PL clubs' finances: Page 4 - The Arsenal discussion community: One More in the Tolly

PL clubs' finances

Pepe LeFrits

Burnwinter wrote:
The other issue is that of clubs struggling along without European incomes for the most part (e.g. Spuds or now Liverpool) who have to spend over their revenue to get to the threshold for qualification. Won't the FFP present an additional barrier to them?

If it succeeds in reducing the spending of teams like City and Chelsea, then surely it won't? Besides, isn't the whole idea behind this to stop clubs from borrowing money they don't have and ultimately protect them from themselves.

goon

Considering how much money Real and Barca make it would take ridiculous levels of ineptness if they managed to fall foul of the rules. Luckily for Barca, Laporta is gone.

Burnwinter

I agree it's complicated, but the FFP rules seem to create a market in which clubs can more easily operate if they already have the revenue that derives from it.

The socialist in me wants to propose an extramural subsidy for the clubs that almost make it each season, derived from a partial redistribution of the CL and Europa TV money. The purist in me hates that idea ... it's complicated.

Burnwinter

otfgoon wrote:
Considering how much money Real and Barca make it would take ridiculous levels of ineptness if they managed to fall foul of the rules. Luckily for Barca, Laporta is gone.

Inter would be a better example.

Pepe LeFrits

We won't have to wait long to see if the FFP is the real deal. It's going to be an interesting summer.

Burnwinter

My view on FFP is that while noble it will prove unenforceable, suffer erosion of credibility and ultimately fail, reason: too many spendthrift clubs are too big to fail!

This worries me as well Lagos. I reckon UEFA could go after Chelsea or City, because they're identifiably "nouveau riche", even one of the other English clubs because of the traditional Continental factor, but one of the big Italian or Spanish clubs would cause a ruckus, and it'd be emotionally problematic for the éminences grises that run UEFA as well.

Burnwinter

On the other hand, it's a good thing we're well run because you can bet your bottom dollar that if we weren't we'd be the first to get banned from the big boys club!

Pepe LeFrits

I don't know, it was pushed partially by the owners of these clubs who want to reduce the cost of being competitive. It's in their own interests to see the rules enforced and there could easily be counter-pressure from clubs who DO fall in line.

y va marquer

Lagos wrote:
My view on FFP is that while noble it will prove unenforceable, suffer erosion of credibility and ultimately fail, reason: too many spendthrift clubs are too big to fail! It's a rule that requires a gentleman's agreement and strict adherence to thatagreement by the "gentlemen" the threat of sanctions is not as great as it may sound because you can't threaten someone who's success is essential for your own success. They can threaten the likes of City who aren't big fish yet but you wait till one of the really big clubs are in breach. Uefa do not have the balls to ban say Chelsea, Inter or Barcelona if they default there will be some compromise and when that happens, it's game over for FFP. Even the wording of the rule only talks about suspension for repeat offenders...that sounds like wriggle room to me.

There will be plenty of wiggle room for the big clubs.

Apparently there is a part of the FFP regulations that allows for a club to lose more than UEFA's acceptable guidelines if ownership is willing to cover it,
in the form of what it describes as "acceptable capital contributions"

"Capital contributions being a contribution by a related party: that is an unconditional gift made to the reporting entity by a related party which increase the reporting entity’s equity without any obligation for repayment or to do anything in consideration for receiving them. For example, a waiver of inter-company or related party debt constitutes a capital contribution, as it results in an increase in equity"

It's the clubs who are not owned by billionaire benefactors who will have to toe the line.

goon

Where did you read that Yva? I remember reading the opposite, to the extent that 'friendly sponseship deals' will not be permitted as generated revenue, and will be monitored.

Lagos wrote:
My view on FFP is that while noble it will prove unenforceable, suffer erosion of credibility and ultimately fail, reason: too many spendthrift clubs are too big to fail! It's a rule that requires a gentleman's agreement and strict adherence to that agreement. They can threaten the likes of City who aren't big fish yet but you wait till one of the really big clubs are in breach. Uefa do not have the balls to ban say Chelsea, Inter or Barcelona if they default there will be some compromise and when that happens, it's game over for FFP. Even the wording of the rule only talks about suspension for repeat offenders...that sounds like wriggle room to me.

I think you underestimate the size of UEFA's ego.

I don't think anyone other than the clubs themselves would give a damn if they were banned. Why would Arsenal, United, Lyon, Bayern, Real or Barca care in Inter and Chelsea were banned? It has no imapact in the money they get from the CL, and they'll just be replaced by the likes of Tottenham, Liverpool, Lazio or Roma until they get their house in order.

The rules are actually very reasonabe and still allow a fair amount of losses, as well as allowing spending on things like the academy. Only a retarded amount of spending and negligence will get you in trouble and currently most of the powerful clubs have no need to go there.

Also bear in mind that all the clubs including City and Chelsea agreed to the rules, it wasn't forced upon them.

Burnwinter

Yeah, and obviously we're already part of that consensus - we've even declared that. However, it's got a lot to do with the luck of the process of adoption of the rules.

If it should happen that City, who are undoubtedly the most egregious likely candidates to emerge, should be the first to have an example made of them, that would be ideal from a political viewpoint, rather than a regulatory one.

y va marquer

otf

The section that I quoted on capital contributions comes directly from the FFP rules , Article 61-2, where they lay out what are acceptable deviations from the break-even requirement.

goon

I think if the likes of City were really against it they'd be a hell of a lot more vocal about it, rather than maintaining they intend to follow the rules.

Manchester City executives have consistently maintained that they intend to comply with the rules, which will also take into account any sponsorship or marketing deals not deemed to be at market rates. But to do so they will have to continue to increase revenues while cutting a wage bill that has spiralled since Mansour's takeover and includes many players who no longer make the first team.

Andrea Traverso, Uefa's head of licensing, said: "We are in talks with the club – they are aware of the rules and they probably have a strategy to raise their income."

Burnwinter

Well, basically anyone inside the tent will probably be perfectly happy to piss out of it.

In England so long as United are IN the tent with us, we're in a fairly good position. The Glazers' interest payments don't count under the rules, so they're in at the moment.

goon

y va marquer wrote:
otf

The section that I quoted on capital contributions comes directly from the FFP rules , Article 61-2, where they lay out what are acceptable deviations from the break-even requirement.

It's limited to 40m for the first couple of years and 25m after that. In other words once the rules kick in properly you can't make losses greater than 25m, which is far lower than the current losses City (100+) Chelsea (70m+) and Inter (100m+) are incurring.

Like I said, the rules are actually very reasonable. They prevent only the severe cases and make sure that any losses suffered are taken up by the owners without the clubs having to suffer and build up massive debts or loans.

y va marquer

That is not my understanding oft.

The article (written into the rules) that I refer to details the acceptable deviation from the break-even requirements AFTER the first two years have passed.

Burnwinter

We appear to be dealing with a fundamental problem of economic regulation in general here, which is that it's rendered impossible (even for highly educated laypeople) to have a confident concrete understanding of what the fuck it's all about.

We should just be thankful that City and Chelsea haven't yet invented consolidated add-on-hotel swap default bundle trade products and started selling each other futures in them.

Pepe LeFrits

Moratti and Abramovich are commonly mentioned as being supporters, lagos. If their rivals weren't spending as much they wouldn't need to either.

otf, those figures are broken over a 2 year and 3 year period respectively, so the losses are much more restrictive really.

goon

y va marquer wrote:
That is not my understanding oft.

The article (written into the rules) that I refer to details the acceptable deviation from the break-even requirements AFTER the first two years have passed.

This is from the article you're talking about:

The acceptable deviation is EUR 5 million. However it can exceed this level up
to the following amounts only if such excess is entirely covered by contributions
from equity participants and/or related parties:
a) EUR 45 million for the monitoring period assessed in the licence seasons
2013/14 and 2014/15;
b) EUR 30 million for the monitoring period assessed in the licence seasons
2015/16, 2016/17 and 2017/18;

The bit you quoted was just an Annex that goes into more detail about equity contributions.

Ah, you're right Pepe.

goon

Lagos wrote:
if anything it's a law to protect the status quo by preserving the participation of clubs with a global following and forestalling the threat of smaller clubs with less following buying their way into it.

They can still buy their way into it, they'd just have to increase their income before being able to play in Europe and they'd have to be far more modest with wages. In other words, it would simply take more time, effort and skill.

But it's another reason why the likes of City and Chelsea should be all for it, as in the long term, it will end up protecting them.

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