The dark and distant past

Flash back to the dark and distant past of the early “naughties” and Huddersfield Town was in a really bad way. It had challenged for promotion to the Premier League by spending beyond its means, failed and plummeted down the leagues, ultimately ending in administration. For a time it looked like we could have been the next unfashionable club success story, but now the club was on its knees. Staring down the barrel of liquidation we needed a hero. 

Fortunately we Yorkshire folk are a loyal bunch and there were a number of parties ready to help out. In the end Ken Davy, the chairman of local rugby league team Huddersfield Giants, was the one chosen and his intervention help to initially save the club from extinction. While we are grateful for that, no one is under the illusion that it was done for the good of Huddersfield Town. The Huddersfield Giants are Ken Davy’s baby and in saving us he also saved them. Both teams share a stadium and without the football team the rugby league team could not possibly afford the running costs.

As a result, the next few years were tumultuous... however, Mr. Ken Davy’s relationship with Huddersfield Town is well documented and I wont dwell on it here. This topic has been done to death and if you’re really interested in it then head here for details. In summary, the club was put back on the road to recovery (at the lowest cost model possible). Though, during the couple of years that Ken Davy ran the club he transferred its ownership of the stadium to himself, for “safe keeping”.

The original ownership agreement of the “Kirklees Stadium”, built in 1994, was for a joint venture between the two major local sports teams and the local council. The goal of this collaboration was to use the facility as a focal point in driving forward the development of local businesses and to support the community.

As stated, Ken Davy was never in it for the long game and promptly sold the club a couple of years later to local businessman, and fan, Dean Hoyle.

 

The New Era

The first goal of Dean Hoyle’s ownership, the “New Era”, was to get the team promoted and established within the Championship as soon as possible. This was never going to be an easy task; it took a couple of false starts, failed attempts, and a lot of money out of Hoyle’s pocket, but was finally achieved in the summer of 2012.

Championship status attained the club had then to look towards its next stated goal – steady and considered growth within the league, eventually building towards promotion to the Premier League.

 

Financial pressures

Sounds easy, right? Just keep doing what you’re doing, slowly ramp up investment over the years and you’ll be there or there abouts? Nah. Not only is the Championship widely regarded as the most competitive league in the world – everyone beats everyone – but the financial pressures to survive continue to rise year on year. Based on last season there were eight clubs in the division receiving parachute payments of up to £10m a year, which is set to be increased even further from next season. Each relegated club will receive a pay out of £59m over four years, an average of c.£15m a year, £3m higher than HTAFC’s  current total income of c.£12m per annum.

In addition to the clubs receiving parachute payments there are arguably a further ten clubs that have powerful foreign investment, aimed solely at attaining promotion to the Premier League and becoming part of the TV rights gravy train (yes, I’ve included Massimo Cellino in that list, but only he knows what his true intentions are).

This may not be what Town fans want to hear, but we simply cannot compete in this league financially as things stand.

 

So what do we do?

It seems desperate at first glance, but lets look at the numbers. Figures from respected football blog, the Swiss Ramble show that we are in the “bottom six” in the Championship when it comes to revenue. OK, the figures are a couple of seasons out, but you just need to look at the other clubs around us in that table to see that the majority have since been relegated. Yet, despite this the club has successfully established itself as a solid Championship side and external expectations for us this season will be as a “mid-table side that can beat anyone on their day” (arguably...). Encouraging defiance in the face of overwhelming pressure.

Internal attention now must shift towards the next goal, pushing up the league towards play-offs and promotion. Fly or die. We could get lucky and have a season where no player gets injured, every shot we take results in a goal and every 50:50 decision goes in our favour. However, realistically, to push on to the next level we need to increase our financial power. Soccernomics-type theories receive a lot of criticism (and in some cases, rightly so), though no one can deny that over time, the team that is generating the most money will finish higher in the league. Another reading of the table that the Swiss Ramble produced indicates that the club is roughly £5-10m in terms of revenue generated from pushing on a “play-off position”.

 

Bridging the gap

Where is that going to come from? Dean Hoyle already supports the club well enough, asking for an extra £5m each year from his bank account is not an option.  Some may say that we should be seeking out foreign investment, but do we, as fans, really want that? You just need to look down the A62 to see the destructive effects that risky ownership can have. Sure, we could end up in a Bournemouth situation, but we could also end up like Portsmouth. And who’s to say that Bournemouth won’t explode in a similar fashion in the future? No, not only does casino-style ownership run at odds to the path of sustainable growth and development that we’ve worked so hard to achieve, it also begins to remove the very notion that this is our club.

We need to generate this additional revenue internally, which will only come, as stated earlier, from everyone at the club working to their maximum potential, and through true innovation. We are attempting to compete with clubs that have larger fan bases and resources, trying to challenge them through standard means will get us nowhere. As experienced already this season, simply increasing ticket prices will not work. We need to do something different.

 

Stadium ownership

Roughly three years ago there was a campaign among Huddersfield Town fans to try and get its 40% share in the stadium back - the shares that were transferred by Ken Davy away from HTAFC back in 2003. We were under the impression that this was key for the club to be able to grow. Previously the club had no say in decisions affecting the stadium, and received no income from services provided there, but by being part owners again we would be able to sit at the top table and benefit from the facility.

Unfortunately, though, this is not the case. All the shares have done is put HTAFC at a table where it is the inferior voice. One that does not have the casting vote and therefore is not heard.  It finds itself in a situation where it faces a 60% majority (40% Kirklees Council, 20% the Giants), one that has a completely different agenda to its own. Where HTAFC wants to grow, innovate and develop, the other parties have no desire to upset the status quo. The Giants, under Ken Davy, have relatively little headroom left. Rugby League, great game though it is, is a small competition. The Giants could go on and dominate the Super League from the position that they are currently in, for Huddersfield Town to do the same requires a metamorphic change in every single aspect at the club (and stadium).

But that’s getting ahead of ourselves; we’re not looking towards the Premier League or Europe just yet. We just want the tools that are required to continue on this growth trajectory that we’ve set ourselves on.  So lets just look at exactly what is wrong with the current situation.

 

The key roadblock

Two teams that play totally different sports and have totally different needs occupy the stadium. One team brings in four times the number of fans to the stadium in a season than the other. The third party is a management company, set up by Kirklees Council, named Kirklees Stadium Development Ltd. (KSDL). Its priority, unsurprisingly, is to develop the stadium, which will in turn benefit the local community. That is the stated aim of KSDL, to benefit the local community. Both teams pay rent to the management company (at different rates for some reason, Huddersfield Town pay c.£1m a year, 3x higher than the Giants), to maintain the stadium.

Both teams also have to pay a maintenance fee to the management company, which is a flat rate applied to each ticket sold, details from last season can be found here. That’s fair enough; the pitch and stadium require maintenance and repair.

Where things start to get strange, however, is that KSDL also retain the rights to all revenue generated by the stadium. This includes everything from catering, to pourage (drink sales), to betting, to stadium advertising rights.  I can go to a match, buy a couple of pints, eat a pie, place a bet, and not a single penny goes to Huddersfield Town. Now, I knew that was the case when the club didn’t own the stadium shares, that’s fair enough, but now it is back in control of them I was under the impression that we would also receive financial benefit from activities at the stadium.

 

Transparent procurement?

This then leads us to an even more unbelievable fact. Huddersfield Town also has no involvement in the letting of contracts for these stadium services. It is not included in the tendering stage (if there even is one), and its suggestions are flat out ignored. For example, when the catering contract was re-let this year Huddersfield Town suggested an alternative provider, which offered a better deal and also more input on supply, however, this was instantly disregarded and the incumbent was offered an EIGHT year deal on, frankly, abysmal terms. This incumbent had been providing poor service, refused to use local suppliers, and offered worse financial terms, yet was re-hired without an official tendering process. This isn’t just working against the best interests of the users of the stadium, but it is flat out negligent on behalf of the public. KSDL is, after all, an organisation run by the local council.

One of the core values that Huddersfield Town attempts to run itself by is that it will help the local community develop as it itself develops. The local business partnership scheme is a key example of this, Huddersfield Town uses it’s position as a community focal point to bring together enterprises from all sectors, fostering a collaborative attitude of innovation. Thus, it only makes sense that it should use local companies that can provide services to the stadium, yet, the current contracts that KSDL has committed to preclude this.

Provision of security has been a hot topic of debate for a number of years; many feel that the current supplier at the stadium works against both fans, and the club. Realising this Huddersfield Town found an alternative provider, one that would provide a better service (by opening a running dialogue with fans and generally presenting a friendly face) and also offered better financial terms. Yet, once again, when this suggestion was taken to KSDL it was instantly disregarded and incumbent was re-hired. Can you see the trend here?

 

The Collaboration agreement

At the core of all of this is something known as the“Collaboration Agreement” - an agreement that was signed by all parties when the stadium was built. This arrangement was intended to ensure that all parties in the stadium ownership model acted in the best interests of the each party. However, while it may have made sense in the past, it is now not fit for purpose. Huddersfield Town has already far outgrown its flat-mates, and if it is to achieve its stated goals it needs to continue on the growth trajectory that it has set itself on. Counter to this, the Giants and KSDL have relatively little to benefit from upsetting the status quo.

 

Faults of the agreement

The Collaboration Agreement requires consensus to be passed within the 40:40:20 relationship for decisions to be made…meaning that anything that Huddersfield Town suggests is likely to blocked by the 60% majority. Whenever Huddersfield Town finally does decide to push on and fund something by itself it is then hit by the same response every time “OK that’s fine but you must allow all three parties equal usage under the “Spirit of Collaboration”. In effect, two parties in this Collaboration Agreement are leeching from the third. It does not work and should be revisited at the soonest opportunity.

The effect of this is that Huddersfield Town estimate the current set up is costing it at least £3m a year. It is clearly not working in the best interests of the club and needs to change if it is to progress. As stated before, one could argue that the difference between where Huddersfield Town stands now, mid-lower table, and consistently challenging is an extra £5m a year. Solving the challenges that the current setup of stadium ownership promotes will go a long way towards bridging that gap.

 

HD1 – a crippling folly in the pursuit of reputation?

One of the key dynamics of this relationship, not mentioned previously, is that KSDL is a non-profit organisation. So if it is non-profit, then where is all of the money raised from the stadium going? There are maintenance and operational costs associated with the stadium, though, as previously discussed, both of the tenants already pay rent, and also a “maintenance fee” attached to each ticket they sell. Surely this should cover maintenance costs?

The remaining profit is being set aside for the  £100m “HD1” project, a scheme that has been around for a while now but is lacking in any funding to effectively take it forwards. It has been heavily criticised in the past as having the potential of becoming yet another white elephant and actually harmful for the town as it drives even more footfall away from the town centre and the train station.

In my opinion, HD1 is the kind of potential mega-project that everyone knows will not get off the ground. Even the most basic level of common sense says that the last thing that Huddersfield needs is a second “centre” away from town.  Why has this project even got to this stage? Is it purely a CV padding exercise for everyone involved? At the cost of the tax payer.

Even if the project is given go-ahead, it won’t be completed within the next 5-10 years. In effect, any profit from the stadium is currently going to finance this project…football clubs do not operate on a 5-10 year basis; every single year promotion or relegation can change everything. Shouldn’t we, as fans and revenue generators, have any say in where the profit from our stadium is going? Did the fans even know?

It is true that if the project is completed then Huddersfield Town will have part ownership, however, no football club would choose to invest up to 25% of its total revenue into a project that may or may not pay off in 10-15 years, that’s just madness.

 

So what can we do?

The key stakeholder in this environment is the head of KSDL, Kirklees Council, who are answerable to us, the public that they serve. By restricting and leeching from the main tenant in the town’s stadium isn't it in fact restricting and leeching from all the local businesses and suppliers that the club wants to support? Yes, there is an argument that should HD1 pay off, the town will benefit, however, how realistic is this scheme, and at what cost to the local community?

The skeptic in me might suggest that the two key individual benefactors of the HD1 project are the ones that currently have ultimate control over the finances and operation of the stadium, Ken Davy (Huddersfield Giants chairman and previous holder of a stadium shares majority) and Gareth Davies (KSDL Managing Director) control a 60% majority in any decision.  For Mr. Davies the delivery of HD1 represents a huge opportunity to prove that he can manage the completion of a large project, and for Mr. Davy there is only financial gain. As such, I would argue that the needs of the key stadium tenant are completely ignored as these two individuals that dictate the majority in stadium decisions are planning for a potential future rather than actively shaping it. They are not currently operating in the best interests of the public. 

Note: I attempted to reach out to KSDL a number of times while writing this article but they refused to provide any comment

Kirklees Council needs to act now in reviewing the current Collaboration Agreement and also the role of KSDL as a whole. Does it currently serve the best needs of the tenants of the stadium and the wider community?

 

Even if the stadium issues were solved, there is still a lot of work for the club to do to get to where it wants to be. Though, with this major roadblock removed, this will come down to a challenge of the drive and desire of the club and fans.

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