When the January transfer window closes, the biggest clubs in the game will once again have purchased the best players from their smaller counterparts. A tale that is able to repeat itself because of one thing only: Money. A whole lot of it. UEFA's Financial Fair Play wants to put an end to these excesses, but research has revealed that the rules don't have their desired effect. On the contrary. How then, do we make football more fair?
Abu Dhabi Massimo Moratti (left), Inter Milan's 'Sugar Daddy', after winning the 2010 FIFA Club World Cup (18-12-2010).
When the transfer window closes, European football clubs will once again have spent an extraordinary amount of money on players.
Last summer, Manchester United set a new British transfer record by buying Ángel Di María for the pretty sum of €75 million. FC Barcelona coughed up a similar amount for Luis Suárez, and Arsenal paid €45 million for Alexis Sánchez. A €30 million transfer fee -the amount of money Bayern Munich paid for Mehdi Benatia- is no longer something to write home about. When all was said and done, the collective spending of the clubs set another record. The British record had long since been broken.
By paying those dazzling transfer fees, however, clubs aren't out of the woods yet; what they have bought is merely the right to add the player to their team. The players themselves still have to receive a salary, and the very best among them -like Real Madrid winger Gareth Bale- earn approximately 400.000 euros per week. This boils down to an hourly wage of 2.381 euros. (Note! To put into perspective just how quickly Gareth and others like him earn money, go HERE. Warning: it might leave a bit of a sour taste in your mouth.)
You might be wondering what on Earth they even do with all that money. The players themselves don't seem to have any problems with it. Because they think only in solutions - and the solution to a surplus of money is usually a new car. Like the Bleacher Report wrote, their spending habits follow the formula x + y = z, in which x= football player, y= salary and z= an incredibly tacky sports car. Like Real Madrid forward Karim Benzema, who treated himself to a Bugatti Veyron this summer. (Note! Check out this list of the top 10 ugliest cars owned by football players, just for a much needed laugh after clicking the Gareth Bale link)
NO BUGATTI AS A GIFT
This kind of outrageous spending will continue, because clubs these days are paying their players more and more money, if only because said players know very well how much they are in demand. Like Ivorian midfielder Yaya Touré who -while his employer Manchester City pays him the attractive sum of 280.000 pounds a week- couldn't help but be a tad disappointed last year when the club didn't present him with a Bugatti for his Birthday - or even so much as a Birthday cake.
Imagine finding yourself with possibly the world's most expensive and chagrined employee at your hands. The HR department of City rival Manchester United clearly took notes after Touré's episode, and promptly offered one of the most beautiful cars primary sponsor Chevrolet had to offer to new signing Ángel Di María (150.000 pounds/wk), just to make sure that the player would start his first day at work with a big smile on his face.
Amusing as it may be, the UEFA is worried by the financial warfare between football clubs. First of all, they fear the clubs are spurring each other on by continuing to cash out on their players, thus forcing more sensible clubs to start spending irresponsibly as well. Second of all, the sport is becoming less exciting. Clubs playing in the bigger competitions -those that earn the most money from sponsoring, television broadcast contracts and entry tickets- dominate the game, because they consistently buy every above average player competing in smaller competitions at an alarming rate.
And those above average players, in turn, spend their salaries on questionably spray painted luxury cars.
LEFT: Alan Sugar (middle), Tottenham Hotspur F.C.'s 'Sugar Daddy' (17-03-2014). RIGHT: Silvio Berlusconi has been AC Milan's Sugar Daddy since 1986 (23-05-2007).
FINANCIAL FAIR PLAY ISN'T MORE FAIR
Can something be done about this excessive spending? And the unfair playing field? Because how will clubs like Ajax, Feyenoord and PSV ever be able to compete with English, Spanish and Italian super clubs? (Note: the author of this article is Dutch, hence the examples at hand)
The UEFA has set up a few financial rules: Financial Fair Play. The idea of Financial Fair Play is that football clubs more or less have to break even: simply put, their expenses (player salaries, primarily) can't exceed their earnings from football activities by too large an amount. Those earnings consist of sponsorships, ticket sales and the selling of television broadcasting rights, and excludes the money rich club owners, dubbed 'Sugar Daddies' for the sake of convenience -a sheikh, Russian oil magnate, or a banker- provide their club with. The club has to manage on its own. (Note: A shortage of 45 million euros across two seasons is deemed acceptable by UEFA. A more extensive explanation about Financial Fair Play can be found HERE.)
What's in a name? The entire purpose of Financial Fair Play is to... right, make football more honest - and thus more exciting. But does the rule have its desired effect?
Absolutely not, say the only researchers who've done empirical research on the functionality of Fair Play so far. The researchers, sports economists Stefan Szymanski and Thomas Peeters, conclude that the excitement within the competitions will decline rather than increase, because the traditionally big football clubs will profit from the rule.
Peeters and Szymanski looked at the effect the Financial Fair Play-rules would have on clubs in four different competitions. (Note: England, Italy, France and Spain) All clubs that had salary data available. They estimated how the competitions would be influenced if the clubs in possession of a 'Sugar Daddy' were to be forced to spend less money.
FOOTBALL GETS MORE BORING BECAUSE OF IT
The results are as surprising as they are sobering. In Spain for example, Real Madrid would further expand its dominance. That's right: Real Madrid. The club that spends shamelessly and continues to buy the best players in the world, who in turn make an attraction out of the club's parking lot.
The club's most expensive purchase last summer was James Rodriguez, who cost a staggering 80 million euros. The transfer took people worldwide by surprise. English ex-football player and TV host Gary Lineker responded with a cynical tweet. "James Rodriguez has moved to Real Madrid for €80m. Good to see that 'financial fair play' is working so well."
Because after all, shouldn't the club be taking it easy with the threat of Financial Fair Play waiting right around the corner?
Szymanski and Peeters ascertain that Real properly meets the rules of Financial Fair Play. "Contrary to popular belief, Real Madrid has a reasonable ratio between their expenses (salaries) and revenue, and will not be constrained [by Financial Fair Play, MdH]," they write.
Simply put: Real spends a lot, but it makes a lot of money as well. That's why the club doesn't have to narrow down its expenses, contrary to Barcelona for example, a club that has a less gaudy image among football enthusiasts, but in reality takes more financial risks.
The competition will get a lot more boring in England, as well, according to Szymanski and Peeters, should Financial Fair Play be administered. In England, the traditional power houses will get even stronger, at the cost of 'challengers' like Chelsea and Manchester City.
To anyone who loves football, it might seem strange to consider clubs like Chelsea and Manchester City to be challengers or victims. After all, Chelsea is owned by Russian billionaire Roman Abramovich and benefits from the many hundreds of millions Abramovich invested in the club, earning it its nickname Chel$ea. Manchester City's owner, Sheikh Mansour, is a member of the royal family of the United Arab Emirates and spends even more money on football. Both teams managed to put an end to the traditional dominance of Manchester United and Arsenal in recent years.
Real Madrid president Florentino Perez (left) presents Colombian striker James Rodriguez with a club shirt during his presentation at the Santiago Bernabeu stadium, following his €80m transfer to the Spanish side.
Alternatively:
DEATH OF THE SUGAR DADDY
Financial Fair Play would rob Chelsea and Manchester City of their benefactor's money and knock them back to the subtop, the results of Szymanski and Peeters' research show. The traditional power houses Manchester United, Arsenal and Liverpool would dominate the EPL once again; clubs that courtesy of their extensive and loyal following will always generate more money from ticket sales, sponsoring, merchandise and broadcasting contracts - and thus have a chronic advantage in the competition.
"If you're not a big club yet, a Sugar Daddy is probably the only way to move forward in football," says Thomas Peeters. "Some people may not like it very much, but these men do make the competition more exciting. More than anything, Financial Fair Play just confirms the status quo."
Is spending exorbitant amounts of money really the only way for ambitious clubs to get ahead?
UEFA doesn't seem to think so. Egon Franck, a Swiss economist who is seated in the UEFA-commission responsible for overseeing the Financial Fair Play-rules, points out the success of German football clubs. In the German Bundesliga, the influence of Sugar Daddies is limited by national regulations, but that doesn't keep the clubs from performing at a very high level. In 2013, financially healthy Bayern Munich beat equally financially healthy Borussia Dortmund in a Champions League final. It's interesting to note that in 2005 -a mere 10 years ago- BvB was completely broke. Good policy has seen it blossom and compete at the top again.
"You could argue," writes Franck in his paper 'Financial Fair Play - what is it all about?', "that Bayern belongs to the European establishment [the big football clubs, MdH]. But Dortmund started off in 2005 on the verge of bankruptcy. Their current success is the result of seven years of good management in an environment -the Bundesliga- which rewards good management by limiting the influence of external 'money injections.'"
That may well be, but Franck declines to mention that Dortmund is by no means a challenger. The fact that Dortmund nearly went bankrupt in 2005 and performed badly, was due to spectacularly bad policy - sort of similar to how Feyenoord performed badly in the Netherlands for quite a long time. The minimum requirement for success, however, was always present in Dortmund (and Feyenoord): a huge, loyal group of supporters, who both directly and indirectly guaranteed a high income. Differently put: Dortmund has performed very well, but clubs who have less supporters and commercial potential cannot measure themselves to the club.
It's no wonder then, that big clubs are advocates of Financial Fiar Play and lobby hard for an even stricter set of rules. (Note: an example of how big clubs are doing this in England.)
IT NEVER REALLY GOES WRONG
Perhaps football won't get any more exciting because of it. But even so, Financial Fair Play can have a positive effect, supporters say: the finances of clubs will have a chance to get healthy again - or will be prevented from going sick.
In his paper, Franck explains just what UEFA is concerned about. Football, he writes, in theory is a race of arms, in which opposing parties (clubs) fight to have the best players at their disposal. With the best players you win the most championships, which in turn brings in money to buy good players again.
That's the theory. In practice, says Franck, football is more like a zombie race, a battle between clubs that spend handfuls of money in hopes of winning prizes and more money - without fearing financial consequences. Because should things go wrong, should in spite of their excessive spending on expensive players they fail to become champions, the clubs are always able to count on either their Sugar Daddy or the government to come to their aid. Football is rotten, an industrial branch full of debt that is blinded by the hunt for glory and Financial Fair Play reigns this in.
Chelsea's 'Sugar Daddy' Roman Abramovich lifts the 2012 Champions League trophy while the Chancellor of the Exchequer George Obsorne (middle) applauds.
FOOTBALL DOESN'T HAVE MONEY PROBLEMS
Thing is: is that analysis correct?
"No," says Thomas Peeters. "Football, if anything, is a thriving industrial branch. One that might have a lot of debt, but also makes a staggering amount of money."
It's true that football clubs have a lot of debt and aren't very profitable. But that's not all that strange, writes Peeters' co-author Szymanski in an earlier paper, in which he examines the reasons for club-bankruptcies. Football is, after all, a transparant market with a lot of players (clubs, trainers, football players) who quickly switch between employers.
Secret formulas, spectacular new players, or the sudden discovery of a more efficient way of working -the usual reasons behind the success of 'regular' businesses- aren't applicable in football. Everyone pretty much knows what the other can do; it's evident on the field. It's to be expected then, that the profit margins are small.
But even in the hyper competitive market that is football, bankruptcies aren't common, writes German economist Henning Vöpel. Insolvency is not a serious problem in professional football, and on top of that there is no risk of the system [the football competition, MdH] collapsing as a result of a bankruptcy, that justifies a stricter issuing of rules.
And if a club goes bankrupt, according to Szymanski, that usually isn't the result of exorbitant risk taking. Usually it's the result of bad luck on the field, or the sudden loss of a major sponsor or TV-profits, the sort of 'exogenous' shocks that also occur in other businesses.
Peeters sees no reason to worry, but rather to rejoice: "Despite the economic crisis, football has only grown in recent years. That's no small feat. If any other business sector had managed to thrive during a crisis, the papers would probably write lyrically about it. But football seldom receives such positive coverage."( Note: Why is it that football has such a bad rep? Peeters believes it's due to the massive attention it receives from the media. First of all, the intensive reporting is the very reason people believe football is such a big business. Undeserved, says Peeters. "Real Madrid and Manchester United are world famous clubs -huge brands- but small businesses. The combined turnover of the biggest football clubs doesn't even come close to the turnover of a company like Shell. But we know pretty much everything about Real, and not nearly as much about Shell. Because of this, it's suggested that the sport is a big economic sector. Second, says Peeters, reports about transfer records are misleading. If the European clubs spend more money on players in total, that money isn't lost. They pay each other that money. So if Club A sells a player for 50 million euros, and they buy another player for 50 million euros, the media writes: "another 100 million has been spent!" But the nett expense is zero, and it's far from irrational. Moreover the luxurious lifestyle of the best players in the game -think of the expensive cars- doesn't help their image. That exuberant behaviour leads people to think that football is rotten or diseased, especially if those reports are combined with reports about financial problems. These problems happen, but financial disasters in football are, according to Szymanski and Peeters, an exception to the rule. Szymanski has written that out of the 92 clubs that played in the four most prominent English football divisions, 80 still play there, and the remaining 12 still exist to this day. "This paints an astounding picture of growth and stability." But it doesn't keep the media from continuously reporting negatively about the financial state of the sport. Szymanski: "In the last 23 years, the press has woven a non-stop tale of doom and gloom. All this time I've been writing about football and economics. Every year I have journalists calling to ask me questions along the lines of 'is the bubble going to burst soon?', and every time they're baffled when I tell them: 'no, this is a stable, prosperous system.'")
STATE AID IS STILL A POSSIBILITY TOO
But what of the state aid football is so well known for? Peeters understands gross excesses take place. He's familiar with the fact that Dutch governments (Note!Again, this article was originally written by a Dutchman) have pumped hundreds of millions into football clubs.
Is that not a good reason to introduce Financial Fair Play?
"Not really", says Peeters, who claims not to be a fan of state aid. "But state aid has already been restricted, anyway, and is susceptible to complaints with the European Commission when there's talk of unacceptable competition. When you look at it that way, Financial Fair Play contributes nothing at all."
Apart from that, state aid to clubs -in most cases- is predominately used to purchase a new stadium or finance their youth academies. Costs UEFA doesn't take into account when it comes to Financial Fair Play - because according to them, those are 'good' investments.
Peeters: "If you are worried about the financial state of football clubs, and you no longer want any bail-outs, you have to forbid every single form of support. And if people are outraged about the bail-outs of football clubs, they have to vote for politicians who'll let that particular club go bankrupt. It's as easy as that."
Manchester City fans thank Sheikh Mansour, the club's 'Sugar Daddy'(11-05-2014).
THIS IS HOW YOU MAKE THE GAME EXCITING AGAIN
So which issue does Financial Fair Play resolve?
"Good question," says Peeters. 'Sugaring' would indeed be restricted, because rich people would be heavily limited in their freedom to make bad investments. That would happen, but it wouldn't make the competitions more exciting to watch.
If you want to make the Dutch competition more exciting, according to Peeters you only have two options. Dutch and Belgian clubs would have to start a joint competition, one more appealing to sponsors and which would generate more income from TV deals due to a larger audience. These extra earnings would enable the best Belgian and Dutch clubs to stand a better chance against European rivals.
Another solution would be to install a limit on salaries in Europe; a maximum salary all clubs are allowed to pay their players - exactly like how it's done in American sports competitions. Because of this simple rule, American sports are exciting to watch every year. (Note!I will be expanding on this a little more in another article)
But what if that doesn't happen?
"Then it is what it is," says Peeters. "For years Belgium -and especially the Netherlands- has managed to compete because of a superior education and a better knowledge of the game. We use money more efficiently than wealthier, foreign countries. But compared to ten, twenty years ago, there's even more money available abroad and we just can't keep up anymore. Boring perhaps, but unavoidable."
[SOURCE. Note! I translated the article and added a few things here and there. More articles such as this one will follow, as I've noticed there's an interest in the community!]