The idea of community (or fan) ownership has gained increased prominence in Scotland as the travails affecting Scottish football continue and a number of its high profile institutions, such as Rangers and Hearts, flounder. For many, community ownership has become a panacea for solving the ills of the game, or at least at their club. In a more real and present sense, it is increasingly the last resort for saving clubs from oblivion, with Dunfermline fans recently ‘saving’ their club and Hearts on the road to becoming fan owned. While some supporters have embraced the idea, a large number remain sceptical, indeed outright opposed.
This article seeks to dispel some of the myths surrounding community ownership by examining how community owned football clubs can operate. There are some common misconceptions surrounding community ownership and a better understanding – or at least different perspective – on the relevant issues will hopefully inform the debate on the future of Ayr United and other clubs.
In exploring what community ownership entails, it is useful to consider football clubs in three separate but interrelated regards: ownership, finance and operation. While the relationship between ownership and how a club operates is fairly straightforward, the association between ownership and finance is perhaps less so.
A traditional view may be that, as an asset or a company, like any other, football clubs in private ownership are the responsibility of their owner(s). Specifically, the owner is obligated to spend money in order to maintain and operate that asset, and to make it successful. While some supporters may be happy to absolve themselves responsibility for their clubs fortunes – “why should I give him my money, its his club” – when expectations that season ticket money and other expenses are wisely invested and the club is successful are not met, supporters are left frustrated. Invariably protestations are made, but with little option other than ‘put up or shut up’.
In this regard, football fans are reduced to being merely customers of their clubs. This, however, is an insincere comparison. If you are unhappy with the service provided by the supermarket you use, your broadband supplier or favourite restaurant you would have no qualms about going elsewhere. The same is not true of football. The financial and emotional investment a supporter make in his or her football club creates a strong bond, often reinforced by familial or social ties (nobody goes to Tesco with their mates after a few pints). Taking the decision to withdraw your custom form your football club is a difficult one to make. You may go less often, or even not at all. It is unlikely you would take your custom to another club.
An alternative way at looking at how a football club is financed is to consider the collective investment made by supporters. A reasonable question to ask may be should one person contributing £100,000 (possibly in the form of soft loans) a season have the controlling interest – and overall ownership – of a football club when there are five hundred supporters contributing £400 each? This collective £200,000 investment should, in my view, bring with it influence on how the club is run and how that money is spent. Furthermore, as owners of the club, its supporters would have access to information on how and where money is spent, and this transparency can only be a good thing.
One criticism levelled at fan ownership is that it equates to less money being available. This conviction stems from the idea that ‘ordinary fans’ cannot hope to invest the same levels of finance as a successful and wealthy businessman or consortia. The viewpoint is, of course, an accurate one and the examples from Scottish football are plenty: consider Roy McGregor, Eddie Thompson and Bill Barr. It is undoubtedly true that money facilitates success.
A football club’s basic income is derived from the following sources: gate receipts; commercial revenue streams such as sponsorship, hospitality, merchandise, lotteries and half-time draws, fundraising; media (including television); and monies distributed by the governing bodies, chiefly prize money. While the total income this amounts to will vary to a greater or lesser extent on success on the park, these represent steady, sustainable sources. In the case of traditionally owned and run clubs, owners, board members or other benefactors may additionally provide finance, often in the form of ‘loans’ and sometimes via complicated corporate structures. It is this finance that will often enable a club to compete at a higher level than could otherwise be expected based on the size of its fan base.
But why should successful and wealthy businessman not want to be involved in a club that was community owned and to provide this additional finance? Because they want control of a club? This can still happen under community ownership, albeit not overall control to the extent they can do whatever they like; because they want a return? Any investment in Scottish football is unlikely to see a return, but that too is possible; because their motivations are not in the best interest of the football club? Well, good.
This brings us on to the problems with ‘rich benefactors’ and clubs in ‘private’ ownership. For every Roy McGregor – who has, and continues to, run Ross County in a manner that has seen their exponential growth and allowed them to compete at the highest level – there are countless examples of owners who have walked away from football clubs in Scotland leaving financial devastation. The Scottish Green Party’s recent Bill aimed at giving supporters the right to buy their football club noted that all too often owners of Scottish football clubs have committed their club to spending money it cannot afford, supplementing revenue with their own resources. In this scenario, without a wealthy benefactor, sporting goals cannot be achieved through ‘normal’ trading, i.e. trading where expenditure is based on earned income. As a result, financial success and sporting success are, for the vast majority of clubs, mutually exclusive and clubs continue to be solvent only as long as their benefactors have the means to support them. When such means are exhausted, the club quickly moves from apparently rude health to severe insolvency.
Community ownership is one mechanism that can prevent this happening as unsustainable options are simply cannot be realised; if the club has no wealthy benefactor, the only way to run the club is as a ‘normal’ enterprise in which income and expenditure are linked in a sustainable manner (although more rigorous implantation of financial fair play regulations by the governing body would also be welcome, and would allow community owned clubs to compete on a more level playing field).
The ethos of community ownership can effectively protect football clubs from financial distress, by taking power away from owners who have the capacity to act in a way that harms the long term sustainability of the club. One specific mechanism is the Community Interest Company (CIC). Most senior football clubs operates as ordinary limited companies. Company law allows such companies to carry out business transactions that may be completely against the aims and wishes of their supporters and to the detriment of the club. It protects investors and shareholders but provides little or no protection to the community or its supporters. Where a CIC differs is that the company must act for the good of the community (in this instance, a football club) and restrictions that prevent profits and assets being diverted away from its supporters and the community. Specifically, an ‘asset lock’ prevents the assets of the company (for example a club’s home ground) being stripped from the company.
The recent Begbies Traynor Football Distress Survey (November 2013) covering Scottish football found a total of four clubs in the top three Scottish divisions were facing critical financial pressure at the end of October 2013 and a further 16 clubs, half of all those covered by the survey, were showing early signs of financial distress. It commented on clubs locked into cycles of financial distress, where aside from a big investment – and the message was clear that the majority of troubled clubs in Scotland can no longer rely on wealthy benefactors swooping in as white knights – it was hard to see what will save these clubs from facing administration unless they completely revisit their business models and make some fundamental changes. The report concludes that alternative structures such as community interest companies and fan-based ownership, may well become an increasing part of the solution and indeed aside from merging and consolidating clubs together, or allowing those who fail to create a reduction in the number of clubs, it is possibly the only hope for many.
Community ownership does not preclude additional sources of income, opens up new potential funding steams and should not be seen as something only appropriate for small-town clubs with limited ambition. The fact that community ownership will inevitably mean football clubs are run on a financially sustainably basis should not be seen as a disadvantage, as history has taught us even the largest clubs in the land can only run on an unsustainable basis for so long.
So perhaps community ownership need not lead to financial Armageddon, and indeed could be a safeguard against it. But what about how clubs in community ownership operate? A further criticism of community ownership is that supporters lack the wherewithal to successfully run a football club. Again, I would suggest there is no logic to this assertion. Football clubs up and down the country are run by supporters, successfully or otherwise: the only difference being they tend to also hold the largest shareholding. Distributing this shareholding more equitably, does not need to change how the club is run or financed. Community ownership does not thrust people, unequipped to run a football club, into the Boardroom. Instead, it ensures that those running a football club have accountability to the supporters (its community) and – more importantly – football clubs are run in a manner that benefits the community and not private individuals. The essence of fan ownership is therefore a move away from the situation at so many clubs where, collectively, supporters have no influence and Boards of Directors and owners have no accountability to supporters.
Community ownership in Scotland currently lacks an obvious exemplar, at senior level certainly. However, this is in no way evidence that it cannot work. So far, fan ownership has largely arisen in the Scotland against a legacy of failure, debt and limited capital. Fans – for example at Dundee, Clyde and Stirling Albion, have incurred debt purchasing the club, or inherited debt and they were faced with having to run a club in a way which no longer accumulated debt. Clyde are good example of this problem. Clyde became a Community Interest Company in November 2010. In December 2013, they were able to announce an operational profit of £80,000 for the year ended 30 June 2013. This is the fifth year in succession that the club – Scotland's first senior club to be wholly supporter owned – has made a profit and through tight financial control on costs Clyde debts have reduced from £½ million in December 2007 to £53,000. The club are on course to become debt free by November 2014. So while on the pitch, Clyde have slid from the First Division in 2009 to the bottom of Division 3 in recent seasons, they are slowly reaching a point, under fan ownership, where income can soon be used to grow the football club rather than paying off historical debt.
Community ownership should not be seen as the solution for the ills of Scottish football and the remedy to clubs financial troubles. It doesn't guard against bad decisions being made or guarantee success. However, where clubs have a responsibility not to a small number of shareholders but to their communities, defined as the local area and its supporters, and are run democratically, transparently and, importantly, sustainably they can look forward to a positive future. The largest stumbling block is how we get there, particularly where clubs find themselves in a cycle of financial distress. Where the debt burden is passed to the fans as new owners, it will take time for the benefits of community ownership to be realised.
The coming months could see Ayr United become a community owned football club. I believe it is an exciting prospect. An opportunity to breathe new life into the club, invigorate the Boardroom and to change the relationship fans have with those who make the key decisions at Somerset Park. It won’t be easy. What happens to the current debt burden – owned chiefly to current Directors in the form of loans – will be critical in determining how quickly community ownership can be a success at the club but, equally, it requires supporters to grasp the opportunity that it presents. The process can start with an understanding of what community ownership means and what it does not.
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In this regard, football fans are reduced to being merely customers of their clubs. This, however, is an insincere comparison. If you are unhappy with the service provided by the supermarket you use, your broadband supplier or favourite restaurant you would have no qualms about going elsewhere. The same is not true of football. The financial and emotional investment a supporter make in his or her football club creates a strong bond, often reinforced by familial or social ties (nobody goes to Tesco with their mates after a few pints). Taking the decision to withdraw your custom form your football club is a difficult one to make. You may go less often, or even not at all. It is unlikely you would take your custom to another club.
An alternative way at looking at how a football club is financed is to consider the collective investment made by supporters. A reasonable question to ask may be should one person contributing £100,000 (possibly in the form of soft loans) a season have the controlling interest – and overall ownership – of a football club when there are five hundred supporters contributing £400 each? This collective £200,000 investment should, in my view, bring with it influence on how the club is run and how that money is spent. Furthermore, as owners of the club, its supporters would have access to information on how and where money is spent, and this transparency can only be a good thing.
One criticism levelled at fan ownership is that it equates to less money being available. This conviction stems from the idea that ‘ordinary fans’ cannot hope to invest the same levels of finance as a successful and wealthy businessman or consortia. The viewpoint is, of course, an accurate one and the examples from Scottish football are plenty: consider Roy McGregor, Eddie Thompson and Bill Barr. It is undoubtedly true that money facilitates success.
A football club’s basic income is derived from the following sources: gate receipts; commercial revenue streams such as sponsorship, hospitality, merchandise, lotteries and half-time draws, fundraising; media (including television); and monies distributed by the governing bodies, chiefly prize money. While the total income this amounts to will vary to a greater or lesser extent on success on the park, these represent steady, sustainable sources. In the case of traditionally owned and run clubs, owners, board members or other benefactors may additionally provide finance, often in the form of ‘loans’ and sometimes via complicated corporate structures. It is this finance that will often enable a club to compete at a higher level than could otherwise be expected based on the size of its fan base.
But why should successful and wealthy businessman not want to be involved in a club that was community owned and to provide this additional finance? Because they want control of a club? This can still happen under community ownership, albeit not overall control to the extent they can do whatever they like; because they want a return? Any investment in Scottish football is unlikely to see a return, but that too is possible; because their motivations are not in the best interest of the football club? Well, good.
This brings us on to the problems with ‘rich benefactors’ and clubs in ‘private’ ownership. For every Roy McGregor – who has, and continues to, run Ross County in a manner that has seen their exponential growth and allowed them to compete at the highest level – there are countless examples of owners who have walked away from football clubs in Scotland leaving financial devastation. The Scottish Green Party’s recent Bill aimed at giving supporters the right to buy their football club noted that all too often owners of Scottish football clubs have committed their club to spending money it cannot afford, supplementing revenue with their own resources. In this scenario, without a wealthy benefactor, sporting goals cannot be achieved through ‘normal’ trading, i.e. trading where expenditure is based on earned income. As a result, financial success and sporting success are, for the vast majority of clubs, mutually exclusive and clubs continue to be solvent only as long as their benefactors have the means to support them. When such means are exhausted, the club quickly moves from apparently rude health to severe insolvency.
Community ownership is one mechanism that can prevent this happening as unsustainable options are simply cannot be realised; if the club has no wealthy benefactor, the only way to run the club is as a ‘normal’ enterprise in which income and expenditure are linked in a sustainable manner (although more rigorous implantation of financial fair play regulations by the governing body would also be welcome, and would allow community owned clubs to compete on a more level playing field).
The ethos of community ownership can effectively protect football clubs from financial distress, by taking power away from owners who have the capacity to act in a way that harms the long term sustainability of the club. One specific mechanism is the Community Interest Company (CIC). Most senior football clubs operates as ordinary limited companies. Company law allows such companies to carry out business transactions that may be completely against the aims and wishes of their supporters and to the detriment of the club. It protects investors and shareholders but provides little or no protection to the community or its supporters. Where a CIC differs is that the company must act for the good of the community (in this instance, a football club) and restrictions that prevent profits and assets being diverted away from its supporters and the community. Specifically, an ‘asset lock’ prevents the assets of the company (for example a club’s home ground) being stripped from the company.
The recent Begbies Traynor Football Distress Survey (November 2013) covering Scottish football found a total of four clubs in the top three Scottish divisions were facing critical financial pressure at the end of October 2013 and a further 16 clubs, half of all those covered by the survey, were showing early signs of financial distress. It commented on clubs locked into cycles of financial distress, where aside from a big investment – and the message was clear that the majority of troubled clubs in Scotland can no longer rely on wealthy benefactors swooping in as white knights – it was hard to see what will save these clubs from facing administration unless they completely revisit their business models and make some fundamental changes. The report concludes that alternative structures such as community interest companies and fan-based ownership, may well become an increasing part of the solution and indeed aside from merging and consolidating clubs together, or allowing those who fail to create a reduction in the number of clubs, it is possibly the only hope for many.
Community ownership does not preclude additional sources of income, opens up new potential funding steams and should not be seen as something only appropriate for small-town clubs with limited ambition. The fact that community ownership will inevitably mean football clubs are run on a financially sustainably basis should not be seen as a disadvantage, as history has taught us even the largest clubs in the land can only run on an unsustainable basis for so long.
So perhaps community ownership need not lead to financial Armageddon, and indeed could be a safeguard against it. But what about how clubs in community ownership operate? A further criticism of community ownership is that supporters lack the wherewithal to successfully run a football club. Again, I would suggest there is no logic to this assertion. Football clubs up and down the country are run by supporters, successfully or otherwise: the only difference being they tend to also hold the largest shareholding. Distributing this shareholding more equitably, does not need to change how the club is run or financed. Community ownership does not thrust people, unequipped to run a football club, into the Boardroom. Instead, it ensures that those running a football club have accountability to the supporters (its community) and – more importantly – football clubs are run in a manner that benefits the community and not private individuals. The essence of fan ownership is therefore a move away from the situation at so many clubs where, collectively, supporters have no influence and Boards of Directors and owners have no accountability to supporters.
Community ownership in Scotland currently lacks an obvious exemplar, at senior level certainly. However, this is in no way evidence that it cannot work. So far, fan ownership has largely arisen in the Scotland against a legacy of failure, debt and limited capital. Fans – for example at Dundee, Clyde and Stirling Albion, have incurred debt purchasing the club, or inherited debt and they were faced with having to run a club in a way which no longer accumulated debt. Clyde are good example of this problem. Clyde became a Community Interest Company in November 2010. In December 2013, they were able to announce an operational profit of £80,000 for the year ended 30 June 2013. This is the fifth year in succession that the club – Scotland's first senior club to be wholly supporter owned – has made a profit and through tight financial control on costs Clyde debts have reduced from £½ million in December 2007 to £53,000. The club are on course to become debt free by November 2014. So while on the pitch, Clyde have slid from the First Division in 2009 to the bottom of Division 3 in recent seasons, they are slowly reaching a point, under fan ownership, where income can soon be used to grow the football club rather than paying off historical debt.
Community ownership should not be seen as the solution for the ills of Scottish football and the remedy to clubs financial troubles. It doesn't guard against bad decisions being made or guarantee success. However, where clubs have a responsibility not to a small number of shareholders but to their communities, defined as the local area and its supporters, and are run democratically, transparently and, importantly, sustainably they can look forward to a positive future. The largest stumbling block is how we get there, particularly where clubs find themselves in a cycle of financial distress. Where the debt burden is passed to the fans as new owners, it will take time for the benefits of community ownership to be realised.
The coming months could see Ayr United become a community owned football club. I believe it is an exciting prospect. An opportunity to breathe new life into the club, invigorate the Boardroom and to change the relationship fans have with those who make the key decisions at Somerset Park. It won’t be easy. What happens to the current debt burden – owned chiefly to current Directors in the form of loans – will be critical in determining how quickly community ownership can be a success at the club but, equally, it requires supporters to grasp the opportunity that it presents. The process can start with an understanding of what community ownership means and what it does not.
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This article has been written to coincide with Community Ownership Week, launched by Supporters Direct Scotland to celebrate and promote fan and community ownership of sports clubs.
I have been a member of the Ayr United Community Initiative – The Honest Men Trust Board since 2011. Formed in 2003, THMT’s goal is that Ayr United becomes as “a financially sustainable, open and inclusive Football Club owned by its supporters which is a genuine community asset and makes decisions aligned to the long term success of the club”.
The views in this article are my own and not necessarily those of THMT.
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