Football Finance

[Bradley]

On the bright side, no asterisk beside teams if we win the league this season.

 

[Beamrider]

Looks like the football clubs have been buying expensive accountants to get around various loop holes. Do you think the rules will evolve to block any dubious activities (e.g. the share purchases designed to write off debt interest (is that describing it correctly))?

I don't have an issue with the share issues. I've said before that when an owner puts in money, they can do it either as shares or as loans. In the past, the main reason for using loans was that it would be easier to pull that money back out in the event that the club made a huge profit further down the line (although off the top of my head, only Brighton have ever been able to do this). Part of the reason why the Premier League didn't go after loans in the first place was that they knew this. The loans only became an issue because of City's associated party transactions case. So all of this conversion to shares is fine. They're just changing a loan, that was probably never going to be repaid, into shares, which will also probably never be "repaid".
But all of this round-robin selling of academy players at inflated prices and intra-group sales of assets, that needs to stop. The problem with the former is that you need to prove there was a scheme and that prices were inflated. Clubs will just say they got it wrong, sorry, shit happens.
And the problem with the sale of assets is that they asked clubs to consider outlawing it and they wouldn't vote for the change, as so many of them know they might need it to bail themselves out at some point in future. Turkeys not voting for Christmas.
That's why I think the PL should have taken a test case on it - if they can't change the rules then they need a commission to rule on it. If the commission goes "letter of the law" then the club gets away with it. If the commission decides it's not fair that some clubs can do it (because of their group structure) and others can't (because they keep it simple and honest) then maybe they rule in the PL's favour. On balance, I think the PL loses that case, but they should give it a go out of fairness to the clubs who can't exploit it. And if they win, they have a mandate to change the rules.
So we are where we are. The difference is that because the PL flexed their muscles over Everton and Forest, the teams are taking it seriously now, even if their solution is to take the piss with clever accounting and structuring, rather than reining in their spending.
And longer term, if they move to the football costs ratio, then it will be harder for clubs to do these tricks to get around the rules. Intra-group asset sales won't help and player sales will only add 1/3 of the profit to the calculation (as it takes the average player sales over 3 years). They are trialling this now in parallel with existing PSR, but it isn't binding, and I suspect it will be difficult to get it voted in as the future measure because it's less open to manipulation.

 

[localny]

From EPSN.

Is transfer spending finally normal? Why a $100m player might be a thing of the past

Deflation is the opposite of inflation; prices go down, not up, over time.

And most economists will tell you that while excessive inflation is bad, deflation is generally really, really bad. If people think something is going to cost less next month than it does right now, they'll delay buying it. That slows down economic activity and production, the government collects less in taxes, folks get laid off because there's less spending, and everyone is worse off.

OK, that's in the real world. What about in the fantasy sports entertainment world we call football?

Nobody likes to talk about it because the outlook can be bleak. At best, when clubs have to cut back, they whine about needing to meet Profit and Sustainability Rules ... as if they weren't the ones who had chosen to implement PSR in the first place.

But an analysis of what happened to the world's richest league, the Premier League, in the last transfer window, when net spend went down by 40% and reached its lowest inflation-adjusted level of any non-COVID summer since 2014, as well as conversations with club officials, owners and intermediaries, paints a fairly stark picture.

Now, this isn't something you're necessarily going to measure in the current January transfer window, as winter transfers tend to have a "domino effect" anyway. Club A acquires Player X from Club B, who then spend part of the fee to replace him with Player Y from Club C, and so on. And there are some evident outliers like Manchester City, who could yet spend big since their ownership don't seem to have an evident profit motive and since their hefty profits the past couple of seasons mean they could, according to football finance blogger Swiss Ramble, lose as much as £369 million ($450m) this year and still be compliant with PSR.

However, you could also see it in other ways. Take midfielder Adrien Rabiot, who became a free agent last summer. He just turned 29 years old, he's a 50-cap France international (starting all three group games at Euro 2024), and he has big-club experience at Paris Saint-Germain and Juventus: You would have thought he'd generate plenty of interest as a free transfer. Nope. The summer window came and went, and he only ended up finding a club (Marseille) in mid-September. And even that was for a measly two-year deal that pays him less than half what he was earning at Juventus.

Or how about Victor Osimhen? Napoli wanted a fee of more than €100m for the then-25-year-old Nigeria striker (48 goals in 71 appearances the previous two seasons), eventually dropped the ask to €80m, then €60m, and still found no takers. He ended up moving to Galatasaray in Turkey, on loan, in September.

Real Madrid spent an initial €103m to sign Jude Bellingham from Dortmund. (Photo by Pedro Castillo/Real Madrid via Getty Images)
It's evident in other ways, too. Consider the league leaders in the Bundesliga (Bayern Munich) and the Premier League (Liverpool). Among Bayern's free-agents-to-be at the end of the season are Joshua Kimmich and Alphonso Davies, who are first and fourth, respectively, in league minutes played this season. Kimmich is 29, captain material and one of the best central midfielders around. Davies is 24 and one of the best left-side players. Both have been a huge part of the club's success in recent years.

(Heck, while we're at it, throw in attacking midfielder Jamal Musiala. His deal isn't up until 2026, but he's 21 and arguably the best player at the club. Not that long ago, it would have been unthinkable to allow someone like that to enter the final 18 months of their contract.)

As for Liverpool, the situation involving forward Mohamed Salah (32 and the Premier League's top scorer), center back Virgil van Dijk (33 and club captain) and right back Trent Alexander-Arnold (26 and Liverpool-born and bred) is well chronicled. Talks are "ongoing," everyone is "relaxed" (that word you always see in stories like this) and it's not affecting performance, yet nobody can remember the last time, amid such a successful campaign, that two massive, well-run, solvent clubs like Bayern and Liverpool left it so late to extend the contracts of key players.

Everyone is keeping their cards close to the chest, but you can only surmise that the reason it is taking this long is that the extensions are far from straightforward. The players and their agents have a certain idea of what their services are worth, while the clubs are dealing with a new economic reality. The market is changing, and this is complicating renewals too.

Real Madrid insist they won't be hitting the market this January despite the fact that injuries have left them with a 33-year-old winger (Lucas Vázquez) playing right back and a 6-foot-1 central midfielder playing center back (Aurélien Tchouaméni). Manchester United are trying to dump salaries (not just that of out-of-favor forward Marcus Rashford), and Manchester City are trying to move on from club captain Kyle Walker, just four months after giving him an extension through 2026.

According to Transfermarkt, there have been 16 transfers of over €100m in history. Look at the list more closely and you'll see that more than half of them turned out to be busts or, at least, not moves clubs would do again if they could go back.

There was a time when you could roll the dice on a pricey transfer, knowing that even if you got it wrong and had to shift the player for a loss you'd still find a taker and could swallow the hit. That's not the case anymore. Look at PSG as they try to find a club to take on forward Randal Kolo Muani, whom they paid €80m to sign from Frankfurt just 18 months ago. They'll be lucky to get more than half of what they paid for him if they can ever find a permanent deal, and he's set to join Juventus on loan for the rest of the season.

Why? Partly because there just aren't that many center forward jobs out there, partly because there aren't many clubs who will spend €40m or more on a striker, but largely because the vibe has shifted. Clubs watch every penny now.

This doesn't just affect the biggest clubs, either. Those teams that relied on player trading as part of their business model -- Brighton or Brentford in England, Borussia Dortmund in Germany, Atalanta or Udinese in Italy, Monaco in France, or Sevilla in Spain -- are finding it tougher, too. You're going to be more reluctant to spend €20m or €30m on that promising young winger you spotted if you think that, once he develops, you won't get much more than that back for him.

Take Dortmund's Donyell Malen. They paid €30m to acquire him from PSV Eindhoven as a 22-year-old in 2021. He didn't necessarily turn into the second coming of Lionel Messi, but he did score 15 goals as a winger last year and is a mainstay for Netherlands. Just 3½ years later, he joined Aston Villa for €25m.


Maybe this deflation is just a long overdue correction, one that was delayed somewhat by the wild Saudi Arabia spending two summers ago. Maybe clubs are realizing that revenue won't continue to increase the way it did. Maybe they understand that regulators -- whether UEFA, the Premier League, LaLiga (just ask Barcelona), whomever -- are serious about enforcing rules. Maybe they finally get the fact that was once billed as "investment in the squad" was actually some combination of ego trip and Ponzi scheme, and it actually gets really, really expensive.

Maybe they simply have come to terms with the fact that transfer fees and wages have reached such levels that once revenue stops growing vertically, you can only justify them if there's a certain number of suckers and irrational actors out there to mop up your mistakes. And there are fewer and fewer of those around.

Maybe we've reached some level of sanity. Maybe this will become a real, grown-up, sustainable business one day.

 

[bluebell]

From EPSN.

Is transfer spending finally normal? Why a $100m player might be a thing of the past

Deflation is the opposite of inflation; prices go down, not up, over time.

And most economists will tell you that while excessive inflation is bad, deflation is generally really, really bad. If people think something is going to cost less next month than it does right now, they'll delay buying it. That slows down economic activity and production, the government collects less in taxes, folks get laid off because there's less spending, and everyone is worse off.

OK, that's in the real world. What about in the fantasy sports entertainment world we call football?

Nobody likes to talk about it because the outlook can be bleak. At best, when clubs have to cut back, they whine about needing to meet Profit and Sustainability Rules ... as if they weren't the ones who had chosen to implement PSR in the first place.

But an analysis of what happened to the world's richest league, the Premier League, in the last transfer window, when net spend went down by 40% and reached its lowest inflation-adjusted level of any non-COVID summer since 2014, as well as conversations with club officials, owners and intermediaries, paints a fairly stark picture.

Now, this isn't something you're necessarily going to measure in the current January transfer window, as winter transfers tend to have a "domino effect" anyway. Club A acquires Player X from Club B, who then spend part of the fee to replace him with Player Y from Club C, and so on. And there are some evident outliers like Manchester City, who could yet spend big since their ownership don't seem to have an evident profit motive and since their hefty profits the past couple of seasons mean they could, according to football finance blogger Swiss Ramble, lose as much as £369 million ($450m) this year and still be compliant with PSR.

However, you could also see it in other ways. Take midfielder Adrien Rabiot, who became a free agent last summer. He just turned 29 years old, he's a 50-cap France international (starting all three group games at Euro 2024), and he has big-club experience at Paris Saint-Germain and Juventus: You would have thought he'd generate plenty of interest as a free transfer. Nope. The summer window came and went, and he only ended up finding a club (Marseille) in mid-September. And even that was for a measly two-year deal that pays him less than half what he was earning at Juventus.

Or how about Victor Osimhen? Napoli wanted a fee of more than €100m for the then-25-year-old Nigeria striker (48 goals in 71 appearances the previous two seasons), eventually dropped the ask to €80m, then €60m, and still found no takers. He ended up moving to Galatasaray in Turkey, on loan, in September.

Real Madrid spent an initial €103m to sign Jude Bellingham from Dortmund. (Photo by Pedro Castillo/Real Madrid via Getty Images)
It's evident in other ways, too. Consider the league leaders in the Bundesliga (Bayern Munich) and the Premier League (Liverpool). Among Bayern's free-agents-to-be at the end of the season are Joshua Kimmich and Alphonso Davies, who are first and fourth, respectively, in league minutes played this season. Kimmich is 29, captain material and one of the best central midfielders around. Davies is 24 and one of the best left-side players. Both have been a huge part of the club's success in recent years.

(Heck, while we're at it, throw in attacking midfielder Jamal Musiala. His deal isn't up until 2026, but he's 21 and arguably the best player at the club. Not that long ago, it would have been unthinkable to allow someone like that to enter the final 18 months of their contract.)

As for Liverpool, the situation involving forward Mohamed Salah (32 and the Premier League's top scorer), center back Virgil van Dijk (33 and club captain) and right back Trent Alexander-Arnold (26 and Liverpool-born and bred) is well chronicled. Talks are "ongoing," everyone is "relaxed" (that word you always see in stories like this) and it's not affecting performance, yet nobody can remember the last time, amid such a successful campaign, that two massive, well-run, solvent clubs like Bayern and Liverpool left it so late to extend the contracts of key players.

Everyone is keeping their cards close to the chest, but you can only surmise that the reason it is taking this long is that the extensions are far from straightforward. The players and their agents have a certain idea of what their services are worth, while the clubs are dealing with a new economic reality. The market is changing, and this is complicating renewals too.

Real Madrid insist they won't be hitting the market this January despite the fact that injuries have left them with a 33-year-old winger (Lucas Vázquez) playing right back and a 6-foot-1 central midfielder playing center back (Aurélien Tchouaméni). Manchester United are trying to dump salaries (not just that of out-of-favor forward Marcus Rashford), and Manchester City are trying to move on from club captain Kyle Walker, just four months after giving him an extension through 2026.

According to Transfermarkt, there have been 16 transfers of over €100m in history. Look at the list more closely and you'll see that more than half of them turned out to be busts or, at least, not moves clubs would do again if they could go back.

There was a time when you could roll the dice on a pricey transfer, knowing that even if you got it wrong and had to shift the player for a loss you'd still find a taker and could swallow the hit. That's not the case anymore. Look at PSG as they try to find a club to take on forward Randal Kolo Muani, whom they paid €80m to sign from Frankfurt just 18 months ago. They'll be lucky to get more than half of what they paid for him if they can ever find a permanent deal, and he's set to join Juventus on loan for the rest of the season.

Why? Partly because there just aren't that many center forward jobs out there, partly because there aren't many clubs who will spend €40m or more on a striker, but largely because the vibe has shifted. Clubs watch every penny now.

This doesn't just affect the biggest clubs, either. Those teams that relied on player trading as part of their business model -- Brighton or Brentford in England, Borussia Dortmund in Germany, Atalanta or Udinese in Italy, Monaco in France, or Sevilla in Spain -- are finding it tougher, too. You're going to be more reluctant to spend €20m or €30m on that promising young winger you spotted if you think that, once he develops, you won't get much more than that back for him.

Take Dortmund's Donyell Malen. They paid €30m to acquire him from PSV Eindhoven as a 22-year-old in 2021. He didn't necessarily turn into the second coming of Lionel Messi, but he did score 15 goals as a winger last year and is a mainstay for Netherlands. Just 3½ years later, he joined Aston Villa for €25m.


Maybe this deflation is just a long overdue correction, one that was delayed somewhat by the wild Saudi Arabia spending two summers ago. Maybe clubs are realizing that revenue won't continue to increase the way it did. Maybe they understand that regulators -- whether UEFA, the Premier League, LaLiga (just ask Barcelona), whomever -- are serious about enforcing rules. Maybe they finally get the fact that was once billed as "investment in the squad" was actually some combination of ego trip and Ponzi scheme, and it actually gets really, really expensive.

Maybe they simply have come to terms with the fact that transfer fees and wages have reached such levels that once revenue stops growing vertically, you can only justify them if there's a certain number of suckers and irrational actors out there to mop up your mistakes. And there are fewer and fewer of those around.

Maybe we've reached some level of sanity. Maybe this will become a real, grown-up, sustainable business one day.

Why did they leave out the Mbappe deal, you can gloss it over as a free but the club paid him €150m upfront? This more or less a transfer fee. Salah was offered for huge fee 12M ago... The owners didn't want to sell.
How many players out there that are worth €100m that clubs will sell?

 

[Beamrider]

I think the Mbappe omission is deliberate, because it doesn't really fit the hypothesis (which is flawed IMO). Are clubs spending less? Some of them are, basically those on the cusp of PSR issues, at least in the Premiership. This may just be a temporary thing until they force through a relaxation of FFP rules or join some sort of Superleague.
Are the clubs with capacity to spend spending less? Perhaps on transfer fees, but certainly not on wages. And that's where Mbappe fits in - the most expensive free transfer in the sport's history, to a club who could afford it. The wages and signing-on fees are astronomical, but when you look at the total spend over the life of the contract, with the excess wages replacing the transfer fee, it's not out of kilter with what you'd expect, it's just that it's all going to the player. That's in danger of becoming the direction of travel now. Players will run down contracts, hoping to get higher wages when they sign for a new club (or to strong-arm their existing club into paying them more to stay). I'm not really sure why this didn't happen sooner - Michael Ballack made himself very rich doing it 15 odd years ago. The clubs that will come out on top in this era are the ones who exploit the situation and sign top players on free transfers with top wages.
But ultimately it will decimate clubs lower down the pyramid who rely on transfer fees to keep going. The Red Bull model is probably the way those clubs need to go - buy them young, allow them to leave for reasonable fees, probably less than their open market values, but it's part of the sell to the player when you sign him.
Or you could buck the trend a go all Chelsea and splash over £1bn on transfer fees.

 

[The Nomad]

Evertons final PSR charge is dropped.

This feels like a set up for 115 to get away scot free.

If that's the case, this will probably be my last as avid watcher of the PL. They have no bollocks at all to enforce the rules. And our owners are the only ones sticking to the rules it seems

 

[My_Blood_Bleeds_Red]

Nothing will happen to the 115 bois. A slap on the wrist at most.

Why else would Pep sign an extension ?
Haaland’s new contract.
Their rebuilding and shopping spree begins soon

Nah, it’s all been programmed.

Money talks.

 

[Dreambeliever]

The word proportionate is concerning in that statement.

I hope City’s wrists are strong enough for the incoming slap.

 

[Beamrider]

The word proportionate is concerning in that statement.

I hope City’s wrists are strong enough for the incoming slap.

I reckon they were thinking that Everton might feel victimised if they had another go at them, but also that they'd be punishing Everton this year for something the appeals panel really should have dealt with last season.
Just to put some colour on this. Everton set up a new company (I'll call it Stadium Co) to build its stadium. The club took on a load of debt and lent funds to the Stadium Co to give it the money to pay the bills. Usually when a company is building an asset, accounting practice allows them to add the interest costs to the fixed asset amount (so the expense doesn't sit in the profit and loss account). There are some conditions for this, which include that the debt must have been incurred to build the asset. Everton couldn't prove this, quite the opposite. The stadium construction was mostly funded by money from Moshiri (interest-free) and the loans were for general business funding. If they'd done things the other way round there wouldn't have been a problem, but they didn't. So there's a first appeal that says it's harsh to be punished for a technical failure, basically an error in their paperwork.
But before we get too sympathetic, there are two alternative readings and some more detail to consider.
Firstly, they charged hefty amounts of interest on the loan between the club and the Stadium Company. They then added the interest expense to the asset cost in the Stadium Company. The only issue with that is whether the interest charges were excessive, and I don't have enough detail to comment on that, but they did initially make the loan interest-free and then charged retrospective interest on it. That feels a least a bit naughty to me.
Secondly, we need to consider what they report on. In one of their hearings, it was documented that their original reporting was on the combined results of the club and the Stadium Co, but that Baxendale had requested permission to report the club only. It isn't clear from the hearings whether this permission was granted, but if it was then they significantly reduced their PSR losses by making charges of interest into the Stadium Co, and arguably artificially enhanced their results with the retrospective charges (the interest charges would have wiped out, even exceeded interest costs in the club's accounts).
If the permission wasn't granted, then they are reporting based on their group results, and this is where I have more of an issue. It was OK for the Stadium Co to add the interest to the asset cost in its OWN books, from Stadium Co's perspective, the money had been borrowed for the clear purpose of building the stadium so the conditions are met. The group accounts are then prepared by adding together the club and Stadium Co results. But, I believe the group accounts are wrong - the recharge of the interest to Stadium Co and the capitalisation of that cost should be reversed out when preparing the group accounts, but it hasn't been. The principle of group accounts is to pretend the entire business is carried on directly by the head of the group. The head of the group wasn't entitled to add the interest costs to the asset in its own books, but the group accounts assume it could do that. They managed to persuade their auditors this was OK. IMO it's not, and therefore they should have been punished more heavily last year as their losses as reported to the PL were understated. But they survived by 14 points last year, so had they been punished then (maybe 4-5 extra points), they would still have been OK. I reckon that's the excuse the PL has used to drop the case.
And that's a problem, because if the penalties they were given historically had been applied in the years the offences were committed, they'd have been relegated (which was the basis of the possible litigation by Burnley and others). So if the PL accepted a timing mis-match previously, they should accept one now.
Obviously if they survive by 4-5 points then it's academic anyway. And if they survive because City are relegated in their place then I can live with that.
But they've dodged a bullet here.

 

[StevieM]

These PSR rules have more dirty great big gaping holes in them than PornHub - there’s no way a team like City gets punished enough to get relegated and doesn’t get it overturned at the shift Court.

I’m calling it now - unable to prove fraud and they get a fine for not being co-operative.

Chelsea will be the same - just a fine.

Pence it happens… Newcastle will be free to spend whatever they want - if City win their case and Newcastle get CL - they’ll go for Salah.