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Nothing Fair About UEFA’s Financial Fair Play Rule

Masterstroke or Mistake - Platini (Image from Getty)The inclusion of the word “fair” in UEFA financial fair play rules is somewhat ironic given that its intended purpose will be anything but fair. Introduced by UEFA president Michel Platini as his masterstroke idea of how to curb exuberant spending by clubs across Europe, its objective is to limit the spending capacity of clubs to their net gains. By net gains what we mean is the difference between what they spend each year in transfers and employee wages vs. what they make back from gate receipts, TV revenue, advertising, merchandising, sales of players and prize money. With a host of clubs now bankrolled by wealthy investors and owners, Platini is keen to stamp out overspending before it damages football in Europe beyond repair. But will the rules really prevent clubs from spending beyond their means or will it simply drive clubs to be more deceitful about its practices and how it generates revenue?

UEFA's Financial Fair Play Rule is designed to make things fairer but will it?  (Image from Photos8.com)
UEFA’s Financial Fair Play Rule is designed to make things fairer but will it?
(Image from Photos8.com)

Breaking it down, it comes down to profit vs. loss and the difference between them. So if a club’s overall running costs (not including infrastructure, training facilities or youth development which is not factored in) are $2million per year whilst they make $6m, they are allowed to spend $4m in that year (give or take a 5% grace window). In theory the rule is sound and restricts clubs from spending astronomical amounts to bring in top talent, and widening the gap between those that have and those that have not. However in practice the rule is flawed and like most things full of grey holes and loopholes. For instance UEFA’s terminology for what they consider acceptable sources of revenue are questionable and without limitations. Advertising revenues generated mostly by corporate sponsorships are  an area that should be built within barriers but none exist to date which will lead to inside deals and US style advertising. Currently there is nothing to stop a club structuring a multimillion pound sponsorship around something as non essential as a training ground or their corner flags. Whilst the latter is idiotic (at the moment) the former is already been explored by clubs desperate to retain their financial clout and advantage. Barcelona recently announced a $25million deal with Intel, for a shirt sponsorship that would be inside the player’s shirts. The deal itself caught the headlines but for the wrong reasons as many looked at it as a unique and quirky ad campaign by Intel. A closer look exposes a potential risk of clubs having more than one shirt sponsor (similar to Formula one) with each piece of the shirt classified as advertising space. Multiple shirt sponsors mean that rule will be exploited as clubs rake in the cash.  If expenses total $2million but revenues, including such sponsorships equal $50m, surely that defeats the purpose of this rule?

Is the Intel deal a sign of things to come?  (Image from AFP)
Is the Intel deal a sign of things to come?
(Image from AFP)

In addition, TV revenues are factored into the profit margin which presents a further problem. The top five leagues in Europe have never been as popular on a global scale as they are right now on. Interest in the leagues continues to surge and as a result so do the various TV deals attached to it. BSkyB, BT, NBC and Al Jazeera have paid billions of dollars between them for the exclusive rights to showcase these leagues, with the money trickling back down eventually to the clubs. However in most Leagues the allocations of TV revenues are not shared evenly but instead the top clubs profit more than the rest. In Spain, Barcelona and Real Madrid command the lion share of this allocation with the rest in La Liga getting a small fraction of the remainder. In the Premiership, Manchester United, Chelsea, Arsenal and Manchester City all received bumper payouts last season based on their top half finish but all have wealthy owners backing them. It’s a similar story when talking about gate receipts and the ability to strike multimillion dollar deals. The top clubs can play host to larger crowds due to larger stadiums which in turn entices companies to invest in association advertising.  Barcelona’s deal with Intel is a good example as Intel see the value in working with the Catalan giants and their extended global reach. A deal with fellow La Liga teams Elche or Almeria would never have been structured by Intel as the value exchange does not exist. In essence the rich are getting richer whilst the poorer clubs struggle to compete. The gap will only widen unless clubs in the lower half of the divisions can compete but in order to do so, they need better players which cost more than they can afford.

NBC has invested heavily in US TV Premiership rights (Image from NBC)
NBC has invested heavily in US TV Premiership rights (Image from NBC)

These are just a few of the loopholes and grey areas within the Financial Fair Play rules but there are many more including 3rd party ownership of players (clubs only pay a fraction of a players wage, whilst an outside corporation picks up the remainder), multiple club ownership outside of Europe (Manchester City’s owners have acquired teams in USA, Mexico and Australia with a view to setting up a network that will see player and financial exchanges outside of these guidelines), varied country specific economical situations(some countries will have higher wage bills due to higher tax rates like France) and charity payments (not included in the calculation by UEFA but questions are being raised over using charities to invest in a clubs development). All in all the Fair play rules, set to begin in full next season, with clubs that fail to adhere to the new rules punished either in the form of a fine, deduction of points or exclusion from European competition.

Manchester City's owners expand their reach across the world  (Image from Getty)
Manchester City’s owners expand their reach across the world
(Image from Getty)

Clubs like Russsian side Anzhi Makhachkala are taking the new rules seriously and have made drastic cuts to their playing staff in order to fall in line with the new rules. Bankrolled by billionaire Suleyman Kerimov since 2011, Anzhi had grand ambitions to dominate European football and with Kerimov’s wealth in support embarked on a spending spree like no other, tempted some of football’s biggest players into moves to the Russian wilderness. Samuel Eto’o, Roberto Carlos, Willian and Christopher Samba were paid astronomical wages by Anzhi as they looked to exploit the system and buy success. But the club has now cut its cloth accordingly, selling most of its star players and started to live within its means. Kerimov is an example of what Platini calls “fat cat owners” and the reason behind the introduction of this new rule but will others follow suit or will they instead look for ways to exploit the system and continue to operate as they have done over the past decade? Share your thoughts now on Facebook: www.facebook.com/BackOfTheNetBlog or on Twitter: https://twitter.com/BOTNBlog

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2 comments

  1. Great points. There were definitely other factors at work when Anzhi’s owner decided to make some drastic changes but he only went public about the influence of FFP rules. It was always going to happen whether Platini introduced it or not but unfortunately as you point out, he hasn’t really thought it through as we discovered when investigating.

    Thanks for taking the time to comment. We always are interested to hear what people are thinking. We are looking for other writers as well so if its of interest, let us know. Thanks!

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  2. Anzhi Makhachkala: interesting case, not easily summarised. The suggestion is the owner’s non-football businesses hit a bit of a rocky patch, and this is what led to them slashing the wage bill, with Eto’o the most high-profile player in the firesale that ensued.
    It’s hard to believe that the changes they made were solely as a result of the FFP rules.
    Agree with the all other points though, and it’s clear that the big clubs are used to their positions at the top of the table, and the wildly unsustainable spending that got them there, and are not prepared to relinquish them easily.
    Unfortunately, Platini isn’t the best face for FFP, either – he’s come up with plenty of loony ideas previously, and isn’t known for being the bookish type, solely looking out for the game.

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