I think it's quite difficult in theory.
25:24 It kind of depends on the intention of the ownership.
25:27 In theory, the current rules should work relatively well for them
25:31 because they've benefited from the cost cutting of the previous regime,
25:35 which has meant that their base in terms of the losses is very, very low.
25:38 So whereas a lot of teams haven't been quite careful,
25:41 so as not to infringe those limits,
25:44 Sunderland actually don't really have those concerns.
25:46 So you could make a case that if you wanted to have a gamble and roll the dice,
25:50 and we've talked about all the reasons why that's incredibly risky,
25:53 but if you wanted to, you could argue that these regulations
25:55 currently suit Sunderland very well
25:57 because they don't have the same level of concerns that the clubs do.
26:00 In principle, I think in time,
26:02 they would probably favour the kind of model we're talking about
26:06 because we say every week we talk about
26:08 Sunderland having the biggest attendances in the league.
26:10 If they're able to maximise that revenue through those commercial things we talk about,
26:15 if they're able to start steadily bringing in
26:17 significant income from the odd sale of a player in every other window or what have you,
26:21 then theoretically, they should be in a really good position
26:25 to start investing quite heavily in the wage bill
26:27 and start to cut the gap to those teams with parachute payments.
26:31 But there's a lot of unknowns moving forward.
26:33 I mean, I think there's a couple of things that are worth mentioning.
26:36 One is, we still don't know if there's going to be a new financial settlement
26:41 between the Premier League and the EFL.
26:42 People are being following this,
26:44 that this is being tied up with the independent regulator,
26:47 which is potentially going to come in at some point,
26:49 and whether that's going to affect the money that gets distributed through the pyramid.
26:54 And it may also mean there's a renegotiation of parachute payments.
26:56 We don't know that.
26:58 That would be a huge game changer, really.
27:00 And that is something that would definitely benefit someone.
27:02 If the parachute payments were overhauled
27:05 and money started to be distributed on a more level basis,
27:09 then that's a real game changer for someone.
27:11 As of yet, there's no concrete indications of that happening
27:14 because the Premier League clubs are very, very resistant to it.
27:16 One thing we do know is definitely changing,
27:19 is that from next season, and people will have started to read about this,
27:22 is there's going to be a new TV deal.
27:25 The short-term impact of this is lots more games on TV,
27:28 lots more rescheduling, but hopefully with more advanced notice.
27:32 But I do think that's going to be worth, judging by the initial estimates,
27:36 I think that's probably going to be worth a couple of million quid
27:38 every season to Championship clubs.
27:42 What's going to be interesting is,
27:43 do the clubs use that to help cut the losses they're making,
27:47 or is it just going to inflate wages more?
27:49 Is a bit more money and a bit more cash in Championship clubs,
27:52 is that just going to go straight into players' wages
27:54 and players' fees and agent fees?
27:56 Or is it going to be a little bit of a tool for most of the clubs to go,
28:00 "Actually, we can move a little bit closer to sustainability
28:03 because it is going to be, like I say, it will be worth at least,
28:06 I think, about one and a half million to each Championship club next year."
28:09 So that's going to be a really interesting sort of thing going forward as well.
28:12 In the long run, I think it's more to answer your question.
28:16 I think a change in distribution and the change in regulations
28:20 might serve something quite well.
28:22 But at the moment, it's probably preventing a lot of ambitious owners
28:28 in this division spending at the level they would like to.
28:31 So I think you could make an argument at the moment
28:33 that the current rules probably suit some of the current guys,
28:36 because I suspect there are some clubs who are being hamstrung
28:38 a little bit by the money that they've spent in the past.
28:41 It's a crazy old topic, this, isn't it, Phil?
28:44 Just football finance in general.
28:45 It is such a hard thing to sort of grasp in its entirety.
28:49 I mean, the ground you've covered there, TV money, commercial income,
28:54 player sales, ambition of owners, salary caps, financial fair play.
28:59 It is bonkers, isn't it?
29:00 It really is a minefield.
29:02 I think we've seen how important it's sort of grown to be.
29:07 Yeah, absolutely.
29:08 And obviously, even to be honest,
29:10 even less so in the Championship than in the Premier League this season,
29:13 really, where they looked like for a while,
29:15 like relegation would essentially be decided off the field, didn't it?
29:18 Three points, it's what I mean.
29:19 Now, as it happens, that isn't the case.
29:22 I think what we're seeing really is the gap between the Premier League
29:29 and the Championship is widening financially.
29:31 That's a fact.
29:32 It's becoming harder than ever, really, to bridge that gap.
29:35 And it's also interesting in the case of Sunderland, really,
29:38 in that we were very lucky, James, of our generation,
29:42 that when Sunderland were in the Championship,
29:44 they were always pretty much going to be right up there,
29:47 because that was the end of the era, really,
29:50 where having a huge fan base, steadily large crowds,
29:53 pretty much guaranteed that you were going to be able to spend
29:56 at a level to get out of the Championship
29:58 and hopefully compete at the Premier League level.
30:01 I didn't know what was happening in Sunderland's case, as we know,
30:03 because they had a couple of absolutely wretched,
30:05 record-breakingly bad seasons.
30:07 But we're now moving into an era where, really,
30:10 attendances, financially, they're helpful.
30:16 - They're not as important.
30:17 - It just pales in comparison to the TV revenues
30:20 of the Premier League.
30:22 And that's why you have an EFL that is packed
30:26 with some of the biggest, most famous,
30:28 sort of most historic clubs in England,
30:30 because those old sort of financial streams are less important.
30:36 And that's why you have what we would describe
30:39 as fairly small clubs able to thrive and compete
30:42 in the Premier League, because if you can get up there
30:44 and stay there, the revenue streams mean
30:47 that your fan base is irrelevant to a large extent.
30:50 So it's really important, I think, I suppose,
30:52 is the point I'm trying to get to in a long-winded way,
30:55 is to not just think within the Sunderland bubble
30:58 and to put Sunderland, which I think we're all guilty of,
31:02 you know, seeing things through very, like, Sunderland lens,
31:04 putting them in the context of the wider game.
31:07 And there's loads of clubs that are experiencing
31:11 what Sunderland are now, which is recognising
31:14 that just having a big crowd doesn't mean
31:16 financially you're on a footing with a lot
31:18 of your championship rivals, especially if they have
31:20 parachute payments.
31:21 And that's still the challenge going forward.
31:23 And that obviously doesn't mean that we shouldn't expect
31:25 something to be ambitious and that we shouldn't expect
31:27 them to be pushing, because we absolutely should.
31:32 But it is, you know, it is definitely a talking point
31:34 that the ones, you know, the financial parameters
31:39 of the game have changed so dramatically,
31:41 even in the last 10 years, nevermind the sort of last 20.
31:44 - No, absolutely.
31:47 Let's talk a little bit about debt.
31:49 I think this is a really important issue,
31:51 especially to Sunderland fans.
31:52 Goes back to what I mentioned earlier about Ellis Short,
31:55 who saddled the club with quite a bit of debt to himself.
31:58 He ended up writing that off, but it came at a cost.
32:00 Sunderland's debt has risen.
32:03 It's debt to Kiri Luyendreifus and Juan Satori.
32:06 What have they said about the debt?
32:08 Should fans be concerned about it?
32:10 - Yeah, it's a really difficult one to answer.
32:14 We're moving well beyond my areas of expertise.
32:17 I think what we can say is there's a couple of factors here.
32:20 One is that this debt is very, very different
32:23 to the bulk of the debt that grew under Ellis Short.
32:26 So when Sunderland's debt was beginning to get
32:28 to a huge level while Ellis Short was in charge,
32:31 part of that debt was to Ellis.
32:35 Part of that debt was to an external body.
32:38 I can't remember exactly what the organization was called,
32:41 but that's the debt that accrues interest.
32:43 So when you have that, it costs you a lot more money
32:46 because you have to pay it back with interest.
32:48 The money to the owners is less concerning
32:51 because you know that they're basically benevolent.
32:54 They're gifting that money to a large extent
32:56 and also you're not paying interest on it.
32:58 Now, as it happens, Ellis decided to pay all of the debt off
33:02 when he left the club.
33:03 So it wasn't just the debt that was owed to him.
33:05 He also paid off the external debt.
33:07 Now, you know, that realistically was a decision
33:10 that gave Sunderland a fighting chance
33:12 of battling back from where they were from.
33:14 We know it wasn't quite as clear as that now
33:16 because of the parachute payment issues,
33:17 which we have not got time to go back into.
33:19 But the reason I've raised that example
33:22 is because it is important to know
33:24 that this is debt to the ownership.
33:26 So it's not debt that Sunderland are paying interest on.
33:29 It's not debt that is going to drain
33:31 the club's financial resource over the next few years.
33:33 And that's a really important point.
33:35 Where I guess there is always a level of concern
33:38 is what's been said, not just in this set of accounts,
33:40 but previous set of accounts,
33:41 is that they consistently said
33:44 that they will convert this debt to equity.
33:47 Basically, it's as good as sort of writing it off,
33:50 if that makes sense.
33:51 They've said that a couple of times
33:55 and they haven't yet done it.
33:56 Only they can answer why that hasn't happened.
34:00 I don't think it's an uncommon practice.
34:03 I don't think it is a major concern
34:05 because as I say, because there's no interest on it,
34:06 it means that the club isn't being drained
34:09 by that sort of decision not to convert it yet.
34:12 But if you're someone who has some reservations
34:16 over the ownership because of what initially happened
34:18 with the shared disclosure
34:19 and certain things like that,
34:21 then you might look at it and say
34:24 that you're quite concerned that something again
34:26 that's been said is going to happen hasn't yet happened.
34:28 - Yeah, absolutely. - It's a concern.
34:29 So it kind of depends where you fall on that one,
34:32 to be honest.
34:33 And for the one thing that we should say
34:36 because it's entirely factual,
34:38 is that it is different to a loan to an external body
34:42 where you're paying interest
34:43 and you could potentially not just harm your future revenue,
34:47 but it sort of could get you into trouble
34:48 in certain circumstances where,
34:50 because often it might be debt that's guaranteed
34:53 against the stadium or the academy alliance
34:55 and things like that in the past.
34:56 That's absolutely not the case in this scenario as it stands.
35:00 So I could certainly see why some fans
35:02 would have reservations over it,
35:04 but it's important to know that it is different
35:07 to some of the debt that we've talked about
35:09 at Sunderland in the past has been very constant.
35:12 - To get out the championship, Phil,
35:15 Sunderland are probably going to,
35:16 well, they are going to have to compete against clubs
35:19 coming down from the Premier League
35:20 with parachute payments.
35:21 Obviously, we've talked a little bit about that
35:23 in this podcast.
35:24 How does Sunderland compete with those clubs?
35:28 Obviously, it's the club's stated aim
35:29 to get back to the Premier League.
35:32 Judged on these accounts,
35:33 what will Sunderland do in the future
35:35 and how can you bridge that gap?
35:36 Obviously, it's not a hard and fast rule
35:38 that clubs that come down with parachute payments
35:40 go straight back up.
35:41 Sometimes they go straight back down
35:43 as we've seen as Sunderland fans.
35:45 So it's not a hard and fast rule,
35:47 but it does help to have 35 million in your back pocket.
35:50 - Time just continuously shows
35:54 what an absolutely spectacularly bad,
35:57 historically bad season that was
36:01 beyond all belief and precedent to,
36:05 yeah, staggeringly bad that season.
36:07 - It's got to be the worst season
36:10 of any championship club ever.
36:12 I mean, I'm sure there's some other...
36:13 - It has to be right up there.
36:15 I'm sure there's other clubs that would be up there,
36:16 but it is one of the great, great dismal seasons,
36:21 really, for so many reasons.
36:22 - Maybe it's Leeds when they went down to League One,
36:25 but obviously...
36:25 - Possibly, yeah.
36:27 Yeah, anyway, I've sort of got sidetracked there.
36:29 Sorry.
36:30 But yeah, no, I think we've talked really
36:34 about how Sunderland view it
36:36 in terms of how they would like to do it.
36:38 One thing is those kind of...
36:40 Well, I suppose the developing young talent,
36:42 I guess, has two reasons or two goals.
36:47 One is that you eventually develop a player
36:50 who is as good as the player
36:51 who is playing in a parachute-pairing team
36:54 and has cost a lot of money.
36:55 So I suppose you could argue that Dan Neil
36:58 is maybe a season away from being a central midfielder.
37:01 Every bit as good as a central midfielder
37:03 in the, for argument's sake, Burnley side
37:05 that's just dropped out of the Premier League.
37:07 The other aspect then, of course,
37:10 is if you then decide to score at the Premier League,
37:12 you get a lot of money for it,
37:13 which you can then reinvest in the team.
37:14 So that's one side of it.
37:16 The second side of it is, as we've talked about,
37:18 is driving those commercial revenues.
37:20 So maybe if a team comes out of the Premier League
37:23 or a team is pushing towards the top of the championship
37:26 and they have a parachute-pairing advantage,
37:28 well, maybe they won't have the level of fan base that you do.
37:31 And maybe you can begin to turn that into your advantage
37:34 by having a really good commercial operation.
37:36 So that's clearly somewhere
37:37 where sometimes there's potential growth,
37:39 but we have to say they're a long way off, I think,
37:41 being able to realistically turn that into a point
37:43 where they can compete financially
37:45 with parachute-pairing clubs.
37:46 And obviously the main thing they have to do
37:48 is they have to make much better decisions
37:50 than they have this season.
37:51 If you don't have that level of revenue,
37:54 then you have to be the team
37:56 making consistent and good decisions.
37:58 And they did do that for a while
37:59 and they haven't done this yet.
38:00 And that's kind of been their biggest problem, really.
38:04 The examples of Brentford and Brighton
38:07 are a little bit not quite right
38:11 in terms of both of those clubs had huge funder investment.
38:14 Tony Bloom at Brighton and Matthew Bentham at Brentford
38:19 invested a lot of money into those clubs
38:21 and we should not...
38:23 The money ball thing is kind of accurate to an extent,
38:26 but we should not assume that that was all sustainable.
38:29 There was a huge amount of owner injection
38:30 and that probably underlines it has to be a balance.
38:33 But it's also a reality that they were,
38:36 the clubs, certainly in Brentford cases,
38:38 who are making consistently better decisions
38:39 than everybody else.
38:40 And that's what we need more than anything else
38:44 from Sunderland this summer.
38:45 There needs to be a level of owner investment.
38:47 We probably need to see them acknowledge
38:50 that it's not Stuart, there aren't many of them around.
38:53 And maybe you have to push the boat a little bit further
38:55 to get that more established option.
38:57 But fundamentally, they need to appoint a good head coach.
39:00 They need to make a better decision
39:01 than other teams appoint head coaches.
39:03 They need to make better recruitment decisions
39:04 than other teams.
39:05 They need to assign the best,
39:06 they need to make the best loan decisions,
39:08 which they made good ones the season before this one,
39:12 but not as good ones this time.
39:13 So I think that's as big a lesson as anything, really.
39:18 Absolutely. Football finances are an absolute minefield.
39:21 And I'm going to ask you a nice binary question
39:24 from Sunderland's latest set of accounts.
39:26 Are they good or are they bad?
39:28 I will allow you to caveat that
39:29 because I know you're dying inside.
39:30 Well, no, I think we should see them as,
39:36 I think we should see them as good to a large extent.
39:40 And that, you know, this was a club
39:43 in a very, very, very severe state of financial distress
39:47 for quite a long time.
39:49 Now, the fact that they've lost £9 million
39:51 means they are still in element financial distress
39:53 because pretty much any other business in the world
39:55 would be saying, obviously, that's an atrocious result.
39:57 But the reality is, is they are not, you know,
40:01 they are not one of the worst off financial teams
40:04 in the championship financially, they're not.
40:05 And there is a way in which they have a platform,
40:10 really, from which to grow.
40:11 And that their losses are modest by championship standards.
40:16 And they have talent in the squad,
40:18 which could potentially bring in revenue in the future.
40:20 They still have a huge, fairly, you know,
40:23 a huge fan base that is very well engaged
40:26 and would like to be more engaged.
40:28 I think most would like to be able
40:30 to spend more money on the club.
40:31 And so I think there is definitely
40:34 sort of grounds for optimism within these results.
40:38 But obviously it's about maximising it, isn't it?
40:41 It's about how does the club build on this platform?
40:45 And intend to, I guess.
40:46 Yeah, exactly.
40:47 And we shouldn't allow what has been
40:49 a wretched second half of the season
40:51 to make us think that everything at the club is wrong,
40:53 because it's not.
40:54 And these accounts show us some uncertainty,
40:56 saying that in this campaign that we're talking about,
40:58 you know, they overachieved
40:59 because they made good decisions.
41:01 They overachieved because they had good academy players
41:04 who were thriving.
41:05 So I definitely think, relatively speaking,
41:09 you know, I do think it's a good set of accounts,
41:11 but that's kind of worthless
41:13 if you don't capitalise on that opportunity
41:15 by really taking things to the next level
41:18 and now really making some good football decisions.
41:20 You know, especially the means you can sort of benefit
41:23 from some of the work that's gone on.
41:25 But, listen, the simplest way to put it is
41:28 we could have sat here many, many other years
41:30 and talked about a considerably worse set of accounts
41:32 than this one.
41:33 Maybe that's the sort of the best way to put it,
41:36 is that, you know, it's a different sum
41:38 than to what we were talking about,
41:40 you know, maybe any time
41:42 between five and 15 years ago.
41:44 Whether people see that as a huge positive,
41:47 I don't quite know.
41:48 But I think that's probably the fairest answer
41:51 I can give you on that one.
41:52 And just on that point as well, Phil,
41:54 do you feel that there's,
41:54 I know every club has to publish their accounts yearly
41:58 and there's little place to hide really,
42:00 but you get the impression
42:02 that maybe there's a little bit more transparency
42:04 around a lot of the big issues now.
42:07 Perhaps Kiri Luyendyrefs has maybe learned his lesson
42:09 from the shareholder initial,
42:12 claimed that he was majority
42:13 when he was in fact a minority,
42:15 I know he was a majority controlling owner,
42:19 but there's a lot of stuff that's happened,
42:20 obviously with Donald and Methen back in the day,
42:22 but I do get the feeling now
42:24 that there's sort of no skeletons in the closet anymore,
42:27 which is quite nice.
42:29 - Yeah, I think there's,
42:31 to an extent, to an extent,
42:36 I definitely think we should
42:39 and can push for a lot more accountability.
42:42 Neither of the club's ownership really are available to,
42:46 - Yeah, you should never stop asking questions.
42:48 - To the media and they've been
42:50 not hugely accessible to fans either, I would suggest.
42:54 I know Kirill has attended meetings
42:56 with the sport collective, which is good.
42:58 I've been at a Q and A that he's done with supporters,
43:00 which was very good,
43:01 but I would argue they've been quite rare
43:03 and not frequent enough.
43:06 So I don't feel that Sutherland are as transparent
43:10 and as accountable as they should be and as they could be,
43:12 but I agree with you that these,
43:16 certainly the last couple of sets of accounts they've put out
43:19 have been a lot more transparent than previous ones.
43:22 Certainly the notes that accompany them,
43:25 which again, people want to go and read them.
43:27 They give you a bit more insight into the plans
43:30 and what the club's planning
43:32 and where they see things than what we used to have.
43:35 So I agree with your point.
43:36 There is definitely more transparency
43:39 than we've had in the past,
43:40 but I would like to see more and also in between accounts.
43:45 I think we could certainly expect and demand a lot more.
43:49 - Oh, brilliant.
43:51 We've gone 43 minutes there, Phil.
43:53 So thank you very much for that.
43:55 A very, very all encompassing topic.
43:58 Thank you very much for watching.
44:00 Phil, you've written about this over at the Southern Echo.
44:02 People can go and read that.
44:03 What else are you writing about at the moment?
44:05 I'll have to put you on the spot there.
44:06 Is the answer nothing?
44:07 - No, it's a good question.
44:10 I'm currently writing about all the transfer decisions
44:14 that we made in the last couple of windows
44:16 and looking at which ones worked,
44:18 which ones didn't, rating them,
44:20 mainly to actually see what needs to change
44:22 going into the next season
44:23 and what went wrong after a really good season,
44:25 the one before.
44:26 We also have the big Under-21s game tonight.
44:30 Our colleague Joe is going to be at that game.
44:32 So there'll be extensive coverage for that.
44:34 That's going to be a really big occasion for the Under-21s.
44:37 We expect as the week develops,
44:39 there'll be some, potentially some retained list news.
44:42 There may be some head coach developments,
44:44 although we're still sort of waiting
44:45 for concrete stuff on that.
44:46 So there is going to be loads of stuff coming.
44:49 But the reality is,
44:51 is that we are a little bit beholden to Sunderland.
44:54 So let's see what Sunderland have in store.
44:56 And then we will sort of be reacting to that.
45:00 But listen, we're going to have loads of videos,
45:02 aren't we, and stuff.
45:03 We're going to do one retained list.
45:05 We'll chat about the squad and how it's looking.
45:07 When a new head coach is in,
45:09 we'll do some stuff around that.
45:10 So yeah, definitely subscribe to the YouTube page
45:13 and stay tuned because we are going to be doing
45:15 loads of stuff as the summer develops.
45:17 We're certainly not going anywhere, are we?
45:19 No, no, we're not.
45:21 And dare I say, this is a little bit of a lull,
45:23 a little bit of a calm before the inevitable incoming storm,
45:28 which is about to hit us at some point,
45:30 which we look forward to.
45:31 Thank you for watching on Facebook, YouTube,
45:35 and Twitter, X as it's now known.
45:37 You can find this podcast on all podcast platforms
45:40 shortly after the end of this broadcast.
45:42 And it's also available on Shots TV later on Freeview.
45:46 Thank you very much for listening to the Raw Podcast.
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