When Eden Hazard finally decided to sign for the European
Champions, as a fan like every single Blues fan like you, this writer felt
relieved. Relieved, for one major reason. An up and coming talent decided to select
Chelsea rather than clubs that can boast of History, Success, Player
Development and Financial Clout, respectively.
Expectedly a bulk of rival fans wanted to vent their
frustration in Hazard ditching their club. Remember he had flirted with quite a
few clubs in Europe : Real Madrid, Arsenal, Manchester
United and City to name a few. So the number of angry rival fans was certain to
exceed the number of happy fans.
The one major talking point of those fans was, Chelsea
is definitely flouting UEFA Financial Fair Play regulations. One could argue, one
signing worth £32m wouldn’t be an issue. However, they were relying on the fact
that Chelsea was ready to pay Porto
£38m for Hulk and planning to recruit more players. As a fan, this writer was
also alarmingly concerned.
This prompted the writer to dig further into the FFP and
Chelsea matter. If you want to read a detailed explanation of the rules, visit Chelsea
FC site here. If you would
rather be content with the writer’s explanation please read on.
The biggest fall out from the inability to meet the FFP
regulations is the ban Chelsea
could face from Champions League or any UEFA tournament. A ban would impact Chelsea
in more than one way. There would be a snow ball effect.
In simple words, in order to comply with FFP, a football
club has to break even at the end of a financial year. Break even means, your
income should be at least equal to or more than your expenditure. If you had to
explain to a six year old, you could say if you earn £10 then you can spend
only £10. Sounds simple now doesn’t it?
If you would like to know what Chelsea FC chief executive
Ron Gourlay had to say on FFP, go here.
So does that mean, if Chelsea
manages to earn enough income then they can even buy players like Hulk and
Falcao? Absolutely. Chelsea can
even buy Cristiano Ronaldo, with a buy out clause of €1 Billion, and Messi,
with a buy out clause of €250 Million, at the same time!
According to the FFP, income source includes revenue from
gate receipts, broadcasting rights, sponsorship and advertising deals plus
profit made from the transfer of players.
Expenditure includes the cost of transferring players in,
salaries and employee benefits expenses and other operating expenses.
Not included in expenses are expenditure on youth
development activities, community development activities and development of
infrastructure such as stadiums or training grounds. A club can spend limitless
amounts on these with no risk of failure to comply with FFP. The before
mentioned point is great news as Chelsea
can develop a new stadium with increased capacity without the fear of UEFA
breathing down its neck.
However, unlike in the past, Roman Abramovich, as an owner,
can not pour his billions directly into the club and help it break even. Also
the income from sponsorship deals such as the one with Sauber F1 cannot be
beyond a ‘fair value’, as mentioned by UEFA, if it is a club related company.
This means, the club would have to look towards other sources of income.
Good news is that Sauber is not related to Chelsea
and their sponsorship deal would go a long way in helping the club in terms of
finance. Also, the windfall from the Champions League victory adds to Chelsea ’s
income.
Another noteworthy point is that whenever a club buys a
player from the transfer market, it doesn’t pay to its seller upfront. For
instance, in the case of Hazard signing, Chelsea
could have an arrangement with Lille ,
to pay his transfer fee of £32m over the period of 5 years (his contract length
with Chelsea ). That means Chelsea
would only be paying £6.4m every year for the next 5 years.
Furthermore, FFP doesn’t stipulate any salary cap or
transfer market spending limit. Those rules have been put in place in other
sports such as AFL and NRL in Australia .
A few years back, a club (Melbourne Storm) had to sell almost all of its star
players and pay a hefty fine, when it was found guilty of having breached those
rules by cooking its books.
As per the FFP, clubs can not make loses of more than £36
million over the period of two years. (Source)
Bad news is Chelsea
has struggled to break even for many years. As of 31st January 2012 , the club had made loses of
£67.7 million (according to Guardian).
Even though Roman took over the club in 2003, the desire to establish Chelsea
as an European power house has impacted the club’s finances in a negative way.
On the other hand the Champions League victory has had a
positive impact on many fronts. Prize money, TV rights, Hazard and other young
talents arrival, to name a few.
So as long as Chelsea can find means to earn more than they
spend, us fans, club officials, players and one and all related to Chelsea in
one way or the other can breathe easy.
If you have some interesting anecdotes, please do share with
us. And as always KTBFFH.
yes we gotta be super careful here :|
ReplyDeleteA good piece of work :)
ReplyDeleteHope Roman and Ron sees this
Thank you. Pretty sure Roman and Ron are aware of FFP. The Battersea bid was part of that.
DeleteHatim Ben Arfa!!
ReplyDeleteCFC should sign him cheap maybe and good
I think we are bit over worried abt FFP. As u have already explained accounting under FFP and the accounts that are published by the clubs annually are completely different. You can't compare them. For eg- u have said that club posted annual loss over GBP 67 mn for year ending jan, 2012. This must have included the purchase of Mata, Raul and other players purchased during the transfer window. For eg- Mata was purchased for GBP 24 mn, In annual accounts published by the club whole of the 24 mn will have been taken as expenditure in year. But under FFP the whole amount will be divided in the length of the contract. In this case it will be around GBP 4.8 mn per year only. This is the one of the case. There are certain other expenditure as you have already mentioned which can't be taken into account under FFP.
ReplyDeleteSo we don't have worry too much about that and keep the faith on Roman.
We believe in him and he knows what he is doing and what is best for the club.
I believe that loss was reported according to FFP rules as they have already kicked in. Started in summer of 2011. So Mata's valuation would have been done accordingly. I've also mentioned that in the article.
DeleteThank you anyways.
Roman will manage I am sure!
ReplyDeletei blieve that this ffp should be done away with.if you talk about it you realise that the older clubs-manu,liv'pool,arsenal etc will continue to have an upper hand becos they have gained goodwill over time.it is worth the while to note that there was a time when those older clubs operated in complete independence and could spend whatever money they wanted thus fans at the time were disposed to support them so now that other teams are gaining sponsors,they should be allowed to grow and compete as they come.it's a free market and whoever has the money to spend should be allowed to do so but a time will come ,naturally, when they will peg the expenses in a reality check situation.
ReplyDelete