blackburn rovers buyout_ what went wrong for the venky's in football business - the economic times

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When Venky's, the poultry business conglomerate from Pune, purchased Premier League clubBlackburn Rovers in November 2010, chairperson Anuradha

Desai said she knew little about football. Few expected her to.

Football was never India's game, to say it is would be rich, even bordering on sacrilege, in cricket country. Yet Indians have shown they are game for football.

The clearest evidence yet of football's growing appetite in India is the huge following on television screens. The English Premier League is especially popular,

boasting an estimated 147 million Indian followers, according to research consultant Sport Market.

People were therefore willing to see the sagacity in the move by Venky's to buy a football club. The company had taken note of the changes sprouting in India'ssporting landscape. The first Indian group to own a team playing in the world's richest sporting league was good publicity for business.

Venky's had big ambitions to expand overseas and what better ticket than the most popular sport in the world. It had also snapped up a club steeped in history

and prestige. Rovers was Premier League champion in 1995, the only club besides the Big Three, Manchester United, Arsenal and Chelsea, to have won the

title.

At Ewood Park, the Rovers' home base, Venky's was received with the same fervour reserved for messiahs. The previous owners, Jack Walker Trust, had been

trying for years to find a buyer. Since it won the League, Rovers had fared badly on the field. The rich and ambitious new owners were about to change that.

The future looked bright. Britain has long had the hots for Indian curry. Indian chicken was about to find a place in the British sun.

Bad News All Around

Flash forward to the present and it turns out that the script has veered off course. Desai is perhaps familiar with football now. But the ways of English football

could still remain a mystery for her. Venky's is saddled with a club languishing at the bottom. The club's finances are in disarray. The company also has to

confront a board it does not see eye to eye. And fans who are very, very angry.

Indeed, watching Rovers in action back home doesn't make for happy television experience these days. It's not just the streak of losses that is worrying.

Placards and T-shirts declaring "Venky's Out", "100% Rovers, 0% Venky's", and "Venky's Wake Up and Smell the Chicken", are a common sight during matches.

Fans are upset that Venky's, as they see it, has "broken all the promises" made at the time of purchase. The company, no slouch in the riches department (see

Venky's Finances), said it would invest in the club. No money has come from Pune yet. Venky's also promised to bring big names such as David Beckham,

Ronaldinho, Kaka and Robinho to Rovers. Fans are still waiting.

Source:www.sportingintelligence.com

"Venky's is the worst thing ever to happen to Blackburn Rovers in its long and proud history," says Kamran Inayat, chief reporter of brfcs.com, a website for

supporters. "They have taken one of the best run clubs in the Premier League and turned it into a circus." Ouch! How did matters come to such a pass? How did

Venky's come to be so disliked?

'Poor Understanding'

22 JAN, 2012, 12.41PM IST, BINOY PRABHAKAR,ET BUREAU

Blackburn Rovers buyout: What went wrong for the Venky's in football business

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The company is not telling. Venky's executives and their PR representative did not respond to repeated interview requests for nearly two weeks from ET on

Sunday.

But football experts and journalists in Britain say the root of the Rovers' problem is that Venky's suffers from a "poor understanding" of the football business. That

has resulted in the owners alienating fans and the board, they say.

The trouble with fans began a month after Venky's took charge. It sacked Sam Allardyce as coach and replaced him with Steve Kean. Many found it bewildering.

"We were comfortably away from relegation and Sam brought with him a wealth of experience in football management," says James Fallon, a fan.

In contrast, Kean was considered a novice. The results affirmed their worst fears. The only high point for Rovers last season was a final-day escape from

relegation. Of the 41 games under Kean's watch, Rovers has won 10. "It is simply not a good enough record for a manager at this level," says Inayat.

It seems Venky's failed to read the sheer passion of the English football fan. Football is to an Englishman what cricket is to an Indian. Football aficionados in the

West symbolise a club's financial and sporting success. Fallon says since Venky's took over, he has felt all sorts of emotions. "I have felt excited, angry, upset,

worried and happy. Now I am just worried about the future of our club."

This sentiment seems to have escaped Venky's. All that the owners have

said is fans had every right to vent their frustration.

A month after Allardyce was given the boot, differences emerged between

the board and the new owners. Chairman John Williams, managing

director Tom Finn, and finance director Martin Goodman, in a letter dated

January 4, 2011 to Desai, said the board was not being consulted on

"some of the most fundamental decisions this or any other football club

ever makes... This includes the termination of the manager's employment

[Allardyce] and the appointment of a new manager [Kean]."

The trio left the club at different intervals in 2011. They had long served

the club and were credited with its successes. Fans were further riled

after the circumstances of their exit were revealed to the press recently. They were already fuming at owners "too busy to attend matches".

Empty Promises

Fans are also piqued that Venky's has been incommunicado despite the club's travails. "We have had no real communication from them since taking over the

club in November 2010," says Fallon. The only person talking is Kean, but the fans want to see his back rather than hear his talk.

The continued frustration of fans may have wider ramifications for the company. Simon Kuper, co-author of the widely acclaimed analytical book Soccernomics,

says fan support is crucial to running a club. "In this industry, consumer activism is extreme. The consumers gather in one place and shout things in unison, you

don't tend to get that in many industries. If at a club, the fans are chanting against the owners, and want rid of them, it's very uncomfortable for the owners to

hang on. The Glazers at Manchester United have hung on despite fan opposition but it's an unpleasant situation."

To say it is unpleasant in Ewood Park would be to put it mildly. Fans have taken out numerous protest marches against Venky's. They have strongly criticised the

club's owners. In November 2011, Desai's brothers Balaji Rao and Venkatesh Rao were booed at halftime during a match. They left the stadium soon after. Theduo had received a warm welcome when they were presented to the crowd a year ago.

Still, that could not be as worrying as the club's plunging finances. Rovers posted a pre-tax loss of 18.6 million for the year to end June 2011 compared with

1.9 million a year ago. Under Venky's' watch, Rovers' wage bill shot up to 49.9million, or 86.6% of the annual turnover, in 2011 from 47.4 million the previous

season. Net debt increased to 26.3 million from 21 million.

Financial Woes

More bad news was at hand. In December, Barclays Bank, the Premier League sponsors, told Venky's that it must deposit 10 million by New Year's eve.

Failure to do so would force the bank to withhold credit needed to pay players' wages beyond January. Barclays shared the fans' belief that the owners would

inject cash into the club periodically, according to British media reports.

The owners are being accused by the football cognoscenti of misreading the Premier League format. Venky's paid the Jack Walker Trust 23 million, cleared

20 million in debts and invested 10 million in short-term capital. Company bosses may have believed that would suffice.

Expenses, including monthly wages of around 5 million, could be met from ticket sales and Premier League central funds, or so they may have thought. After

all, wasn't this regular club income? Rovers made 42 million from central Premier League funds in 2010-11 and another 5.5 million from ticket sales .

This season would have played out the same, except that money is not paid evenly through the year. The largest chunk was paid in the summer. For the rest of

this season, Rovers will receive only 1.7 million a month, plus a 'facility fee' (for matches on TV) of around 5.8 million in January. Ticket sales in 2011 too had

fallen from 6.1 million in 2010.

Rovers had no trouble paying the December wages. Likewise, January was easy thanks to the television income. The future, however, looks less sanguine. To

sketch a bleak scenario, the overdraft will balloon to 13 million in February, according to Nick Harris, an expert in football business and finance and editor of

www.sportingintelligence.com .

Perhaps the Venky's management should've read Soccernomics. In the book, Kuper argues that football clubs almost never make profits. "I don't believe that

many owners buy clubs in the hope of profits. It's actually rare for business groups like Venky's to be club owners. Most owners are individual rich men like

[Roman] Abramovich [Russian owner of Chelsea] or the Abu Dhabi owners of Manchester City, who buy clubs in the same spirit that they buy paintings or

yachts, for the thrill, the vanity, the glamour of it," says Kuper.

Screaming Foul

The financial pain will escalate if Rovers continues its poor run on the field. This season, it has won four matches, drawn one and lost 12. It is very much a

relegation candidate. "I will be very surprised if we don't get relegated," says Jordan Wilson, a digital account manager who started the website

www.RoversFans.co.uk


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If it were to drop, there are many who think a financial catastrophe awaits Rovers. First, regular income would fall sharply to around 25 million. As wages form

the lion's share of revenues, the better players would have to be sold. That will make it hard for the club to get promoted back to the Premier League. With stars

gone, attendances too are certain to shrink.

Inayat says the owners would have to make up the difference. That is about as certain as Rovers finishing on top, though Venky's did assure last season it

would fund the club if it were relegated. It was also forced to refute talk that the club was for sale, a year after acquiring Rovers.

The pall of gloom enveloping Rovers, meanwhile, is threatening to snowball into a political controversy. Councillor Kate Hollern, leader of Blackburn with Darwen

Council, recently wrote an open letter to Desai "to discuss the present problems being experienced at the club". "Given the importance of the football club to the

local economy, I have serious concerns how the club is being run and the effect its demise is having locally," she says.

Management Failure

The Venky's family, says Hollern, clearly has no experience in running a complex organisation like a Premier League Club from thousands of miles away.

This argument was lent credence in a recent article in The Independent. The paper produced an account of Rovers financier Ian Battersby who said the owners

expected the club to operate the same way as their subsidiaries, in this case, one business head (Kean) who reports directly to the Venky's board. "This explains

the once-monthly trips to Pune that Kean has been willing to undertake, with a 10-hour flight from London to Mumbai and four-hour onward road trip to Pune."

The paper wondered if Venky's had heard of video conferencing. There are some willing to give Venky's the benefit of doubt. Harris, who travelled to Pune to

meet the owners in January 2011, says Desai and family are nice people with good intentions. "The owners were badly advised about how much it would cost to

run a Premier League football club and naive in some ways to accept advice without checking it."

Bad Business?

For Venky's, business gains would have provided some respite from the current troubles. No luck here too. A TV commercial showing Rovers stars tucking into

Venky's fare before kickoff was chafed at for its "ludicrousness". "Can it really be good preparation for asoccer match?" many wondered.

Venky's also brought Rovers players to India to play a match against Pune FC in 2011 after three failed attempts. The timing came for flak because fans thought

Rovers should have been preparing for another tough season. The club may have given Venky's a global brand exposure, but the string of controversies has

cast the company in unusually negative light. "Due to the way they have acted as owners, brand perception will not be great," says Wilson.

Inayat agrees. "In the UK, the Venky's brand is tainted."

The only discordant voice is Kuper's. "Buying Blackburn will make Venky's better-known internationally... it could be a good thing to tell business clients, and a

way to meet other rich people. All that may help Venky's in business," he says.

Kuper says one day Venky's might sell Blackburn for more than it paid for the club, i.e. they might make a capital gain. Many see the sale as a distinct possibility.

Venky's may have to plan an orderly exit if it fails to commit big bucks to Premier League survival and prepare to rebuild for the next season.

Surprisingly, fans are cool to the exit option. "This is a case of 'better the devil you know'," says Fallon. "If they go, who is going to come, reorganise the club and

make it one to be proud of again?" he asks.

Inayat says at the moment there is no viable alternative to Venky's. "Therefore, I would want to work with Venky's and help it rebuild a club they have almostdestroyed." The situation, he says, is not beyond repair. Until then, looks like the last word on Indian chicken must wait.

EPL is made of 20 clubs:

The 'big clubs', or the wealthy ones, are Manchester United, Arsenal, Chelsea, Manchester City & Liverpool. The 'medium clubs' are Aston Villa, Newcastle,

Sunderland & Everton. The rest are smaller clubs. Rovers is one.

Clubs have three main income streams:

Match Day: Essentially ticket sales plus money fans spend during match for pies and drinks.

Media: TV money from central Premier League funds. There may be also money from the FA Cup (if a club is on TV) and Europe (if a club plays in Europe).

Rovers doesn't.

Commercial Sponsorship: deals, merchandise and any other deals (pitch-side adverts, ads in the match programme

booklets etc).

The bigger ones, of course, earn more. Still, Blackburn Rovers benefits because the English Premier League is the world's richest league by

income... (Figs for 2010-11)

600 mn - Earnings from domestic TV rights in a year (paid by SKY & ESPN currently)

479 mn - Earnings from foreign television rights in a year

121 mn - Other income from Barclays sponsorship and other sponsors, media rights

1.2 bn - Total income in a year

And these funds are distributed:

The domestic money, or Premier League central funds, is split into three parts: an 'equal share', facility, and success payments. For equal share, each club gets

13.8 million.

Facility money depends on how many times a club appears on TV, but each club guaranteed a minimum of 5.8 million. Overseas TV money is split equally at

17.9 million per club.

The success, or merit, money amounts to 756,756 per place in the league. Bottom-placed team (20th) gets that while the top team gets 20 times as much.

Stinging Criticism:


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The Venky's family clearly has no experience in running a complex organisation like a Premier League club from thousands of miles away. --- Councillor Kate

Hollern, Leader of Blackburn with Darwen Council

If at a club [and I'm not specifically referring to Blackburn here] the fans are chanting against the owners, and want rid of them, it's very uncomfortable for the

owners to hang on. --- Simon Kuper, Co-author of Soccernomics

I want Venky's to show it means business and want to make our team a success and to face up to the critics. If it can't do that, it should hold its hands up and

admit it was a mistake buying the club and should actively seek potential new owners who can make the team a success. --- James Fallon, Rovers fan

Venky's took over a side that were in the top 10 and consistently challenging for Europe. Since then, we have become relegation candidates and I will be very

surprised if we don't get relegated. --- Jordan Wilson, Rovers fan

Venky's is the worst thing ever to happen to Blackburn Rovers in its long and proud history. --- Kamran Inayat, Chief Reporter, BRFCS.com

My personal view is that the owners were badly advised about how much it would cost to run a Premier League football club and naive in some ways to accept

advice without checking it. --- Nick Harris, expert in football business and finance, and editor of sportingintelligence.com

There was apprehension among the majority of fans because with the takeover came change... None of us knew what we were in for. --- Mike Delap, Editor,

blackburn.vitalfootball.co.uk

Paying The Penalty

Since purchasing the Blackburn Rovers in November 2010, Venky's has been beset by a litany of woes.

Internal Strife: Soon after the takeover, differences cropped up between Venky's and the Rovers board over running the club. Chairman John Williams,

managing director Tom Finn and finance director Martin Goodman quit at different intervals in 2011.

Angry Fans: Fans are upset with the way Venky's is running the club. They have taken out marches, brandished placards and wore T-shirts at matches to venttheir ire. They are also angry that Venky's has not kept its promise of bringing big names to the club.

Political Row: The poor run of the club and protests by fans have caught the attention of local politicians. Councillor Kate Hollern has written an open letter to

Venky's chairperson Anuradha Desai "to discuss the present problems being experienced at the club".

Embarrassing Commercial: An advertisement in which players stuff sauced chicken drumsticks into their mouths before

kickoff drew criticism from analysts and the UK media: "Can it really be good preparation for a soccer match?"

Financial Woes : Club debt rose to 26.3 million in 2011 from 21 million in 2010. Rovers posted an annual pre-tax loss of 18.6 million for the year to end June

2011 compared with 1.9 million a year earlier. Venky's was also asked by bankers Barclays to make a 10 million deposit or risk crossing overdraft limit.

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blackburn rovers buyout_ what went wrong for the venky's in football business - the economic times

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