Spurs Banter Archive October 15 2014

 

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15 Oct 2014 15:23:28
Back in July, I expressed concern that mega-sponsorship deals (even legitimate ones) were now distorting the financial relativities between clubs just as much as much as Roman Abramovich and Sheikh Mansour had done in the past.

Ed002 reported that the top clubs were due to meet in August in order to agree a cap on sponsorship.

Did this meeting take place and was anything agreed?

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{Ed002's Note - The clubs considering a pan-European breakaway and similar matters have met twice this year and efforts are being made to have a brief meeting again in December. In respect of sponsorship their concern is to limit how much can be allowed in terms of FFP, not how much can be provided to the clubs in total.

There has yet to be an agreement reached although I am aware of the likely figure to be offered up to UEFA (circa €105M).

Other issues remain as the English sides are top of the TV income list and a new deal is about to be negotiated that will see a very significant increase from 2017 - something other countries are concerned about. This will become a high-profile issue in coming months.

Just to make it clear as you are confusing income provided by owners with sponsorship, Mr Abramovich has never provided sponsorship to Chelsea. Chelsea like all sides are restricted to how much additional income can be provided to the club and have been fully compliant since the rules arrived. You need to separate that from all discussions about FFP.

Ed002
I am not confusing income provided by owners with sponsorship, although the two issues have come together.

When Abramovich bought Chelsea he immediately started pouring vast sums of his own money into the club. There was nothing to stop him doing this. Ten years earlier, Jack Walker had done exactly the same at Blackburn Rovers.

Nominally, Abramovich was lending money to Chelsea FC, which is now massively in debt to him. As recently as the financial year ending in June 2012, he lent an additional £79m to bring his total investment to £896m.

However, these loans are interest-free and will only be called in if Chelsea is sold, when their repayment will just be part of the purchase price.

They were not real loans, they were gifts. In 2011/12 Chelsea reported a net debt of £878m but interest payments of zero. I wish I had taken out my mortgage with Roman Abramovich.

Other top clubs looked anxiously at what Chelsea was doing and wondered how they could compete against a club that now seemed to have bottomless pockets. This concern intensified when Sheikh Mansour arrived at City and set about out-spending Chelsea. Then a similar thing happened at PSG.

Eventually UEFA got involved. They had made several proposals over the years intended to minimise what other clubs saw as an unfair advantage and eventually they settled on the FFP approach.

The FFP rules are supposed to be addressing the general problem of debt in European football and may have had some positive impact, but I think the reality is that they are they are primarily aimed at curbing clubs like Chelsea, Man City and PSG.

City immediately countered the FFP threat by clearing most of its debt and quickly boosting its income by means of massive sponsorship deals with various Middle Eastern organizations: many of which seem to have little commercial justification and look to be hidden subsidies to the club. A similar thing seems to have been happening at PSG.

While this is a real issue, it was not the problem to which I was referring in my original post.

I am worried that there are now a few clubs with such a huge global brand value that they can legitimately attract massive sponsorship deals that put them into a different financial league to all the rest. I gave the example of the new Addidas deal, which will bring United as much additional money each year as Spurs could generate by filling the new stadium every game, but with none of the cost or risk.

Potentially, these huge sponsorship deals pose as big a threat to the competitiveness of European football as the self-funded spending sprees of Abramovich and Sheikh Mansour once did.

My concern was that nobody was really addressing this issue. I was sceptical in July and I am still sceptical. The elite clubs are concerned with regulating the relationships between themselves. They are not going to worry about the glass ceiling that is being created below them.

The proposal which you report is currently under discussion, will allow unlimited sponsorship (no surprise there), but cap the amount of the sponsorship that applies to the FFP rules. I may be wrong, but this sounds like a toothless fudge, which will just be an invitation to creative accountancy. If a club wants to invest in heavily in players and wages, it will find ways of calling on all that sponsorship money while formally complying with the FFP rules.

Neither do I expect UEFA to solve the problems of competitiveness or debt, partly because they helped to create them in the first place. All too obviously, they set up the Champions League in the hope it would grow into a full-time European League. In practice, it has undermined national football and weakened many of UEFA’s National Associations.

However, UEFA’s ambitions have also contributed to the emergence this relatively small group of European super clubs whose collective power and influence now rivals its own.

They have sown the wind and may yet reap the whirlwind.

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{Ed002's Note - (a) You have obviously spent a lot of time on your reply but you are using some old numbers for which the situation is entirely different. Chelsea has no debt to Mr Abramovich any longer. (b) The discussions and decisions over FFP are nothing to do with what happened at Chelsea and predate their being implemented by some time. (c) Your comment about Manchester City's sponsors not being appropriate seems to be guess work and entirely unfounded. However, the original issue you raised is regarding the amount of money involved in such sponsorship - and this is the issue that a number of clubs have been looking to address themselves. The clubs involved are those that have been looking for a pan-European breakaway league and they want a self-determined cap to be imposed rather than one proposed by UEFA. The issue was discussed in a lot of detail at the end of March and briefly at the end of August. The figure is about €105M per annum. Clubs could continue to have as much sponsorship as they want, but only €105M would be allowed for the purposes if FFP. (d) The "elite" clubs as you refer to them are primarily concerned with a far more significant issue of a breakaway - they are looking to remove as much sponsorship money and TV money as they can. (e) The cap would stop excessive spending on players - there will not be creative accounting. (f) In the long term the breakaway would be a disaster for UEFA. And it is going to happen. And the face of professional football will change considerably. If you search for FFPR you will find what I wrote previously about it - if not let me know and I will repost.

Thanks for such a good and thoughtful reply. Great job.}

Thanks for the offer, but I stored your post on the FFP rules when you first made it in 2012 and responded along these lines:

"This is an excellent post which I have copied and pasted for permanent reference.

For newcomers to this site I will try to summarise it.

a) The Financial Fair Play Rules will have no impact whatsoever on football, because

b) the Great Fear."

I have looked for more recent Chelsea figures. The Guardian reported a Chelsea debt of £958m for 2012/13 (no interest paid) but I found another report that a large chunk of Chelsea debt had been converted into equity, which merely confrms my suspicion that the intentions of FFP can quite easily be flouted.

'The Great Fear' is something I posted on extensively a few years ago. I felt that the sudden interest of Americans in buying English clubs (the Glazers, Hicks and Gillett, Lerner, Kroenke) was best understood if it was their intention to set up a breakaway league based on the NFL model: with no promotion or relegation and financial controls to ensure profitability etc.

About 5 years ago, I came across a very interesting article by an American financial journalist which outlined what a breakaway European League might look like. He estimated that the average value of clubs in this league would be substantially greater than any actual clubs at that time. There were fortunes to be made.

Since nothing seemed to be happening, I didn't want to be a Cassandra so I stopped posting on the subject.

But, clearly, this threat hasn't gone away.

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15 Oct 2014 09:51:51
I was reading Martin Jol's comments about Hamburg being offered Gareth Bale for £5m by Redknapp yesterday. Apart from the fact it shows how thin the line is between success and failure in football, it made me think about all the deals that don't happen and turn out afterwards to have been a lucky escape or a really big miss.

So, other than Bale, anyone got any deals that fell through that turned out to be a big miss or lucky escape for Spurs?

I am guessing missing out on Begovic because Pletikosa turned up at the same time has to go down as a big miss.

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15 Oct 2014 20:26:12
I suppose if the rumours are true then the biggest miss would have to be suarez. Imagine bale, suarez and modric. League title would have been likely.

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{Ed001's Note - they are true that Suarez was rejected as costing too much.}

15 Oct 2014 21:26:24
Haha, in hindsight maybe not though a? Am I right in thinking Bale is the most profitable player made by any club based on what we payed for him and what we received for him?

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15 Oct 2014 22:02:25
Redknapp said after watching Suarez that 'he is no better than what we already have' which at the time was Pavlyuchenko, Crouch and Keane I think.

He also said something about Suarez not being able to play 'in the hole'!

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