UEFA is to change its Financial Fair Play rules in response to Chelsea’s recent trend of signing players on long-term contracts. We all saw the exuberant amount of money spent by Todd Boehly in Summer and once again in January – how is he and Chelsea able to spend that much on players but still be within the remit of the Financial Fair Play regulations?
In this blog, we aim to address the question that is on everyone’s mind and give you an overview of what is going on behind the scenes at Chelsea and other Premier League clubs. Make sure to visit the LV BET Sports Blog for some of the best insights in world football, big game previews and betting tips.
What are the rules in place?
There are two sets of rules that each Premier League team need to adhere to, and these are the Premier League’s profit and sustainability rules and, for those teams who regularly play in European competition, UEFA’s Financial Fair Play regulations. Now the Premier League’s profit and sustainability rules allow for total losses of £105m over a three-year period. Any club that registers a loss in excess of that high figure could face penalties, including a large fine or even deduction in points. On the other hand, UEFA’s current rules stipulate that clubs can spend up to £4.4m more than they earn over a three-year period. They can exceed this level to a limit of £26.6m if it’s entirely covered by the club’s owner.
UEFA has a wide range of pushinments to dish out to those clubs who fall foul of these rules. Wolves came into it’s crosshairs in 2020 due to their overspending, but the punishment, in reality, did not affect them – Wolves were only allowed to register 23 players if they qualify for the 2021/22 Champions League.
In terms of the situation at Chelsea, the accounts submitted until 2021, the club registered an FFP loss of £15m, which leaves them with a fair amount of leeway in terms of permitted losses. The question is how they are going to reconcile the losses incurred in 2022 and 2023. The FFP losses were that minor due to winning the Champions League, Super Cup and FIFA Club World Cup generating a lot of income and offsetting their losses. Winning the Champions League generated £106m in prize money, and one can expect to make £3-4m per home game plus bonuses from sponsors.
Chelsea’s transfers with Boehly
Incoming:
Marc Cucurella – Brighton, £60m
Raheem Sterling – Man City, £50m
Kalidou Koulibaly – Napoli, £33m
Carney Chukwuemeka – Aston Villa, £20m
Cesare Casadei – Inter, £12m
Wesley Fofana – Leicester, £70m
Pierre-Emerick Aubameyang – Barcelona, £10.3m
Gabriel Slonina – Chicago Fire, £8m
Denis Zakaria – Juventus, Loan
Benoit Badiashile – Monaco, £35m
David Datro Fofana – Molde, £8m
Andrey Santos – Vasco da Gama, £10m
Joao Felix – Atletico Madrid, £9.7m (loan fee)
Mykhailo Mudryk – Shakter Donetsk, £89m
Total: £415m
Outgoing:
Alvaro Morata – Atletico Madrid, £31m
Tammy Abraham – Roma, £34m
Kurt Zouma – West Ham, £29.8m
Fikayo Tomori – Milan, £24m
Timo Werner – RB Leipzig, £25m
Emerson – West Ham, £13m
Mario Pasalic – Atalanta, £12.8m
Total: £169.6m
The total is a grand £245.4m in expense with not much more to gain since they did not advance in any tournament last year and things in the Premier League don’t look good. The chances aren’t looking favourable that Chelsea and new manager Graham Potter will make it into next year’s Champions League group stage.
Chelsea’s spending explained
The big issue with most people is when Chelsea signed Mykhailo Mudryk from Shakter Donetsk for an astonishing amount of money. How could they buy three or four players and then be able to fork out an additional £90m on top of that and still be within the FFP regulations?
The secret sauce is in accounting, and Chelsea are ahead of the game in that regard. In football, when you buy a player, you spread the cost of the player over the life of the contract. So given that Myhkailo Mudryk is the most expensive player that Chelsea bought, let’s take a look at his scenario. Chelsea bought him for £89m, and he is now on an eight-and-a-half-year contract. The length of the contract is especially important in this case because Chelsea can reduce the yearly cost as the contract is spanning eight years. Now in football, you rarely see contracts spanning more than four or five years, for plenty of reasons, one of which is if the player is injured or falls out of favour with the manager at the time, the club is stuck with a hefty wage bill for nothing in return.
So, this game that Chelsea are playing with transfer and player contracts is a high-risk game that might blow up in their faces. On the other hand, when a club sells a player, all of the profits are taken into the accounts immediately, even if the whole sum of money promised is yet to be paid. So in essence, since the contract of the Ukrainian youngster will cost Chelsea just £11m per year it will allow more short term spending. In terms of accounting, this is now becoming the trend with Chelsea and other clubs in the Premier League. Badiashile, who is 21 years young, is also on a long-term contract of seven-and-a-half-years, which is a continued trend on Wesley Fofana’s contract, who signed a seven-year deal with the London-based club.
This stance might stem from the fact that Chelsea lost two of their mainstay players, Antonio Rudiger and Andreas Christensen, leaving for nothing to join Real Madrid and Barcelona, respectively. That defensive pairing contributed 85 starts last season in all competitions. So, tying someone down to an eight-year contract mitigates the chance of a repeat. Especially with your best players, if you have them on a four year deal, after three years, the club needs to renegotiate or risk the player leaving for free.
This act of deflecting costs across the length of the player’s contract is called amortisation. Now, UEFA are watching this situation unfold and they are working on an amended set of rules in the FFP. This change will see a capping on the amount of years clubs can do this amortisation – of up to five years and not any longer. This is somewhat of emerging news and things are still uncertain on how this will impact Chelsea, will the changes be imposed from the day they are put in place to the future, or will it also affect the previous three-year period?
What does the future hold for Chelsea?
The present looks unstable. Players, alongside the managers, need to work hard to get out of the position that they find themselves in. The Blues are currently in tenth place, behind Brentford, Fulham and Brighton and 21 points behind rivals Arsenal at the top and, most importantly, 10 points away from Champions League football. Currently, the Premier League is at half distance, so there is plenty of football yet to be played, and a recovery from Chelsea won’t be considered a shock, especially after their shopping spree. One vital thing is that they really cannot afford a similar scenario to Joao Felix’s red card, hampering his loan and making his availability even more expensive (£700,000 for each appearance).
For the long-term signees, the club is going out on a limb, full of confidence that the players will be able to perform at their very best and steer Chelsea to the top again. Should that not happen with one or two signings, the club could end up in a Tiemoue Bakayoko situation, where a player is under a long-term contract but drops out of the side, and the club no longer wants him. The club may want to move him over to another club but may struggle, so in the meantime, they still have to pay his wages whilst recruiting a replacement.
Graham Potter is the man to lead the charge but his methods are starting to be questioned by the fans. Results haven’t been favourable but things can quickly change. The main objective is to have a successful campaign in the Champions League, generating a large sum of money to offset the expenditure. It is considered that for every £1 you make in the Europa League, you make £4.50 in the Champions League, so there will be a significant effect if Chelsea fail to qualify for the Champions League. The Premier League will be the most difficult as they need to overcome a lot of challenges to get into the top four. The football club has endured a lot of changes, from top to bottom so time is needed to get things moving forward again.
A fact that needs to be discussed is the fact that Todd Boehly owns 20% of the Los Angeles Dodgers, a Major League Baseball team and in that sport in the USA this is general practice. Those involved in running baseball franchises have recognised that, rather than pay a superstar towards the end of his peak a massive amount of money for a shorter period, it is better to lock in an emerging star for nine or 10 years on slightly lower annual wages. That helps spread out the cost so that teams can effectively spend more in the short term. Additionally, this enhanced the worth of club as when a club is being put on sale for example, the assets (i.e players) and their contracts are considered. A player with one year left on his contract does not have a bearing on that figure but someone on a six-year contract will most definitely impact the amount.
What are your thoughts on the long-term contracts being handed to incoming players at Stamford Bridge? Is it something that other clubs should do or is this a method of making a struggling side great again fast?