Soccer’s New Goal: Kick The Spending Habit
To end lavish spending, European soccer's governing body UEFA has devised new regulations to force clubs to pay out no more than they earn.
August 13, 2011 9:36 by p.deleon
Talk about inflation.
In 1977, when English soccer club Liverpool sold two-time European player of the year Kevin Keegan to Hamburg they charged the German club a 500,000 pound transfer fee.
In 2009, as the world struggled to emerge from the worst financial crisis in more than half a century, England’s Manchester United sold European player of the year Cristiano Ronaldo to Spanish club Real Madrid. The fee: 80 million.
Ronaldo may be a goal-scoring machine, but is he worth 160 times more than Keegan? That increase outstrips the UK inflation rate between 1977 and 2009 by a factor of 35. If costs in soccer had mirrored the real world, Ronaldo’s transfer fee would have been around 2.3 million pounds.
But soccer finances rarely resemble reality. While no transfer has broken Ronaldo’s record in the past two seasons, deals worth 30 or 40 million pounds ($49-65 million) are now commonplace. Even a journeyman player can cost 20 million pounds. And that’s before player wages, which have also exploded. In the final year of Ronaldo’s 6-season contract with Madrid, the Portuguese superstar will make 556,000 pounds a week.
European soccer’s governing body UEFA wants to change that. To end lavish spending it has devised new regulations to force clubs to pay out no more than they earn.
The new rules, which UEFA calls Financial Fair Play (FFP), begin this month with the start of the European season. Clubs will have two years to begin balancing their books. If they don’t meet FFP targets from the 2013/14 season, UEFA says it will expel them from club soccer’s premier Champions League competition. That would lose a club tens of millions of euros in television revenue plus the global exposure that helps generate millions more in merchandise sales.
UEFA General Secretary Gianni Infantino believes change is vital. In an interview at UEFA headquarters in Nyon, Switzerland, Infantino said the global financial crisis and years of losses in European soccer — 1.2 billion euros in 2009 alone — have convinced even club bosses that they can’t go on spending more and more.
“They were as worried as we were about the escalation of finances in club football. We had to find a way to make sure that club football was sustainable in the future,” Infantino, 41, told Reuters. “If this continues and nothing is done, the whole system will collapse.”
Despite the impending regulations, though, most of Europe’s biggest clubs — the likes of Manchester United, Chelsea, Barcelona, Real Madrid, Inter Milan — have continued to spend. Sceptics think the top clubs will find clever ways to sidestep the new regulations and doubt that UEFA will ever stop a club like Barcelona or Manchester United playing in big competitions, because it would alienate tens of millions of fans and hit UEFA’s own revenues.
“If I was a betting man I would say one of the rich benefactor clubs will fail to meet the regulations first time around,” said Neil Patey, a soccer industry adviser at global accountancy firm Ernst & Young. “I think there’s a high chance Chelsea, Man City and Inter Milan will fail (to balance their books). If Barcelona and Manchester United failed, UEFA would find it difficult to not have them in European competition and I think UEFA are praying that doesn’t happen.”
AN INCREDIBLE DEAL
The driving force behind Financial Fair Play is former French player Michel Platini, who is proving almost as influential in his current role as UEFA President as when he inspired France to victory in the 1984 European Championships.
Platini and Infantino say their aim is to loosen the link between spending power and on-pitch success. The connection has become more pronounced in recent years, especially in the English league, as wealthy owners have poured hundreds of millions into clubs in an attempt to win silverware. Russian oligarch Roman Abramovich, for instance, bought London club Chelsea in 2003 and spent 600 million pounds in his first five years as owner. Since his takeover the club has won three Premier League titles and three FA Cups, and appeared in the 2008 Champions League final.
In the past couple of years, Abramovich’s big spending has been overshadowed by Manchester City owner Sheikh Mansour, half brother of the ruler of Abu Dhabi.