MAY
26
2010
Mickey Blue Eyes...
INTERVIEW WITH ROBERT ELSTONE
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INTERVIEW WITH ROBERT ELSTONE

By

Mickey Blue Eyes

Last Wednesday 19th May 2010, to Goodison Park for an interview at 3.30 pm with Everton Chief Executive Officer Robert Elstone.

As always, I suggest you make up your own mind and ignore ale-house gossip and rumour.

 

MBE:

Thanks for seeing me again, Robert.

 

 

 

Last season was your first full season after your appointment as CEO. It couldn't have been more difficult. What impression has it left on you?

 

 

RE:

I did in some respects get chucked in at the deep end, which isn't necessarily a bad thing. It just makes for a busy life! In circumstances like that you have to learn fast, think on your feet and rely on a good team of people around you. I had to get to grips very quickly with the stadium issues and gain an understanding of a mountain of documents, contracts, drawings and designs. It was a steep learning curve to say the least.

 

 

 

In addition, I quickly realised there was no such thing as a normal day as challenges and opportunities appeared from nowhere at an alarming rate.  I recall when our Finance Director joined us about three years ago and a few months into the job he said he couldn't believe the pace and diversity of the work. Which is very true and why ultimately it is very stimulating here. There's never a dull day.

 

 

 

I can remember when I was an accountant and it seemed all about routine. You knew exactly what you would be doing each day of the month. Everton couldn't be further from that!

 

 

MBE:

As a start, can we talk about the general structure of the game?

 

 

 

I think the event which has most shaken football during the last year - including the Triesman nonsense - is the Portsmouth bankruptcy..........Do you think that is just the first, or is it a one off in the Premiership?

 

 

RE:

Naturally I hope it is a one off.

 

 

 

Richard Scudamore has pointed out Portsmouth happened at a time of a deep and widespread recession which has resulted in football revenues becoming harder and harder to come by, particularly from corporate entertainment and sponsorship. Raising money and securing credit has become much more difficult than previously. Against that backdrop you also have ownership that didn't seem to work out in the way it purported. The combination apparently took Portsmouth over the edge. You could talk for hours as to how and why it happened.

 

 

MBE:

True, but the fact is they had four owners in the space of a year................

 

 

RE:

Well, all I can say as an outsider is it looks as though promised financial support evaporated when it was most needed. But undoubtedly it is true the Portsmouth bankruptcy is a blot on the Premiership.

 

 

 

The financial issues which are causing most concern are the balance sheets of two of the most famous clubs in the League, Manchester United and Liverpool, which are played out on a daily basis in the media. I suggest it's these issues as much as Portsmouth that are fuelling the "something-has-to-change debate" as well as raising attention at UEFA and FIFA.

 

 

MBE:

In that case, do you anticipate any restructuring of the game at all?

 

 

 

The fear since the formation of the Premier League in 1992 has always been that something as football tragic as the Portsmouth bankruptcy would happen. Well, here it is. It has happened.

 

 

 

The financial model was always unreliable. It works after a fashion during a boom, but the moment the inevitable slump arrives the consequences are all too predictable. Surely Portsmouth is part of that, aren't they?

 

 

RE:

I would argue Portsmouth is a special case, a special set of circumstances which contributed to the club's demise. Chiefly, substantial borrowings appear to have been racked up on the cusp of an unprecedented credit collapse, without, in hindsight, ownership support and a sufficiently robust business standing behind it.

 

 

 

I still believe the Premier League is the best league in the world. You only have to see attendance occupancy rates........ninety three percent across the board. Attendances are the best barometer of success. Ninety three percent full tells me the game is still in good shape. You also have to look at the new Sky TV deal, which is an increase on the old one, albeit not at the same rate and, in particular, the international deal, which is absolutely phenomenal, almost double. The fact that people are still packing into stadia, the fact that Sky are still prepared to pay more money for it, the fact that internationally it is hugely popular, all of this tells me the underlying state of the game is pretty healthy.

 

 

 

The financial challenges facing the game are no different from forty years ago. It is the search for talent, and as always demand outstrips supply. Ever since abolition of the maximum wage clubs have been tempted to spend more than they could afford. Wages have always been the issue. The difference now is they have several more noughts on the end!

 

 

MBE:

Do you see a wage cap anywhere in our future?

 

 

RE:

No. I don't see that as the answer. It isn't enforceable for a number of reasons. The fact is it is a global game where the search for players is international. Therefore a salary cap would have to be applied across the whole sport in all countries. If you could find an international model or formula that worked could you then police it, could you rely on the accuracy of the numbers? Even if you could believe the numbers how could you enforce penalties?

 

 

 

For instance, Melbourne Storm rugby league club have just had all their points wiped off for the current season and will finish it on zero points. That penalty is about as severe as you can get. But does the FA or UEFA have the will to impose something similar?

 

 

MBE:

So what's the difference between football and rugby league?

 

 

RE:

Essentially rugby league exists on a small scale in four countries. One of the big threats in football is a potential exit of players from one country to the next. If we impose a tough salary cap in the Premier League players will simply go to countries where they can earn more.

 

 

MBE:

So you believe any measures would have to be global?

 

 

RE:

Yes. But I also think on the whole the free market model in football has worked well. Scudamore recently said it's a business model that rewards speculation. We reward speculation on hiring playing talent by awarding prize money for league placings and TV appearances. I believe that sort of free market model has on the whole stood the test of time.............

 

 

MBE:

...........But it hasn't, has it? It hasn't worked..........

 

 

RE:

...........And I would also add that the regulation we face in the Premier League is already reasonably onerous. We are governed by the Companies Act. We have to have an independent audit. We have to have auditors signing off on going concern. We have to submit future financial information to the Premier League every Spring, which is a forecast of income and expenditure for next season - a kind of early warning. We have to apply for a licence to play in Europe, which also means submitting financial information to UEFA. We are probably more heavily regulated than any other business in the UK. So there's regulation from our government, regulation from the Premier League and regulation from UEFA.

 

 

MBE:

Well , surely it's a matter of the kind of regulation, not the amount of it.

 

 

 

But I suggest it hasn't worked anyway, especially in the Football League where thirty percent of clubs have been in administration.* And now we have a situation in the Premier League which was highlighted by Lord Triesman when he became chair of the FA two years ago, that of a total Premier League debt of £3 billion. He warned then, rightly in my view, that it couldn't go on.

 

 

 

With that in mind I'm not sure how you can argue convincingly for the free market model. We could probably argue this all day and never reach agreement!

 

 

 

(*NOTE:  Actually the figure is rather higher.....56 clubs in 22 years. See http://wwwm.coventry.ac.uk/researchnet/CIBS/Documents/CIBS%20WP04_edit.pdf)

 

 

RE:

A couple of things, Mike. Firstly, I don't know the statistics on the number of Football League clubs who went into administration - I'll take your word for that - or whether it's more or less than ten or twenty years ago. Secondly, the fact is the Football League is the fifth most-watched league in the world. If you watched this week's play-off games I'm sure you would say it was a pretty good spectacle. I would also add that reports of debt in the Premier League are unfairly and materially skewed by the borrowings at Manchester United and Liverpool and the "soft loans" at Chelsea and Manchester City. If you pull those out the debt is nowhere near as high as some members of the press report.

 

 

 

I don't want to come across as someone who claims everything in the garden is rosy. But I would also challenge those who advocate alternative models or regulation to actually come up with solutions. It's very easy to say we pay too much to players and we're all carrying too much debt. Coming up with a workable solution is a whole new ball game.

 

 

MBE:

Which is why I used the term "restructuring." I didn't just mean the financial model, which is really an accountancy exercise. I think the game's problems require a complete rethink and a new philosophy before it's too late.

 

 

RE:

Fans may not be aware of impending moves from UEFA to implement "Financial Fair Play." It will be implemented in some form, though I can't really comment on the detail of it because it isn't yet known. However, it is generally known one of its central tenets is to try to ensure clubs live within their means. The definition of "means" is essentially operating revenue. It is likely to preclude clubs from investing shareholder monies into the team.

 

 

 

One of the things it might do is further embed the current competitive system, because forcing clubs to live within their "means" almost automatically entails big clubs with big stadia intensifying a monopoly position. It becomes difficult if not impossible for a so-called small club to break through if they can't introduce additional financing. At the moment it looks as though UEFA's proposal will only consolidate that difficulty.

 

 

 

Now, we can argue whether that is right or wrong. We might even agree it should be difficult. But it also resists one of the biggest aspirations of the game, that one day your club can be as big as anyone else's.

 

 

MBE:

Well, the pre-Premier League corporatist model actually worked that way. For example Nottingham Forest came through and won two European Cups. Aston Villa plummeted to the old Third Division and then rose again to win the Championship and the European Cup. Even Wimbledon rose from non-league to the First Division and won the FA Cup. So there are alternative models that work.

 

 

 

For instance the German Bundesliga model is well worth looking at.

 

 

 

However, perhaps we should move on. We could argue this for weeks and probably only agree to disagree.

 

 

RE:

Oh yes. There are many more factors than we just touched on. I'll certainly agree to disagree with you on this! Maybe we can take it up another time.......

 

 

MBE:

One of the things that really annoys fans is the number of games played other than Saturdays because of the demands of TV companies...........

 

 

RE:

........and European football..........

 

 

MBE:

........And it is surely established (without quoting empirical evidence) that this affects attendances at TV broadcast matches. At the moment I don't think the balance has been properly struck between the overall interests of the game and the commercial interests of the TV companies. After all, physical attendance is the lifeblood of the sport. Dwindling gates almost saw the death of football in the eighties. But the threat this time is not from hooliganism and awful stadia, but from addiction to TV money.

 

 

 

Can you offer any hope on that front?

 

 

RE:

You're absolutely right. If you ask me what I want to achieve in the next twelve months it is to have 40,000 Evertonians chasing the 37,000 tickets we have on offer after the away allocation. And I totally agree that playing on Sunday on TV doesn't help.

 

 

 

I was at a Premier League meeting when this got discussed. The League was surprised to hear many clubs feel TV damages attendances. The League feel TV is a great marketing platform and that it widens the total fans base. I don't think they really appreciate that when we do a budget we knock attendance figures down for TV games, and substantially so.

 

 

 

Having said all that, when we get picked for TV "the champagne comes out." It's worth close to half a million pounds in additional revenue. Total gate receipts are about three quarters of a million for a home game. So you can see the TV money is equal to two thirds of our average take at the gate. In next year's budget our revenue from the Premier League will be roughly sixty/sixty five percent of our total income. So it gets very difficult to take, say, £45/50 million from the TV companies and then say, "And by the way, we're going to decide when we play." In present circumstances it's just a pill we have to swallow to accept the cheque.

 

 

 

Like the fans, we would prefer to play on Saturdays. At the moment we don't have much choice. I can't see it changing any time soon.

 

 

MBE:

Which brings me neatly on to one of my favourite subjects: I simply cannot see why the game doesn't own its own TV and radio channels and cut out the middle man. What's the problem?

 

 

RE:

I know the Scottish Premier League looked at this on at least two occasions. Perhaps they did so as a negotiating tool with the TV companies. Whether there was real intent I don't know. Nor do I think there is a single example of any league anywhere in the world which operates its own media outlets. The central problem appears to be obtaining the technical capability of a functioning broadcast platform at the quality production levels of the BBC and the TV companies. Plainly this would take a huge investment, or doing a deal for others to cover it and transmit it.

 

 

 

At the moment we have the guarantee of millions without absorbing the risks. I believe it is a good solution that sees the Premier League in nine million homes live and of course many more across the country with free-to-air highlights.

 

 

 

In my experience there has been no serious desire from English clubs to look at self-ownership of media outlets.

 

 

MBE:

Can we move on to Everton-specific issues?

 

 

 

The Portsmouth debacle has sounded alarm bells all over the place, largely because their debt was initially quoted at between fifty and sixty million and then grew exponentially to a hundred and thirty nine million. That first figure is often guesstimated as our debt figure? Is that accurate?

 

 

RE:

Managing our debt is arguably the single biggest responsibility we undertake and it's about balancing financial common sense with a burning ambition for success. It can feel like you're walking a tightrope. Most importantly, we have to maintain the confidence of our lenders. We have a very strong finance team and a board of directors which appreciate the challenges. The present economic climate makes everything even more difficult than previously, and it applies to everyone in the game, not just Everton Football Club.

 

 

MBE:

Are we in danger of "doing a Portsmouth"?

 

 

RE:

No, we are not.

 

 

MBE:

The wages ratio. The last time we discussed this we had just crossed the dreaded sixty percent threshold identified by your good self when you were at Deloitte. Has that ratio increased?

 

 

RE:

We're presently finalising accounts for 2009-2010 and the figure will be issued then together with our forecast for the next year. There is a limit where the ratio is not sustainable. We're not at that point and we won't get to that point. We are realistically ambitious and intend to live within our means.

 

 

MBE:

Will there be anything available for transfers this Summer?

 

 

RE:

There won't be a substantial war chest, but we have always managed to provide a certain amount for team improvement. This year the challenge will be that much harder for obvious reasons. I would suggest that apart from billionaire backed clubs most of us will be in a similar situation. All I would say is for the last six years we have started the season with a stronger squad than the previous one. It hasn't been easy, but we have managed it. The combined experience of the manager and the chairman provides me with the confidence we can achieve that again.

 

 

MBE:

You mentioned the new stadium issue earlier. Obviously the Kirkby rejection was a major blow to aspirations. I estimate it has put us back at least five years, probably ten. What's your view?

 

 

RE:

The government's Kirkby decision has set us back considerably and means we are at a significant disadvantage when competing with other clubs with better and larger stadia. In short, every year we spend outside a new stadium is a year of missed opportunity. It means the search for a new stadium is top priority.

 

 

 

The more we look at it with our advisors the more it boils down to the simple fact that the City Council plays a pivotal role in this. To make it work we need a financial model which provides substantial third-party support and allows for the sale of naming rights to the new stadium.  The Council holds the key to the former.  

 

 

MBE:

Has the political change of council leadership induced a change of approach?

 

 

RE:

Well, our approach hasn't changed. We have always been clear in our objectives and our needs.  We have always been ready to talk and to listen. We have always been flexible.

 

 

 

We had pre-election contact with the new leader, Joe Anderson and over the coming months we look forward to getting down to more serious in-depth discussions with him. The Kirkby funding model was driven by a progressive local authority and that's what we need from Liverpool if we are to secure the stadium we need within the city boundaries. Every other new stadium in the country has had that kind of co-operation and enabling spirit. We deserve equal consideration.

 

 

 

I think one of my tasks is getting the Council to fully understand the contribution this Club makes to the city and its communities. Sadly, I don't think we always get a fair crack of the whip when it comes to recognising what an asset Everton Football Club is to the city. If we can't get over that first hurdle then we're never going to make progress.  I can only imagine the excitement at the town hall in Blackpool and wonder if we take our status and profile for granted?

 

 

MBE:

While we're waiting for them to get up to speed have you had any other prospective sites and schemes?

 

 

RE:

Yes. I'm swamped with suggestions and designs. Also, we had a lot of discussion with Warren Bradley the previous council leader. A number of sites have been identified, some of them with possibilities. Unfortunately I did feel that when we got to the point of mapping out possible next steps a lot of the impetus was lost. The strategy has to be to work together to find solutions for what would be a landmark development in the city's history. That's what we want to do and that is our intention.

 

 

MBE:

The most recent notion I have seen is the so-called "twin-stadium" concept. And I have to say in a lifetime of looking at architectural projects it has to be the daftest I have seen. Is that typical of the kind of stuff coming in your mail?

 

 

RE:

Maybe that's a bit strong! It's not appropriate to pick out one idea or design over another.

 

 

 

Recently on our website I said there is no shortage of concepts, schemes, potential sites, or even whether we share with Liverpool. What we are still short of is a viable funding model. I think there are lots of well-meaning groups - and I stress "well meaning" - looking for solutions but the focus has to be on funding and that focus has to be shared by the City Council.

 

 

 

What we are short of is money, not designs. We will consider anything that meets our needs and has a viable financial plan behind it. It's that straightforward. There's no mystery.

 

 

MBE:

How are season ticket sales going?

 

 

RE:

We're delighted. We again owe a big thank you to our fans. Once again there has been an increase. We are over 23,000, excluding lounge members. It's about six hundred ahead of where we were at the same time last season. The Early Bird window has been a big success with our fans. The critical thing for the sales team is to maintain sales over the next two or three months.

 

 

 

Last weekend we invited fans down to see some of the great seats still unsold, either to buy or to relocate and I'm pleased this turned out to be a great success with almost 200 additional seats snapped up for the season.

 

 

MBE:

Has there been any "sniffing around" by potential buyers of the club?

 

 

RE:

There's always sniffing around, someone who knows someone who knows a man, who knows a man with a billion dollars who says he wants to buy a football club.

 

 

 

There has been interest during the last twelve months but none of it has come to fruition. It's something the directors pursue vigorously.  We believe the Club is a very attractive proposition for genuine investors. We have a great tradition, a loyal, large fan base, a well run business, a great squad and a great manager, all things that make Everton a good investment for the future, and one with enormous potential.

 

 

MBE:

Finally, the Everton V Everton match before next season. I am absolutely delighted it has come off after all the efforts of John Shearon and Tony Heslop in the Ruleteros Society. They have dreamed about this for years.

 

 

RE:

Yes, a lot of people are excited at the prospect.

 

 

 

Leading up to it we have a couple of weeks in Australia and three games against Australian clubs in Sydney, Melbourne and Brisbane. It's a new club in Melbourne and we are very proud to be their first opponents. Then a couple of weeks later we are home for the CD Everton Chile match.

 

 

 

I know the match has brought a smile to the faces of many Evertonians. We are really looking forward to it. The Chileans we have dealt with have been absolutely wonderful, straightforward, nice people. A CD Everton representative will be coming over at the beginning of July. We will be posting some extremely competitive prices for the event, but this game isn't about commercial concerns, it's about commemorating a unique historical relationship.

 

 

MBE:

Okay. Thanks for your time, Robert. And good luck to us all for next season.

 

 

RE:

We'll do our best!

 

 

Comments about INTERVIEW WITH ROBERT ELSTONE
7
I thought MBE, as always, asked interesting questions. It was a bit disappointing that RE couldn't or wouldn't a) put a number on the debt and b) let us know the wage ratio. Both of those pieces of information would have been valuable. I understand his views on the other issues, in fact I'd say I'm closer to RE's position than MBE's. Portsmouth were a stupid football club that overspent repeatedly and the fans knew it and rather than have the sense to try and stop it celebrated winning the FA Cup. Too bad. The legal implications of changing football in the way MBE suggests are enormous. For corporate law, competition law and financial law. Our government have much more important things to be doing, starting with getting a proper tax amount off these footballers who are the recipient of so much of the fans' money but appear content to shove it offshore in the name of image rights.
Al, Smoke, 1:07 PM 28/05/2010
6
Good interview MBE, keep'em coming. Next time can you ask him whether their are any plans to RETURN the Liver bird back on our shirts (not the LFC design), even if it's just on the tab near the waist or on the neck for now. If placed on the crest then KEEP Prince Rupert's Tower and maybe place it perched on it or something like that. It annoyed the fuck out of me when Ian Ross said that we'd never use it again because it's now synonymous with LFC. So what, just concede to the red half, or reclaim it as ours as well, we would be daft not to. The Liver Bird is seen everywhere around town, and all evertonians can't help but feel a little left out. NIL SATIS NISI OPTIMUM. The Bird Belongs to the CITY.
JT, Gtr Liverpool, 10:33 PM 27/05/2010
5
In fairness, MBE gets access to ask the questions and RE faces them. I would sooner read such interviews than not have them at all...
Robert M, Brussels, 1:10 PM 27/05/2010
4
Am I the only one a bit disappointed in what this interview achieved? A great chance to ask some pertinent questions pretty much blown in my opinion. A reasonable read nonetheless - overall, it simply re-inforces my opinion that I won't see Everton challenging for major honours in my lifetime. And I'm only 25...
Lee, Liverpool, 12:05 PM 27/05/2010
3
Speaking with a business contact yesterday who has long-time ties with PNE said that he it was mutual. Rathbone wanted to try different things, Moyes was concerned at the abormally high number of long-term injuiries and then setbacks that seem to afflict us.
Chris, London, 11:39 AM 27/05/2010
2
Excellent interview by MBE.Regarding Mick Rathbone's sudden departure(as raised by John of London)a recent article by The Echo's David Prentice indicates that he was "sacked" by David Moyes because of the setbacks experienced by Mikel Arteta, Jags, Victor and Phil Neville when each of them were recovering from their long-term injuries last season which delayed their respective returns to the first-team.
BRYAN, PRENTON, WIRRAL, 11:31 AM 27/05/2010
1
Well done on getting the interview. Some interesting stuff. I hope the next time you interview him, you ask why Mick Rathbone left the club.
John, London, 8:25 AM 27/05/2010
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