Southampton FC, Martin Samuel, and Financial Fair Play (Part 3)

In Part One I promised to analyze Martin Samuel’s claim that the Financial Fair Play (FFP) rules limit Southampton’s ability to break through what he once referred to as a “glass ceiling.”  In Part Two I started that analysis.  In this article, I continue the analysis.  As always, when I discuss Financial Fair Play issues, I rely upon the Financial Fair Play website which is linked in the sidebar.

In my last post I talked about money.  Money is critical to progress in football.  This is self-evident, but the extent of its importance may not be.

In Chapter Three of Soccernomics, Simon Kuper and Stefan Szymanski discussed the relationship between what football players are paid and how good their team is.  They showed the strong relationship between the two for the BPL from 1998 through 2007.  On the Financial Fair Play website, similar information is presented for the seasons ending in 2011 and 2012 and part way through last season. Very likely this information will not surprise anyone, but its meaning must be understood.  In order to improve your team significantly you must either improve your payroll relative to the other teams in your league or you must find a way to play better than your payroll would justify.  To break through any glass ceiling, Southampton will have to find a way to do both.

Before I go into more detail I think it is necessary to say something even though it might be obvious.  An increased payroll reflects an increased caliber of player.  It is not an end in and of itself.  Southampton will not win the BPL by increasing the salary of each of our players by ten times even though that would give us the highest payroll in the league.  This has been proven experimentally, albeit not to such an excessive extent, by QPR two years ago (and maybe again this year).  Overpaying mediocre players does not help.  In fact, it leads to disaster.

On the other hand, in the past couple of years Southampton has well overachieved versus what would be expected by the club’s payroll.  By payroll, Southampton should have finished 15^th last year.

Given the importance of payroll, it is immediately clear that Southampton has a problem.  The payroll cap, imposes a significant limitation on potential improvement of the squad.  Using the FFP website’s payroll numbers for last year (which, according to my calculations overstate Southampton’s actual player payroll—but are good enough for what we are doing here)  Manchester City  outspent Southampton on payroll by £149 million.  Even if Southampton FC had the real money and the will to increase payroll spending this much, it could not.  The salary cap prohibits the spending increase.  I will discuss ways to raise the salary cap in Part Four.  The rest of Part Three will focus on the possible ways to overachieve and I want to begin that discussion with a digression into Major League Baseball.

Major League Baseball (MLB) is an interesting basis for comparison with football because, like football, MLB teams devote a lot of money and time to training players.  In MLB the training by professional teams rarely starts before age 17.  However, MLB teams can tie up their players relatively cheaply for much longer periods of time than in football.  Basically, prospective baseball players are chosen in an amateur draft so they can be signed by only one team to which they are contractually bound for four or five years at the minor league level and another six years at the major league level—although players who are good enough to make the major leagues do not often spend the full five years in the minors. 

During the six restricted years in the major leagues, players tend to be very underpaid, but there is little they can do about it.  In the first three years players virtually have to take whatever money is offered.  In the next three, they are eligible for salary arbitration which greatly increases their income, but not to a fair market value.  After six years, they are eligible for free agency where they (baring illegal owner collusion) can earn what the market will pay them.  Thus, one of the ways a team can be successful in MLB is to have a good number of underpaid young players who will over perform relative to their salary.

This is not so easy in football.  Young players do not have to sign a contract at age 18 and, instead, can become free agents.  Compensation must be paid, but it will be less than the value of the player to his former team.  Also, for a lot reasons, football players have more freedom to push for transfers even when they are under contract.  Young baseball players in MLB must accept that they are tied to their team for six years and that team can pretty much trade them at will.  Their only real leverage is a willingness to sign a longer term contract to keep them at the team beyond the six years in exchange for getting more money during the six years.  For obvious reasons, such contracts tend not to be available until year four, if ever.

The other strategy by which MBL teams can outperform is by going the “Moneyball” route where the team tries to identify players who are more valuable than commonly believed so they can be obtained cheaply and then underpaid.  This type of strategy is theoretically available in football.  However, it is not as easy to do so as it was in baseball when such strategies were first adopted.  Football statistics are not as amenable to definitive analysis as are baseball statistics.  I am sure many football teams are working on Moneyball strategies behind closed doors but I do not see know how this can be a reliable strategy for Southampton to gain a competitive edge—especially since the bigger clubs are also adopting the strategy.   Instead, Southampton will have to go the Moneyball route just to keep up.

On the other hand, Southampton’s academy does make the underpaid youngster strategy possible.  If our good young players will sign long term contracts at age 18—and so far they seem to be willing to do that—the club obtains a good supply of underpaid players to exploit to gain a relative advantage over the rest of the BPL.  However, there are a couple of problems with this approach.  Most 18 year old football prospects are not going to be ready to play at the highest level of the BPL before they turn 20.  This means that these young prospects are not really that underpaid or valuable for what they can do when they are 18, 19, and 20.  In effect, they replace older squad players who would earn a higher salary and have little resale value.   This is very helpful but it is not going to get Southampton into the Champions League.  There are exceptions.  Some youngsters can jump right into the first team at age 18 and replace a very expensive high quality veteran player, but these players are rare—even with a strong academy.  And when you find such players, the pressure to sell them for a big profit to a bigger team is often overwhelming.  Southampton worked against the underpaid youngster strategy this summer by selling two very good underpaid youngsters.  On a purely value to salary basis, Southampton should have kept Shaw and Chambers for as much of their recently signed long term contracts as possible.

This is not necessarily a criticism of Southampton.  There were other reasons to make these deals.  As noted, football players have the ability to try to force a move and to be disruptive if they do not get it.  In theory Southampton could have told Luke Shaw, we are not going to sell you because we want to keep you here and underpay you for three more years, but his reaction would not have been pleasant.  Yet, MLB tells that to all its young players and they accept it because they have no choice.

There is another strategy to finding and employing underpaid players—use foreigners or, at least, players from foreign leagues.   Southampton proved this summer that BPL teams will pay a lot of money for good English players or players who have had a single good year in the BPL and then give these players big raises.  Southampton demonstrated that it is also possible to find cheaper players in smaller leagues who can be brought to the BPL for a lower price and cheaper wages—even though those wages will be a big increase on what the players were getting at their old club.

There is one other way to get players to play for less which is to take advantage of their emotions.  I do not mean this to sound as cynical as it probably does.  There is nothing wrong with doing things to make players happy so they are more likely to want to stay at the club.   New players should be offered virtually unlimited help in settling in Southampton.   The team should probably hire a full time assistant for each new player who is fluent in both English and the player’s native language—the cost of doing so would probably be less than two week’s salary for the new player.

The club should also take steps to encourage loyalty to the club.  Katharina Liebherr should probably try to develop a little bit of a personal relationship with each player.  The board should takes steps to make sure the players have a sense of loyalty not just to each other and the manager, but to the fans and the club as a whole.  Despite our experiences of this past summer, player loyalty does exist.  Lambert probably would not have left us for anywhere but Liverpool.  Lallana would not have left us for Liverpool if we could offer Champions League football this year and moderately significant raise.   On the positive side, emotions undoubtedly played a part in the decisions by Bertrand and Alderweireld to sign for us.

This does suggest that there is one thing fans can actually do to help the club.  Make the players feel welcome.  This includes not gratuitously booing Southampton players.  Not only will that make the booed player unhappy, but it will probably make his friends on the team unhappy as well.

At this point, it may be apparent that Martin Samuel’s primary argument was at least partially right.  He warned Southampton of the danger of constantly selling good players and attempting to replace them with equally good, but cheaper players.  But under the salary cap and FFP, that might be Southampton’s only plausible strategy.   Very likely, that is what Samuels meant by the “glass ceiling”.

However, Southampton is not completely powerless.  The club can try to do what they did with Morgan Schneiderlin and enforce long term contracts for at least a few years so we get some additional value out of the contracts.  Players who sign long term contracts should be told quite clearly that they will not be sold prematurely no matter how much they want to move.  Top quality players can, on a selective basis, be paid big team salaries.  Would Schneiderlin happily agree to stay for four more years if Southampton paid him £150K a week?  Could the other players on the team be kept happy knowing that that kind of salary was never going to be available to them at Southampton—even though it was available to Morgan?  Who knows?

The best way for Southampton FC to solve this problem is to change the club’s financial situation so that more money is available both under the salary cap and FFP.  In what I hope is the final part of this series, I will address that issue.