By Tony Attwood
It is always interesting to look at the project that is Manchester City, not just because they are seemingly creating a new brand of football development, but also because of the commentaries we always get back.
When Untold covers Tottenham, for example, we get a mix of abuse and serious debate, the latter being very welcome. But this seems to be less in evidence with Man C articles – although we do get a fair number of “why don’t you just focus on your own club?” type comments.
But undeterred I return to Man C boosted a little by the fact that our last two major forays into the subject have been rather successful in predicting the future. Untold was just about the only outlet that was suggesting that Man C would fail FFP and be sanctioned, until a day or two before the results of Uefa’s deliberations came out, Guillem Balagué did a piece on Radio 5 one tuesday night, and said that the BBC’s approach had been quite wrong and Uefa would find against Man C. The response from a few Man C supporters was that this would not happen as FFP would be found to be in contravention of EU competition laws and the EC would throw it out.
Which led to the second arena – the launch of legal action to get the decrease in the amount of money that FFP would allow clubs to lose each season, stopped. Untold suggested across several articles that this would not happen, not least because the court that was being used to launch the appeal was not capable of hearing the case.
Of course sometimes lower courts do try and take on matters they are not supposed to – I’ve sat in District Courts in England that have tried to hear database rights cases, only to find after a while that they don’t have the right. Such things happen.
Anyway, with due speed the action failed as Untold had suggested, so FFP marches forth, amended and tweaked but pretty much still there.
Man C drew attention to themselves as being not just one of the clubs fined and sanctioned for not getting its FFP amounts right, but being the only one that didn’t settle at once with Uefa, but instead held out for a while, making no response while PSG and the like accepted their punishment.
So it is interesting to speculate (and of course it is nothing more than that) on how Man C will fare this time around.
Man C are buying players. Quite a few of them in fact.
- Enes Üna £2m
- Raheem Sterling £44m
- Patrick Roberts £11m
- Fabian Delph £8m
- Nicolás Otamendi £32m
to name but a few. That gives £97m spent according to the figures published on Transfer League.
Going the other way are quite a few more players
- Álvaro Negredo £24m
- Matija Nastasic £10m
- Karim Rekik £3.5m
- Scott Sinclair £2.5m
and a few others.
£97m in, £41.65m out and so a net deficit of £55.35m – again according to Transfer League
So where does that leave us with FFP? There has been very little in the mainstream press about this – but then as they gave a lot of publicity to some of Man C’s fans supporting the legal case in Belgium, maybe they are holding back this time, waiting to see. (I would love to say that since Untold is one of the few publications that called both the outing of Man C, and the failure of the Belgium case aright, they are waiting to see what we have to say this time. But that would be pretentious.)
And there may of course be other cases (nothing to stop people starting legal cases – that’s a fundamental right in a democracy). I haven’t seen the next one loom up yet, but that doesn’t mean it isn’t there. Maybe the media have seen something I’ve missed.
Anyway under FFP clubs can spend up to €5million more than they earn per assessment period (which is three years). However it can exceed this level to a certain limit, if it is entirely covered by a direct contribution/payment from the club owner(s) or a related party. This provision aims to prevent the build-up of unsustainable debt.
The limit is €30m for assessment periods 2015/16, 2016/17 and 2017/18
In order to promote investment in stadiums, training facilities, youth development and women’s football (from 2015), all such costs are excluded from the break-even calculation.
Manchester City had their restrictions on transfer spending and Champions League squad size lifted after meeting their financial fair play target, although Gary Neville said Man City should take UEFA on over FFP.
City were ordered to play in last year’s Champions League with 21 players in the squad, four fewer than usual, and spending on new signings in last summer’s transfer window was capped. The club also agreed that total wages last season’s Champions League squad must not exceed that of the 2013-14 season. They were also fined £16.3m a year for three years totalling £49m but only the first year’s fine has been imposed. The rest is suspended pending good behaviour.
So it is interesting to speculate how Man City are doing in keeping this year’s £55m expenditure within FFP. The most likely argument that Man City will use is that revenues will grow over the next three years to allow them to eventually break even through increased match day revenue with the expanded stadium, and the increased sponsorship deals that winning more trophies will bring.
And the base situation is far from bad. In 2014/15 they made a loss down to £22.9m with their wage bill being a very acceptable 59% of turnover. So that makes it look possible.
There are a few ups and downs however.
A lot of the improvement comes from a £39 million increase in TV revenue. But history suggests that most of this money is then “pissed up against the wall” to use Lord Sugar’s elegant phrase, by spending on enhanced salaries. And we are seeing huge hikes in transfer fees at the moment – which means huge rises in salary. So broadcast revenue gives a boost, but then leaves a long tail of higher expenditure.
Man City also benefitted by reducing its wage bill by £23m in 2014 over the previous years. So they will now have pressure on the wages bill, from existing player demands and from these new transfers in this summer. Mindful of the CAS ruling about player contracts all clubs (seemingly with the exception of Liverpool who appear to be in a fantasy land of their own) recognise the need to negotiate deals well in advance for fear of losing a player for far less than they paid. Man C will have that concern as do all other clubs at and near the top of the league.
However they won’t have to bother about things like the pesky £16 million FFP bill in this financial year. But 2014 had very little in it from player profits, and as a total outsider looking at the financials I might guess that they were expecting to have a decent bit of income from player profits this summer. And yes there is £41m coming in. But the problem there is it is dwarfed by the money going out.
Man City has not made a profit since 2006, which shows just how far removed football can be from the norms of financial reality. But its losses have declined each year since 2011 when they hit £197m and as I said, they were just £23m last time around – and that is a positive move.
Commercial partnership income has risen over 800% in the last five years, but here it is difficult to see how that sort of rise can continue. It could, but the club’s revenue growth has exceeded everyone else in the Premier League so a tailing off seems more likely. They have almost half their income coming from commercial activity, as compared to 26% at Arsenal. It will prove much easier for Arsenal to grow this revenue than Man C, I suspect.
And this is a point I have ended up at in the past. How long can this commercial activity keep growing? Of course I don’t know, I can only guess based on what I see but I still think Arsenal still has a long way to go in developing its commercial activity. As we know it was hampered by the years of building the Emirates, and then by the successful negative promotions of the aaa which made everyone aware of how long it has been since Arsenal won a trophy. Two FA victories in two seasons however, have led some firms to a reassessment of this, and those who opted not to back Arsenal three years ago, have realised just how much exposure they missed out on from that double Cup success, Arsenal becoming the most successful FA Cup team ever, and Wenger equalling the 19th/early 20th century record for the number of wins. So for Arsenal the numbers in the commercial deals are really starting to rise.
It is a guess of course, but it looks to me as if Man City won’t get caught again by FFP despite the mega spending this summer. But that isn’t the issue they are facing. Their issue, which of course they will be fully aware, of is the escalating wage demands that always follow TV revenue hikes, and the fact that the growth in commercial partnership revenue must come to an end sometime.
I suspect it is not this year that is a problem, but the change of direction needed next year to balance the books again.
From today’s anniversary files
23 August 1975: Arsenal 0 Stoke 1. Arsenal won only two games in the first ten and ultimately ended the league in 17th.
23 August 1986: Arsenal 1 Man U 0. George Graham started his career as Arsenal manager. Unfortunately this was one of only two wins in the first eight. Charlie Nicholas scored.
- @UntoldArsenal on Twitter
- Arsenal Annivesaries each day on the home page
- Remember, remember. The history of Arsenal’s pre-seasons: now covering every season from 1983 to 2014, with more articles forthcoming.
- 23 August 2006: Theo Walcott became the youngest Arsenal player to play a match in a European competition against Dinamo Zagreb. He was 17 years 129 days old.