Lockdown’s hit every club hard, and the battle is just starting…

Relegation would be a nightmare for West Ham but the owners would pay up

West Ham’s valuation has dropped by £73m to £248m claims football finance expert Kieran Maguire from the Price of Football.

If true, that relegates West Ham down to the 15th most valuable club within the Premier League and that was before the current pandemic or any potential relegation which will devalue the club further. The loss of nine Premier League games would lead to a massive reduction in TV money of £762m from the broadcasters for every Premier League club and season ticket holders are set to be refunded £170m across the top flight.

Abandoning the 2019/2020 Premier League season could cost West Ham as much as £40m in lost revenue. With this hole in our finances for this season, this could lead to total losses of over £80m without factoring in any relegation figures if the Premier League were to restart.

Club insiders say West Ham — like every club — is having to concentrate on keeping the club solvent during these unprecedented times. The Hammers continued to pay a staff payroll of over £10m each month while still paying £44m in instalments this year on players purchased under the Pellegrini/Husillos era adding another £3.6m of monthly outgoings.

West Ham would usually rely on season ticket renewal money this time of year to the tune of £23.5m putting much-needed cash in the bank.   The Hammers would usually earn another £4m per year from general ticket sales and more still from corporate hospitality members many of which have paused their direct debits.

We were due to have four of their nine remaining games broadcast live on UK TV which would have earnt them an additional £4.8m in facility fees. There is also no income from the club store which brings in around £9m each year or around £750,000 per month.

This is the primary reason the club has created a rights issue for existing shareholders including David Sullivan, David Gold, Tripp Smith, Terry Brown, Harris family and Karren Brady to inject cash in return for extra shares for something they already own collectively. The West Ham shareholders are taking their share of the pain in investing cash instead of loaning it with interest or borrowing from the banks.

From May, players took a deferment on their wages thought to be 25% repayable at the end of the season while Karren Brady, David Moyes and CFO Andy Mollet took a 30% pay cut. David Sullivan and David Gold have deferred any interest due to them in shareholder loans.

If the Premier League does restart all clubs including West ham will have to pay back an extra £36million in rebates to the TV broadcasters for every week the start is delayed beyond June 12.   The payment is on top of a massive £330million the broadcasters are already due even if the remaining 92 games of the 2019-20 campaign are completed.  

If the season is abandoned with no more games played then the money due back to Sky Sports, BT Sports and the international broadcasters is increased to £762million. A delay until June 19 will cost £36m in penalties bringing the total rebate to £366m while a delay of three weeks until the end of June, as Steve Bruce suggested, would add another £72m bringing the total compensation to £438m.

Should the Premier League not start until the end of July then the figure bumps up to £582m and should it not start until end of August it will rise to £726m, at which point it makes little financial difference whether the games are completed or not. The Hammers recently announced their season ticket refund policy which will cost up £5m in cash refunds, they also face the real prospect of no ticket revenue for the 2020/2021 season if the season is played behind closed doors.  

On a positive note, the Hammers have no significant borrowing outside their shareholders but we are certainly living beyond our means with a £138m wage bill and tens of millions left in transfer instalments from the Pellegrini era.   Relegation causes financial disaster for any club and last time the owners injected £45m, the majority of which is still outstanding to the shareholders nine years later.

No-one could have predicted or financially planned for the current hiatus in football but everyone is in the same boat. If the Hammers are relegated the owners will once again put their hands in their pockets to ensure West Ham bounce back to the top flight.

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