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How much revenue will Sunderland lose next season & how will they be affected by financial fair play? Key questions explored

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How much revenue will Sunderland lose next season & how will they be affected by financial fair play? Key questions explored

Post  Silvers on 2017-05-01, 3:47 pm

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Relegation has been seen by many as, if not by any stretch, at the very least an opportunity to take stock and rebuild away from the pressures of the Premier League. It is a quite understandable viewpoint given the years of underachievement, but the major caveat is the financial problems that Sunderland will have to deal with as they plot their way back. Sunderland’s latest accounts showed a drop in the debt, but that still remains at £110 million, while player trading costs meant a loss of over £30 million was recorded for the 2015/16 year. So how will relegation affect the overall picture? Will Sunderland’s finances have improved this year? The recent financial results released covered the season ending last May. The picture at Sunderland will have changed over the following 12 months, though we won’t know exactly how until this time next year. There are some very cautious reasons for optimism. Turnover should have increased in line with the beginning of the new TV deal worth almost £100 million, and less staff upheaval should have reduced costs. Sunderland made a profit in the January window, which should offset the summer spending, not a great amount to begin with, making a loss to the extent of recent years unlikely. If the debt can be brought down again, the picture will look slightly better, but on the back of relegation still relatively bleak. How will revenue change next season? Sunderland will receive parachute payments for the next three years after relegation, starting with a payment likely to be around £44 million for the next campaign. That will reduce the season after and then dramatically again a year later, the final payment likely to be closer to £15 million. That, clearly, is a dramatic drop and will drastically reduce Sunderland’s revenue streams. Sunderland will hope to cover some of the £50 million revenue drop this summer through selling assets such as Lamine Kone. It is clear that not a great amount will be left to bring players back in if Ellis Short does not invest. The absolutely critical factor in safeguarding Sunderland’s financial future is dealing with a wage bill that currently accounts for close to 80% of turnover. With so many players out of contract, high earners set to leave and most squad members having reduction clauses written into current deals, the Black Cats can make inroads. The key will be getting better value for money from those that come in, sourcing less established players on sustainable deals as they cope with the gradual decline in revenue as parachute payments drop. Does FFP operate in the Championship and how will that affect Sunderland? It does and it has bitten sides dropping down from the Premier League hard as they look to slash their wage bill in line with the drop in TV money. Blackburn Rovers, Cardiff City, Fulham and Bolton have all been hit with transfer embargoes that stunted their second tier progress. There are numerous permutations but the basic bottom line is that a club must not make a loss greater than average of £13 million per season, over three seasons. That is loosened for sides dropping from the top tier who have greater leeway (£35 million loss limit) but the Black Cats, should they not make a swift return to the top tier, face a tough challenge to cut costs in line with a decline in revenue. The need to continue bringing the debt down only adds another layer of complication. That further stresses the need to prevent fan apathy turning into empty seats and reduced season ticket income. Above all else, it further stresses the need to buy players on lower wages, at the start of their careers, who can be sold at a profit should the Black Cats not be promoted. Fail again in the market this summer and the financial implications will be dizzying and dramatic.

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