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UEFA Financial Fair Play

January 16, 2011

Last Tuesday, Michel Platini explained the UEFA Financial Fair Play Regulations. It is a new set of regulations aimed at improving the financial conditions of football clubs. An alarming number of football clubs are living well beyond their means and if this is not addressed soon, apparently we’ll be left with only Arsenal.

It is true though that most football clubs do not look healthy financially. Lots of clubs have a lot of debt, or are spending more than they are earning, or are pretty much bankrupt already. Even Manchester City with the oil money does not look healthy at all, as they are spending like crazy yet do not have any income to match it.

UEFA decided to tackle this situation with the Financial Fair Play Regulations, which they published back in May. Not sure why they are only talking about it now. If you want an in-depth analysis on these regulations, The Swiss Ramble has done it already. Basically, UEFA wants football clubs to start to break-even as of 2012 with the assessment coming in the 2013/2014 season (the 2012 financial statement will be released early 2013, and UEFA needs a couple of months to look at them all). Clubs are allowed some leeway, but if they can’t break-even (or make a loss of 45M Euros) then they might be kicked out of any UEFA competitions (Champions League, Europa League, Intertoto Cup, etc).

It is clear what UEFA wants. But there are two ways for any kind of business to break-even. Either reduce spending so that it equals revenues, or increase revenues so that it equals spending. I don’t see a problem with the former, but for the latter there can be lots of problems.

In the regulations, UEFA defines revenues as:

  1. Revenue – Gate receipts
  2. Revenue – Sponsorship and advertising
  3. Revenue – Broadcasting rights
  4. Revenue – Commercial activities
  5. Revenue – Other operating income
  6. Profit on disposal of player registrations (or income from disposal of player registrations)
  7. Excess proceeds on disposal of tangible fixed assets
  8. Finance income

Therefore, a football club can do the following to increase their revenues:

  1. Raise ticket prices. Or make more VIP boxes as those are the cash cows.
  2. Get more sponsorship. Have numerous sponsorships even.
  3. Exclusivety on broadcast rights, make their own paying TV channel, sell anything they can record, make their websites a subscription only model, etc.
  4. Commercial activities, now this one can make football clubs creative. A fashion line? A club-themed video game? Coffins? Friendlies all over the world? Merchandising everything?
  5. Other incomes that can’t be classified in the other categories.
  6. Buying players cheap and selling them at a higher price – of course the player must be of quality (unless the buyer is Manchester City).
  7. Technically, if a club owns a stadium they can then sell it for a profit and make money. Sure they will be left without a stadium but they can always rent one. Real Madrid did this. Not sure if it will pass the auditors as it is just shifting assets but it is a possibility.
  8. Earn interest from their bank accounts, bonds, etc.

What I am saying is that we might see a lot of commercial activities from football clubs in order to raise as much revenues as possible. The problem is that by doing so, the football club will be more dependent on the economy and as we all know, the economy has a tendency to go bust once in a while. When that happens, the football club will suddenly be without its revenue stream and therefore unable to cover their expenses.

It happened before in Formula One. The expenses were skyrocketing and instead of curbing the expenses, the teams went all out to raise as much revenues as possible. Until the economy burst and teams made losses.

Maybe UEFA should try to find different measures to regulate the club’s finances, because a Champions League with only Arsenal in it won’t be as much fun. Although I cannot imagine a Champions League without the likes of Barcelona, Real Madrid, Manchester United, and both Milan clubs. And I’m sure Platini can’t either…

3 Comments leave one →
  1. January 21, 2011 21:24

    Good article, was looking into football finances for the game we are making. Think its an important point for football to address.

    Nice website logo by the way, you do it yourself?

    • January 21, 2011 21:36

      Cheers. I’m quite interested in the finances, it’s not very clear at the moment…

      A mate of mine made the logo…

      • January 21, 2011 22:01

        Ah yes i see the tweet about the logo design.
        Yeah i think football finances are a mess, UK MP for sport said as much recently.
        Keep up the good writing 🙂

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