Michel Platini Aims To Revolutionize The Transfer Market.
UEFA President Michel Platini has today announced that UEFA, the European football governing body, will pass a law that states that clubs cannot spend more money than they make, and that the ‘sugar daddy’ owners who have become so infamous in football, cannot inject massive amounts of cash into their clubs to provide for excessive transfer market spending.
We have seen examples of what Platini is striving to prevent most recently with Chelsea and Manchester City, where billionaire owners buy a club and inject massive amoutns of cash into the club so that they can go out into the transfer market and purchase any player they choose to. We have also seen Mallorca of Spain’s La Liga continue to spend money to create a side that will compete for European football, just to be barred access to European competition because of their excessive debt situation. We have seen Leeds United and recently Portsmouth go through the same type of situation, where excessive amounts of money is spent on bringing players into the side, only for the side to perish into financial anarchy.
Platini spoke about the new rules and said;
“For years and years we were in total anarchy but the clubs asked for the rules because they knew they could not continue. We can see already that the clubs are spending less as they look to balance their books. This is because the first time the break-even rule will kick in is in the coming year, the 2011-2012 season. It’s very soon and this means that the strategy to say ‘I can now go and spend hundreds of millions’ doesn’t work because we will see it in two years at the latest. Transfers have not been as crazy as in the last few years, they are pulling up their socks and the clubs are making special efforts to comply with the rules.”
Platini’s new rule will only allow rich owners – like Chelsea’s Roman Abramovich and Manchester City’s Sheikh Mansour – to inject a maximum of 15 million Euros which will shrink into a maximum of 10 million Euros by 2015, as a supplement to any money the club makes. The injection of a transfer kitty from rich owners can also not be a loan; a loan of that size would just create another debt situation that Platini is fighting to avoid.
I personally think this new rule will be fantastic for football. Time and again we have seen clubs come from nowhere – like Manchester City and Chelsea – and turn themselves into super-clubs just through the spending power of their new owners. It is the death of football. A club who can go out and offer massive wages and massive transfer fees to a club for whichever player they wish will surely come to dominate their league. We’ve seen it happen with Chelsea in England and Real Madrid in Spain. With Platini’s new rule, clubs will be forced to look to their youth setup for talent instead of splashing the cash on foreign prospects.
Think of it this way. Werder Bremen lost Mesut Ozil, and Stuttgart lost Sami Khedira. With these new laws in place, those two clubs may not have lost their most talented young players. Jerome Boateng may not have joined Manchester City. Angel di Maria would never have joined Real Madrid, and Javier Mascherano would not be a Barcelona player. It would just mean the strengthening of every domestic league. English clubs would be forced to blood their youth players, and rely less on their spending power.
I think it could signal an era of German dominance in European competition. German clubs already basically follow this rule. They spend very little money compared to the rest of European leagues, and instead look to their youth for new talent. If German clubs could hold onto their most promising players, then they could be dominant in European competition. If top teams in any league were stopped from spending ridiculous amounts of money on the best players from some of the smaller teams, then every league in Europe would be a lot more competitive, and European competition would be a lot more competitive as a result of that. There would no longer be a two-horse race in Spain, there would no longer be a ‘big four’ in England.
I think Platini is spot on with this rule. Level the playing field, it’s the only way forward. There were suggestions of starting European Super Leagues, because of how far ahead some clubs are from their domestic opposition. It’s ridiculous. It takes away from the game as a domestic competition. Every club should have at least a slight chance of fighting for a title at the end of every season. Every club should have a slight chance of a cinderella story. As things stand now, it just can’t happen. Clubs are too rich and are in so much debt that a club like Bolton or a club like Wigan will never be able to compete with a team like Chelsea or Manchester United or Manchester City; teams with a bigger budget.
Platini is in the right here. A level playing field means more competitive leagues, which means more excitement for fans of every club, not just the biggest ones.
Looks like Europe is coming MLS’s way rather than MLS going their direction.
So teams like Man United, Barcelona, & Real Madrid who make more money than anyone because of their worldwide popularity will have the advantage. I don’t see this having the desired effect.
They don’t actually make more money than any other teams. They’re in massive debt. Real Madrid and Barcelona especially, have massive debts. Nearly half a billion euros of debt, to be more accurate. That means they’d have to clear that before being able to spend anything. So the playing field, then, would be level.
Damn!
Is this really going to happen? So we won’t see teams spend money that they DON’T HAVE?
Dylan, when do you think the effect will happen?
So basically, the Bundesliga will become the best league in the world? Because the Premier League is all foreigners and La Liga is only 2 teams?
I personally think there should be a first division in Spain called BarcaReal and a second division of all the other teams LOL.
Way to go Platini, bring football back.
Great Job Platini! It is about time!
Man U and co do indeed make more money (in gross revenue terms) than other teams. They have bigger stadiums, bigger marketing operations, a bigger share of domestic prize and TV money and (crucially) they have had long term access to the rewards of the Champions League (whose rules have been modified over time by UEFA, to reinforce just this situation). The Spanish teams also have access to favourable tax conditions whereby the Spanish government effectively subsidises the wages of foreign players.
The reason that Man U are in debt (and the massive interest payments move them towards break-even/loss) is because the Americans who bought the club used a debt mechanism to acquire it, and managed to land the debt on the club rather than themselves. It has nothing to do with their spending (if anything, it has artificially constrained it).
Leeds hit problems because they attempted to use debt to break into the Champions League group in the league, and failed. Ironically, their brief successful spell in Europe managed to move the number of the English CL qualifying clubs from 3 to 4, but it was Chelsea (firstly by the same debt mechanism – they had higher debts than Leeds when they were taken over – and subsequently sustained by Abramovich) who succeeded in moving into the upper group. Since then, and until relatively recently the CL revenue difference has managed to sustain 3 of the big 4.
The number of teams with “sugar daddy” owners (i.e. rich owners who pump massive amounts into the club) is relatively small – Chelsea and Man City. There’s another group with rich owners who’ve merely stabilised their clubs (e.g. Aston Villa) and another where the unstable financial fortunes of the owners have actually destabilised the club (West Ham, Portsmouth, Liverpool). But if you look at how money has impacted the English Premiership, Champions League revenue has been a far bigger factor than ownership subsidy in creating artificial barriers between haves and have-nots.
The consequence of this new move for English football is just going to swing the advantage back to those clubs with greater revenue, which by and large means the self-perpetuating elite who regularly pick up CL qualification positions (and who originally lobbied UEFA to create such a situation, and who have lobbied for this latest move). Until the issue of the distorting effect of CL revenue is fixed, there’ll be no level playing field within the domestic leagues.
And as for the Bundesliga and level playing fields, some Leeds fans are old enough to remember the 1975 European Cup Final, whereby Bayern Munich beat Leeds with the help of a large number of “controversial” decisions from a referee later banned for match fixing. The same happened in the 1973 Cup Winners Cup Final (AC Milan vs Leeds, referee also subsequently banned). UEFA did nothing at the time (except to ban Leeds for four years when their outraged fans rioted during the 1975 game) and has done nothing subsequently to review either game.
UEFA exists to protect the interests of the so-called big clubs. This is really just a continuation of that theme.
It’ s gonna be interesting to see how this will work out.
The big question mark will be the transfer fees. They might die down dramatically because of a negative spiral.
A lot of clubs use the money from the sales of (their top) players to pay the salaries of the remaining players (i.e. Werder Bremen, Athletic Bilbao). Other clubs use the cash from the sale of their best players to buy two or three other players to replace them.
But when teams like ManCity, Chelsea, Real Madrid or even Wolfsburg (with the money from Volkswagen) stop pumping extra cash into the market the size of future deals will be reduced.
Then again salaries might go down as well to offset this (since rich owners will not be able to subside player wages of their clubs).
In regards to the advantage for the Bundesliga: I do not think Bundesliga clubs might profit from the ruling because of their youths systems (Youth systems in the Netherlands, France or Spain are just as good) but because the revenue of clubs like Dortmund, Schalke, Hamburg or Stuttgart exceeds their performances in european competitons (should they even qualify). Spanish generally have done much better (especially in the Uefa CUP/ Europa League) but because of the individual TV rights bargaining in Spain these clubs like Sevilla, Valencia or Athletico Madrid have much lower revenues. See the Deloitte Football Money League.
Because of their stadiums and the better competitve balance in the Bundesliga those mentioned german clubs generate more revenue than their comparable english counterparts (Aston Villa, Everton, ManCity).
This is absolutely phenomenal and one of the things that european football desperately needed. This year Barcelona was in ridiculous debt whereby they had to take a 150 million loan to pay their players and still they are buying two top (and costly) players in the form of David Villa and Javier Mascherano. That’s ridiculous!!! They should not be allowed to do that! This rule will stop that. Well done Mr. Platini!
The next thing some of these leagues need is caps on player salaries and serious limits on the number of foreign players. What the premier league did this season is a wimpy attempt at the latter.
@Nick,
Platini plans to put this into effect as soon as next season (2011/2012) so we’ll be seeing clubs try and deal with their debts before then so they’re able to spend at least some money once this rule kicks in.
@lefthog,
I agree. Bundesliga clubs are far more profitable than a lot of other clubs in Europe because of their smart spending and extremely small debts.
@Curtis,
I also agree. I think Platini is completely spot on with this rule. Barcelona, a team who are so proud of their youth system, go out and splash the cash on whoever they want with no consequence! But now, finally, there is a consequence, and there needed to be.
Although I think the concept is interesting, the implementation could simply widen the gap between the haves and the have nots further.
As others have stated, the big clubs (Man U, Real Madrid, Bayern Munich) all pull in more revenue than small clubs. They’ve got much larger fan bases and that provides bigger revenue streams. Thus, they’re better off than any of their smaller counterparts if no team is allowed to go into debt.
Additionally, Champions League provides huge payouts to the participants, much of it based on TV revenues. Thus, once again, the big teams from the big leagues will benefit. If Chelsea gets 30 million pounds, for example, that’s 30 million pounds more for them to spend than a smaller EPL club that doesn’t make Champions or Europa League. So really, the Champions League payout just perpetuates a cyclical system of the best teams being able to spend the most money, and thus ensure their place in Champions League year after year.
Let’s take pre-Sheik Mansour Manchester City as an example. Not a big revenue team. Not a traditional Champions League team. Under the no debt rule, they wouldn’t have been able to compete with the big teams. But the Sheik came in with a blank check, and now Man City should be in strong contention for the Top 4 in the EPL. Obviously some people don’t like that the Sheik threw his money around, but at least it is fresh blood to challenge the establishment in the EPL. Under the no debt rule, that would never have happened.
Furthermore, I think there are some serious questions to be asked about what kind of accounting principles will be used under Platini’s rule. There are a wide variety of accounting principles out there. For example, Barcelona’s new directors now say they are 80 million Euros in debt, when the previous directors had claimed a 7 million Euro profit. There’s a lot of gray area when a club’s books are done.
But, concerns about the system aside, I think it clearly benefits the Bundesliga most. They’ve been the most financially stable league in Europe for years, and Platini’s rule will have little effect on how they currently do business. So, at least from that standpoint, I’m pleased with the prospects of the rule.
There a reason why United is not mentioned when they have spent the most money almost yearly for decades?
Or we just pretend that they didn’t and thus blame the newcomers to this?
Or maybe we are just mocking those who are NOW playing Uniteds game with spending more than others?
‘As things stand now, it just can’t happen. Clubs are too rich and are in so much debt that a club like Bolton or a club like Wigan will never be able to compete with a team like Chelsea or Manchester United or Manchester City; teams with a bigger budget.’
I was just giving a few more recent examples, a few more easy to identify examples.
By the way, because of all the good discussion this article produced, I’m wondering:
Would you BundesligaTalk readers be interested in a BundesligaTalk podcast? Maybe a weekly roundup type situation? Let me know!
http://swissramble.blogspot.com/2010/07/is-manchester-citys-strategy-fair-play.html
This doesn’t directly address the issue of the fair play rules, but somewhere in there it talks about them & how they may not have quite impact people think they will. Plus there are some loopholes that may or may not be closed.
Also, not that I don’t think you should do a podcast, which I’d love to hear — maybe you’re heard this one?
http://thebundesligapodcast.com/
The few I’ve heard have been interesting, but they don’t seem to be too regular, so there’s plenty of room for you.
I think the guys are football journalists based in France.
Yeah I’ve heard that a few times, but it’s not as regular as I’d like to be in a potential podcast. How does a phone-in sound, better?
Hmm. Regulating spending will require access to team’s financials, that few non-publc teams will want to disclose. Also, it’ll be fun to see some of the dubious big team (Juventus) scramble to suddently rearrange things to make their mountains of debt disappear just in time. This reminds of the Florida Marlins.
man uniteds treble winning team i.e beckham,scholes,nevilles,and nicky butt were a product of the youth program etc with a few transfer additions like schmeichel,400,000 pounds and ole gunner solskar,denis irwin,ronny johnson,jesper blomqist,dwight york and teddy sheringham hardly blockbuster transfer deals along with ryan giggs whilst a youth recruited from under the nose of a then poor man city
it shows what can be done and its true uniteds worldwide fanbase could give them an edge if it werent for the murky flip side of the billionaire owner
like liverpool the edge of competitiveness shaved off by the spiralling prices in the market but also saddled by owners like the glazers who use a club as a cashcow to subsidze their other ailing business’s all through money `borrowed then thereby leaving the club and fans to pay the phenomenal burden of the interest
this is an area mr platini should direct his attention too now
i applaud his efforts and hope that some effort can be employed into ensuring that there could be a maximum level of interest repayment ratio to club value when takeovers are undertaken
this would at least go some way into stabilizing a clubs finances and removing the worry of fans and the threatening of a clubs stature and possibly existance