Newcastle United could face a 50% drop in income

May 27 2009 by Adam Jupp, The Journal

NEWCASTLE United will need to plug a £25m black hole in order to balance their books following relegation from the Premier League.

The club’s three main revenue streams – television money, gate receipts and corporate hospitality – will all be severely hit by the loss of top flight status.

Financial experts estimate United’s annual income will be cut in half, dropping to around £50m, as the harsh financial realities of life in the Championship hit home.

But with the Magpies’ wage bill standing at nearly £75m, a huge cost-cutting exercise will be needed if owner Mike Ashley wants to simply break-even over the next 12 months.

That is likely to include efforts to off-load several of the first team squad’s big earners, many of whom are locked into lucrative long-term contracts.

Richard Slack, who lectures in football finance at Newcastle’s Northumbria University, told The Journal it was realistic to assume the Magpies’ revenue will plummet by around 50%.

Mr Slack, principal lecturer in accounting and finance at Northumbria’s Newcastle Business School, said: "The club is protected for one season with a parachute payment worth about £11m.

"But that only lasts for one season, at which point the average deal for a Championship club is around £3m. So, there’s a huge initial reduction and an ongoing reduction if they don’t get back up to the Premier League, which is why the bounce-back is so important.

"Obviously, season ticket sales will also be lower than this year, so therefore, the matchday income the club receives will be more variable and will depend on how well the club is doing.

"Previously, the income stream from gate receipts has been fairly predictable but now it will be more volatile, as many people may decide not to bother with a season ticket but buy tickets on a game-by-game basis.