Chelsea spending does not stack up

A LEADING football business analyst has rubbished claims Peter Kenyon can turn Chelsea into a "normal business" inside five years.

Kenyon, chief executive at Stamford Bridge, has set out a business plan for the club to break even by 2010 and cut its dependence on billionaire benefactor Roman Abramovich.

But Professor Tom Cannon believes Chelsea stand very little chance of turning into a profitable operation and that the club would go to "hell in a basket" without Abramovich's money.

The Barclays Premiership champions made an £88million loss last year and wages at the club represented totalled a remarkable £115million, 77% of the club's annual income.

And they have continued to spend. Asier del Horno and Shaun Wright Phillips cost £29million and that figure could double if manager Jose Mourinho manages to land Lyon midfielder Michael Essien.

Kenyon, meanwhile, has spent much of the summer criticising his former club Manchester United for declaring Chelsea have no competition for the Premiership title.

Cannon's view is that Kenyon has realised his business plan is not workable because the revenue streams in the UK, Europe and Asia are tailing off and Chelsea do not boast the brand history of teams like Manchester United or Real Madrid.

"It seems to me that Peter Kenyon may be protesting and seeking high profile because he is not delivering in terms of the balance sheet," said Professor Cannon, the former head of Manchester Business School.

"It is much easier to spend Roman Abramovich's money than to offer any clear insight into how that spending can ever become an investment, because that assumes a return.

"Abramovich's investment is probably in the region of £300-£400million. You have to assume he wants a return that is probably either massive capital growth or revenue line.

"That would have to be a profit of £50million a year to make that investment sound. There are no signs Chelsea can ever come close to that. The most Manchester United have ever earned is £38million."

Professor Cannon's assessment is that Chelsea are breaking all the rules of normal business practice because they are an "anomaly" with the "ultimate sugar daddy".

And if Abramovich was to leave Stamford Bridge, Cannon believes the walls would come tumbling in.

"If Abramovich went, there would be no way back," he said. "It's that old saying: 'Never put your fate in the promises of princes'.

"There are three things a sensible businessman has. The first is a Plan B. I don't know what that plan could be at Chelsea.

"It is possible they are looking to broaden their business base. But if you use Man United as the best example of a club that has broadened its business base, they never earned the returns that Chelsea will require.

"The second thing is Richard Branson's classic phrase: 'never go into anything where you don't have a way out'.

"I don't see Chelsea's way out, other than keep on spending the money. What is their exit strategy?

"The third is that a businessman looks to cut his cloth, to spend what he can afford to spend. But that is not an option with Abramovich around. There appear to be no limits on spending."

Kenyon declared yesterday that Chelsea will win the Premiership title this season and take a "quantum leap" forward in doing so.

But Professor Cannon's assessment is that Chelsea are some 50 years away from being able to match teams like Manchester United and Real Madrid, whose history rather than just money attracts the world's best players.

"There is no sign Chelsea are able to attract the quality of talent that will come regardless of money, in the way Manchester United and Real Madrid attract players," Professor Cannon said.

"Nobody has ever got into that position in the time scales we are talking about. It has taken Manchester United about 40 or 50 years, Real Madrid a similar time.

"They need a produce a conveyor of John Terrys over the next 10 years for players like Robinho and players of that calibre to want to play for Chelsea."

Professor Cannon also believes Chelsea and all Premiership clubs are starting to feel the pinch because the Asian market has peaked and that overseas revenue streams are declining.

"Asia is bad. It has been a late summer shock for everyone who thought the Asian market was about to take off. I expect the Asian market may have peaked for European and English football," he said.

"The gates for the big teams like Real Madrid and Manchester United were poor. The clubs may have got the money, but if they can only half fill stadia, what hope is there for other clubs that don't have that global brand.

"All the revenue streams in this country are on the decline, television money is down, attendances are flat. There are serious questions about where revenue is coming from."

Professor Stefan Szymanski, an industrial economist and specialist in the business of sport, takes the opposite view and compares the football markets in Asia with the dot com boom.

The financial markets collapsed when it became apparent the internet was not a bottomless money pit but dot com business has continued to increase steadily after that initial spurt.

"I have never seen football healthier. It has never been more popular and will continue to grow at a healthy rate," he said.

"Football has still got some way to go to catch up with American Football. It is an incredible powerful brand."

But football's growth will not be painless and Professor Szymanski feels a European Super League is inevitable.

"Within football itself, there will be huge numbers of losers out of the restructuring that will take place to extract new sources of income," he said.

"The little clubs will become more and more isolated as the hard core of big teams dominate everything. The European Super League is inevitable."