GoalUK: How Chelsea and Man City are battling FFP
31 Jan 2015 09:00:00
The Blues have allied a controversial yet lucrative mass loan system to shrewd player trading, while the Premier League champions have pioneered a global network
By Liam Twomey
Whatever the result, Chelsea’s clash with Manchester City on Saturday is likely to prove a defining moment in this season’s title race. To those of a financial mind, however, it is even more significant; an emphatic reminder that the two hulking monuments to the Premier League’s billionaire age will not be loosening their grip on the top of English football anytime soon.
It wasn’t supposed to be this way. When Uefa’s Financial Fair Play regulations first came into force in 2011, many assumed that the Premier League’s two brash nouveau riche giants would be most at risk from a brave new dawn of financial responsibility.
But while City were compelled to agree a punitive settlement with Uefa last summer, both they and Chelsea now appear firmly entrenched within the European elite and neither anticipate any future sanctions. The Londoners announced a record £18.4 million profit in their most recent financial results and City expect to be in the black in 2015.
“When they went into settlement with Uefa, City would probably say they were in compliance with the break-even aspect - it was just that Uefa came up with a different calculation based on their sponsorship and a different interpretation of the rules,” Daniel Geey, sports lawyer with Field Fisher Waterhouse, tells Goal. “They decided to take the more efficient approach of settling rather than disputing through the courts, which would be a long, drawn-out process.”
In the event City’s £49m conditional fine, wage cap and transfer spend restriction have not stopped them acquiring Eliaquim Mangala, Fernando, Bacary Sagna, Willy Caballero and Wilfried Bony since last summer, while over the past five transfer windows Chelsea have replaced an aging and unbalanced squad with one of the most youthful, talented and dynamic groups anywhere in Europe without ever incurring Uefa’s wrath.
Necessity is the mother of invention and, starting from a significantly lower commercial and infrastructural base than established giants Manchester United and Arsenal, both clubs have been forced to get creative – Chelsea with a controversial and lucrative mass loan system allied to shrewd player trading and City with an innovative and expanding global portfolio of clubs.
In each of the last three seasons Chelsea have loaned out at least 30 players. Most have remained on the carousel, shifting from club to club as they continue their development. Romelu Lukaku and Kevin de Bruyne excelled to the point where their departures brought in huge profits, while Thibaut Courtois is now No.1 goalkeeper at Stamford Bridge.
Desirable but expendable first-teamers have been sold for maximum market value; Juan Mata and David Luiz are gone for a combined £87m and Andre Schurrle looks set to follow. In the last two transfer windows the arrivals of Nemanja Matic, Mohamed Salah, Cesc Fabregas and Diego Costa have been completely offset by sales.
“Chelsea have been extremely savvy in the transfer market in the last couple of seasons in part because of these FFP restrictions - there’s no unlimited chequebook any more,” Geey adds. “You’ve seen the upside [of the loan system] with Courtois, who is already one of the top goalkeepers in world football after three years at Atletico Madrid. You can also see the positives of buying Lukaku and De Bruyne and trading Mata and others. It involves a lot of up front costs but one or two transfers can make it a worthwhile exercise.”
City, meanwhile, have gone global, purchasing controlling stakes in an MLS expansion franchise in New York and A-League side Melbourne City, as well as a minority share in Yokohama F. Marinos in Japan. In time there are plans to expand into Africa, South America, India and China. The Frank Lampard contract debacle has undermined the integrity of City’s sister clubs in many eyes, but the financial benefits of such a worldwide network are obvious.
“It spreads the web more widely and does it in quite a clever way,” says Rob Wilson, sports finance expert from Sheffield Hallam university. “Instead of doing what United do and simply sell the club’s brand all over the world they’re trying to localise some of that support, generating sponsorship in New York and Melbourne. It’s clearly worked for them because it gives major sponsors like Etihad a much broader market to promote their services to.”
City’s commercial revenue of £165.8m for the year ending June 2014 – powered by an eye-watering £400m, 10-year stadium and shirt deal with Etihad Airways agreed in 2011 – is bettered only by United in England and four clubs worldwide. The Premier League champions rank sixth in Deloitte’s 2015 Money League. For a club that only joined the financial top table in 2008, it has been a remarkable rise.
Chelsea, seventh in the Money League, banked £113.5m from commercial streams last year and can expect that total to increase further if, as expected, Turkish Airlines are tied down to a significantly more lucrative agreement to succeed Samsung as the Blues’ shirt sponsor from next season.
But for all the gains, Stamford Bridge remains a millstone holding down future growth. Chelsea’s 2013-14 matchday income of £71m holds up well in comparison with domestic and European rivals, but a capacity of just 41,387 is smaller than all but three of the Money League’s top 20 clubs. Barring significant and highly unpopular ticket price rises, it is already maxed out.
City made just £47.5m from matchday revenue last year but have huge potential to boost that figure. Planned redevelopment of the Etihad Stadium will increase capacity to 55,000 in time for next season and could eventually stretch to 61,000, making it the second biggest club stadium in England behind Old Trafford.
“The only revenue stream clubs can genuinely have an impact on is matchday, and if you’ve only got a stadium that holds 40,000 fans you’re limiting yourself against everyone else,” Wilson adds. “Chelsea simply can’t compete with the likes of United on that front despite the fact that because of their history, they’ve probably got the supporter base to merit a 60-70,000-seater stadium. They need to either find a new site or redevelop at some cost.”
Wilson believes City are in the better position going forward but freely admits that, in sport, there are few guarantees. “These things are inextricably linked to success,” he insists. “United have been so successful off the pitch because of their success on it. That’s why everyone wants to be associated with the brand and even a blip like last year hasn’t really had too much of an impact.
“Chelsea probably need to run off with the Premier League title and reach the latter stages of the Champions League consistently for a good number of years before they can really lay some roots down and capitalise on that success financially, and the same goes for City.”
