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Transfer fees and FFP: a revolution in the making.

By Richard Bedwell

Tony’s excellent piece on wages the other day prompts (on the eve of a new window opening) some thoughts on the other major part of player costs namely transfer fees.

If FFP is fundamentally designed to remove, or at least ameliorate, inflation in player costs then surely such fees will need to have downward pressure applied to them in order to bring club balance sheets into line with UEFA expectations.

In fact, I believe, this might not be so – or certainly be not anything like so urgent.

Loans have become commonplace. We also know that the Bosman ruling has significantly increased the number of ‘free’ transfers that are happening and, when there is little or no competition from financially doped clubs for a players signature, a fee might actually be quite low anyway.

However the fact remains that the vast majority of clubs rely on receipt of transfer fees to fund their existence and without them (and without a significant reduction in wage costs at the same time) many more clubs would be in financial difficulties than is even the case now.

That is not something that UEFA want to see happen and therefore, in theory, they will be far less concerned over transfer fees (and the source of their funding) than they will be about wages.

After all if, for example, Abramovich finds a way of funding a big transfer into Chelsea, that will represent new money into the game that will be passed almost in its entirety to another less wealthy club. It will help to secure that club’s future as long, of course, as they don’t fritter it away on wages and agents fees which, by definition, represent funds going out of the game completely.

Much more important to UEFA is the fact that, when that money is spent by the likes of Chelsea, it is to secure the services of a player who will be paid less than the man he is replacing.  That way, over time, wage expectations throughout the game will be reduced and all clubs will benefit. This benefit will be all the more enhanced by a widespread move towards more performance related player contracts which would see players rewarded much more according to predetermined measures of team and individual ‘success’.

If we believe what we read it would appear that Arsenal are, with a significant degree of success, moving in that direction.

Given that they are also a club who, certainly in the Wenger era, have only funded transfers in from the proceeds of transfers out, any change in the levels of those fees should have little or no effect in the way the Club operates in this area.

However two things have changed at the Club which are pretty certain to have a major impact on how it operates within the market for players. We now have a much more commercially driven owner who has a basic requirement to protect his investment and to make sure that the maximum number of bums on seats is maintained and that prize money is also maximised as much as is realistically possible.

It’s also the case that cash flow into the Club from outside the game is about to leap thanks to new TV and sponsorship deals.

With Wenger being as bullish as he has perhaps ever been about the quality and quantity of talent coming through from the reserves there are plenty of indicators that money will not be spent that will merely end up choking off that potential. But the patience of the non football expert owner may not be quite so great and the prospect of non-qualification for the Champions League may prove too much for him to bear.

This coming transfer window is likely to see, all told , another decline in total net spending. But with prices falling and Arsenal quite possibly having more actual (and potential) money in their bank accounts that the rest of the EPL put together transfer strategies just might start to look a little different over the next couple of windows.

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The books…

The sites…

6 comments to Transfer fees and FFP: a revolution in the making.

  • Adam

    A nice read, and agree with most of the article Richard I do think you have not taken third party player ownership in to account when considering this new money coming in to football even TV monies. A lot of Chelsea’s recent signings were partly owned by outside investors so the money you state comes in to football doesn’t actually make it, it goes to the investors.
    Same with a lot of the TV money spent on transfers some will stay in the game and filter down the pyramid but most will leave via the agents and wages you state.
    Most transfers that take place have no actual fee attached (this is world wide) it is a very small minority of player movements that come with transfer contracts.
    You may find the following link interesting?

    http://www.football-observatory.com/?lang=en

    My own personal opinion is that transfer fees and player wages will not come down until third party player ownership is either controlled or abolished.

  • jake

    i’m not as optimistic as you Richard. i think some clubs will see what if/any sanctions are imposed .

    a game of bluff basically.

  • Valentin

    I believe that we may start to see more common sense in the non sugar-daddy club.
    Arsenal has decided to add result based (qualification for Champion’s league, …) clauses in players’ contract. Other clubs will follow suits. The FA is now indicating that every premiership club should have relegation clause in their contracts.
    The problem is that clubs like Manchester City, Chelsea, PSG will find ways around the FPP. Too good to be true deals with related companies will be investigated, but very fews will be rejected and lead to bans.
    Malaga’s ban is not yet definitive. Also their owner’s sulk and complete shambles of organisation is the reason the ban has been imposed. I cannot see the same thing happening to any other money bags.
    The FPP is a good thing, but it may have an unwanted effect: fixing the hierarchy in term of finance. Fixing the financial hierarchy is likely to result in fixing the club hierarchy.
    We may end up with a four tier league: the super riches, the nearly there, the also ran and the relegation fodders.
    Well managed teams will try to reach the nearly there group. Arsenal may be one the few teams that because of their current manager, their location, the timing of the stadium build have an unique opportunity to end up in the super riches group without having a sugar daddy.

  • nicky

    In these days of grossly inflated wages, it’s a pity that the transfer of players, particularly from abroad, usually has a standard initial contract period of four years.
    This means that those players not making the grade after (say) two years are in a sort of limbo for the rest of their contract.
    The Club finds it difficult to sell them and ease the wage bill because invariably the players won’t reduce their high income to facilitate a move.
    There should be some kind of “half way review” so that Clubs
    AND players can consider a “get out” clause.
    It just seems wrong to me that Clubs have to bear the wage cost of unwanted players for such a long time.

  • Amos

    FFP doesn’t attempt to make a distinction between spending on transfer fees or spending on wages. It’s designed to bring total player budgets (transfer and associated fees plus wages) within the revenues of the individual club. What should happen is that pressure is exerted on both. The more you spend on transfer fees the less you can spend on wages and vice versa. The likely outcome of that is that transfer fees that should fall.