by Justin Urquhart Stewart

The football season is up and running again, but the collapse of ITV Digital has left an uncertain football market.

Justin Urquhart Stewart, from Seven Investment Management, guides Cashing In viewers and readers through the perils of dealing in football shares.

'Ere we go, 'ere we go!

Are you ready for the new football season with scarf, bobble hat and share certificate in hand? Well, maybe not.

As the World Cup fades from memory and the football players come back from their training sessions in the sun, the smell of Ralgex should be wafting through the dealing rooms of the City.

However, this year the season starts from a weaker footing with fears looming over the actual financial viability of certain clubs creating fears for players, fans and investors.

Chasm

Rio Ferdinand - one of the few big money signings

The start of the summer saw the demise of ITV Digital, the effects of which are only now being felt as clubs realise that they really aren't going to get the money they had expected. It seems inevitable that some are going to fail, but the general malaise will spread further than that.

For the publicly quoted clubs, the airing of their somewhat grimy kit is going to have to be done in public. This will highlight the growing chasm that has developed between those in the English First Division and the Premier League.

Manchester United and the other star clubs will continue to afford some of those ludicrous purchase and pay deals, but for the others life may well get worse.

The opportunity for clubs to leap up from the First Division will become an even more daunting prospect.

Clawed back

Those at the lower end of the Premiership will also fear that a drop from the top flight could lead to financial disaster, with a higher cost base being supported by a lower income.

With the main television revenue going to the top division, their spending power is always going to be far stronger, and any club "unlucky" enough to win promotion will have to spend a lot to ensure survival in the Premier.

But I think that the greed of many footballers and agents may well have gone too far and some of these excesses may be drawn back.

When trying to mitigate some of these issues, new finance structures - like the securitisation of club turnstile receipts - may assist certain clubs' finances such as Manchester City and potentially Everton, but these are not long term solutions for businesses.

Suppliers and vendors

For shareholders in football clubs the outlook is poor

Justin Urquhart Stewart

For shareholders in football clubs the outlook is poor, not only because of the financial structures but also because much of the institutional City moneymakers have lost faith in the corporate management skills and abilities of these businesses' directors.

Some clubs are seen almost as private fiefdoms of individuals and cliques, and the other poor shareholders that exist are seen as an unfortunate irritant to them.

Should we just ignore the whole sports sector? Well, in my view it is probably the related businesses that will provide greater financial benefit for investors.

Rather than the clubs themselves, how about looking at their suppliers and vendors? For example, the sports clothing retailers have benefited for years from the sale of club strips, whose colours seem to vary with the speed and regularity of a chameleon.

Negotiate

More importantly would be the much maligned television rights. After the collapse of ITV Digital, it has been BSkyB that seems to be the real winner.

It would appear that they are going to be best placed to negotiate better deals for themselves, and this will impact on all the clubs in due course.

Lower sponsorship and rights costs will feed directly to their bottom line and assist with profitability. The shares have come back with the market, and with a six million client base of satellite dishes they are in a strong position to benefit.

So for us as investors, by all means enjoy the football, and certainly buy the scarf, but leave the shares for someone else.

I would look at those who are likely to make the real profit - it's the people with the dishes who are most likely to get the dosh.