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Chelsea, Manchester City’s new means of dealing with Financial Fair Play

Jan 23, 2014, 4:41 PM EST

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Major League Soccer commissioner Don Garber claims his league is losing between $75-$100 million a year, a claim more likely a pre-collective bargaining stance than anything reflecting the league’s true financial health. The claim does, however, highlight the state of MLS’s maturation. With signings like Clint Dempsey’s and Michael Bradley’s, and with investments from clubs and the league helping the teams move beyond their first generation venues, it’s easy to slant the books to make the league seem more impoverished than it actually is. Put those big, long-term commitments on the books now, and leave the league to look thriving once a new collective bargaining agreement is signed.

They’re the same type of machinations that could also help the league’s new partner deal with UEFA’s Financial Fair Play regulations. Manchester City, who this week also acquired Melbourne Heart in Australia, have become one of Europe’s big spenders since Abu Dhabi United took over the team in 2008. They’ve paid a premium to bring the likes of Yaya Toure, Sergio Aguero and Fernandinho (among others) to greater Manchester. In the process, they’ve served as one of the poster boys in UEFA president Michel Platini’s quest to get big clubs’ spending in line with their incomes.

Designated Players and Manchester City’s new Marquee contract havens

That’s where MLS (and the A-League, two leagues with permeable salary caps) come in. With no FFP-esque oversight in CONCACAF or its Asian counterpart, the AFC, those highly speculated Gareth Barry-esque loans become a way to get inefficient contracts off the books, giving City some extra room beneath UEFA’s spending ceilings. If City can send Barry’s salary ($10.37 million) and, say, Javi Garcia‘s ($7.26 million) to NYCFC while claiming their child club will cover the wages, the parent team all of a sudden has a significant amount of breathing room on their books. While Abu Dhabi United adds money directly to NYCFC’s coffers, City gets some FFP flexibility they wouldn’t get if their owners were merely writing checks to the club.

Under FFP, UEFA has the power to investigate these shady dealings. The problem is, on the books, this won’t look shady. City will loan the players to NYCFC and have their wages covered by their partner. NYCFC will simply pay for them and either not have to explain that Abu Dhabi United’s simply shifting money from one pile to another or confess that’s what’s happening while asking ‘why shouldn’t we be able to do this?’

Of course, that’s all speculation. NYCFC is still a year away from taking the field. Who knows what their team will look like? Yet, if Manchester City so choose, they can fill their new teams’ three Designated Player spots with City’s less useful contracts. They can do the same at Heart with the A-League’s Marquee Player rule (one per team). With whispers around MLS saying City has already secured promises for more lenient spending rules (perhaps more Designated Players), it’s not difficult to imagine the Australian federation  making similar guarantees to lure a high-profile owner.

source: Getty Images

On loan at Everton this season, midfielder Gareth Barry has been linked with a move to NYCFC for 2015 – the new franchise’s debut season in Major League Soccer. (Photo: Getty Images)

In the grand scheme of things, it could be seen as nitpicking at the margins. On the other hand, if City are able to take four contracts that aren’t significantly contributing to their team, move them abroad, and get room within FFP to replace them, those could be the type of margins that make a difference at the highest levels. Given the gap between Arsenal and City at the top of the Premier League, or the gap in quality between Barcelona and City in their UEFA Champions League Round of 16 matchup, every little bit could help.

When UEFA implemented FFP, it’s unlikely they anticipated these kinds of maneuvers. As Platini spoke against the continued spending of his confederation’s biggest clubs, he never spoke about the possibility of “player havens” popping up across the globe. It’s unlikely that’s Manchester City’s sole intent (the growth possibilities alone in MLS and the A-League justify the expenditures), but the havens are still a nice coincidence. How many of Europe’s top teams would pay a one-time $100 million fee to have a permanent FFP work around?

Chelsea: Udinese, on a totally different level

In a completely different way, one City’s Premier League competitors appear to be developing a different work around, one that was evident when they sold Kevin de Bruyne to Wolfsburg. Although Chelsea never significantly used their young Belgian attackers (loaning him out for 1.5 of his two years at Stamford Bridge), they were able to turn a nice profit on the former Genk star. Having become the Wolves’ record signing earlier this month, the near-$15 million Chelsea netted in transfer fees will go toward their FFP bottom line. Though wages and other expenses take a bite into that profit, the Blues still made big money off their de Bruyne flip.

For purchases like Mohamed Salah, Chelsea’s unlikely to experience that kind of profit. And with deals like Fernando Torres‘s, Gary Cahill‘s, Willian‘s and Eden Hazard‘s, they’ll surely lose money, just as most teams do when they pay their key players. But among the 26 players Chelsea have on loan — including Vitesse’s Christian Atsu, Middlesbrough’s Kenneth Omeruo, and Valencia’s Oriol Romeu — the Blues will have a few more de Bruynes. For every Thibaut Courtois or Romelu Lukaku that eventually breaks into Jose Mourinho’s first team, there may be two eight-figure flips that pad Chelsea’s FFP margins.

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Purchased from FC Porto this summer, Ghanaian international Christian Atsu is one of five Chelsea players at Vitesse in the Dutch Eredivisie.

It’s a model that Serie A club Udinese is built on, even if the Giampaolo Pozzo’s team is operating on a much lower level. With 33 players on loan between the Serie A, Granada (Spain) and Watford (England), the Genoa-based club have set up an infrastructure that allows the Bianconeri to scoop up and house prospects across South America and Europe, hoping to find another Alexi Sanchez. Though the Zebras rarely find a player that allows them to collect over $35 million (as the Chilean did from Barcelona in 2011), smaller sales make the model work, with players waiting to be sold making up the squads of Pozzo’s expanding number of clubs.

Instead of paying $1 or $2 million on true prospects, Chelsea’s able to spend much more on more established talents. And while those players’ values mature — while they’re out on loan across Europe — most of the wage burden is being picked up by other clubs, leaving only the balance and an amortized transfer fee on the Blues’ FFP bottom line. Instead of selling on the Sanchezes of the world, Chelsea keeps the stars they develop, with the rest of their sales addressing their financial end.

That end isn’t profitability. It’s Financial Fair Play – rules implemented to try to bring clubs’ spending in line with income. In the case of Chelsea and Manchester City, however, new approaches are (or will) allow them to play beyond FFP’s pure intent. For Chelsea, that means becoming a broker for emerging talent, helping them to either the Premier League or some nice wages while they await their next permanent home. For City, that means setting up franchises across the world, with the rules of each region potentially helping the Citizens transcend UEFA’s limits.

  1. dfstell - Jan 23, 2014 at 5:02 PM

    These FFP rules are never going to work because for these ultra-wealthy owners the soccer club isn’t a business….its a toy. Some guys like Paul Allen buy 500 foot yachts. Some guys buy Chelsea. Some guys buy racehorses.

    Those guys’ want to see their toy win and are willing to spend and that will always overpower any FFP rules.

    FFP is like telling Paul Allen that he can’t put new engines on his boat.

    Mind you, I’m saying this as a Manchester United fan where we would benefit greatly from FFP because we actually have commercial revenues and DO run more or less as a business. Same with Arsenal and Bayern.

    But, FFP won’t ever work. And truthfully, even owners like the Glazers don’t really want effective FFP because it limits how much they can sell United to some oligarch in the future.

    • walterswhites - Jan 23, 2014 at 8:31 PM

      The REASON FFP won’t work is not because of clubs like Chelsea and City, it’s because of clubs like UNITED that are buried in DEBT. Fortunately for United, they are able to service that debt quite easily through revenue by making Ching Chong Noodles their official noodle partner in Asia and Ming Lao Sung their official toenail cutters in Malaysia. They’re also able to get sponsors for Rooney’s hair plugs…etc.

      Not that I care, but don’t act like United are all sanctimonious in their selling of the clubs soul to service that debt.

      Furthermore, being that you are one of the 656 million United fans that lives in Manchester, you’ve seen what’s going on in the east of Manchester with the City Football Academy and how that (up until recently) industrial wasteland is being changed into a job creating centre for local restaurants, hotels and shops in that area on top of being a state of the art footballling academy. Heck of a play toy wouldn’t you say?

      Also, have you seen the newest Deloitte Money League figures for 2014? Manchester City are now in 6th place earning more commercially than Arsenal, Chelsea and Tottenham. So, spare me your smug BS about United and Arsenal being the only teams that “have commercial revenues.” If you want to see how a business is run, look no further than the Eastlands.

  2. atxnole - Jan 23, 2014 at 5:12 PM

    One thing to keep in mind is that the player has to agree to the loan. More often than not, someone like a Gareth Barry would rather continue to play in Europe. Your scenario where the new club (NYCFC) absorbs their contract would be a good means to shave some costs but at the same point in time, MCFC are in it to win it. They’re not going to be sending expensive players to NYCFC unless they think they can help them win the league.

    More than likely, any loanees will be good, young talents who they want to get some top-flight experience abroad. I could see someone like Marcos Lopes, Seko Fofana, etc. being sent to NYCFC rather than playing for the EDS or a Championship or League One side. These players would not absorb a DP slot in most cases as well.

  3. danielofthedale - Jan 23, 2014 at 9:36 PM

    Doesn’t MLS require all loans to have a purchase option? And would MLS want to have a player like Javi Garcia as a DP?

  4. yoshou - Jan 24, 2014 at 11:07 PM

    Let’s completely ignore the fact that MLS has final say on all transfers, loans, and signings. They have and will continue to reject attempts by MLS teams to severely overpay players. You may have a point with A-League and its lack of oversight, but MLS would never allow Mansour to dump those contracts onto NYCFC’s books.

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