In late May, UEFA’s exec committee passed a few new rules. You’ve probably heard about them:
Uefa has approved plans to force clubs in European competition to spend only what they earn. The financial fair play rules will require clubs to break even over a rolling three-year period if they want to play in the Champions League or Europa League.
This will take effect in 2012, though clubs will be given leeway over a six-year grace period. UEFA boss Michael Platini justifies the new rules thusly:
“This approval is the start of an important journey for European football’s club finances as we begin to put stability and economic common sense back into football. I thank all the stakeholders who have supported this along the way.”
I’m all for fair play, and everyone reading this blog would probably like to see more of it in European football. The ‘haves’ at the top of the EPL and La Liga, along with giants like Juventus and Bayern Munich, have a stranglehold on the vast majority of the cash in the game. A look at the revenue numbers tracked by Deloitte reveals 10 teams pulling in at least 196m euros per season, with Real Madrid, Barcelona, and Manchester United dwarfing everyone else by pulling in over 300m each.
Teams raking in that kind of dough should have to work hard to wind up in the red… which is apparently just what they’re doing. There’s the insane debt at Man U from the Glazers’ leveraged buyout, the monster loan taken out by Real to go on their Galacticos spending spree last year, and Barca’s recent loan taken out to pay staff and players — and that’s just off the top of my head. With teams like these unable to spend within their earnings, it’s easy to see why Platini’s new rules would appear helpful. But spending within your means is only half of an equation, and on its own can make matters of fairness worse. Teams also need to share revenue to avoid entrenching the elite clubs and blocking anyone else from joining their ranks.
Let’s take a look at why UEFA’s financial fair play rules, as they stand, have a chance of making the problems in the game worse, not better (unless you’re running one of the top 10 clubs, of course).
1) Teams with loads of money will be able to outspend teams with less.
Duh, right? But when the 10th team in the world earns twice what the 20th team earns, think of where that leaves team number 50, or team number 250. If the top teams in a league are spending 2-5 times what a mid-table team spends because that’s what each side presently earns, how can that mid-table side catch up?
This is why we need better revenue sharing within leagues, and possibly across UEFA — without it, existing powers will remain at the top due solely to where they were in the hierarchy when the ‘fair play’ rules were implemented. In the NFL, teams share practically everything. Even jersey sales and gate receipts are thrown into a common pool and spread among all franchises. Combined with a hard salary cap, this means any team with competent management can go from the cellar to the title in just a few seasons. This is laughably implausible in European football.
2) Team incomes vary too wildly from season to season for this rule to help.
The EPL has some revenue sharing via its TV rights — thus the big boost in income teams get (and sometimes choke on) when promoted from the Championship division. Of course, those revenues also create their own problems as squads have to consider whether to spend their new money on new players to try and push up the table or protect themselves from adding wages/contracts that can sink them if they fall out of the league. None of that directly impacts the UEFA rules, which only apply to teams attempting to compete in Europa and Champs League tourneys, but it’s part of the larger economic issue in the game.
What certainly impacts the top 4-8 teams in each league is the disparity in money that results from European competition. Estimates vary pretty wildly, but Champions League football can add £30-50 million per year to a team’s coffers, especially if you make it out of the group stage. In Platini’s ‘fair play’ system, the teams already in Europe will have a huge leg up on what they can spend over those who aren’t. We’ve seen the damage that can happen when teams budget for that European money like it’s a given, and now teams will almost have to gamble that money on a sustained European run — that’ll be the main advantage they have over the teams nipping at their heels. Spend conservatively and you’ll fall back to the pack, but spend what you earn and you run a risk similar to promoted teams: either you stay in Europe and keep the big money rolling in, or you wind up with high wages on long contracts that put you in the red when you fall out… which could disqualify you for Europe if you don’t get back in within 3 seasons.
Until there is more predictability in annual revenue, it can’t be used as a gauge of ‘fair play,’ even across 3 seasons. Big player contracts usually run much longer than that.
3) Without revenue sharing, the only way to drive yourself into contention is to spend hundreds of millions of pounds/euros/dollars over what you earn.
How much into the red did Abramovich run to take Chelsea to the top of the Prem? £700m? Sure, he wrote it all off to himself, but that’s about the going rate of building an elite football squad these days. Man City’s oil patriarchs are likely to spend £1b to challenge for the EPL title, but because they’re doing it before the ‘fair play’ rules kick in, there’s a good chance they can station themselves in the elite just in time for the status quo to lock itself in.
It’s sad that spending is the only way to join the elite in European football if you aren’t already there. But it’s slightly less fair to set an arbitrary date after which other teams won’t even be allowed to play this sick game should they fall into a fat-cat owner who wants to take them into Europe.
None of us want to see the system work like it does. It’s bad for the game, bad for the fans, and given what we’ve seen in terms of debt from Man U, Real Madrid, and Barca, it’s potentially bad for the teams. But while the ‘fair play’ rules might save the big boys from themselves, it also prevents anyone else from crashing the party.
I’m not saying there’s an easy or obvious revenue sharing plan given the amount of leagues, divisions, and teams across Europe. All is know is without a reduction in the revenue discrepancy amongst squads, the ‘fair play’ rules will feel anything but. Here’s hoping the team you root for is earning a lot by 2012…