Financial Not-Fair Play
In my never ending quest to improve the Four Star Spurs banter with highly directional and opinionated questions about the greatest team in North London (and no Cory my comments are not stupid!!!), I thought maybe I can get a one up on the Four Star Spurs crew by leveraging my business acumen to understand the rules that each club must adhere to. And maybe in my wildest dreams I can stand on the chair with the group and state, “Aha – in fact you do not know shit about soccer”, and I wouldn’t have to pretend I am from Britain with an obviously fake accent. (Rick?)
Week to week, I would hear individuals complain that teams buy their way to the top in spite of a rule created to circumvent those rules. All teams must adhere to a rule called Financial Fair Play (FFP) and even with this rule, every week we see the same five teams listed as transfer opportunities, or as I like to call them the red vs blue group (Liverpool, Arsenal, Manchester United, Chelsea, and Manchester City). Honestly, is the Premier League just scared of any other color? Regardless, when reviewing the FFP program I find that the nomenclature of the program does not fit, and that in reality, the program helps dilute the opportunity for parity within the league.
To start, let’s review what FFP is not and how the name itself is misleading. FFP is not meant to ensure that each team has parody or spending in equal amounts. It is not intended to have both Man City and Hull have the same cap on spending. So it really is not meant to be used as Fair Play, but let’s pretend that it instead it is more in line to be called, “HSGB” or the Hey Stop Going Broke plan.
About ten years ago, a couple of teams starting going bankrupt and about 50% of teams were operating at a loss. This caused players to not be paid and construction loans going into default. UEFA decided to create a program to help ensure that each club is fiscally responsible. In the most basic parameters of the program is that each club should operate at a net profit with all business expenditures. These expenditures include construction costs (calm down Rick), operating fees, player acquisitions and salaries. In addition, owners can help supplement losses for a year up to a certain point but cannot exceed $15MM a season. FFP is all about the individual team and their fiscal positive worth, there is no wording about spending habits in relation to other teams in your division.
So how can Manchester United afford Pogba in addition to other signings for a total of $395MM in player turnover? Because they have a much larger stream of revenue. Last year, Manchester United collected $400MM in business revenue, $200MM due to commercial activity alone (think advertisements and endorsements). In that same time, Tottenham had only received $60MM and that figure isn’t low in terms of the table. But going forward in that year, that means United has a much higher budget for all activities in operations. As long as they stay profitable, (historically they have been the top 3 teams in terms of profit) they are allowed to spend away. That Manchester United, Chelsea, and the other large clubs have this large source of funds to leverage has put the other clubs at a disadvantage. How can clubs compete with the level of flexibility that three large clubs have afforded themselves, especially when it comes to bidding for key players?
What does this mean for Tottenham and the future? In recent history, the team has routinely either been the top or near the top in terms of profit each year and the future has an even more positive outlook. The club is in the middle of development of a new stadium which should ensure more gate receipts, advertisement revenue, and will increase the gross profit of the organization. It will help close the gap that larger clubs have over us in terms of overall revenue, though we still have to get through the debt costs on payments for the construction of the stadium. This is why Daniel Levy is the highest paid chairman in the league. He has consistently kept an eye for additional revenue sources such as hosting the NFL, procuring contracted rights for the steel needed in the stadium, and reselling of the construction equipment. He has set the club up for sustainability and growth, a combo that in the Premier League is very hard to attain. He has not just grown our revenue stream artificially by drowning in debt (* cough Arsenal, Manchester United cough *), but kept costs low with positive player transfer fees and signing key players to long term deals. After the club finishes the construction, I would anticipate a change in tactics where we are more adventurous with our player purchases as we won’t be constricted by the high upfront charges on the new stadium.