Thursday, February 16, 2012

Rangers newco: Yes or no?

Will Scottish football die if Rangers are wiped from our footballing landscape?

No. It would be greatly changed. But it would adjust and it would survive.

But it's disingenuous to deride those who claim that the end of Rangers equals the death of the game as weak willed apologists for a failed institution.

The question is framed incorrectly.

Would Scottish football be willing to let Rangers die? To me that's the more instructive query.

Let's imagine that this current period of administration fails. The big tax case is lost. Rangers go into liquidation.

Craig Whyte - if he's still around, doing little to dissuade people of the opinion that this has always been the end game of his dreams - knocks at the SPL door.

"I've founded a newco, Rangers 2012, and I want to play in the SPL again."

There would be but one moral answer to the chinless - but remarkably brass-necked - charlatan. It's short, satisfying and blunt.

What Rangers have been doing with HMRC's money this season is despicable. The outcome of the tax case could condemn their recent history to being recorded as a stretched out theft against the authorities. At the very least they have lived above their means to artificially enhance their chances on the pitch.

Cheating, financial doping. An assault on the integrity of the sport.

The six man SPL board would have no option but to refuse Rangers' newco entry to the league. It would be immoral to decide anything else.

But will they be able to isolate themselves from all other considerations and make a purely moral choice?

Take a look at the TV deal. We know that the new deal signed with Sky and ESPN last November is worth £16 million a season to the SPL.

We also know that deal will be ripped up if there is any shift from the current arrangement where the league split guarantees four Old Firm games a season.

Sky, the senior partner in the deal, show all four of those games. The final Old Firm game of last season was the first Scottish game to reach one million Sky viewers.

I'll suggest the other three games were watched by an average of 700,000 viewers. That's 3.1 million viewers for four games.

Take those four games out of the season's nine million total audience. That's an average of around 105,000 viewers for each game featuring just one of the Old Firm or two non-Old Firm teams.

Would Sky be tempted to pay good money to cram those games into their crowded schedule? I don't think so. That would leave ESPN as the sole bidder for the rights and the SPL hoping they'd want to double the number of Scottish games they show.

That's a bargaining position for the league that would leave the TV deal not just reduced but decimated.

The counter-argument is that the current distribution of TV money is so inequitable that the SPL's "other ten" teams would be able to cope with the financial hit.

Perhaps some, maybe most, would. But the existing deal provides guaranteed income. We know that many of our clubs live a hand-to-mouth existence, with levels of debt and ratios of wages to turnover that are all but unsustainable.

It's not outlandish to assume that the existing TV deal provides the leverage they need to keep trading at a just about manageable level.

It might be relatively low sums involved but this is a league where £35,000 represents a big January signing, where a club will shut a stand for the season to try and save £20,000. The loss of small sums could be fatal.

Neil Doncaster, the SPL's chief executive, has also previously suggested that every single sponsorship deal the league has is dependent on the Old Firm continuing.

So the remaining teams would likely have to accept reduced sponsorship money with renegotiations made harder by the uncertainty over a new TV deal.

That would mean an overhaul of the league's distribution of prize money and parachute payments. Another revenue stream would be considerably damaged.

The counter-argument to this is what I might call the Utopian scenario.

Here we see a newly competitive league attracting more supporters, and offering clubs easier access to European competition.

Would the league be more competitive? The question should be "is playing for second more attractive than playing for third?"

As their chief executive, Peter Lawwell, said this week Celtic's business model is perfectly sustainable without Rangers.

They also have access to match day revenues and a cash spending fan base that dwarfs every other club.

In the immediate shock of adjustment to a Rangers free Scotland, Celtic would be uniquely placed to weather the storm.

That would suggest they'd move further away from the chasing pack, with every other club - already operating cost cutting schemes - further reducing their playing budgets.

That in turn would diminish the quality on show. It would remain to be seen if the lure of watching average teams play it out for second place would be enough to bring supporters back.

Would they come back anyway? There are no guarantees. Most of our clubs have shown how easy it is to lose fans and how hard it is to get them back.

Given the reductions likely in other incomes there would also seem to be little chance of ticket prices falling.

Is it the lack of competition, the price or the product that keeps fans away? Or is it a combination of all three - a combination likely to remain with or without Rangers.

Good luck going to the bank and asking for them to sign off a business plan that has "the fans will probably come back we think. Maybe." as the main revenue stream.

Europe? It's quite a leap to think that our clubs are going to massively improve in, say, the first three seasons without Rangers. The current trend of continental woe would continue, hurting the co-efficient and so making it harder for them to get real financial benefit from European participation. Qualification might be something of a Pyrrhic victory for many.

Scottish football wouldn't die without Rangers, no. But delivering us from the evil of Rangers might not deliver us to the promised land.

That will leave the people running our clubs anxious.

How, for example, do Dunfermline feel?

It might be argued that the way Rangers played fast and loose with the actuality of their wealth has cost Dunfermline league positions - along with increased prize money - and perhaps contributed to their relegation from the SPL.

We're denied the gift of time travel so we can know none of those things for certain. But it's reasonable to assume that the way Rangers imposed unfair practices on an already uneven playing field has hurt every club in some way. That might well have cost Dunfermline dear and contributed to their precarious financial position.

So Dunfermline have basically been punished for Rangers' mismanagement.

They would want to see Rangers pay for that. But what if punishing Rangers means saying no to the Rangers newco and that is a course of action that would condemn Dunfermline - this is hypothetical - to administration because of the impact it would have on prize money or parachute payments?

In that scenario Dunfermline are being punished twice for someone else's crimes.

Or imagine you are a club director. A goal from a Rangers player that they'd signed on big money thanks to their artificial financial construct cost your club a place in a Scottish Cup final.

Denied the money from reaching the final - maybe even winning the trophy - your club struggled at the end of that season. You reached in to your own pocket and paid part of the wage bill and gave a soft loan to cover a tax payment.

You'd feel physically sick at Craig Whyte's non-payment of £9 million in taxes.

But you'd also see that your club has moved on and developed a sustainable model based on remaining in the SPL and enjoying your small slice of TV money.

Now here are Rangers, a club dealing with finances that your club wouldn't match in a decade, asking for forgiveness.

You'd think "hell mend them." Until you thought about that TV deal and realised that without it your club would return to financial disarray.

There is no moral reasoning I can imagine that would persuade me that "new Rangers" are in any way deserving of a place in the SPL.

It would be the final gargantuan cheat in a litany of wrongdoing that should shame every director, accountant and discredited owner of that club.

But how moral can you afford to be if saying no to "new Rangers" would mean the end of your club?

I suppose there is an argument that this could be the seismic event we need to put the strugglers and stragglers of the Scottish game out of business.

Yet it's hard to see how financial chicanery at Ibrox should threaten the existence of other clubs. That's not survival of the fittest, that's murder at the hands of the most corrupt.

For the integrity of the league, saying "no" is a decision that would seem to be a moral absolute.

But if that's weighed against having to tell your own fans that what little money there is has gone, telling your own employees that they are out of job, then it becomes a little less clear, a little less certain.

I hope that the SPL are doing everything in their power to insulate other clubs from the immediate impact of Rangers' administration and that the business implications of life without Rangers are being thoroughly explored.

But I fear Rangers cheating has left our clubs with a huge, difficult, complex decision to make. The right decision could be the wrong decision for other clubs. The wrong decision, even if it saves their own club, will outrage supporters across the country.

Right, wrong, moral, immoral. I don't envy them their choice.

Update: After a chat on Twitter I think I should probably add that this exploration of the newco option depends on "new Rangers" being legally validated. Phoenixism, the term apparently used in such situations, is not illegal and not all newcos are "rogue companies" but it might not entirely free Rangers from the attentions of the taxman.

If there is dubiety about the legality of the new company the decision would surely be taken out of the SPL's hands.

Would there be an option for the SPL to set out strict conditions for re-entry? Conditions that might include no current board members or any members of the old board being involved in the "newco?"

Update two: Couple of related articles in today's Herald which I think confirm some of the concerns I've taken a look at. Former St Johnstone chairman Geoff Brown has his say and Richard Wilson speaks to Stephen Morrow, the head of Sports Studies at Stirling University.

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