Before dying at the age of 59, George Best, widely considered one of the greatest footballers and dipsomaniacs of all time, imparted some great words of wisdom during a BBC News interview when he stated, “I spent a lot of money on booze, birds, and fast cars – the rest I just squandered.”
Although Geordie’s antics are amusing, the 1968 Ballon d’Or winner understood the importance of priorities. Well, at least his priorities. Unfortunately, the same cannot be said for European football clubs. According to a 2009 UEFA Review, over half of the 655 registered European clubs experienced a loss in the previous year, and more than 20% of the clubs were in risk of bankruptcy. In fact, four historic clubs (Leeds United, Rangers FC, Portsmouth FC, Parma FC) have been forced into administration since UEFA published its findings six years ago.
As a result, the administrative body of European football developed a set of financial guidelines known as Financial Fair Play (FFP) to combat the growing number of debt-laden clubs throughout Europe. Effective 2011, clubs were required to balance their expenses with revenues and maintain a reasonable amount of financial debt. Let’s examine the merits of FFP more closely.
Although Financial Fair Play might appear to be labyrinthine, it’s rather straightforward. Every club, from APOEL FC to Real Madrid, that has qualified for the UEFA Champions League (UCL) or UEFA Europa League (UEL) needs a license to compete. In order to receive a license, clubs must prove “they do not have overdue payables towards other clubs, their players, and social/tax authorities throughout the season”. Essentially, clubs must prove they pay their bills.
Since 2013, the Club Financial Control Body (CFCB) has been responsible for determining whether or not European clubs have balanced their spending with revenues and restricted their accumulation of debt. Every season, the independent oversight-board provides an opinion of compliance or non-compliance for each club to the Executive Committee after performing a break-even analysis of three years’ worth of club financial figures.
If found non-compliant, the CFCB may impose a series of disciplinary measures against clubs. For example, Manchester City and Paris St. Germain were forced to reduce their Champions League squad to 21 players during the 2014-2015 season. In addition, both clubs could only spend £49 million (€61 million) during last summer’s transfer window, a paltry sum for two giants of world football. Unfortunately, some clubs are not so lucky. UEFA recently decided to exclude Dynamo Moscow from this season’s Europa League after failing to comply with the break-even requirements.
While such break-even requirements may seem severe and draconian, UEFA has provided many opportunities for European clubs to achieve significant growth. For example, clubs can spend up to €5 million more than they earn per assessment period (three years). Furthermore, clubs can exceed this level to a certain limit, if the additional expenditures are covered by a direct contribution/payment from the club owner(s) or a related party. From 2013-2015, clubs were allowed to recognize a net loss of €45MM, while from 2015-2018, clubs are expected to not exceed a net loss of €30MM over the assessment period.
Lastly, the CFCB has chosen to exclude expenditures related to investment in stadium development, training facilities, youth academies, and women’s football in the break-even calculation. Although UEFA considers this a gift, most clubs do not have the ambition or deep pockets to build a footballing cathedral which would provide revenues that offset and exceed expenditures related to player’s salaries, transfers, and general operations. For the one’s that do, massive amounts of debt await.
If we are all honest with ourselves, most European football clubs aren’t the size of Real Madrid, Barcelona, Bayern München, Manchester United, Paris Saint-Germain, Manchester City, Chelsea, Juventus, Arsenal, A.C. Milan, and Liverpool.
Yet these clubs, which constitute less than 2% of all of European football, are the direct beneficiaries of financial fair play. When massive clubs are forced to spend within their means, they go down the street to their favorite manufacturer (Nike, Adidas, Puma) and absurdly colossal corporate sponsor (Chevrolet, Fly Emirates, Yokohama, Etihad Airways) to increase their revenue-earning power. For example, Manchester United and Chelsea have locked-in £122m ($195m) and £70 ($109.3m) respectively every year for the next five years in kit-deals alone. Similarly, Arsenal (£60), Liverpool (£53), and Manchester City (£52) have found wealthy benefactors to support their supremacy in English football. Then, these clubs enter the summer transfer market with wads of cash, convincing other clubs to sell their most promising players (i.e. Raheem Sterling, Kevin De Bruyne, Anthony Martial, Christian Benteke, Neymar, Julian Draxler). Year after year, this script is played out by the largest European football clubs, and it has rendered competition in the UEFA Champions League and many domestic leagues meaningless.
Admittedly, FFP does a great job at preventing teams from posting excessive losses and promoting investment in infrastructure and youth academies to achieve long-term success. Fewer clubs across the continent are going into administration and artificially inflated wages from transfer activities are slowly lowering. Yet, European giants have used the financial regulations to their advantage by securing massive, multinational sponsorship deals, and creating an even more inequitable playing-field.
Perhaps UEFA will consider creating a more equitable redistribution of TV rights, or follow the MLS in imposing an luxury tax against all clubs that exceed a specific salary cap. However, if the Champions League continues to generate over €1.34 billion in revenue, I highly doubt any meaningful change will occur. It’s the nature of the beast.