FFP does not count money spent on infrastructure as an
expense. This means that even though
there are limits on how much money an owner can contribute to the team, money
contributed to build or expand a stadium does not count against those limits.
Thus, Chelsea is considering expanding their stadium from 41,837 to 60,000. The costs of planning the expansion,
building the expansion, and paying interest on any loans used for the expansion
will not count against FFP profitability.
Roman Abramovich could pay the entire cost directly out of his pocket
and it would not affect Chelsea’s FFP compliance. Yet, the increased revenue earned from the
larger stadium counts as additional income for FFP purpose and as
increased revenue that would increase the club’s salary cap. This, of course, explains why the other bigger teams, such as
Tottenham, Manchester City, and Liverpool, have been looking into expanding
their stadiums’ capacity.
In order to evaluate the financial significance of these
stadium plans I must estimate the income that larger stadiums will generate. Although it is not an entirely accurate way
to calculate the financial consequence of new stadiums, I will assume that the
entire increase in the stadium capacity will be sold out at the current cheapest
season ticket price. Very likely, this will under estimate the financial benefit
of the larger stadiums, but it will serve as a basis of comparison and give
some idea as to the financial significance of the clubs’ stadium plans. The BPL
ticket prices for 2014-2015 had recently been tabulated and publish. They can be found here. I
will be using this Daily Mail article as my source of current BPL stadium
capacities, except for Hull which was inexplicably omitted from the list and
replaced with Reading. I should mention, however, that different sources list slightly different
stadium capacities for the various clubs.
I have conducted appropriate google searches for new stadium
plans. I have decided to ignore older
proposals that no longer appear likely to happen—for example, Aston Villa’s
plans to expand to 50,000.
Club Old
Capacity New Capacity Increase in Revenue (in £million)
Arsenal 60,432 no
plans
Aston Villa 42,640 no plans
Burnley 22,546 no plans
Crystal Palace 26,255 no plans
Southampton 32,689 no plans
The first thing that jumps out from this list is that the
clubs that have relatively firm stadium expansion plans fall into three
categories: top seven teams, London teams,
and teams with stadiums that are too small for the club even if they were
relegated into the Championship. QPR,
Chelsea, and Tottenham, obviously, each fit two of these categories. (On the other hand, relegation into the Championship may not be an available option for QPR right now.)
Of the top seven teams, Arsenal and Manchester United
already have the biggest stadiums, but probably could both sell out much larger
stadiums on a regular basis—although that may be less true for Manchester
United after last season. Arsenal supposedly still has a very long waiting list for season tickets.
The remaining five teams—Everton, Chelsea, Tottenham,
Manchester City, and Liverpool—all have comparatively firm expansion
plans. Undoubtedly, they feel safe in
making such plans because they view their BPL position as secure and because
they are confident they can sell out the expanded capacity. Tottenham has more than 47,000 people on its season ticket waiting list. That is an awful lot of money to leave on the table in the modern FFP and
salary cap world. Possibly Tottenham
should be looking to build a stadium the size of Old Trafford. However, even the 56K stadium would allow
Tottenham to increase its weekly salary cap by nearly £300K.
Manchester City is unusual in that it plans to use its expanded stadium to sell more of its cheapest £299 season tickets. This is an inefficient use of the seats
in FFP terms, but it should make the fans happy.
West
Ham’s Olympic Stadium deal is particularly interesting. Setting aside the fact that the deal might
end up costing taxpayers an additional £50 million for a total of £630 million, it’s terms are outrageously
favorable to West Ham. They only have to
pay £15 million out of the £630
million and that pittance does not count against FFP limits. They also will pay a very low annual rent
which should count against FFP limits, but might not. Given West Ham’s London presence and the
advantages that offers for worldwide publicity and revenue, West Ham, if
properly run, could secure itself as top half team that no longer worries about
the annual relegation battle.
Manchester United’s situation is also interesting. According to a 2012 article Manchester United rejected plans to expand Old Trafford by 15,000 because they were too expensive and would cost £30 million.
Yet, by my, admittedly uncertain, calculations, that cost would have been
paid off in four years with increased ticket sales—assuming Manchester United
could sell 90K plus tickets per game.
This might be yet another example of the financial stress placed on
Manchester United by the Glazers’ ownership. Or, perhaps, the author of
the article was wrong.
The effect on Southampton of all these stadium expansions is
potentially significant. If Southampton
wants to compete with the biggest teams for a place in Europe, it will need to
increase its revenue. Yet all the
biggest teams have more match day revenue right now and most of them are
looking to increase that revenue by even more in the near future. Southampton cannot respond simply by
expanding St. Mary’s. It is not clear
that the expansion would sell out except for a small number of games so it
would not bring in that much more money. From a FFP and salary cap perspective,
this is not a problem. Any increased
income helps and the costs do not count.
However, if Southampton is going to be run on a sustainable basis—in other
words, if Katharina Liebherr is not going to pay for the expansion out of her
own pocket—any informed cost-benefit analysis of a stadium expansion will
probably reveal that it is not a good idea.
In any case, expansion of St. Mary’s will never be a way for
the club to lower ticket prices. That
would simply be throwing money away in the current FFP environment. It would be better to leave the stadium the
size it is now and spend Liebherr’s money on some other part of the club.
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