Football Finance
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Just watched it. Interesting
Yerbouti?
As if he'd drop £5bn on United
I was surprised we didn't fall further back. Think there's a bit of currency movement in there - one article I read suggested that our turnover is flat in sterling terms, which is a very good performance given we nearly did the quad 2 years ago and were absolute shite for much of last year.
But as always with the Deloitte review, bear in mind that it doesn't really offer that great an analysis, it's just a bit of turnover analysis and them trying to showcase themselves as sector leaders - fair play to them for making a great deal of a not very insightful survey. It never caused much more than a ripple in the office when it dropped. We'd just look at it for 10 minutes or so and think "Whatever" and then get on with our normal day's work.
And ultimately, turnover isn't that important if you can make profit (and more particularly, generate cash) at the bottom line (e.g. via player sales, which don't feature here). Barca have been up near the top of this survey for years and could easily have gone bust 18 months ago, and only kept themselves going by selling all the family silver to cover the huge losses they were making by paying Messi silly money and being shite in the transfer market. By contrast, Brighton don't even feature but have shown everyone else how a smaller club can compete and be self-sustaining.
But as always with the Deloitte review, bear in mind that it doesn't really offer that great an analysis, it's just a bit of turnover analysis and them trying to showcase themselves as sector leaders - fair play to them for making a great deal of a not very insightful survey. It never caused much more than a ripple in the office when it dropped. We'd just look at it for 10 minutes or so and think "Whatever" and then get on with our normal day's work.
And ultimately, turnover isn't that important if you can make profit (and more particularly, generate cash) at the bottom line (e.g. via player sales, which don't feature here). Barca have been up near the top of this survey for years and could easily have gone bust 18 months ago, and only kept themselves going by selling all the family silver to cover the huge losses they were making by paying Messi silly money and being shite in the transfer market. By contrast, Brighton don't even feature but have shown everyone else how a smaller club can compete and be self-sustaining.
So @Beamrider - back to the age old question, how do a club fund spending sprees these - is it by selling low book value or youth players for huge fees, selling off equity in the club and converting some of it to, I guess income or cutting things like wages by signing up and coming players and getting rid of older players on big contracts?
How much leeway does an ownership group line FSG have in they unlikely event they decided they wanted to pump money into the club for signings - I presume they just couldn’t without other measures to avoid falling fowl of FFP?
How much leeway does an ownership group line FSG have in they unlikely event they decided they wanted to pump money into the club for signings - I presume they just couldn’t without other measures to avoid falling fowl of FFP?
All that stuff is valid, but under the new rules (the cost ratio) the profits from player sales are averaged over three years but everything else is on a current year basis. This really changes the dynamic on the "pure profit" theory from selling academy players.
If I can give an example, for the sake of argument, if you have two players with 2 years to run on their contracts. They're both worth £50m, one has negligible book value and the other is on the books at £20m. So the theory goes that if you sell the academy player, you add £50m pure profit to your calculations, and you make £20m more profit than if you'd sold the other one.
But then you write down the other player by £10m, so your net gain is only £10m. The following year, that net gain is wiped out as there's another £10m amortisation on the remaining player. So all you actually get is a one-year timing benefit. But that may be worthwhile under the current rules if it keeps you within limits.
However, under the new rules, you only get to take 1/3 of the profit in the current year, so the impact on your top-half of the fraction is: £20m / 3 - £10m = -£3.33m - you're worse off. Same the following year, and it's not until year 3 (when you get 1/3 of the profit but no amortisation) that you're better off for FFP. And yet I'm reading everywhere about how clubs are under pressure to sell academy players in priority and that this is dysfunctional. That won't be the case under the new rules.
Plus the problem will probably be made even worse by wages as the chances are the guy signed for a fee will be earning more than the kid who came out of the academy, who loves the club and didn't want to screw it over for silly wages.
In terms of FSG's leeway, I've commented previously that we are comfortably within the ratio, but our revenue will be down a fair bit this year because we're not in the CL (good job too because Newcastle and United made such a great fist of it in our absence - what a waste of a place they were). That's not an issue this year as we're well within parameters and there are more lenient targets in the transition period. If we're back in the CL next year then being out for one year will have no impact on our future compliance (as the reduction in revenue only affects the calculations for this year, it doesn't have a three-year impact).
What that does mean is that dipping in and out of the CL is not a good place to be as regards compliance, so we need to get our shit together and get back to regular qualification.
So this year's dip doesn't affect our ability to spend. What will give us more wiggle room is driving revenues up. Obviously media is what it is and we'll be adding a bit more with the Annie Road but match day revenue will be fairly constant and is only really driven up or down depending on progress in knock-out competitions and how many games we play as a result.
Profit on player sales will help, but is not as instantly impactful as under the current rules, as I've set out above. The ideal there will be to have some consistency over a three year period - i.e. an underlying £40m or so that we can bank on every year to give stability to the ratio. Best way to do this is a City / Chelsea style conveyor belt of middling talent from the Academy - players who are not quite good enough for us but who can be sold for decent money. And needless to say, that doesn't happen over night, and it also doesn't happen without bending the rules on youth recruitment.
TLDR - our financial performance gives us decent leeway to spend, but we're off the pace on youth development.
Insightful as always. To your point about youth team players, I think we have done an ok job of developing the middling type of players and selling them i.e. Ibe, Stweart, Smith, Wilson, Williams & maybe others I cant think off. Not to the level of City or Chelsea but still quite decent.
Brings me to the other point I have been wondering i.e. Ownership of a feeder clubs like the Redbull model. Why do you think LFC have not gone that route? Seems to be quite the obvious think to do and overcome some of the disadvantage we have in terms of financials viz City/Chelsea/PSG etc.
Yeah, the likes of Smith and Williams are exactly the kinds of deals I'm thinking of. 2 or 3 of those every year and you're in a good place.
I think the feeder club question probably comes down to ownership style. You either have a set of owners who like the idea of multiple clubs, managing them across different jurisdictions, or you don't. And I think most owners of major clubs have more than enough going on just managing their main investment.
And you can replicate much of he impact of feeder clubs if you can develop strong partnerships that stop short of investment, but it means you have a limited scope as to what you can do with loans etc and you risk irritating the managers of both clubs by having a rigid structure. Fair play to Red Bull, they've made it work, but they're pretty unique in that respect, and it might be argued that Salzburg is, in essence, little more than an overblown reserve team for Leipzig. If I were a Salzburg fan I wouldn't be overly keen on that, but maybe they quite like seeing all these raw talents coming through the ranks and they've had some domestic success along the way.
Where I think we've failed in recent years is in our loan management - we've not recruited great young prospects and/or we've not arranged good loans for them, particularly this season. Awoniyi is probably the most successful player we've recruited and sold on, and he didn't become a success until after he'd left us because our loan options were limited by work permit issues.
I still tend to favor the feeder club model over loaning out youth prospects. In addition to developing players and generating income for the club, it could also provide first team management experience to coaches in our system eg Pep? With loans many factors beyond our control could lead to what we would classify them as unsuccessful. Ideal solution for me would be to allow u21 to join the football league like in Spain etc, but that’s highly unlikely.
I think we'd be wise to pursue the feeder club strategy but we've seen that FSG seem more interested in diversifying their investments across additional sports instead of going deeper on football. Which, financially, probably makes sense.
Regarding Salzburg, they already win the league every year and compete in Europe. They get exciting talent and know that when it's sold off they're not at risk of sliding down the table because the conveyor belt keeps rolling. 14 time league winner since 2007, including 10 in a row at present. 9 time Cup winner in that spell as well. Where else can they go?
Agreed and if the selection of feeder clubs is done in a manner which allows them to grow and improve performance than it ends up being a win win for both sets of fans. At the end of the day if this strategy allows LFC to become more successful on the pitch via player and staff development or increase revenue through player sales, this will help increase the value of LFC which is what ultimately FSG are after. Of course the underlying assumption being that we have a highly efficient footballing operation which will deliver on these objectives.
I see the company trying to buy the Daily Telegraph is backed by City’s owners.
It’s as if having ownership of one of the most pro-Tory newspapers in an election year might give you some leverage over the Government for “something”.
The Tories, for their part, are desperately trying to ensure that new owners can’t alter editorial stance, etc.
Honestly - City are getting off with this and it will stink to high hell.
It’s as if having ownership of one of the most pro-Tory newspapers in an election year might give you some leverage over the Government for “something”.
The Tories, for their part, are desperately trying to ensure that new owners can’t alter editorial stance, etc.
Honestly - City are getting off with this and it will stink to high hell.
Like the tories are going to win the next election
Yeah saw this a while back and wondering how the current set frothing columnists at Telegraph will maintain their Tory and right focussed ways but not mention the middle east and Islam. I guess they will stick to twitter for that.
Well if we win everything we will make a loss due to player bonus payments. We have to ask the question now my friends, can we actually afford to win this quad this season ?
Yes, as commercial deals get a huge boost off winning titles. Merch sales increase significantly as I suppose venue bookings.
I mean, you realise the player bonus payments are likely directly funded by additional prize money gained from winning it don’t you - it’s not a flat revenue stream.
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