Manchester City hit lottery jackpot

Move to Commonwealth Games stadium on favourable terms promises Light Blues rosy future if they can reach Premiership

Manchester City fans have finally learned the meaning of their footballing purgatory - double-relegation, last season's trips to Colchester, York and Wycombe, their lesser neighbours Stockport and Bury playing in the division above, and all in the shadow of the relentless triumphalism at Old Trafford.

Manchester City fans have finally learned the meaning of their footballing purgatory - double-relegation, last season's trips to Colchester, York and Wycombe, their lesser neighbours Stockport and Bury playing in the division above, and all in the shadow of the relentless triumphalism at Old Trafford.

The 30,000 supporters who remained loyal throughout the downward plunge now know what it has all been for - the right to pay to view City's matches on Sky.

The £7.5m "media agency" deal with BSkyB announced last week by David Bernstein, City's chairman, continues BSkyB's colonisation of football. It comes in the infancy of City's revival when they are top of the First Division and due to move to a new stadium in 2003. Now being built with £90m of public money by Manchester City Council, the stadium will be given to City on extraordinarily favourable terms, straining rules designed to restrict the ability of private companies or individuals to make money out of the lottery.

The media deal sees BSkyB paying £5.5m for 9.9 per cent of City, and a further £2m, potentially rising to £5.5m, for the right to act as City's exclusive "media agents". Sky, with a director on City's board, will be paid 30 per cent of any extra revenue they earn for the club. The deal clarifies BSkyB's strategy, as it seeks to maximise its hold over English football in preparation for the renegotiation of TV rights in 2001.

"This is a complex, fast-moving world," Bernstein said. "I am comforted to have a powerful partner, like Sky, with their considerable expertise."

Yet it is increasingly clear that the "agency" description is potentially misleading. Sky sources confirm that they are, in reality, looking to broadcast matches, not sell them as an agent to other broadcasters. This deal, like the one with Leeds, effectively, buys them the right to see other broadcasters' bids for the right to screen clubs' matches and trump them.

A BSkyB spokesman admitted yesterday that the company has almost no expertise as an agent, only as a broadcaster. In this light, the 70-30 revenue split seems a bad deal for the clubs; if Sky as agent sells TV rights to Sky as broadcaster, it would in effect take back from the clubs 30 per cent of its own payment.

Bernstein would not be drawn on these broadcasting implications. Indeed, for City, the deal has a more short-term benefit, the £5.5m being available to pay off some of the debt piled up during Francis Lee's chairmanship. But with City's fans having been used last season for two pay-per-view experiments, away at Colchester and Bristol Rovers, Bernstein supports the development of pay-per-view. He said: "People who couldn't get to the matches were able to watch them at reasonable cost. Pay-per-view, handled the right way, could be very beneficial."

This 9.9 per cent football club tourism raises major questions, both about the independence of clubs, and their relationships with broadcasters. The Department of Trade and Industry blocked the proposed takeover of Manchester United in April this year because the Monopolies and Mergers Commission decided it would give BSkyB an anti-competitive advantage, placing them on both sides of the negotiations of football's television coverage contract, starting in 2001. These deals appear to sidestep that ruling, giving an advantage in both the negotiation of any collective deal in 2001 and in the broadcasting of additional, "subsidiary" matches by clubs, on pay-per-view.

BSkyB has foreseen such objections, proposing that BSkyB's director will absent himself from club board meetings at which the Premiership TV deal is discussed. Yet, this kind of protection was dismissed out of hand by the MMC.

Yesterday, a DTI spokesman said the Government will take its lead from the Office of Fair Trading, but the OFT is still unsure whether the 9.9 per cent deals even qualify as "mergers". If they do not, the OFT could be powerless to intervene.

Meanwhile, football's authorities are again burying their heads in the sand, refusing even to discuss the question of media ownership. BSkyB are already apparently in breach of the Premier League's rule against owners of more than 10 per cent of a club holding "any interest" in the shares of another. They still own 11.1 per cent of Manchester United.

A Premier League spokesman said, however, that the League's board has the discretion to allow the stakes to remain. The spokesman added that the rule book is robust enough. "We have other rules on limiting influence in clubs which are designed to protect their integrity," he said.

For BSkyB, Manchester City offers the additional benefit of the new stadium being built with public money. With Manchester City Council needing a long-term tenant to secure lottery funding for the 2002 Commonwealth Games stadium, City have managed to strike a remarkable deal. The club will effectively be given a 250-year lease on the new stadium, which is costing £90m to build - £77m from the lottery, £13m from the council. In exchange the council will be given Maine Road, which has itself received £3m of public money since 1993 in Football Trust grants, but could now be demolished. City will be responsible for the new stadium's upkeep, but pay no rent. Up to an attendance of 32,500 - City's current average - they will pay the council nothing. Thereafter the council will take a share of the profit on each ticket. Whatever the crowd, all match-day catering and merchandising sales will belong entirely to City.

The deal tests the terms of the National Lottery Act, which says money should be used "for projects which promote the public good or charitable purposes and which are not intended primarily for private gain".

City's major shareholders - John Wardle and David Makin, of the JD Sports chain (26 per cent), the family of the late kitchen magnate Stephen Boler (18 per cent), Francis Lee (6 per cent) and BSkyB (9.9 per cent) - stand to make fortunes if City win promotion and fill their new home. Bernstein does not deny this, or City's long-standing plan to float on the Stock Exchange. "Of course people could make a lot of money. But that doesn't mean they are exploiting the club. That's not the driving force," he says.

He added that the club was sensitive to its supporters, and stressed the extensive community work it will continue in Moss Side, and east Manchester, when the move goes ahead.

Manchester City Council was not willing to comment on the stadium deal. Sport England, the lottery grant-giving quango, said it was "unique", to have a private company as long-term tenant in a lottery-funded facility. But contrary to Bernstein's own assessment, a Sport England spokesman argued that the stadium did not necessarily add value to the club. "Share prices of football clubs can rise and fall. We believe that the value of a football club is based on the quality of the team, not its stadium," he said.

City fans themselves have mostly welcomed the BSkyB deal, giving the lie to the cliché that United fans are out-of-town glory hunters, while Maine Road guards the soul of the game. By coincidence, while Bernstein was locked in sales talks with BSkyB last Thursday, United fans Andy Walsh and Adam Brown were celebrating the launch of their book, "Not for Sale", an account of the successful fans' campaign they led against the BSkyB takeover of United.

No such activism is expected of City's long-suffering crowd, who have proved their loyalty to be inspiring and unquestioning. To Bernstein, this support is "magnificent". To BSkyB, it is road-tested, guaranteed "brand-loyalty", the ultimate commercial prize in the multi-channel age, which has arguably been bought cheaply at the price.