In a little over a fortnight, UEFA, European football’s governing body, is expected to make a significant announcement, chastising and probably fining at least two of the continent’s highest-profile and ‘richest’ football clubs, Manchester City and Paris St Germain.
Yet the riches and new-found status bestowed on each have accumulated not as a result of sustained on-field success. Instead, both clubs have been funded by spare petrodollars generated in a part of the world where excess is the norm.
Beforehand, of course, there’ll be plenty of intense negotiating, horse-trading and legal brinkmanship to complete, all the consequence of a two-day meeting of UEFA’s grandly-named Club Financial Control Body (CFCB) this week.
The body will convey its findings to representatives of around twenty clubs after concluding a two month-long investigation into 76 football clubs, during which it searched primarily for evidence of breaches of Financial Fair Play rules. Each club will be given leave to appeal.
Following UEFA’s expected announcement on May 5, those clubs who have failed to agree to the sanctions or fines imposed by UEFA will be given a further opportunity to appeal, this time to the Court of Arbitration for Sport.
Irrespective of how protracted the appeal process might prove, however, it looks as though UEFA is finally addressing a burgeoning problem first highlighted in this column in May 2008.
Since 2010, every club competing in either the Champions League or the Europa League has known that, as a condition of entry to these competitions, it was not permitted to post aggregate losses exceeding €45 million (approximately £37.5 million) over a two year period.
This arbitrary-looking figure was designed in order that clubs with wealthy owners at the helm, the number of which has grown markedly over the intervening four years, could not spend ‘excessively’, nor Hoover up talent in order to prevent competitors getting their hands on it.
When first revealing its FFP proposals, UEFA said that the ultimate sanction for offenders would be expulsion from its competitions, though there’s no chance of either City or PSG being unable to compete in next season’s Champions League.
While the FFP rules have applied since the beginning of the 2011 accounting year, which starts in August for most football clubs, UEFA did not commence its assessment of accounts until earlier this season.
Since last summer, its licensing unit has been analysing leading clubs’ annual accounts from 2011-12 and 2012-13.
In a perfect world, it would prefer clubs to be breaking even, but it has allowed an ‘acceptable deviation’ (the said €45 million) over the period. From August 2014, this figure will start to fall, so, it is hoped, reducing the propensity for some football clubs to borrow too much money.
Manchester City always knew their commercial arrangements, which to some outsiders may have appeared contrived, would fall squarely under UEFA’s investigative spotlight.
At the end of the accounting period immediately preceding the one investigated by the CFCB, the club reported an annual loss of £121 million, the result, primarily, of a wage bill running to more than £130 million. Any repeat of these phenomenal losses would have resulted in banishment from top-flight European competition, but in a flash, the men with the calculators and others dressed in sharp suits appeared to have found a way out for City.
This arrived, magically, in the form of a ‘multi-faceted sponsorship contract’ worth around £400 million over ten years, covering naming rights to City’s Eastlands Stadium (a ground they don’t own), shirt sponsorship and financial assistance towards infrastructure development around the stadium.
City’s accounting methods, which continue to accommodate an astronomic wage bill, have been criticised, with Liverpool managing director Ian Ayre asking if it was right that clubs could apparently circumvent FFP rules simply by sponsoring themselves.
“Are Etihad, Manchester City and (owner) Sheikh Mansour related parties?” asked Ayre. “If they are, then it is up to UEFA to rule on it (because) UEFA said there would be a robust and proper process about related-party transactions.”
Arsenal boss Arsene Wenger also questioned the commercial value of City’s decade-long sponsorship deal. “The credibility of financial fair play is at stake,” he said. “If it is to have a chance, the sponsorship has to be at the market price. It cannot be doubled, tripled or quadrupled.”
What has caught the CFCB’s attention this week is the colossal scale of City’s deals. Even when compared with the world’s highest shirt sponsorship and stadium naming rights arrangements, the value of City’s sponsorship contracts appear to include an enormous premium.
Whether Manchester City are on a par with Barcelona when it comes to attracting deep-pocketed shirt sponsors, or with baseball’s New York Mets where stadium naming rights are concerned, is questionable, particularly as they do not own their ground.
“We are aware of the situation and our experts have made assessments of the fair value of all sponsorship deals,” a UEFA spokesman said, so it’ll be interesting to see how much value the CFCB ascribe to the shirt and naming rights and the extent to which they vary from those made by City’s bean counters.
The situation at Paris St Germain has come under even greater CFCB scrutiny over the past couple of days.
The French champions maintain that their €200 million per year commercial arrangement with the Qatar Tourist Authority is entirely proper, although UEFA are understood to be unhappy with PSG’s attitude to having the arrangement scrutinised in detail by its auditors.
For some owners, the acquisition of a football club remains little more than a vanity project, an opportunity to spend lavishly until they grow tired and search for something else upon which to splash their considerable wealth.
For others, though, the lure of financial rewards, particularly those associated with Champions League football, are sufficient to persuade them to ‘shoot for the stars’ as former Leeds chairman Peter Ridsdale once put it.
Ironically, while the acronym-heavy imposition of FFP and investigations by its CFCB are laborious processes, UEFA could lessen the worrying, all-encompassing focus on Champions League football – and its financial benefits – in one fell swoop.
Were it to scrap its existing competitions and introduce three new continent-wide tournaments, the money European football generates would immediately be more evenly distributed.
The first of these could be a knock-out competition reserved solely for the league champions of each European country. There would be no seeding and ties would be played over two legs.
The second tournament could comprise domestic cup winners from each nation, also playing an unseeded knock-out tournament, while for teams finishing between, say, second and fifth in their domestic leagues, entry to a third cup competition would be their reward.
UEFA could then aggregate the television and sponsorship receipts it received for the three competitions and distribute them on a 40%-30%-30% basis.
As for naming these new knock-out tournaments, how about the European Cup, the Cup Winners Cup and perhaps the UEFA Cup?