October 27th, 2010
Footie Finances: A Word From The Experts
For Chelsea, money equals trophies. But are we beginning to see the real costs? (Getty Images/Zimbio)
At first glance, the best thing that ever happened to football (and us) was the EPL. Bringing regular football to subscription television has directly contributed to a huge influx of fundage filtering into the game, not just in England but across Europe. As we all know so well, the money allows clubs to spend ludicrous sums on players, which in turn allows players to spend ludicrous sums on designer tat and hair product.
Results: as players became richer, with better access to quality garms and spray tans, websites like Kickette just made sense. To us, anyway.
OK. Football purists might be angrily swiping their oh-so-pure club loyalty at our facetious attitude to ‘their’ beautiful game but you can’t have it both ways, lads. Money talks, and the game has changed. Ladies may have been attracted by the flashing of the flesh but that doesn’t mean we haven’t done our homework.
The majority of our soldier girls could stat most guys under the table. Just because it’s glossy, pretty and committed to labels doesn’t mean it can’t make you look like an ass-hat. Look at Cristiano. (Bauer Griffin/Zimbio)
Therefore, as Liverpool FC snatch survival from the jaws of insolvency via a last minute buy out, Manchester United hang on to their talismanic number 10 by making him one of the highest paid players in the world and Portsmouth FC teeter on the brink, even we have to admit that at some point this relentless pursuit of trophies via expenditure is going to hit a wall. And it isn’t going to be pretty.
As experts in our field of frivolous financial expenditure, we know that unchecked spending on pretty things like cakes, shoes and Iker Casillas posters eventually leads to scary letters, the reclaiming of said purchases and if you’re really bad, a ban on buying anything of worth for a significant period of time. When even the most successful clubs on the pitch are struggling behind the scenes, surely the powers that be must realise that their empire is crumbling from the foundations?
Whether it’s a review of the criteria that constitutes a ‘fit and proper’ person to acquire a football club, a ban on leveraged buy outs, or points penalties for operating at a loss, we would like to see FIFA take action in order to preserve the longevity and integrity of the football league system across the world. Action from one country alone is not sufficient; any kind of individual league wage cap, say, would merely see an exodus of players to leagues where their demands will be met.
And they need to do it soon. As Wayne Rooney is experiencing right now, there is only so much the ordinary fan will take. In these times of austerity, to see an individual using his value to press more cash from his already strapped club may well provoke a backlash that will dwarf the current ‘green and gold’ anti Glazer campaign at Manchester United. We hope not. For the sake of our game.
Your view? Are you happy to live for today and see your club splash the cash? Or are you concerned for the future? Tell us.
moreover the game, it is sad but we have to admit it: football is a bussiness!
EPL has the best fittest men in the world.
Splurge…amuse me..and oh John Terry can be proud as a stag on yr cover shot. He deserves to be crowned!
I am always fascinated by the amount of money that these transfers cost and I always wonder where do clubs(which sometimes are in great debt) find the money to buy these players?Well I also find the price that those players are paid quite outrageous and I am trying to find some logic behind it: Is it because there is high risk to have a long term injury which will resolve in a player prematurely ending his career(it happens with some players)? Is it because they have a UNIQUE talent because lets face it not everybody can be a C-ron, Messi, Kaka, Iker…Is it because they train so hard to be at their best? Is it because of their endorsements deals? Or because this is a short-term career and the medium age to retire is in the late thirties? Or because they live a high quality of life and have to pay for their cars, house, PR, agents……..Frankly for all those reasons I can understand why they are paid so mush but still……
:):)
Btw very good article kickette
Girls (and boys!) it seems that you all have an opinion on the matter and some of you have raised valid, interesting points which I didn't consider. As I stated somewhere above, I'm currently authoring an academic paper on this subject. If there's anything you'd like to share me with, be it your opinion or an article or anything else you think is interesting and on-point, please message me. I'd love to continue the dialogue with you all, but I'm swearing off Kickette as of tomorrow for the next two weeks (I am writing the ethics portion of the bar exam and I need to do nothing but study and the temptation is too great!)
Of course there must be a limit, but, clubs need money to be competitive, to win titles. I compare them with a business: you need to spend some cash to make profit. Money brings money. Eg. I'm not against what Chelsea and Man City do, cos without the money, and the top players coming along, it'd be very hard to pursuit a title. And let's face it, titles are important. But, on a long term, both of them will need stability. Chelsea are already on their way to level what they spend to what they earn, Man City are still a long way to go. Of course, money is not all, but it is a big part of it – clubs need money, all of them. How they administrate it, is a different matter.
Players, of course, need their money too, cos no one works for free, and playing football is their job. But sure, the amount players are earning has become an absurd. And it's the competition who does that – if a club won't pay a player what he feels he's worth it, another one will. But again, there's a limit to what is acceptable, and what isn't.
Cool.
P.S. Sorry my rant was particularly long.
And btw, as a general comment, I must say that I thoroughly enjoy that on the same website where I can ogle Aitor Ocio's thighs and Xabi looking like a GQMF, I can read thought-provoking conversation on real issues. Thanks Kickette!
The economics of sports is really interesting to me, so I am glad this got a post. As an American, I am totally fascinated by the whole transfer, buying, selling players that happens in Europe. I am still trying to learn how it all works, but it seems like complete madness. In the U.S., if a player has a contract, they stay with that team until it runs out or until they get traded. In Europe, it doesn't seem to work that way, so I don't understand why they even have contracts. Meanwhile, if a team wants certain players, it can just buy them provided their former squad agrees and then they can just 'sell' the players they don't want and so on & so on until they get the squad they want. It doesn't seem like money is even an object. I guess when you are talking about millions of euros/dollars/pounds, money becomes less tangible and more abstract than if you are dealing with the salaries regular people make. I am surprised that all of football isn't bankrupt. I would like to see some restrictions on buying and selling and more honoring of contracts. Sorry this doesn't make any sense. Does anyone know of any good resources about this topic? Blogs, books, anything?
On a side note, I always wondered why athletes have to make so much money. What does someone really need 25 million dollars a year for? (this is the case for some American baseball players) I understand the whole Catch-22 of the club/team making money off the player's image – whether it be merchandise or the fact that more people would be willing to pay to come to a game, etc, etc; hence, the player needs to be compensated accordingly to match how the club is profiting from him. On the other hand, I think about how many people could eat or get vaccinated or not have to live in a shelter or refugee camp with the amount of money a player makes and it just irritates me. I think I should stop talking b/c I am starting to sound like a major kill-joy.
I totally agree with you. I have a long rant further up (or down, depending on how you sort it) the page on this "athletes make so much money" issue, bc it makes me a little irritated as well. Making $1 million a year is enough to afford a pretty cushy lifestyle, so why do these ppl need to make $25 million?
In a slightly unrelated topic, I just felt like I'd propose an interesting theory that I have: in the case of footballers versus other athletes as far as favorite American pastimes go…let's say baseballers (if you will)…when I compare the two, I do think that footballers deserve the amount of money they make even marginally more than baseballers…not that any of them necessarily NEED to make as much money as they do, but footballers deserve it more. Why? Well for starters, I must maintain the soccer is harder than baseball. Is hitting a ball with a bat difficult? Well, yes, but so is kicking a ball with accuracy, precision, power, and creativity around a field for 90 minutes. Two, footballers play ALL YEAR ROUND. There's no real "off" season for them. Let's say you're a top-flight EPL footballer. You have your league games each weekend, from August to April, essentially. Then you have the FA cup and Carling cup matches. Then there are "breaks" which really means time for your team to play their Champions or Europa League games. Then there are international friendlies. Then EURO qualifying after a World Cup, and World Cup qualifying after EURO, plus, of course, you'll be joining your national team for both Euro and World Cup every other summer…That's a pretty grueling schedule I would say…
Baseball season is what? March to November? Football (American) is only August to February…
Just a thought.
I'd also be interested to know where this money is going?!?! $25 mill. a year is A LOT of money to be making/spending!! I guess it's easier to know how to spend that kind of money when you have it.
I meant to post a reply sooner, but now it's night-time & I have had a little too much wine – my brain is a little foggy. I had a good reply formulated, but no time to post earlier. Cannot really formulate intelligent thought right now. Liked what you said in your earlier post about dealing with people who are living in poverty everyday – pretty much like what my work day is like. Puts things in perspective & definitely gets me irritated with the EPL WAGs & Stephen Ireland's totally ridiculous house
There is tons of scholarship out there. I'm really busy for the next ten days but if you remind me after that I can compile a list of articles about how the transfer system in Europe works for you – that's been part of my research also.
Just message me
This was meant as a reply to Emme, sorry!
That would be great! Thanks so much, sweetie! Best wishes on your writing & bar exam stuff – I think you will pass
I hope you get published!!!!
I just saw this! Thanks! Pls keep after me to get you the stuff to read anytime after Saturday!
Thank make more money for another reason it not as big a reaason as the ones you have mentiuoned but still, and that is most won'tcan't/shouldn't work after 40 (wrong kinda football but I am looking at you Favre!) I totally agree with you though! Take for example David Beckham's galaxy wage he is totally worth 6 something million dollars but he isn't worth almost 60% of galaxy's payroll. no one is not Messi not Ronaldo!
wow that was some awful spelling I am sorry
It is unbelievable that someone like Alex Ferguson would let himself be played by a twit like Wayne Rooney. He should have cut him loose instead of giving him a pay raise. Rooney should be ashamed of himself. Deep down he must realize that he is SO NOT WORTH IT.
Love your display name
RE: "profit-maximizers" vs. "win-maximizers"…
Rossanera…you have just articulated what I have felt for quite some time. Americans sports franchise owners do not truly understand the value of the clubs they're buying. Tom Hicks reaffirmed your "profit-maximizer" theory when he called Liverpool "a great asset". An EU owner would probably refer to the football club as "an institution".
However, I'm not sure if I'd say that European club owners are "win-maximizers". I think both Europeans and Americans want to win (Americans equate winning with profit…Europeans seem to place legacy before profit.) Therefore, I'd say that European club owners are all about the prestige of a club. Maintain the prestige = long-term profits.
Maybe Europeans evaluate success over a longer term than their American counterparts?
(Excellent though-provoking writing Rossanera. Thank you.
)
Thank you so much for the compliment. The thought that my ideas are "thought-provoking" is a good sign in terms of being selected for publication. (I really want to knock that off my law-school-to-do list.)
However, two comments are in order. When I say "profit maximizer" I don't mean that American sports teams don't seek to win as well. It's just that in the European sports model of "win maximization" all surplus income is reinvested in talent (as opposed to other, perhaps more economically pressing alternatives). This does, however, align with your thoughts on clubs as prestige seekers: you are right, they percieve themselves as "institutions" to be revered.
Also, I can't properly take credit for this "theory", it's something I've come across in the literature. If you're interested, though, get in touch with me and I can direct you to some academic articles/books on the subject. I've read a lot. There's some good reading out there
The problem with the financial fair play rules is that the the spending limits are set up as a percentage of the clubs' revenue – not a flat rate. Say, for example, that clubs can only spend 20% of their annual revenue on transfers. Club A makes 480 million and can spend 96 million while Club B makes 56 milion and is limited to 11.2 million. Note that FIFA's rule that exempted clubs with less than 50 million euros was taken out of the final plan. The ladder of wealth will be locked in, especially for clubs receiving an extra revenue boost from Champions League appearances. If there's only one CL slot in a country's domestic league, that club's revenue is automatically higher than most in that league. They will be the top draw for players wanting CL football and will be able to spend the most on transfers. The others will have find alternative revenue streams (no sugar daddies). Of course, finishing top isn't guaranteed but the odds are favourable.
The fair play rules applied to debt may be the saving grace. These are much trickier and it will be interesting to see how clubs find loopholes around them. I think a few of the big boys will be in trouble come the 2012/2013 season.
Excellent point.
Thank you!
Interesting. I'm familiar with these rules but this is helpful info.
It seems silly that the cap is based on a percentage of revenues and not some other meaningful threshhold like Cash Flow or net income. How much revenue any company/organization earns is irrelevant if they are losing money.
And therein lies the problem…the clubs are spending more money on players than they can afford and still make money. This leads to more debt/borrowing to cover operating expenses. This would also explain why teams with corporate owners seem to be fairing better, as they have a responsibility to shareholders to make money.
Operating at a loss will be grounds for exclusion from European competition as of 2012-2013. And they will have to declare any debt repayments as part of that loss.
At some point the system is going to fail and I would rather we start fixing things before they are critical, than wait until every club is near bankrupt and fans have given up on the beautiful game.
I'm an American. Is there a limited amount of money??? Oh wait… never mind.
lol! American here too…understood! :p
To be honest.. Cristiano Ronaldo was a good yet expensive buy for Real Madrid. With murion he is becoming more team oriented and we are doing better than ever! Karim Benzema and kaka on the other hand were wasts of money as they hardly play (in the case of kaka) or cannot score a goal (in the case of Benzema).
In all fairness, they didn't know Kaka was going to end up injured.
I don't know what's going on with Benzema, though…
FIFA, UEFA give Rossanera a job! Some oversight is needed if we are to preserve the beauty of this game: teams are not toys even though football is a game!
Thanks for the vote of confidence
Two words. Salary cap.
Those pesky EU trade laws will block this one, though I agree that it seems to be the best way to level the field.
So funny, Kickette – I'm actually writing a paper about the interplay between EU competition law and FIFA's financial fair play regulations for a law review article. The main conclusion that keeps coming up in all the scholarship I've read is that a wage cap would not survive a challenge under competition law (antitrust is the North American term) because it actually would operate as a restraint on competition/trade. Never gonna happen.
rest of what I wanted to say:
So … we have the FIFA financial fair play regulations as an alternative instead. I'm all for them. I think it's the only way to ensure viability. For those who have no idea what I'm talking about, these are new rules FIFA is implementing which require all clubs in all leagues to break even or face bans from European-wide competition like the Champions League. This in turn means they can't spend themselves into debt chasing players … which is what's currently happening. If you monitor this kind of news (and I do) Real Madrid, for example, is operating with billions of dollars of debt, so are Man U and Chelsea, and Barcelona may be hauled into Spanish court to explain the current financial fiasco they're in.
… UEFA, please give me a job. I have a dual-degree in poli sci and econ and I'll be a lawyer come November, I speak three languages, and I love the game. Stop hiring all these f*ckups instead !!! It's all about good governance from the top-down … the clubs are not going to slap their own wrists, are they?
really??? That's very interesting. I'm going to show this to a friend of mine, she's an attorney as well and this is her field. Thanks for the input.
I am by no means an expert, though! In fact I know next to nothing because my professor is useless ! USELESS ! I am teaching MYSELF antitrust law. On that note, could you put me in touch with your friend? If she does competition law I would love to speak to her about her field and maybe bounce some ideas off her if she's amenable. I'm at the point where I need to start exploring practice areas and applying to firms and I would love to get some insight from someone on the front lines
You can email me directly at ecotignola@gmail.com. I would really appreciate it.
I thought Real broke even by now! Why are they doing this? I mean they are winning and i've read reports that ticket sales and shirts have gone up!
You know, the articles I read were a month or so, they very well could have gotten their act together. But again, that's only one example … Real are indicative of the prevailing, systemic problem. The same problem persists in Serie A, except, for example, the big teams like Milan and Juve are assured liquidity because of their giant corporate conglomerate owners (the Berlusconi and Fiat/Agnelli empires, respectively).
Winning games has nothing to do with it, either. That's another common theme I've uncovered in my research: while American sports clubs operate as profit-maximizers, European football clubs are win-maximizers, and they therefore have an incentive to DISREGARD rational economic considerations (like avoiding debt) in favour of winning trophies (which they do by buying the best players and paying them exorbitant salaries, among other things – hence the debt).
Am I making sense? I haven't worked out everything myself yet so it's hard for me to explain it.
I think all your points on this are very interesting, and I agree totally.
To preface, I don't know anything about economics or business law and what have you, but I'll try my hand at addressing the issue.
One of the other issues that I think the ever-lovely Kickette staff pointed out is the fact that it is true that clubs are willing to spend themselves into oblivion for these players…and at the same time, these players are completely aware of that fact. This fuels the ego. And its a problem. It's always been mildly ironic to me that athletes and entertainers are among the highest paid individuals on the planet. Not that what they do is necessarily easy (lord knows I can't sing like Beyonce or bend it like Beckham (sorry for that, haha)), but Wayne Rooney is over there complaining about his measly £200,000-a-week salary, and the guy at John's Hopkins who's been working on a cure for cancer for the last 15 years still has to beg the gov't for more grant money. LeBron James buys a pinky ring that costs more than my college tuition, and meanwhile, I'm advising and counseling students who are single parents, living in a shelter, trying to work and go to class, and worried about how they're going to feed themselves and their baby bc they can't afford it.
I guess my point is that when is it going to get to a point where there's a salary cap for players? I mean, obviously, as humans, if you have the opportunity to make more money doing something you love to do, you'd take it. So I don't expect players to be like "Nah, that's too much money." HOWEVER, in the US, salary caps exist for NHL, NBA, and NFL. It's a flat amount that teams are allowed to spend, and its the same for everyone. No matter how much your club makes, they can only spend a designated amount. So if you have a club like ManU given the same spending limit as Bristol City, either both of them can afford a Cristiano Ronaldo, or both of them can't. If the salary cap for all teams were the same, then that would mean that the salaries for many footballers would have to decrease accordingly.
http://en.wikipedia.org/wiki/Salary_cap#
Is this easy? Of course not! Asking for both Bristol City and ManU to have the same spending limits is borderline crazy. But my point is that demand for these players drives their "prices" up, so if there's a limit on how much the players can make and, conversely, how much the clubs can spend, that might be something that helps the overall problem, even a little.
Besides, if the players' heads start to get TOO big with all this money, we might have a few more Stephen Irelands on our hands…
Would you please post it when you're done? And are you single?
Sorry, but the law review owns the first right of publication to the piece. I can't publicize it anywhere if/until they publish it in the issue for which I'm submitting it. IF they reject me for publication they I can plaster it all over the internet … so stay tuned !
And yes, I am single, but why is that relevant?
Bahahahahah!!! Kickette the dating site?
But seriously lol how is that even relevant? As her official fangirl, I have a right to know these things.
Rossanera if I was working for UEFA I would give you a job! Football needs more women, that's one of its current problems I think..
To the issue at hand I'd say blame the free market – the same thing that can give us the freedom to choose between tomatoes from Spain or home-grown, also gives us this ridiculous situation in football. The reality is that human beings NEED a certain level of control, rules, caps, that's why the off-license cannot sell alcohol at certain hours etc. Otherwise we'd be all over the place in wanton abandon. Which is what is happening to football at the moment. FIFA's own financial dealings do not exactly seem pure as driven snow either, if you check out its page on wiki.
I'd say a salary cap definitely is in order, and if I were FIFA president I'd make it compulsory for a footballer who earns over x amount a year to donate a % of his salary to charity.
Haha thanks! And btw, your instincts are totally on-target. Blame the free market – or the European Union, to be more specific. A LOT of the problems we are seeing today can be traced back to the consequences of the European Court of Justice's decision in the Bosman ruling. I'm not going to go into it here, but you can just Google "Bosman ruling" and a ton of stuff will come up by way of explanation. Essentially, the effect of the Bosman ruling (which mandated absolute freedom of movement for labourers between any nation in the EU, football players being characterized as labourers) was to abolish the pre-existing transfer structure – which was highly and rigidly regulated – giving rise to the free-for-all we have now.
I just wrote out a big long reply about how you are right and explained the consequences of the Bosman ruling and Kickette deleted my comment. Maybe they are getting mad at me for hogging this thread? Sorry, guys ! I just got really excited! I love when my worlds collide!
We didn't delete your comment! We welcome the intelligent discussion going on in this post xo
That's so strange! It told me that "comment had been deleted by the administrator."
Yeah must have been a technical hitch cuz you are completely on-topic and as far as I know there are no rules against post-hogging!
Anyway good luck on your paper, and keep to your promise – don't want to see you back here in the next 2 weeks hahaha!
As always very impreesed by you, Rossanera! And though i work with actual rocket scientists every day i fail to have anything smart to say about this. I never had the time to further my knowledge about this aspect of football, even though i do understand the basic rules of the transfer system. I think
.
I do think that the money sums are bordering on the obscen. It is almost offending. The bubble must burst if nothing is done about it. I mean, what else is there to earn except money? And when money starts to get too abstract (because of the enormous sums) , are the players to receive small countries instead?
Good luck with your studies!
I'm really not that impressive. You work with rocket scientists. You win.
But thanks
I only work with them, in a science programme, And they are more into physics, not so much the actual rockets. I´m pretty confused about the solar system
. But they are smart.
And will you please let me know when and where your paper will be published? I would very much like to read it!
Maybe Kickette can post it
It looks like people would actually read what I had to say!
You bet!! I for one would like to know more about this.
Maybe I would understand econ if Xabi Alonso taught it. In his pants.
I don't think i would be thinking about econ.