Football fans around the world are bracing themselves for 2013, when FIFA’s Fair Play Regulations go into effect. We’ve been told it’s going to change things, and these changes will be bad for Premier League Clubs.
The concern is understandable. Reports last year indicated that four clubs – Chelsea, United, Liverpool, and Arsenal – were responsible for more debt than the rest of European football combined. That doesn’t even include Manchester City and their spending rampage.
Fortunately for English fans (except for one bunch), the new rules aren’t likely to have any impact until 2017, and could actually benefit the top clubs going forward, by restoring some financial sanity.
When you factor in allowances for contributions from equity holders, the maximum operating losses for 2013-15 are EUR 45 million, and the limit is still roughly EUR 30 million for three additional seasons beyond that point. These limits exclude spending on youth programs and stadium construction, so there are major exceptions to FIFA’s definition of a “break even” situation.
If FIFA somehow decides not to revise these by 2017, teams will be looking to quickly get under the upcoming EUR 5 million limit. They’ll do this partially by ensuring their players have long term contracts, to allow amortization of their transfer costs. They’ll sell veteran pieces for a few million a pop, and replace them with young talent. Instead of finding ways to minimize reported earnings (as any good business would), teams will find ways to inflate their sponsorship revenue without exceeding the “fair value of such transactions” as determined by FIFA.
On top of whatever other methods these teams might use to avoid disciplinary action, there has been speculation that the top clubs might force a move to a TV revenue program similar to the Spanish model, where the teams negotiate their own deals. If the rules are not tweaked, this could likely be replicated all over the Europe, leading to a time when nearly all of the top talent was purchased by two, maybe three dozen clubs worldwide. Fortunately, we can count on FIFA to come to their senses. I mean, look how logical they’ve been about issues like World Cup site selection, diving, and goal line technology.
So LFC fans, the Reds will be fine. Really, all the Premier League clubs should be able to handle the challenges ahead, with the exception of Man City. While the penalties start in 2013, the financial reports being used to determine penalties will be based on a 3 year average, meaning this year and next will count. With nearly £300 million in transfer fees being amortized over five years, City will be hard-pressed to stay under the debt limits without an immediate spending freeze, and the possible sale of at least a few assets. It’s very possible the club’s best strategy may be to accept whatever consequences may be ahead, focus on player development for awhile, and be in position to outspend teams in five years, when the rules get tighter and City of Manchester Stadium has been converted to a 60,000 seat revenue-producing monster.
FIFA’s Club Licensing rules can be found here(PDF document). Pages 35 and 70-85 explain most of the important stuff.
OurKop.com would like to welcome Jason Mohr from the USA to the team.