The Financial Fair Play blog has
described its understanding of the likely new rules here. According to that understanding, the rules
will be changed to allow rich owners to give their clubs large, if not
unlimited, amounts of money, but those contributions must be gifts (or equity
injections), not loans, so they cannot leave their clubs heavily in debt.
Martin Samuel of the Daily Mail, who
has never been a fan of Financial Fair, sarcastically congratulated Michel
Platini for his sudden realization that there was something wrong with the Financial
Fair Play rules. (His article is found
here.) According
to Samuel, “[i]t only took the ruination of the Bundesliga, the reduction of
the greats of Italian Football to neutered also-rans, the destruction of
leagues across Eastern Europe, £100
million-plus in unjustly leveled fines, the milking of fans for owner profits
at clubs such as Newcastle, legal actions in double figures across Europe and
the creation of a sinister, untouchable European elite for him to work out what
some of us knew eight years ago.”
Samuel believes that the changes in Financial
Fair Play will be a good idea. It is
difficult to know whether Samuel is correct because we do not really know what
those changes will be. The understanding
of the proposed rules shared by Samuel and the Financial Fair Play website is
not the only one. Gabriele Marcotti
described the proposed changes quite differently here.
According to Marcotti, the spending
limits will remain in place and will continue to tighten even further as
currently planned, but “[w]hat they are hoping to do is to allow a little more
flexibility if somebody comes to them beforehand.” As Marcotti explains it, rich owners would be
allowed to put money in the club to invest in its future growth if they have a
reasonable business plan so that the investment would lead to a sustainable
club in the reasonably foreseeable future.
Marcotti analogized the problem faced by club owners under the current
Financial Fair Play rules to the problems that would be faced by someone who
has bought a rundown house and needs to spend £100,000 to fix it up but who is prohibited from spending more than £5000
a year.
Obviously, a new owner of a house would not want to wait 20 years to
make his house livable.
In footballing terms, Marcotti
thinks that these changes would allow a new owner of a club to do a substantial
investment at the beginning of the ownership period to make the club
competitive. The owner might be
permitted, for example, to pay off preexisting debts. On the other hand, Marcotti claims that UEFA
will expect a credible business plan that would lead to compliance with
Financial Fair Play within a few years and that the club would have to hit its
predicted targets along the way. Thus,
he claimed that “it can’t just be about doubling your transfer spend and your
wage bill in the hopes of earning it back via prize money.”
As far as I could determine, there
are no official specifics as to what the proposed rule change will be although,
supposedly, it will be enacted in June. Daniel
Geey, a sports lawyer with a blog (found here) who
generally seems to know what he is talking about, wrote about the subject on
the Secret Footballer web site. (See
here.) He suggests that UEFA may be moving toward a more Premier League type of
Financial Fair Play with much higher, but not unlimited, allowable losses that
must be made up by prompt capital contributions by the owner.
The different proposals have
significantly different consequences. The
version of the new rules described by Marcotti would not really change very
much although it would be more sensible.
It might allow owners to do occasional major investments but it would
not allow the sustainability of a football club to be dependent on constant
influxes of tens of millions of pounds. The version described by Geey would
allow owners to contribute tens of millions of pounds a year, but not unlimited
amounts.
The changes implicit in the version described
by Samuel are a great deal more significant.
Samuel correctly believes that these changes will increase competition
in European Football. Right now, only
three European Clubs can enter a season believing they should win the
Championships League: Bayern Munich,
Barcelona, and Real Madrid. Possibly, a
half dozen other clubs might think, that if things go well, they have a shot at
winning the Championship League. If
unlimited owner equity contributions are allowed, clubs like PSG and Manchester
City will become regular contenders to win the Championship League. Other clubs with rich owners would have the
same potential.
However, these new rules would have
a completely different effect on domestic competitions. They would create a situation where a rich
new owner could turn a formerly uncompetitive team into a competitive
team. On the other hand, they could also
create a situation where well run clubs, living within their means, will become
less and less competitive. As things
currently stand, three English clubs will be particularly hard hit by these
changes: Liverpool, Swansea, and Southampton.
Whatever Southampton fans might
currently think of Liverpool, Liverpool is not operating on large cash influxes
from a rich owner. The club is richer
than we are because of their longer and more prestigious history and their
greater world wide support. Yet, the
current American owners of Liverpool bought the company because of the Financial
Fair Play rules. They thought that through
superior management, they would be able to compete with the clubs owned by the
very rich people. Swansea does not have
rich owners willing and able to kick in lots of money, but it is a well-run
club that has demonstrated an ability to progress without influxes of
money. We, on the other hand, have been
reliant on money given to us by our owner, but it has always been clear that her
generosity will end and the team needed to become self-sufficient.
If the rules are changed to allow,
effectively, unlimited investment by owners things will change
dramatically. There will be winners and
losers. Even if the rules are only changed to be more like the current Premier
League Financial Fair Play rules things will change dramatically. Even though these rules already allow owners
to make up losses of up to £35 million
pounds a year, they didn’t really matter because clubs competing for Europe had
to follow the more stringent UEFA rules.
Any of these changes will make it a
lot easier for people to sell their football clubs. If rumors are true several Premier League
clubs might be up for sale if buyers could be found. It would be easier to make those sales if the
new owner could engage in unlimited, or greatly expanded, investment. If unlimited investment is going to be
allowed, the purchase of Aston Villa, for example, would become a reasonable
investment for a rich person who wants to spend freely to take advantage of
Aston Villa’s famous name and history and build the club up to be a
full-fledged title competitor. So long
as the new owner will give, not loan, his money to the club, Aston Villa could
start putting things together and competing for Championship League football in
a few years just as Manchester City did several years ago.
Similarly, Crystal Palace may be
sold to a rich new owner who would now be able to invest large sums of money
not just to expand Crystal Palace’s facilities—which would have been perfectly
permissible under Financial Fair Play—but to bring in new players, pay higher
salaries, and do whatever other helpful things money can do in football.
Even if Marcotti’s understanding of
the likely new rules is correct, it will still be easier to sell clubs, but the
increased investment by the new owner would have to be designed to kick start the team up to a new level, but
not to sustain the team at the new level indefinitely.
In fact, one way of looking at
Marcotti’s view of the new rules is that it would specifically legalize, under
the Financial Fair Play rules, what the Liebherrs did at Southampton. They contributed a fair amount of money to
the club. As a result, of those
contributions, after losing money for four years, Southampton made a good sized
profit last year and, presumably, intends to at least break even
hereafter. This is exactly the sort of
investment that Marcotti’s view of the new rules would be designed to
encourage.
On the other hand, if the other view
of the new rules is accurate, things are not so rosy for Southampton. Make no mistake, our owner is one of the
richest around. If Liebherr has been
reluctantly limiting her financial contributions to remain compliant with Financial
Fair Play, but genuinely wants to spend her fortune to move Southampton to the
top of European Football, this change in the rules would let her do that. However, if she wants to run the team on a
sustainable basis and was relying on Financial Fair Play to limit the ability
of less well run teams to compete with us, the rule change will be a
devastating blow to her plans. In fact,
this change in rules might very well cause the owners of clubs like Southampton
and Liverpool to sell their club—presumably to new rich owners who are willing
to spend money.
The new Premier League television
contract is an attractive incentive for rich people from around the world to believe
that the combination of their unique business brilliance, their vast fortune,
and the new TV money will allow them to put together a top notch team that will
compete for Championship League football in just a few years. Virtually every rich person interested in
running a top level football team will believe that they could duplicate the
success of Manchester City and Chelsea.
Of course, every brilliant rich person who buys a Premier League team
cannot win the title every year and the more of them who try, the more of them who
will fail and end up very disappointed.
However, that does not mean they will not try and it does not mean that
their attempts will not hurt those clubs who are trying to run on a sustainable
basis.
It is not clear that the current rich
owners should actually want to change the rules. Although Abramovich spent a lot of money to
more Chelsea to the top, right now Chelsea is Financial Fair Play compliant with
a sustainable model of buying young player, loaning them out and then selling
them for a profit. Despite its
obnoxiousness, this is a reasonable approach to dealing with the current
version Financial Fair Play, while still operating at the top of European football. If the rules are changed, Chelsea may not be
able to compete with Manchester United’s inherent financial strength or
Manchester City’s unlimited wealth even if Abramovich is willing to go back to
putting large sums of money into his club each year. He is not as rich as the owners of Manchester
City or PSG. If push came to shove, he
would lose the spending war. On the
other hand, he might feel that the ability to spend unlimited money would give
him his best chance at competing with Barcelona, Real Madrid, and Bayern Munich
and represent his only real hope of winning the Champion’s League again.
Of course, Platini’s expressed
intent to change UEFA’s rules does not mean that the Premier League will change
its rules. I have seen no reports that
the salary cap is going to be changed or that the more lenient, but still real Financial
Fair Play rules in English football are going to change. If nothing changes in England, a change in
the European rules to allow unlimited owner capital contributions will badly
handicap English clubs when competing in European competition. A loosening of Financial Fair Play rules
might make it easier for clubs with rich owners to compete with Real Madrid and
Barcelona in Spain, with Bayern Munich in Germany, and of Juventus in
Italy. However, the rules will not
actually make European football fairer. The total number of clubs that have anything
resembling a shot at winning the Champion’s League would increase, but for the
vast majority of the clubs who did not have a multibillionaire owner, their
chances of competing for titles and trophies will be reduced all across
Europe.
One thing no one should
misunderstand is that the Financial Fair Play rules whether changed or
unchanged, really are not connected with the concept of fairness. There is no intent to create anything
resembling a level playing field.
European football is never going to resemble North American Sports where
the system is designed to give every club a chance to win titles if they do a
good job of scouting and recruitment and are otherwise well run. Any future European football salary caps will
almost certainly resemble the Premier League salary cap which does not actually
limit spending just unfunded increases in spending. The NFL salary cap limits all teams to
spending the same amount of money on salary each year. Unless the cap was set at such a high level
as to be effectively meaningless, it is impossible to imagine the Premier
League adopting a similar salary cap. Moreover,
the very existence of European competition and relegation makes it impossible
for the bigger clubs to agree to any limitations on their spending that might
jeopardize their status in the top division.
Right now Manchester United can be confident that they will never be
relegated and they will always be in competition for Europe. If their spending on salary were limited to
that of Newcastle, or even Tottenham, they could never be so confident.
This January, I posted an article
entitled “Financial Fair Play: Friend or Foe.”
(See here.) In that article I analyzed the effects
of Financial Fair Play on Southampton and concluded that given the size of the
Premier League television contract, Financial Fair Play put us in a
tremendously advantageous position with respect to virtually every club in the
world. If these rules are now going to
change, it will make it very difficult for us to compete with the top four or
five teams in the Premier League unless Liebherr was willing to spend tens of
millions of pounds every year to fund massive transfer fees and much higher
players’ salaries. The preexisting
Financial Fair Play rules made it difficult for us to compete with the top
teams, but given the absence of any evidence that Liebherr actually wanted to
put tens of millions of pounds into the club every year, we were not actually
limited by the Financial Fair Play rules, but by our owner’s finances. On the other hand, these rules also us in a
position where except for the very top teams in a few counties we could afford
to pay higher transfer fees and salaries than virtually any other club in the
world.
If UEFA changes Financial Fair Play,
this will no longer be true. Right now
Southampton is one of the top 25 teams in gross turnover worldwide. The new TV contract will move us even higher on
that list. However, if owners can spend functionally
unlimited amounts of money, that will not matter. Last year, this year, and, probably, next year
may turn out to be Southampton’s golden age where due to a rich owner willing
to support us as permitted under Financial Fair Play combined with good
management and a good crop of players, we were able to over achieve before
being brought crashing back to earth by the sheer mass of money that the crazy
new rich owners of Premier League teams will spend.
Ms. Liebherr, even now, may be asking
herself what she will do when and if the rules of the game completely change.
