Am I Crazy? (Part two)

At the end of my last post, I concluded that coming into this season Southampton had 13 to 18 million in salary cap space, not the four million or so I had previously believed.  In this post, I attempt to address the consequences of this conclusion with a series of brief scenarios.

I will continue to base my salary calculations on the information from Football Manager 2014. Even though in my last post I realized that the base FM salaries are not the complete wage costs given the other information in FM, I have decided not to increase them by 15% as I did in the earlier post because the unmodified salaries were actually right on target with the information provided by the team.  Therefore, I will use unmodified FM base salaries. (I round off numbers a lot to make things clearer.)

Also, I assume that Osvaldo was never coming back to play for Southampton, but the best deal we could get for him was a loan where someone else pays his entire salary.  This makes it easy for me because I can completely ignore him. (A fine idea in and of itself.)

However, before I outline these scenarios, I thought I should paste in the BPL Handbook rules on the salary cap as found in Rule E.18:

E.18. If in any of Contract Years 2013/14, 2014/15 and 2015/16 a Club’s aggregated Player Services Costs and Image Contract Payments:

E.18.1. exceed £52m, £56m, or £60m respectively; and

E.18.2. have increased by more than £4m when compared with the previous Contract Year or by more than £4m, £8m or £12m respectively when compared with Season 2012/13;

then the Club must satisfy the Board that such excess increase as is referred to in E.18.2 arises as a result of contractual commitments entered into on or before 31 January 2013, and/or that it has been funded only by Club Own Revenue Uplift and/or profit from player trading as disclosed in the Club’s Annual Accounts for that Contract Year.

I will discuss the significance of this rule, as necessary, below.

EVERYTHING IS FINE

In this scenario, I simply assume that all the players would happily continue to play for Southampton without any desire to leave the team or to obtain pay raises.  Even players like Cork and Fonte in the last year of their contracts would re-sign for no increase in pay.  Naturally, this scenario leaves us well below the salary cap, but with an unimproved team.  This is not a plausible scenario.  At the very least some new signings would have been required.

EVERYTHING IS NEARLY FINE

In this scenario, everyone stays at the same price, except for Lambert, who I believe left for his own reasons.  I believe that, if Liverpool really wanted him, money would not have kept him here.  Given the injury to Rodriguez, Lambert would need to be replaced.  In previous, posts I assumed that any sufficiently good new signings would want pay comparable to our new signings from last year.  The FM 2014 average for those signings was 2.6 million.  This is 0.5 million more than we were paying Lambert.  I assume we would spend 10 million on his replacement (as we more or less did).  This scenario is financially feasible, but no more plausible than the first scenario.

EVERYTHING IS NEARLY FINE PLUS

In this scenario, I follow the second scenario, plus I assume we buy some quality new signings.  Based upon everything we were thinking back then, we needed another striker, a winger, a CB, and a goalie.  Again, I assume that each player costs 10 million pounds and will receive pay of 2.6 million.  With the Lambert replacement, this would increase the pay roll by 11 million pounds leaving 2 to 7 million pounds in cap space  Obviously, this scenario is financially doable, if we can actually come up with the 50 million in transfer fees, but it is not realistic.  It appears that KL did not want to keep pumping in her own money and, in any case, some players would want raises.

EVERYTHING IS NEARLY FINE, IF YOU GIVE US MORE MONEY, PLUS

Given what has happened, we know that Shaw, Lallana, Lovren, Schneiderlin, Rodriguez, Cork, and Chambers would all want raises.  I am going to pretend that raises would have kept them at the team and I will arbitrarily assume that they would each want their salary doubled, except Shaw who would want it tripled.  Obviously this is a guess and, frankly, I think it unlikely they all would have stayed anyway.  This would increase the payroll by 12 million pounds.  This means that, when added to the pay for the new signings, suddenly our salary cap space is gone.  Instead, we are 5 to 10 million pounds over the salary cap.  Moreover, relatively small as this amount sounds by modern BPL standards, it presents the very difficult problem I focused on in my first several blogs.

To get the space under the salary cap rules to pay these amounts we needed to increase either our “Club Own Revenue Uplift” or our player trading profit.  But in this scenario we have spent 50 million pounds.  There is no net profit there. 

The BPL Handbook defines “Club Own Revenue Uplift” thusly:

A.1.32. "Club Own Revenue Uplift" means any increase in a Club's revenue in a Contract Year when compared with its revenue in Contract Year 2012/13 (excluding Central Funds fee payments from its revenue in both the Contract Years). The Board may if necessary adjust the calculation of a Club Own Revenue Uplift:

(a) to ensure that it is calculated on a like-for-like basis; and/or

(b) to restate to Fair Market Value any consideration which arises from a Related Party Transaction.

This means that neither (non-European) TV money nor money gifted to the club by the owner can be used.  I am sure the new sponsorship deal is better than the old deal, but I doubt that it is 5 to 10 million pounds better.  Increased match day revenue will help, but can it really be counted on at this scale.  I doubt it.

 

Therefore, it simply was not possible to keep the team together and bring in new players in any significant amount or of any significant quality.  The situation was not as dire as I indicated in my first analysis of the issue.  But the result is similar.