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Financial Fair Play


Elliott

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http://www.guardian.co.uk/football/blog/2011/jun/23/chelsea-financial-fair-play

Rampant Chelsea a long way off satisfying financial fair play agenda

A new manager and talk of players being bought for huge fees does not suggest a tightening of purse strings in west London

When Michel Platini unveiled his financial fair play agenda he held up the Chelsea owner, Roman Abramovich, as its unlikely standard bearer. The Uefa president claimed club benefactors had pleaded with him to find ways to control rampant wage inflation and stem spiralling losses.

And yet the publicity-shy Russian has followed up the headline-grabbing, if not yet wholly successful, January splurge on the £74m pair of Fernando Torres and David Luiz by limbering up for another spending spree. First there was the £5m compensation for Carlo Ancelotti, the Italian manager who won the Double in his first season but was sacked after his second.

Then there was the £13.3m due to Porto to trigger the release clause for the new 33-year-old manager, Andrés Villas-Boas. That took the amount spent on hiring and compensating managers and coaching staff alone to an estimated £69m since Abramovich bought Chelsea in 2003. During that time he has pumped £739m into the west London club.

Now back-page headlines scream of huge fees being considered for Tottenham Hotspur's Luka Modric, Anderlecht's Romelu Lukaku, Porto's Radamel Falcao, the Ajax right-back Gregory van der Wiel and the Santos striker Neymar.

Chelsea insiders say nothing has changed and that any signings must fit into an overall strategy drawn up by the chief executive, Ron Gourlay, that still has breaking even as its target. But outsiders could be forgiven for wondering how on earth they plan to get there.

The high-wire act that the club with the highest wage bill in the Premier League at £174m, running at 82% of revenues, has to pull off is far from easy. It must at once try to get that wage bill down while overhauling an ageing squad, bringing down pretax losses that stood at £78m and considering the imminent arrival of FFP.

There is more time than most realise. Through a series of reforms negotiated by the powerful European Clubs Association, the body that replaced the G14 and represents the views of the continent's 191 most powerful clubs, the path to compliance with Uefa's rules has been smoothed considerably.

While Platini continues to talk tough, and argues privately the looming threat has already caused clubs to put the brakes on their out of control spending, they know they have some grace.

The first accounts that will qualify concern the next financial year, 2011-12. But Uefa's accountants will not start examining them until the 2013-14 season.

Even then, there is an "acceptable deviation" of €45m over the first two years. And, as long as they can prove they are moving in the right direction, they are also allowed to discount the wages of players on contracts signed before June 2010. That rule will hold for the first two "monitoring periods" – the two years ending 2013-14 and the three years ending 2014-15.

With a maximum Premier League squad size of 25 and Chelsea's need to bring average age and salaries down, expect at least as many departures as arrivals. Many of the players the club will seek to move on will not attract big fees. Yuri Zhirkov, José Boswinga, Florent Malouda, Nicolas Anelka, Salomon Kalou, Mikel John Obi, Paulo Ferreira and Alex, for instance, could fall into that camp.

Up to five senior players are expected to leave, plus the usual turnover of youngsters going out on loan and the sale of other fringe players. Then there is the cadre of established players that have been at the heart of Chelsea's success in the Abramovich era but will represent Villas-Boas' first big call. How he decides to handle John Terry, Frank Lampard, Didier Drogba and Michael Essien could well set the tone for his tenure. If two new strikers arrive, it could signal Drogba's departure while Essien was a shadow of his former self for much of last season.

Of those in first group the key from a FFP point of view is getting them off the wage bill. Chelsea then hope to attract younger players – whose fees, even if high, can be amortised over long contracts – on lower salaries than those they replaced.

The holy grail is to mix them with some promising youngsters from the academy - where Abramovich is still hoping that his big investment at Cobham will pay off despite mixed results and the departure of Frank Arnesen - and a sprinkling of superstars in the Torres mould. It is not an original model and it is one that, to a greater or lesser extent, Chelsea's rivals are also following. But for the London club the need is more pressing, because its losses and wages are higher and the potential for increasing matchday income is lower.

Those star signings are also important in executing another plank of the Abramovich strategy that has been long talked about but yet to be effectively implemented.

Given the relatively small capacity at Stamford Bridge, and the decision to put plans to move on ice, Chelsea are even more reliant than their Champions League rivals on commercial revenues. They currently have the third highest income in the Premier League, but it is hard to see where substantial growth will come from.

While its deals with Adidas and Samsung are lucrative, in order to keep up in a world of Financial Fair Play that threatens to lock in the established order - aiding those with big grounds and big revenue bases like Manchester United and Barcelona most - Chelsea need to step up efforts to drive overseas income.

Like Liverpool and Arsenal, Chelsea are looking longingly at the Manchester United model of boosting overseas revenues in a range of categories. Whether or not they will ever have the global reach to do so has remained one of the great unanswered questions of the Abramovich era, for all their success on the pitch. A naming rights partner for Stamford Bridge willing to pay up to £10m a year is yet to be found and, despite repeated pre-season forays west and east, significant funds are yet to flow from global deals.

If – and it is a big if, given the owner's craving for instant success and swashbuckling football – Villas-Boas can deliver on the pitch, while also balancing all of those competing financial demands, the £13.3m it has taken to bring him back to Stamford Bridge will represent Abramovich's best investment yet.

Edited by Elliott
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I'm yet to be convinced that the Financial Fair Play will ever really happen, as the article mentions it will look after the likes of Manu and Barca but not enough clubs boast such huge revenues. That means that a large number of the 191 most powerful clubs in Europe will, if fair play is bought in - have to play second fiddle to the few real giants of European football, and no new clubs will ever be allowed to enter that elite. If the elite group was in excess of 100 clubs then I could see it working, as it's not I think the closer we get to the fiar play deadlines the more we will see clubs the that second tier (like us) start to flaunt them, then UEFA will have a decision, does the Champions League become a competition for the big 6 of European football, or do they back down on the rules. It seems that they're already starting to back down on the rules.

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I've already stated elsewhere that I doubt whether the Financial Fair Play rules as they stand would stand up to a firm legal challenge.

Among the counter arguments was that it's Uefa's competition so they can allow/disallow whoever they want from entering the competition. However, football is also a business, and the Champions League in particular is a massive business competed for by a large number of companies with huge business interests.

Simplified the argument goes something like this:

Uefa:

We require you to operate within the limits of our rules.

Any club you care to mention:

We are currently operating as a viable business according to the applicable laws, and run no appreciable risk of going into administration, becoming insolvent or are in no other way shape or form in any danger of going out business.

Furthermore, the rules as they stand do nothing to promote competition but will merely reinforce the status quo, ultimately diminishing greatly the opportunity of success in this competition for those clubs with fewer resources at their disposal. The rules will indeed have the effect of limiting the opportunities for such clubs to increase their overall revenue.

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I just can't get at all interested in this subject. FFP will change nothing. Bosman rules and anything else that's happened just gets dealt with and we all move on.

Scanning through the comments below that Guardian article was quite fun though. I sometimes enjoy reading the jealous and bitter ramblings of other clubs supporters. Same old stuff generally, "Chelsea bought it", "Stolen oil money", "No fans" etc etc. I quietly revel in the knowledge that fans of most other clubs have a thoroughly miserable time watching their ‘bigger club than Chelsea’ winning sod all and not even nearly winning anything year after year.

And even if FFP had a dramatic effect on Chelsea, it wouldn't help Spurs, Villa, Everton, Arsenal, Newcastle or anyone else. They will still have and always will have more than Chelsea in between them and winning a title or European Cup.

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This extremely thorough piece of research suggests we're not in as bad shape as the Guardian thinks - http://swissramble.blogspot.com/2011/02/chelseas-financial-fair-play-challenge.html

Ironically there is a quote on the site linked from the Guardian praising the blog.

As far as the FPPR's are concerned all the clubs want them and have been working towards them being introduced so that large transfer fees and large wages can be removed from the game.

As for Manure their interest payments may be high, to pay for the stupendous amount of debt, but I understand that their revenue still satisfies the interest payments so they are okay. Liverpool however have an upcoming problem as their interest payments will exceed revenue and that means they breach the FFPR's.

As for us, whilst we may deviate in year 1 that does not mean we get excluded from the CL as you have a year of grace to get your house in order. As far as income streams are concerned the tour in Asia and the internet may play a huge part.

I still dream of being paid to go to games to help make the atmosphere for those watching on TV. :)

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