BPL Stadium Expansion Review

In recent weeks and months, there has been a lot of talk about stadium expansion by BPL teams.  This talk is being driven by a desire for more money, but it is not your normal every day greed at work.  It is yet another consequence of the Financial Fair Play (FFP) and Salary Cap rules.  (The current salary cap rules are only in effect through the 2015-2016 season.  I assume that similar rules will be adopted for subsequent seasons.)

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

Chelsea                                  45,522                   60,000                                   10.9

Crystal Palace                       26,255                   no plans

Everton                                 40,394                   50,000                                   4.0

Hull                                        25,404                   no plans

Leicester                              32,262                   no plans

Liverpool                             45,362                   59,000                                   9.7 

Man City                              47,405                   55,000                                   4.0

Man United                        76,000                   no plans

Newcastle                           52,409                   no plans

QPR                                       19,161                   40,000                                   10.4

Southampton                    32,689                   no plans

Stoke                                    28,383                   no plans

Sunderland                         48,300                   no current plans (66,000possible)

Swansea                              20,280                   33,000                                   5.5

Tottenham                         36,240                   56,250                                   15.3

West Brom                         27,877                   no plans

West Ham                           35,345                   54,000                                   11.6

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.

Concussion Update (Part Six)

Unlike my prior concussion updates, this time I do not have a detailed timeline of an improperly handled head injury.  This doesn’t mean that there were any improperly handled head injuries recently.   It just means that I did not happen to see them.

I did see a serious head injury in the Denmark-Portugal Euro qualifier game where Danish left back Nicolai Boilesen was hit in the side of a head with a misdirected clearance.  He was immediately removed from the game.  Since this is what should happen in such cases, I have nothing to complain about.

I have an update on the injury to Thibaut Courtois which I discussed in my last concussion update.  Courtois has gone on record defending the handling of his head injury. He stated that the Chelsea doctor did a good job.  She asked him the questions she needed to ask and he was able to respond appropriately.  He was feeling well so he did not need to come off.  He did not lose consciousness or have a headache at the time, but after a few minutes he felt worse and worse so he needed to come off.

The most interesting quote is his statement that “I had some neck pains, dizziness, and headaches for a few days afterwards.”  He then notes that according to the neurological tests his brain was responding correctly so he traveled to Belgium and played every minute of their game against Andorra on Friday 10 October 2014.

Something is very wrong here.  If we give everyone the benefit of the doubt and assume that by “a few days” Courtois meant only two days that means that he was still suffering concussion symptoms on 7 October 2014.   The process of returning to play after suffering a concussion is supposed to take a minimum of five days after symptoms cease.  (See here and here.)

The protocol involves a specific sequence of steps.  You only progress to the next step if you remain symptom free in the prior step.  First, you have one symptom free day resting completely.  The next day you may engage in light aerobic exercise.  The third day you may engage in moderate exercise.  The fourth day you may engage in non-contact exercise.  The Fifth day you can engage in normal practice.  Only if you have remained symptom free through this process can you safely return to play on the sixth day.

Assuming that Courtois was symptom free on Wednesday, that should have been the first of the six days.  Assuming he suffered no further symptoms, the earliest he should have returned to play was Monday 13 October 2014.  In other words, the Belgium national team flagrantly disregarded the best medical practices for how concussions should be handled and, instead, chose to risk Courtois’ career and life by rushing him back to play against Andorra.   It is difficult to view this as anything but grossly irresponsible and stupid behavior on the part of the Belgium national team.  If I were Chelsea FC, I would not be too happy about this treatment of my concussed player although, perhaps, by not removing him from the game immediately, Chelsea might understandably recognize that they had forfeited the moral high ground.

In any case, nothing about the way this was handled suggests to me that the new focus on better treatment for concussed football players is anything other than a publicity stunt. (To be fair, Belgium may not be participating in the publicity stunt.) Certainly, it is difficult to look at the Courtois incident and see where anyone, including Courtois himself, put his long-term health ahead of the trivial short term interests of his club and national team.

This cavalier disregard for concussed players is the primary reason behind the lawsuit filed against FIFA in California.  I have reviewed the 138 page Class Action Complaint against FIFA and various American soccer entities (I will call it soccer when referring to American organizations) concerning concussions.  Of necessity, substantial parts of the document are devoted to standard legal things such as proving that the United States Northern District for the Northern District of California has jurisdiction over FIFA and repeating the same thing over and over again because that is what lawyer do.  Nevertheless, the document as a whole is an in depth primer on the current status of the science of concussions in sports.

The complaint includes detailed information about the various studies that have established the types of dangers concussions represent both to younger players and elite athletes as well as to men and women.  (Generally speaking, women, and particularly girls, are more susceptible to concussions than men and boys and younger people are more at risk than adults.) The document contains a great deal of information as to what actions should be taken to mitigate the risk of concussions both before and after they occur.

Of particular interest is the relief sought by the plaintiffs and the legal basis for their claims.  The lawsuit claims that FIFA and other entities were negligent by violating their duty to protect all soccer players by failing to take appropriate action in light of the knowledge they had or should have had about concussions and the consequences they cause in both the short and long term.  In particular, the plaintiffs claim that FIFA and the other entities were negligent by

a. Failing to educate players and their parents concerning symptoms that may indicate a concussion has occurred;

b. Failing to warn of the risk of unreasonable harm resulting from repeated concussions, the accumulation of subconcussive hits, and heading;

c. Failing to disclose the risks of long-term complications from repeated concussions and return to play;

d. Failing to disclose the role of repeated concussions or accumulation of subconcussive hits in causing chronic life-long cognitive decline;

e. Failing to promulgate rules and regulations to adequately address the dangers of repeated concussions and accumulation of subconcussive hits, and a return to play policy to minimize long-term chronic cognitive problems;

f. Concealing and misrepresenting pertinent facts that players and parents needed to be aware of to make determinations of the safety of return to play;

g. Failing to adopt rules and reasonably enforce those rules to minimize the risk of players suffering debilitating concussions;

and

i. Other acts of negligence or carelessness that may materialize during the pendency of this action.

The complaint asked for injunctive relief requiring FIFA and the other entities to adopt rules to deal with these problems.  The lawsuit focuses on the laws of the game promulgated by FIFA which all football and soccer entities worldwide are compelled to follow at the risk of being evicted from FIFAdom.  FIFA’s insistence that everyone must play football their way or not at all is probably what makes them susceptible to this type of lawsuit at least in the United States.

If, for example, an official football or soccer league wanted to create a system whereby players could be removed by the game temporarily and replaced while they were being evaluated to see if they suffered a concussion, that rule would be in direct violation of the laws of the game.

The current version of the laws of the game provides:

Modifications

Subject to the agreement of the member association concerned and provided the principles of these Laws are maintained, the Laws may be modified in their application for matches for players of under 16 years of age, for women footballers, for veteran footballers (over 35 years of age) and for players with disabilities.

Any or all of the following modifications are permissible:

• size of the field of play

• size, weight and material of the ball

• width between the goalposts and height of the crossbar from the ground

• duration of the periods of play

• substitutions

Further modifications are only allowed with the consent of the International Football Association Board.

While the reference to substitutions, might suggest that football leagues could create rules allowing temporary substitutes to evaluate head injuries, the Laws of the Game dealing with substitutions make it quite clear that a substituted player may not return to the game:

To replace a player with a substitute, the following conditions must be observed:

• the referee must be informed before any proposed substitution is made

• the substitute only enters the field of play after the player being replaced has left and after receiving a signal from the referee

• the substitute only enters the field of play at the halfway line and during a stoppage in the match

• the substitution is completed when a substitute enters the field of play

• from that moment, the substitute becomes a player and the player he has replaced becomes a substituted player

• the substituted player takes no further part in the match

• all substitutes are subject to the authority and jurisdiction of the referee, whether called upon to play or not

Under these rules, it is possible that FIFA would be okay with removing and temporarily replacing players in under 16 leagues—assuming that such actions maintain the principles of the Laws.  However, professional leagues quite simply cannot make such changes because they are prohibited.  FIFA would no doubt object to changing such a significant rule without their permission.  This power which FIFA has deliberately gathered to itself is the opening that allows FIFA to be the target of this and other similar lawsuits.  Moreover, because FIFA does business in every country in the world, courts throughout the world would have jurisdiction over FIFA.

The lawsuit asks that FIFA be required to adopt a medical monitoring process to watch over persons who have played football who may in the future manifest the physical and long term mental effects of their head injuries.  In a way, this is not unlike the remedy that has been sought (and granted) in the NFL concussion lawsuit.  Specifically, the complaint asks that FIFA be required to:

a. Establishing a trust fund, in an amount to be determined, to pay for the medical monitoring of all past, current, and future FIFA athletes, as frequently and appropriately as necessary;

b. Notifying all Medical Monitoring Class members in writing that they may require frequent medical monitoring; and

c. Providing information to treating team physicians to aid them in detecting concussion or sub-concussions and to assist them in determining when the student-athlete is subjected to an increased risk of harm.

The difference is that the NFL lawsuit obtained (grossly inadequate) monetary damages while the FIFA law suit appears to be asking only for monitoring and testing of athletes who may have suffered injuries, but not compensation for their injuries either in the form of money for pain and suffering, lost income, or medical expenses.  However, the request for relief at the end of the Complaint also asks for “[a]n award to the Plaintiffs and Class for such other and further relief as the Court deems just and proper.”  While this is standard legal boilerplate, it does leave the door open for a monetary award which could be quite sizable.

 

The most significant barrier to the success of this lawsuit is likely to be the certification of the Plaintiffs as a class.  Recent developments in American Jurisprudence and the current pro-business slant of the United States Supreme Court have made it more difficult to pursue class actions.  I am not an expert in this field of law so I cannot evaluate whether the lawyers in this case have done enough to establish that a class action is appropriate.  I have no doubt that if the proposed class were being evaluated 20 or 30 years ago it would pass muster.  I also have no doubt that the lawyers who prepared this lawsuit are competent and do not intend to waste their time.  They must believe they had established a viable class.  No doubt they are hoping both to fix a serious problem and be well compensated for their efforts

The class in this case purports to cover basically everyone who has played organized soccer in the United States from 2002 to the present.  The 2002 date is apparently chosen because the first international symposium on concussions was held in Vienna, Austria in 2001.  The theory of the case is that following that conference FIFA and everyone else should have recognized the serious problems of concussions and taken immediate action.  To support this claim, the complaint discusses in some detail the findings and recommendations included in the protocol that emerged from that conference.

This lawsuit is a serious threat to FIFA’s way of doing business.  The orders that could result from a successful prosecution of this lawsuit might change the way that football is played worldwide.  On the other hand, it might not.

FIFA may be able to convince the court that the class action lawsuit is not appropriate and, obviously, this is not the sort of case that can be litigated by individual plaintiffs.  They also may be able to convince the court that it should not assert jurisdiction over FIFA and that only the American soccer entities should be held responsible for the rules in America.  As a lawyer, my best understanding of the law is that both of these claims would be weak but I am cynical enough to recognize that powerful entities get more favorable treatment in courts and I also recognize that I am not an expert in this area of the law.

Even if FIFA does, ultimately, lose this lawsuit, it is possible that any orders that result of the lawsuit would only apply to the United States.  FIFA might be able to choose to leave the concussion rules and other issues unchanged in the rest of the world but simply change things in the United States.  I would think that this would leave FIFA wide open to further lawsuits in other countries, but who knows.

FIFA might be able to convince the court that their actions with respect to concussions were reasonable either because concussions are not as harmful as the plaintiffs claim or because they could not have known how harmful they would be at the early date that the lawsuit alleges.  The problem for this sort of response is that the NFL case set something of a precedent that supports the idea that FIFA should have known about the dangers of concussions and taken early action.  On the other hand, the NFL case had some smoking guns indicating that the NFL was covering up evidence of the effects of brain injuries on its players.  As far as I know, no similar evidence of a FIFA cover-up exists.  Of course, if there is an ongoing cover-up, I would not know about it.

Finally, the plaintiffs might settle the lawsuit.  Most lawsuits are settled.  The could result in some lesser remedy, perhaps some money for the members of the class, and hefty attorney fees for the plaintiffs’ law firm.  There is no way to predict what might result from a settlement.

FIFA has not yet responded to the complaint.  According to a paralegal at the plaintiffs’ law firm, their response is not due until sometime in November.  The American entities are supposed to respond earlier than that.  I will review the responses when they are filed and if there is anything worth reporting, I will do yet another concussion update.

Great Moments in Recent Southampton History (Part 7)

It has been a while since I did one of these, but I think it is pretty clear that this qualifies as a great moment for Southampton:

Southampton land striker Rickie Lambert from Bristol Rovers

Despite his recent departure from the team, there is little doubt that Lambert was the key signing in our move up the ladder to the premier league.  There was probably not a better striker in the world who would have signed for Southampton as a League One team with minus ten points.  And there was certainly no other striker a League One team could have signed who would still be starting for that team in the BPL just three years later.  Of course, I was not yet following Southampton FC at that time so I could be wrong.

Rickie is not playing much now for Liverpool or for England.  It seems pretty clear that however much Brendan Rodgers and Roy Hodgson disagree about other things such as appropriate training regimens and football style, they are on the same page when it comes to having no clue as to how to use Lambert to get the most out of him.  In any case, when Rickie’s career comes to its inevitable premature conclusion at Liverpool, I hope he will return to Southampton in some capacity—even if just as a fan—and that he will be welcomed back when he does.

By the way, in researching this item (and others) I came across this post on the Saintsweb forum.  I thought I should also give credit to its author for his perceptiveness and lucky guessing.

Concussion Update (Part Five)

Finally, a head injury incident has captured the attention of the main stream media (or whatever you call it in England).  I will not bother to link to anything for this because the internet is full of articles about the incident.

In Sunday’s Chelsea-Arsenal game Alexis Sanchez collided with Thibaut Courtois causing Courtois to suffer a head injury.  He was allowed to remain in the game for more than ten minutes before he was replaced.  There are several interesting aspects to this incident, but first I will summarize the timeline.

9:22:   The collision occurs.  Courtois is not moving.

9:26:   Alexis pats Courtois’ arm.  There is no response suggesting he might be unconscious.

9:35    The Chelsea doctor and a physio arrive.  Courtois is moving now.

9:37    Director cuts away to a replay.

10:02  Courtois is moving while the doctor is checking him out.

10:13   Courtois sits up with help.

10:18  Director cuts away.

10:29  Cuts to doctor speaking to referee as Courtois heads back towards his position.

10:33  TV announcer says referee is speaking to “trainer”.

10:49  Game restarts.

22:04  Chelsea sideline is trying to get referee’s attention.

22:12  Courtois is on ground again being treated by doctor. It looks like something is coming out of his ear.

22:21  Doctor makes some sort of hand gesture near her mouth.

22:33  Doctor says something to other member of physio team who gives the signal that Courtois needs to come off.

23:14  Courtois stands up with help and heads off field.

24:15  Game restarts.

The first question is obviously “why wasn’t Courtois taken off immediately?”  As reported here, Chelsea contends that it followed the proper procedure and did everything right. If this is true, it suggests that the rules are grossly inadequate.

The problem may be one of interpretation.   Here are the new BPL head injury rules:

O.22. Each Team Doctor, physiotherapist, therapist and Medical Coordinator shall, when present at a League Match or at any other match or at training, carry the pocket concussion tool (which is set out at Appendix 4A).

 

O.23. Any Player, whether engaged in a League Match, any other match or in training, who has sustained a head injury, shall not be allowed to resume playing or training (as the case may be) unless he has been examined and declared fit to do so by his Team Doctor or, if he is unavailable, by another medical practitioner. The decision of the Team Doctor or other medical practitioner as to whether the Player is fit to resume playing or training shall be final.

I interpret rule O.22 as not merely requiring the doctor to carry the pocket concussion tool, but to use it and follow its dictates.  Otherwise, what is the point?  The pocket concussion tool lists as visible clues of suspected concussion “Loss of consciousness or responsiveness” and “Lying motionless on the ground/Slow to get up.”  All of these, except possibly the loss of consciousness, applied to Courtois.  The doctor may not have seen the loss of responsiveness because it only lasted a few seconds and, by the time she got to him, Courtois was responsive.  Possibly she missed the lying motionless on the ground as well.  If so, that demonstrates a real problem.  The simple answer would be to require examination of replays as part of the concussion evaluation process.

In trying to understand why Courtois was not immediately removed from the game, I reviewed the exact  language of the pocket concussion tool.   Maybe they are simply interpreting it in a ridiculously literal way.  Thus, when it says “Any one or more of the following visual clues can indicate a possible concussion,” I would interpret that to mean that if you see one of those clues, you should suspect a concussion and act accordingly.  But maybe, it is entirely optional on the part of the doctor to suspect a concussion.  Maybe the doctor can say “Sure, I saw several symptoms that could indicate a concussion, but I chose not to suspect that one occurred.”

The pocket concussion tool specifically states that “Any athlete with a suspected concussion should be IMMEDIATELY REMOVED FROM PLAY, and should not be returned to activity until they are assessed medically.”  I would interpret that to mean that when someone is slow getting up after a head injury, the doctor should suspect a concussion and the player must be removed from play until assessed medically.  But maybe the doctor felt that Courtois was removed from play during the minute he spent lying on the ground. During that minute, she assessed him medically and then allowed him to return to play.

If so, the whole process is a complete farce or, as Taylor Twellman, a American soccer player who career ended prematurely due to a head injury, put it:

“The new rules are eye candy,” Twellman said. “It’s b-------. Science tells us that seven minutes gives you enough time to assess someone. Fifa have said three minutes. That makes no sense but is at least three minutes. The Premier League does what? Fifty-six seconds? If the protocol says suspected concussion, somebody needs to tell me what Courtois was. He was on his back dazed. It’s mind-boggling how he was left on the field.” 

However, even if the BPL rules are just eye candy, the new FA guidelines (found here in my earlier blog post ) are more specific: “If there is any suspicion of the player having sustained a concussion, they must be removed from the field of play, and not allowed to return.”   The guidelines also authorize the medical personal to seek elucidation from other players.  Maybe someone should have asked Alexis what he observed. 

In this case, there were surely reasons to suspect a concussion.  Maybe the problem is still one of interpretation.  Since the FA’s guidelines are guidelines, not rules, perhaps they can be ignored at will.  If so, that problem needs to be fixed.

The second question is why did this incident capture the attention of the media when the various other incidents I have discussed in my earlier posts did not.  The incident seems fundamentally the same as the Shane Long incident or the Shingi Kagawa incident.  (It would also seem to be the same as the Koscielny incident, except that Arsenal has stated that Koscielny suffered a cut and not a concussion.)

I have no good explanation for the sudden interest.  This incident did involve a goalie so it was, superficially, more like the Hugo Lloris incident of last year.  Two big teams were involved in a nationally televised game so more people were watching the incident.   The other incidents were not as high profile.  The Shane Long incident did not occur in a televised game and he only plays for Southampton.  The Kagawa incident occurred in a League Cup game and he is back in Germany anyway.  Maybe the increased attention arose out the fact that some head injury advocates spoke up and drew attention to the incident.  Who knows?

Finally, I found it interesting that the TV announcer did not know that the woman leading the medical treatment of Courtois was the Chelsea team doctor, Eva Carneiro.  It was almost as if he could not accept the existence of a female team doctor, even though she was obviously the person in charge of the medical evaluation.  I had no idea that Chelsea had a female team doctor, but I was not announcing a Chelsea game, so I had no reason to research this fact in advance.  However, I did do the research before making a fool of myself on the internet.

I have received a copy of the Complaint in the Concussion Lawsuit against FIFA.  It is 132 pages long.  I will read it and, probably, discuss it in an upcoming blog post.

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.

Southampton FC, Martin Samuel, and Financial Fair Play (Part 2)

In Part One I discussed some aspects of Martin Samuel's recent articles about Southampton.  I promised that in Part Two I would analyze his claim that the Financial Fair Play (FFP) rules limit Southampton’s ability to progress beyond what he once referred to as a “glass ceiling.” This is the beginning of that analysis.

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.