Newcastle’s Club Model is Sound – but its functioning is all wrong

By Josh Macmillan

Mike Ashley is a marmite sort of person for most Newcastle United fans. I’m going to try and point out the few good things that Mike Ashley has done for us, but mainly show where he’s gone wrong, and the model that we should be following as a club. 

As Newcastle fans, the one thing that we’ve learned about Mike Ashley during his 6 years as owner is that he is very unwilling to invest his own money into the club. His initial vision was a self-sustaining football club, which makes him a few million pounds in profit each year.

If you look all over the world, there are very few football clubs that actually operate in this manner. There is a widely held perception that Ashley’s modus operandi is to buy cheap, sell high, and yet there have been very few examples of such deals.

Here are the players signed in the Ashley era whose transfers have resulted in a large gain or large loss.

Alan Smith (£7.9m), left for £0m.                       (-£7.9m)

Joey Barton (£7.6m), left for £0m.              (-£7.6m)

Danny Guthrie (£3.8m), left for £0m.          (-£3.8m)

Xisco (£5m), left for £0m                           (-£5m)

Sebastien Bassong (£1.6m), left for £8.2m.        (+£6.6m)

Yohan Cabaye (£4.4m), left for £20m         (+£15.6m)

Total: £-2.1m

Take into account two players likely to leave this summer Fabricio Coloccini and Jonas Gutierrez, whose transfer fees combined are unlikely to pass £5m, and they were bought for a combined £16.5m, that total could drop even further to around £-12/13m. Other players bought and sold in his era have resulted in small losses/gains of around £1m.

The reason that he’s made any money at all from selling players is due to the crazy price Liverpool paid for Andy Carroll, £35m for a £10m player, and because he sold lots of players he inherited – James Milner (£13m), Obafemi Martins (£9m), Shay Given (£8m), Charles N’Zogbia (£5m) etc. The total profit on transfers under Mike Ashley sits at £39.3m, which if you take a single transfer was £35m, shows how his model just isn’t making any money – £4.3m in 6 years.

If he wants to make this model work, Mike Ashley’s should study and try to replicate what Ajax have been doing for the last 10 years or so.

Their policy is also buying cheap and selling high – since the turn of the century the most they’ve spent on a single transfer is £14.3m, and below that, no transfer over £7m. Yet in that time they’ve received 8 transfer fees over £10m, and 3 fees over £20m.

The bulk of those are academy players, but here are some of their transfer deals that have made or lost big amounts of money (the players have to have been signed and sold by the club in this time. This is the same 6 years as the Mike Ashley reign at Newcastle):

Thomas Vermaelen (£0m), left for £10.6m          (+£10.6m)

Demy de Zeeuw (£7m), left for £5.3m                        (-£1.7m)

Luis Suarez (£6.6m), left for £23.3m                  (+£15.7m)

Klaas-Jan Huntelaar (£7.9m), left for £23.8m      (+£15.9m)

Albert Luque (£7m), left for £0m                        (-£7m)

Bruno Silva (£3.3m), left for £0m                                (-£3.3m)

Dario Cvitanich (£6.2m), left for £1.3m               (-£4.9m)

Miralem Sulejmani (£14.3m), left for £0m           (-£14.3m)

Ismael Aissati (£3.5m), left for £0.5m                 (-£3m)

Nicholas Lodeiro (£3.5m), left for £0m                        (-£3.5m)

Mounir El Hamdoui (£4.4m), left for £0.7m         (-£3.7m)

Total: +£0.8m

If you compare this figure to Newcastle’s figure, they’re pretty similar – neither club is making money this way. However, what Ajax have done brilliantly, and what Newcastle have failed to do, is produce young players through their academy that make the first team, make a name for themselves, before going on for big prices. Here are some examples:

Christian Eriksen (£0m), left for £11.8m              (+£11.8m)

Toby Alderweireld (£0m), left for £6.2m              (+£6.2m)

Jan Vertonghen (£0m), left for £11m                  (+£11m)

Vernun Anita (£0m), left for £7.5m                     (+£7.5m)

Gregory van de Wiel (£0m), left for £5.3m          (+£5.3m)

Maarten Stekelenburg (£0m), left for £6.4m                (+£6.4m)

Wesley Sneijder (£0m), left for £23.8m               (+£23.8m)

Jonny Heitinga (£0m), left for (£8.8m)                        (+£8.8 m)

Ryan Babel (£0m), left for £15.2m                      (+£15.2m)

Total: £96m

Some of the names in that list are amongst the best players in the world at the moment – Suarez and Sneijder jump out at you immediately. And those is just the sales in the last 6 years – I’ve researched from the year 2000, and their academy transfer profit stands at £115.3m, from a total of 36 players sold (players count if they have made any appearance at all for the first team, no matter how short). That’s £8.85m every year for the last 13 years for players they are getting for free.

Newcastle’s problem is that we’re trying to just doing the buy low, sell high part of this model, and we’re not producing massive quality through our academy. It’s not just in the Mike Ashley era, over the same time period – 13 years – Newcastle have generated £39.7m from the sale of 14 academy players, coming in at £3.05m per year.

If you take into account that £35m of that came from the vastly exaggerated fee for Andy Carroll it shows how little we’ve produced in 13 years. Had Carroll gone for a normal fee, lets assume £15m, that would be only £19.7m in 13 years, which is £1.5m per year.

Total spending on the academy in those 13 years is:

2000/1-2008/9 – £8m invested in the academy

2009/10-2012/13 – £5.4m invested in the academy

2013/14 – £2.8m invested in the academy.

Total investment over 13 years: £16.2m.

(Mark Douglas, The Journal, 22/02/12)

Taking the Carroll transfer with a pinch of salt, the yearly return on investment in the academy since 2000 is very small. It’s not like Newcastle have produced great players who haven’t been sold and are still in the squad.

Here are the academy products that are still in the squad (the numbers in brackets are their absolute peak value according to http://www.transfermarkt.com):

Steven Taylor (~£5.7m), Shola Ameobi (~£5.7m), Sammy Ameobi (~£2.6m), Shane Ferguson (on loan, ~£1.3m), Paul Dummett (~£0.2m), Adam Campbell (on loan, ~£0.2m), James Tavernier (on loan, ~£0.1m).

Had they all been sold at their peak value, it would have added an extra £15.8m in potential revenue, still miles behind Ajax – especially if you take into account that Ajax have 13 academy products in their first team squad, adding a potential value of £30.4m to the £115.3m of academy sales.

Now, I’ve used Ajax as the example here as I believe they are a shining light in the way a football club should be run. Their academy has been churning out great players since the 90s, and it is unrealistic to expect Newcastle to start doing the same straight away.

Mike Ashley has increased academy spending from £1m per year to £2.8m per year since taking over, which is clearly an important step. Young players being purchased such as Kevin Mbabu and Olivier Kemen show that we’re looking to expand our academy to include promising foreign imports – Ajax have been doing this for years and have a big link with Danish clubs and often bring in their youngsters at 16 years old.

Not many Newcastle fans are big supporters of Mike Ashley (and in general I’m not) for so many reasons that I won’t properly go into – sponsorship, lack of signings, terrible PR, the dealings with Keegan and Shearer, free advertising for Sports Direct etc.

However he’s almost trebled academy spending, and if he’s taking a leaf out of Ajax’s book and trying to start a proper academy to back up his transfer policy, then it can only be a good thing for him financially, and for us fans seeing local talent being brought through.

Ajax may be in a weaker league than the Premiership, but they’ve still won 5 league titles and 4 cup titles in the last 13 years, are completely sustainable and have a transfer profit of £115.8m. They also have had regular Champions League football, where they seem to continually get put in the group of death (look it up, it’s ridiculous).

Whereas Newcastle have tasted the highs of the Champions League, and the gut-wrenching lows of relegation not to mention the harrowing derby defeats, we have a transfer profit of £-47.2m, and have won nothing.

I understand that a lot of people are very unhappy with Mike Ashley and the way he runs Newcastle – I also hate how he’s reduced us to a cheap, bargain basement club, however he’s a businessman first and foremost and has no loyalties to us.

If he ends up making us self sufficient and profitable that will lead to better league and cup performances. It’s a long way off, and there is a lot of anger floating about, but maybe, just maybe some good can come out of all of this.

(All player valuations and transfer fees come from http://www.transfermarkt.com)

Thoughts Welcome