When Eden Hazard finally decided to sign for the European Champions, as a fan like every single Blues fan like you, this writer felt relieved. Relieved, for one major reason. An up and coming talent decided to select Chelsea rather than clubs that can boast of History, Success, Player Development and Financial Clout, respectively.
Expectedly a bulk of rival fans wanted to vent their frustration in Hazard ditching their club. Remember he had flirted with quite a few clubs in Europe : Real Madrid, Arsenal, Manchester United and City to name a few. So the number of angry rival fans was certain to exceed the number of happy fans.
The one major talking point of those fans was, Chelsea is definitely flouting UEFA Financial Fair Play regulations. One could argue, one signing worth £32m wouldn’t be an issue. However, they were relying on the fact that Chelsea was ready to pay Porto £38m for Hulk and planning to recruit more players. As a fan, this writer was also alarmingly concerned.
This prompted the writer to dig further into the FFP and Chelsea matter. If you want to read a detailed explanation of the rules, visit Chelsea FC site here. If you would rather be content with the writer’s explanation please read on.
The biggest fall out from the inability to meet the FFP regulations is the ban Chelsea could face from Champions League or any UEFA tournament. A ban would impact Chelsea in more than one way. There would be a snow ball effect.
In simple words, in order to comply with FFP, a football club has to break even at the end of a financial year. Break even means, your income should be at least equal to or more than your expenditure. If you had to explain to a six year old, you could say if you earn £10 then you can spend only £10. Sounds simple now doesn’t it?
If you would like to know what Chelsea FC chief executive Ron Gourlay had to say on FFP, go here.
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| Chelsea Chief Executive Ron Gourlay |
So does that mean, if Chelsea manages to earn enough income then they can even buy players like Hulk and Falcao? Absolutely. Chelsea can even buy Cristiano Ronaldo, with a buy out clause of €1 Billion, and Messi, with a buy out clause of €250 Million, at the same time!
According to the FFP, income source includes revenue from gate receipts, broadcasting rights, sponsorship and advertising deals plus profit made from the transfer of players.
Expenditure includes the cost of transferring players in, salaries and employee benefits expenses and other operating expenses.
Not included in expenses are expenditure on youth development activities, community development activities and development of infrastructure such as stadiums or training grounds. A club can spend limitless amounts on these with no risk of failure to comply with FFP. The before mentioned point is great news as Chelsea can develop a new stadium with increased capacity without the fear of UEFA breathing down its neck.
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| Time to increase stadium capacity |
However, unlike in the past, Roman Abramovich, as an owner, can not pour his billions directly into the club and help it break even. Also the income from sponsorship deals such as the one with Sauber F1 cannot be beyond a ‘fair value’, as mentioned by UEFA, if it is a club related company. This means, the club would have to look towards other sources of income.
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| Worrying times for Roman on FFP front |
Good news is that Sauber is not related to Chelsea and their sponsorship deal would go a long way in helping the club in terms of finance. Also, the windfall from the Champions League victory adds to Chelsea ’s income.
Another noteworthy point is that whenever a club buys a player from the transfer market, it doesn’t pay to its seller upfront. For instance, in the case of Hazard signing, Chelsea could have an arrangement with Lille , to pay his transfer fee of £32m over the period of 5 years (his contract length with Chelsea ). That means Chelsea would only be paying £6.4m every year for the next 5 years.
Furthermore, FFP doesn’t stipulate any salary cap or transfer market spending limit. Those rules have been put in place in other sports such as AFL and NRL in Australia . A few years back, a club (Melbourne Storm) had to sell almost all of its star players and pay a hefty fine, when it was found guilty of having breached those rules by cooking its books.
As per the FFP, clubs can not make loses of more than £36 million over the period of two years. (Source)
Bad news is Chelsea has struggled to break even for many years. As of 31st January 2012 , the club had made loses of £67.7 million (according to Guardian). Even though Roman took over the club in 2003, the desire to establish Chelsea as an European power house has impacted the club’s finances in a negative way.
On the other hand the Champions League victory has had a positive impact on many fronts. Prize money, TV rights, Hazard and other young talents arrival, to name a few.
So as long as Chelsea can find means to earn more than they spend, us fans, club officials, players and one and all related to Chelsea in one way or the other can breathe easy.
If you have some interesting anecdotes, please do share with us. And as always KTBFFH.
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