As always, when I discuss Financial Fair Play issues, I reference and rely upon the Financial Fair Play website which is linked in the sidebar. Since my goal here is not to explain the FFP rules, but to analyze how they effect Southampton FC, I will not explain the rules in full detail. Instead, I will limit myself to explaining specific rules as they become relevant.
As you might expect, the key issue is money. But there are five different “types” of “money”
that matter for this discussion.
First, there is real money—the kind of money the club spends
on everything. This is the money that
Roman Abramovich and Sheikh Mansour used to buy their way to the top. This is the kind of money we used to buy our
way back to the premier league. This is
the kind of money that Randy Lerner doesn’t seem to have right now. It is the kind of money that the Glazers sucked out of Manchester United to the tune of £700 million (I finally figured out how to insert the £ sign) over ten years. Think what that means. With more responsible ownership, Manchester
United could have spent an extra £70 million a year on transfers and
salary. How many more trophies would
Ferguson have won with that kind of money?
How much more money would Abramovich have had to spend to compete with
him?
In Southampton terms, real money includes the money
Katharina Leibherr might want to take out of the team as loan repayments or
dividends or give to the team as a capital contribution. There is a belief that real money doesn’t
matter in this era of FFP, but that is not true. You have to pay the bills and bills are paid
with real money.
PSG and Manchester City have both been subject to FFP sanctions
that limit what they can spend this year, but their owners’ real money can
still be spent on a variety of football expenses that are not covered under FFP
regulations. Their real money also
allows them to set up those ludicrously lucrative related party sponsorship
deals. Sure the FFP value of those
sponsorships can be discounted, but they are not discounted to zero.
For the purposes of this analysis, I will call the next type
of money Sustainable Money. It is the
real money that is actually available to the club based upon its own
activities. It is the money that is
there if the owner puts nothing in and takes nothing out. This is different from the money that is
considered under FFP regulation because FFP regulations do not count some types
of spending, but those bills must still be paid, and FFP regulations allow
owners to contribute some money to cover losses.
If I am drawing the right inferences from the public
statements of the Southampton board, this is the type of money with which Liebherr
wants us to operate. I get the
impression she does not want to take money out, but she wants to stop putting
money in. If this is true, this is a
significant impediment to sustained progress for Southampton. FFP regulations present barriers, but if
Liebherr is not going to kick in the maximum amount of money she can legally
contribute under FFP, we will have to progress more slowly. And slow progress might be fatal to our
ambitions. Schneiderlin and Clyne might
be happy (or even thrilled) to stay here if they thought we would make the
Champions League in three years. They
will not want to stay if it is going to take ten years.
If we are limited to sustainable money, we will have trouble
competing with teams like Chelsea and Manchester City whose owners will (almost
certainly) continue to contribute whatever the rules allow. For that matter, QPR has its problems with
FFP, but it certainly seems like its owner is willing to put money in. If QPR can
avoid relegation and stop wasting money on bad players, they will be able to
outspend us too. On the
other hand, Arsenal’s owners, both of whom are richer than Liebherr, do not
seem to be willing to put money in. However,
Liebherr’s desire for us to operate on a sustainable basis is not a limitation
that is imposed upon us by FFP. It is a
self-imposed limitation.
Next is the money that is available under UEFA’s FFP
rules. UEFA’s rules are
complicated. These rules do not affect
Southampton until we qualify for Europe.
However, there has been a recent clarification to that limitation. Previously, it was thought that teams that qualified
for Europe would not be evaluated under UEFA FFP in their first year. Recent
reports (here,
here,
and here) indicate that any team that might qualify for
Europe needs to be aware that if they are not presently in compliance they
might have prize money withheld or suffer some other sanction.
The BPL has its own FFP rules and its own limits on the
money that can be spent under those rules.
These limits are far more generous than UEFA’s limits. Once the rules are fully in effect, UEFA
limits losses to 30 million Euros (£23.4 million) over a three year period
whereas the BPL will permit losses of £105 million pounds over a three year
period. Although last season will count
as one of the first three years for the BPL FFP rules, the penalties for any
failure to comply do not take effect until after the 2015-2016 season.
Finally, there is the money that can be spent under the BPL
salary cap rules. Although related to
FFP rules, the Salary Cap is completely independent. It is possible to violate the salary cap
rules while being well under the FFP limits and possible to comply with the Salary
Cap rules while failing a FFP test. I
have discussed the salary cap at some length in several earlier posts. I believe my understanding of the rules and
my analysis was correct, but, early on, I made a mistake in thinking that Southampton’s
reported salary spending was the relevant number for salary cap purposes. It was not. Only player salaries count against
the cap, but I was using the total salary spending for the club as a whole. I
corrected that error in my third post on the subject. My earlier posts on the
salary cap as it affects Southampton can be found here,
here, here, here,
here, and here.
If my most recent salary cap calculations are correct--I
know that they are not exactly correct, but they should be good enough for our
purposes—Southampton is spending around £41.6 million on player salaries this
year. The Salary cap this year is at
least £56 million. Depending upon our
commercial income and how much more we spend on transfer fees, this year’s cap
could be much higher, but that only matters if we actually spend the money. Next year’s cap is either £60 million or £4
million more than what we spend this year.
This means that we could offer Rodriguez, Schneiderlin, and
Clyne each £100K a week to stay and still be under the cap. Given their current
salaries, this would add a little over £10 million to our spending—although
since we are part way through the season it would add less depending on when
the contracts were signed. The problem
with adopting this strategy is that other players might expect big raises too,
and we cannot give everyone a big raise and stay under the cap—unless we do it right
away and do not spend much more money on transfers.
It is possible that this is a significant dilemma now facing
the board and might explain why players like Cork are not being offered new
contracts now. The board may be waiting
until closer to the January transfer window to figure out whether we need to
use the summer transfer profits to strengthen the team or whether they can
safely be spent on increased salaries and, if the latter, whether they will try
to push the salary cap up. If we spend
more than the current £56 million limit this season—say £59 million—then our base
cap for next season is £63 million instead of £60 million. Of course, to do that we have to actually
have to real money to afford it—not just this year, which we clearly do, but also
during the remaining years of the contracts.
In pre-FFP universe, we know from simple observation what it
took to challenge for the title and the Champions League spots. In his first ten years of Chelsea ownership, Roman Abramovich spent £2 billion on Chelsea.
Sheikh Mansour spent around £900 million in his first three years of ownership. Obviously, these figure are not exact or up-to-date,
but they don’t need to be for our purposes.
If you spend £200 to £300 million a year, you can turn your team into a
contender. FFP prohibits this now. If all Samuel meant was that we could not do
this, then he was right, but that is not really a limitation that FFP imposes
on Southampton because no one seriously believes that either Markus or Katharina
Liebherr would have spent that kind of money on the club. The estimates I have seen of Katharina’s wealth are around £3 billion. Abramovich supposedly has four times that much
and Monsour has ten times that much. Liebherr would never be able to compete with them by
spending her real money on the team. In
that sense, FFP, by limiting what they can spend, gives us at least a
theoretical chance to compete—if we can find enough EUFA FFP compliant money to
do so.
Of course, there are teams that compete with Chelsea and
Manchester City without spending £200 million a year: Manchester United, Arsenal, and Liverpool.
However, the last time any team other than United, City, or Chelsea won the BPL
was 2004-2005, so in a sense only Manchester United is really competing and
they did it with their fabulous worldwide popularity and commercial income
combined with talents of Alex Ferguson.
Right now it is not clear that they will be able to continue to compete
for the BPL championship without him.
Moreover, while those three teams did not require the
massive level of injections of real money that boosted Manchester City and
Chelsea, they already had their own massive levels of income from other sources—perhaps
most importantly, decades of building up their worldwide brand name without any
FFP limitations. Obviously, Southampton
does not that kind of income from any sources and our brand name is not so well
known around the world. Yet, in order to
compete with these teams for Championship league places we must either find a
way to obtain that kind of money or find a way to progress with less
money. So the question is, does FFP make
both options difficult or impossible for Southampton?
I was hoping to complete my analysis of these issues in just
two parts, but this article is already longer than I intended and I need more
time to research , calculate, and think.
So I will write and post part three sometime in the next several days.
No comments:
Post a Comment