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An Open Letter to Sir John Madejski

Dear Sir John

A few hours before the start of what may be one of the most decisive matches in Reading FC’s long history, I thought it apposite to write an open letter regarding the future of our club. It’s clear to all that the club is potentially at a crossroads – promotion to the Premier League will make the club a much more attractive asset to potential buyers, whilst another year in the Championship will inevitably mean the sale of some or all of the club’s more valuable players. Both of these outcomes are virtually inevitable given the broken financial model that is English football in the Twenty-First century.

You’ve discovered from our previous flirtation with the top tier that the Premier League is not the land of milk and honey and endless riches that the media portray it to be – whilst income increases massively, so do expenses – for instance average Premier League wages are 4.54 times greater than those on the Championship.  This means that any extra income is swallowed up on player salaries, just to try and stay in the Premier League – to actually compete takes a whole lot more money, with no guarantees of success.  And the more you spend, the bigger the impact to the club, and the greater the drop, if relegation does happen.  It’s clear to me that you recognise these financial realities when you’ve told the press a number of times :  "I'll listen to sensible offers but from billionaires only. Millionaires need not apply."  The same applies when you publicly complain about levels of player wages – the majority of supporters wholeheartedly agree with you, but again that is the financial model that football operates under, and no one club can change it.

Similarly, failure to go up through the play-offs will inevitably result in a loss of players.  Some of them will be lured away by Premier League clubs offering salaries far greater than we could ever offer – and whilst supporters will be disappointed at their departures, no-one could reasonably begrudge them such chances to further their careers.  But whether the income from the obvious departures will be enough to balance the books for another Championship campaign remains to be seen.

Because it’s a long-established fact that no-one makes money from owning a football club, and that at this level either player sales or external investment is needed just to stand still – that broken financial model again!  But you, admirably, have chosen to make investments in bricks and mortar, and facilities which bring in an income – those calling for “investment” in players don’t realise that it’s not possible to actually “invest” in players – all that can be done is to “gamble” on players.   Yes, more expensive players and higher wage bills increase the chances of success, but there are no guarantees, and the greater the number of teams gambling their money in the same way, the lower the chances of any gamble winning.  The  truth is that only the same small number of clubs can succeed, no matter how many throw money at the problem.

I think the majority of Reading supporters recognise this and applaud the way that you’ve resisted joining in football’s game of “living the dream” or of thinking only in the short-term, with no regard for long-term financial realism.  We’re proud to support a club that is financially responsible, sustainable and well-run – and in the context of a football club “well-run” means in control of the financial situation, able to survive relegation from the Premier League and flexible enough to react quickly whenever financial circumstances change.

When I said that no-one makes money from owning a football club that was a slight generalisation – there are two exceptions to this rule.  The first is those who saw the football boom coming and cashed in previously worthless shares in clubs for large sums, following the FA’s submission to commercial pressures and their repeal of FA Rule 34 - I’m thinking of people such as Martin Edwards and David Dein here.   The other exception is you.  Your remarkable foresight, in buying a run-down and largely unremarkable lower-division club and investing in infrastructure, as well as taking a long-term view, means that you now have an asset worth much more than you have invested in it.  But, of course, that gives no liquidity – all such investment is locked up in the club, and can’t be realised until it is sold.

You’re virtually unique in seeing this opportunity and going for it, and although many others have tried to copy the strategy, you alone have made it work.  And no Royals fans would complain about that, because it truly has been a win-win situation.  Whilst your asset has appreciated, the team that we support has gone from strength to strength, with status and facilities a world apart from where we were when you bought the club in 1990.

So no-one begrudges you the success, and everyone is truly grateful for the way that you have transformed the club and its fortunes after spotting this opportunity – without any suggestion that your motives have been anything other than for the best rather than purely as a money-making opportunity.  After all, when you purchased the club you made clear it was because you recognised the importance of it to the town of Reading and to the club’s community and supporters, with quotes such as “...for me, seeing the name "Reading" in the sports pages of the paper…’s like a suck of the thumb.

I'm firmly of the opinion that the ideal football club Chairman or owner should act as a guardian of the club, looking after it for its community and supporters – after all, they were there before any change of ownership, and they will still be there long after any Chairman or owner has moved on.  In many ways you have been close to that ideal – in your time as steward of the club it's flourished and prospered.  The supporters have seen some great times, but even more importantly it's all been done the right way – in a way which is responsible and sustainable, and with great integrity, so that in many ways Reading FC’s business model is the envy of many other clubs.

But with a potential sale, many supporters are worried about what the future holds.  The thought of a potential new owner brings with it many potential worries.   We have all seen countless other clubs where potential new owners have come along – often from abroad, but not exclusively so – making grandiose promises of vast riches and endless investment, but these promises have proved to be founded on quicksand.  The story of a club taken over and later ending up in dire financial trouble is all too familiar – everyone can no-doubt easily last at least half a dozen such sad tales, including clubs forced into administration to those burdened with massive debts.

So if the promotion does happen, or even if it doesn’t but the worldwide publicity of the play-offs brings a new buyer, I’d like to remind you that your responsibility to the supporters and community of Reading FC doesn’t end with any sale.   The decision of who to sell the club to is just as important a decision for the future of this club as any other you have made in your 21 years of stewardship.

So I’d ask you to bear in mind the below points in any negotiations and due diligence of any potential sale of the club :

  • Who wants to buy and why?  Clearly, supporters want someone who is here for the football club and will do the same as you in safeguarding it for the future – someone who buys it as a potential money-making venture will inevitably fail, and may well bring the club to its knees in the process.
  • What are their plans for the club? Is the intention to carry on building the club, or to pump endless money in to try to compete with the biggest clubs?  Although some Royals fans would love the latter approach, I don’t think it’s appropriate for Reading FC or would actually work.  Yes, it might bring some short-term success, but it would inevitably change the whole ethos of the club, and it’s fundamentally unsustainable - boom is inevitably followed by bust.
  • Where’s the money coming from?  Does the money actually exist, or is it all empty promises that will bite us later on.   And what are the implications of where it has come from?  We know you are a man of great integrity, and we love the way our football club has the same attributes.  So it would leave a nasty taste in the mouths of many supporters if the club we purchased by someone who has acquired their money in questionable or possibly illegal ways – and in my book not knowing where it has come from means it has almost certainly been obtained in a questionable way.
  • Will it leave us saddled with debt?  Whilst perfectly legal, leveraged buy-outs such as those seen at Manchester United and Liverpool leave clubs saddled with debt, and the only way that can be recovered is by slowly turning the financial screw on the supporters. Supporters universally hate leveraged buy-outs, so please don’t allow any purchase to be funded in such a way.
  • Who is the owner?   Too many football clubs are owned by unknown parties, through tortuous ownership models and umbrella companies in overseas tax-havens.  Supporters have got a moral right to know who owns their football club, and why would any club owner want to hide their ownership through such complicated ownership structures?  Again, something that would leave us all very worried and suspicious, and which would inevitably change the club for the worse.
  • What will be their relationship with the Supporters?  If I were going to criticise you, this is the one area I’d choose, because you’ve often had an arm’s length relationship with the club’s supporters, appropriate to your ownership of 97% of the club.  But times are changing, and supporters across the globe are participating more and more into the clubs that they put so much financial and emotional investment into. And there are so many talented and committed people out there who care deeply about the future of their club that the club can only benefit from their involvement – not every supporter thinks only of short-term results.  Countless legal structures exist to allow supporters to participate in their clubs, so how much involvement would any new owner be prepared to allow them?
  • What guarantees are being made?  A tricky last question, this.  How can you be sure that any of the answers to the above questions will actually be true.  Partly a judgement call, but partly also something that can be judged from due diligence and proper investigation of the bona fides of any potential buyer.  But there ought to be conditions in any sale ensure that any promises made are translated into actual deeds.

To close, Reading FC is at a crossroads, and the club’s supporters and community, as well as the people of Reading in general, are trusting you to properly consider the answers to the above questions in any potential sale.  The future of our club is in your hands just as much as the past has been for the last 21 year.   The past has been handled with great integrity and skill to everyone’s benefit – please, for the sake of us all and for Reading FC,  ensure the same for the future.

urzz1871,  a member of Reading FC's community of supporters