Scunthorpe United is a professional English football club based in Lincolnshire England.

Critical Analysis of Scunthorpe United’s Income Stream

Introduction to Literature Review
Scunthorpe United is a professional English football club based in Lincolnshire England. The club was formed in 1899 but joined The Football League in 1912. Scunthorpe United runs a football academy that identifies and enrolls talent from the local community and trains them into potential first-team squad players (Martinez and Janney 2015). The club began the construction of a 12,000 all-seater capacity stadium with having a variety of amenities including bars, restaurants, hotels, and conference rooms.
Scunthorpe is one of the debt-free football clubs in English football league (Biscaia et al. 2014). The International Journal of Sports Communication by Cianfrone & Zhang (2013), report that the club was rated among the best financially managed clubs in England. Its main sources of income include the sale of tickets, low expenditure on players and advertising. Scunthorpe achieved this through enhancing its stadium seating capacity from 2,100 to 12,000 seaters. The project significantly increased its income stream through increased sells of tickets and income from a variety of amenities such as bars, restaurants, hotels, and conference rooms. This has seen the club strike high ticket sales and increased its income. Additional income is accounted for from the savings made by the low costs of buying players. The company sources its potential first squad players from its football academy.

As a football club, Scunthorpe’s financial status unearths various questions on the understanding of football economics and financial management of football clubs. Various sources of literature such as books, magazines, Journals and financial reports have delved into the understanding of how big leagues are beneficiaries of this sector of football economics. However, little research has delved into the construct of critical analysis of how specific football clubs such as Scunthorpe manage their finances and earn money from football through creating an effective income stream. This paper therefore seeks to critically analyze Scunthorpe United‘s income streams. It shall focus on the objectives of examining how its performance affects its growth of revenue and how sponsorship, advertising and ticket revenues affect Scunthorpe football club.
The Annual Review of Football Finance 2017 by Deloitte reveals an interesting discovery of the continued revenue growth of major leagues in Europe’s football industry
The review notes that income streams in the football industry strike its all-time highest in 2015-2016. This was due to the pan-European increases of UEFA’s distributions to 80% of the amounts received by English clubs. According to the review, the constantly increasing revenue for English leagues stretches individual club’s financial resources. This reinforced the importance of financial regulations in the football sector. On the other hand, the English 03 Annual Review of Football Finance 2017 asserts that English clubs remained ahead of European clubs in the generation of revenue generation, in the 2015/16 season. For instance, English Premier League clubs generated £1.6 billion of operating profits more than the total for the combine 16 previous seasons.
Salaga & Winfree’s literature on the determinants of market sales prices for Football League has delved into the rights that control licenses and ticket rights. The authors note that, England’s big five leagues fixed their financial leverage around revenues accruing from broadcasting, sponsorship, commercials and sales of tickets. In fact one of England’s leading authorities on football stadiums Cianfrone states that ticket sales became a critical avenue for revenues for most football clubs since the beginning of the new millennium. According to Salaga & Winfree, this realization that tickets are an important source of revenue drove most clubs to reconstruct or expand stadiums capacity. For instance, Scunthorpe club relocated from its 2,100 seater Old Show Ground in 1988 to Glanford Park with a seating capacity of 12,000.

Ticket sales
The Journal of Sports Economics by Noll indicates that leagues one’s clubs recorded 44% increase in revenues from ticket sales for the past five consecutive seasons. Subsequently, over ten clubs including Coventry, Derby, Millwall, Reading and Scunthorpe changed their stadiums. In the Journal, Noll asserted that movement into purpose-built arenas created safe environments and transformed the fortunes of over ten clubs in England’s league one alone. His literature further reports significant increase in revenues accruing from increased ticket sales in England’s big five leagues. Up to 45 % profits in England’s league, accrued from tickets sales and attendance (Noll, 2002). Noll states that league one hosted 0.5 million fans who generated gross revenue of over € 0.9 billion in the 2015-2016 season alone. The author argues that this was €500m more than the 2012- 2013 season. Noll’s account as reflected in his Journal resonates with Kennedy’s literature. According to Kennedy, ticket sales accounted for 44% of revenues in England’s league one. His literature shows that ticket sales have become a significant aspect of revenue collection in football economic in England football economic landscape.

Adrian Bell and Tom Markham define performance of football clubs as the realization of both winning trends and financial stability of the football club. The author’s definition is limited to clubs that score and win matches and those that make profits. Their model evaluates performance of football clubs in league one based on unrelated attributes. For instance, it measures success with score and assumes the separate characteristics unique in various teams such as milestones and the contribution of individual experienced players. At some point, the Adrian’s literature is not clear whether it base performance of on skill or luck.

John Goddard and Peter Sloane’s handbook on the Economics of Professional Football analyzed performance of football clubs affects how football clubs make money. This model is a more simplistic approach that illustrates how football clubs in England raise revenue through broadcasting, match day revenue and commercial revenue. However, it argues that all these channels of raising revenue are dependent on the performance of a team. In England leagues, team’s performance has a direct impact on the club’s revenue and expenditure. It is argued that good performance leads to an increase in revenue (Andreff and Szymanski 2006). The authors. John Goddard and Peter Sloane’s literature is challenged by the fact that the best performing clubs are not usually the wealthiest football clubs. Though important, performance is not the only factor that influences the level of income (Cianfrone & Zhang (2013). For instance, Leicester City’s achievement in the English premier league in the 2015-2016 season has confirmed, that other factors beyond income and expenditure on buying players which contribute to clubs performance. In fact, Leicester won the 2015-2016 league with a wage cost ranked at 15th place. On the other hand, Chelsea whose wage costs was ranked second best in England finished at eight places.
Kemper is one of the prolific sports economics analysts who has delved into the Economic Analysis of Club Performance, and Revenue Sharing in England’s Football Leagues. His argument equates the availability of funds with expenditure on players. According to Dobson (2001), this is an erroneous assumption. While teams such as Milwall reported a high revenue return, their debts and equity could not allow it to spend on signing more proficient players. Barlow and Forrest’s handbook argue that performance is a relative factor that is also affected by the cohesion of team members, their relationship with the coach. Sloane, (2015) also asserts that the experience of players cannot be underestimated in the performance of a team. Experienced players add a lot of value to the team. The quality of the game played attracts spectators, which in turn affects the sale of tickets. This is the most direct impact of good performance by a football club (Barlow &Forrest, 2015).
International Review of the Sociology of Sport Literature carried out global analysis of commercial transformation of world football. Its finding asserts that football clubs that have experienced players perform well and win matches and trophies. Though winning trophies translates to increased popularity, it is not revenue from sales of products, tickets and also club attracts sponsorship (Yang & Goldfarb, 2015). Sponsors are a significant part of a football club’s revenue. They offer money that goes to the signing better players. Also through better performance, the club attracts sponsors (Yang & Goldfarb, 2015). Sponsors are a significant part of a football club’s revenue.

Sponsorship and advertising
The aim of football club sponsorship by the sponsoring company is to create awareness and for its specific brand (Brewer 2017). Clubs sell the sponsors’ brand out to potential clients through advertising the company on the player’s jerseys. In turn, the clubs receive revenue in the form of payment for advertising. Rob Steen’s “The Cambridge Companion to Football” researched on the economics of English football and how it relates to investment through advertising. Football clubs that play in English leagues are beneficiaries of this sector of football economics. Different media houses heavily televise the major leagues in the world (Szymoszowskyj et al. 2016). Part of the revenue generated from matches televised is paid to the football clubs. This amounts to hundreds of million euros per season. The Journal of Sports Economics asserts that League one clubs receive 360, 000 euros annually. That is part of the income stream of Scunthorpe United (Sloane 2015).

Collective selling
According to the Competition Commission concluded that collective selling of televised matches harmonized the redistribution of revenue and promotes solidarity at all levels of football. Jewell and Szymanski’s thesis contributes to the understanding of the concept of collective selling as applied in the industrial economics literature. The empirical economic analysis in Adan’s model established if clubs share revenue, league one football will achieve a competitive balance. Experts argue that televising matches reduces the need for spectating at stadiums and increases television viewing.
The Restrictive Practices Court asserted that collective selling promotes the growth of all levels of football as it redistributes revenue (European Commission, 2002). Collective selling promotes financial equality amongst league one’s clubs and a competitive balance (Szymanski, 2001). In fact, Brewer’s International Review of the Sociology of Sport revenue reported that televised matches stood at £14.6 million of the league on matches. According to the commission’s report the average club revenues represent 25 percent domestic broadcasting rights revenues (Biscaia, 2014). League one has two or three teams such as Scunthorpe that dominate top positions in league one. Being at the top of league one gives Scunthorpe the ability to attract larger merits such as a promotion to Championship thus increase sales and commercial sponsorships.

Earlier research by John Goddard and Peter Sloane’s analyze income stream for football clubs on the basis of performance of the teams in league one. Others argue based on revenues from ticket sales. Though all models agree that football revenues accrue from broadcasting, sponsorship, commercials and sales of tickets, there is little literature outlines how clubs directly benefit from this revenues. Their literature assumes that clubs are the sole beneficiaries of revenues as influenced by their chosen factor. They do not an attempt to use controls to that effect. This review delves into the construct of critical analysis of how specific football clubs such as Scunthorpe manage their finances and earn money from football through creating an effective income stream.

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