Everyone these days are hearing about Financial Fair Play Regulations related news and why not its another transfer season in the world of football. Top Teams of the world spend a hefty amount on new players. Before Financial Fair Play came into existence, teams with their owners that owns a sound amount of money invest a good amount in the sporting projects of their respective teams and buy any player they want to buy.
However, beneath all these eye catching deals and transfers lies a structured and a developing set of rules and regulations called FINANCIAL FAIR PLAY. UEFA introduced this rule in 2010 for the 2011-2012 season. They played a major role in its creation after observing that overspending was leading to financial instability in football clubs. After Analyzing UEFA found out that its the overspending done by clubs while acquiring new players.
LETS UNDERSTAND WHAT IS FINANCIAL FAIR PLAY
UEFA President Michael Platini introduced this rule in European football to stop excessive spending by clubs on new players. The sole purpose of FFP is to limit club spending. In other words, clubs are allowed to spend in proportion to what they earn. FFP rules are designed to ensure clubs operate within their financial capabilities. Following FFP rules can reduce the future risk of a club facing a financial crunch or pressure on owners if they don’t get the right Return On Investment (ROI) on the players they’ve spent heavily on.
THE KEY PRINCPLES OF FINANCIAL FAIR PLAY INCLUDES THE FOLLOWING :-
- Break-Even : Clubs are allowed to spend in proportion to what they are earning. No club can spend more than their revenue, as doing so would breach Financial Fair Play regulations.
Case Study : In 2014, Manchester City was found guilty of breaching FFP rules. The club did not earn enough to match their high expenditure. As a result, Manchester City was penalized. They were ordered to reduce their squad size from 25 to 21 and paid a fine of €20 million. - Expenditure Cap: UEFA keep a check on clubs financials. Clubs are allowed to spend only 70% of their total revenue for signing, wages and other expenses. Clubs are asked to provide their fundamentals and financial report without manipulating them. They check whether the club is adhering to all the rules setup in accordance to financial fair play.
Case Study : AC Milan was found breaking FFP regulation in the year 2019 when checked by UEFA officials. In result of this breach they were banned from UEFA EUROPA LEAGUE 2019-2020. - Sanctions : Clubs which fail to meet the FFP requirements go through a good amount of sanctions on them. It can last up to a season or some matchdays. Also breaching FINANCIAL FAIR PLAY rules may end up in deduction of points in that season.
Case study : In 2017, PSG came into the limelight after they bought Neymar Jr. for €222 million. They also signed Kylian Mbappe for €180 million that same year. An investigation found that PSG was spending more than they earned. Although no immediate action was taken, PSG had to increase their revenue to register players like Kylian Mbappe and Neymar Jr.
HOW BIG CLUBS LIKE ARSENAL AND CHELSEA ARE KEEPING UP WITH FINANCIAL FAIR PLAY REGUATIONS ?
BELOW IS THE DATA FROM LAST 6 YEARS OF BOTH THE CLUBS AD THEIR TOTAL SUMMER TRANSFER AMOUNT
| YEAR | ARSENAL | CHELSEA |
| 2019 | £138 million | £40 million |
| 2020 | £77.4 million | £222 million |
| 2021 | £150 million | £97.5 million |
| 2022 | £144.08 million | £540.55 million |
| 2023 | £145.2 million | £270 million |
| 2024 | £38.3 million* | £40 million* |
Arsenal’s Financial Strategy
- Revenue Generation:
- Matchday Revenue: Arsenal generates a good amount of revenue from its home ground, The Emirates Stadium. The stadium holds a spectator capacity of 60,000 people. The Emirates Stadium is one of the major reasons the Gunners can balance their books.
- Commercial Revenue: For a change Arsenal have moved their focus to commercial revenue which include merch sales, commercial deals and partnerships. Gunners deal with Adidas and Emirates contribute the most for this channel.
- Player Sales: Every season Arsenal tries to sale the academy players to other club and te reserve player this source also generate a good amount of money.
- Financial Fair Play Compliance: Compliance:
- The Gunners do have a stable income and a good income stream I must say that keep FFP rules and regulations under their watch. The club’s focus on youth development and strategic sales also helps balance expenditure with income.
Chelsea’s Financial Strategy
- Revenue Generation:
- Ownership Investment: Chelsea is strongly backed up by their owners for a long time. Earlier Roman Abramovich and now by the Todd Boehly invest a good amount in clubs project. It provides the club with liquidity to invest heavily in the transfer market. Liquidity provided by the owners plays a crucial role in transfer market. Though, Their money isn’t counted as revenue.
- Commercial Revenue: Chelsea also cracked some good deals with strong market players like Nike and 3 (Three) these deals stabilize their in-flow of income.
- Player Sales and Loan System: The club loans out a large number of players each season, generating loan fees and future sales. High-profile sales indicate that a club’s scouting mechanism needs a review to determine whether they want a player or a profile. All signings from the previous season are now linked with other clubs.
- Financial Fair Play Compliance:
- Chelsea’s compliance with FFP has been a subject of scrutiny, especially given their record spending. However, they have managed to stay within FFP rules. They achieved this by offsetting expenditures with large revenues from commercial activities, player sales, and successful performances in the Champions League. Additionally, the club has utilized accounting practices such as amortization. This involves spreading the cost of a player’s transfer fee over the length of their contract to manage their reported finances.
EDITOR’s OPINION ON BIG CLUBS DEALING WITH FINANCIAL FAIR PLAY SYSTEM
In my opinion its easier for big clubs to go for big players now days but the catch is signing big players doesn’t mean better results sometime we can see how Chelsea’s spending sky-rocketed last season but the harsh reality is that they have become a mid table team from last couple of seasons. On the other hand we have Arsenal keeping it the window low-key and simple which also shows that Mikel Arteta want profilic players not big names in his teams and recent performance suggest he is going in right direction.
The best way to keep wage limit of squad under a check is to promote academy players. A team like FC barcelona who suffered from FFP. FC Barcelona lost the best player of all time Lionel Messi. This incident opened their eyes and they are promoting academy players.
FFP or Financial Fair Play system is a great system, still got some loopholes but they will be sooner or later identified. This system not only encourages young talents to come up on big stages and performs but also safe smaller clubs which are more susceptible to Bankruptcy, debts, debt traps and financial Instability.
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