Liverpool Rumours Archive September 11 2012

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11 Sep 2012 17:29:26
Ed002! What is your opinion of the ffp then. Do you think they will be implemented fully with sanctions against clubs to follow? Reading what you say about the clubs discussing a breakaway european league and as you say eventually being the end of Uefa, why would Uefa continue to go down this route and possibly sign their own death warrant? It seems to me that the clubs still hold the balance of power. How can Uefa push these rules thru?

The Irish Rover {Ed002's Note - Subject to a legal challenge I would expect the FFPR to be fully adopted on schedule. The issue will likely come when they try to impose sanctions but as I said that is some years away. Pretty much all clubs have accepted the proposals. The issue with the breakaway is really independent of the FFPR - it has been in discussion for many years.

But the impact is potentially very significant. There is every likelihood that the big money from television, sponsorship etc. would go with a breakaway league. It would completely rupture the operations of UEFA and I would expect it would require national associations like the FA to restructure their leagues. Nobody wants this but it is the eventual consequence I would expect. If I had to speculate, I would think (a) you might eventually see something like five or six EPL teams leave for two-tier pan European league; (b) the Premier League would be disbanded as an organisation; (c) the FA would restructure in to two 20 team divisions with lower leagues regionalised as they were many years ago; (d) FIFA would ban all players from the breakaway teams from International football - perhaps rescinding that position to stop FIFA breaking up as well. I could also see many teams lose their professional status.

I would think we are probably 10 years away from any significant move at this time.}

Hi Ed002 - this may be a stupid question, but would you expect Liverpool to be part of this?

Cheers

Crooky
YNWA {Ed002's Note - As I said we are probably 10 years away from anything significant actually happening.}

Ed002 I'd just like to say thank for your helpful and informative replies today. You Eds, and you Ed002 in particular, get a lot of unwarranted crap from posters.

What are the implications as far as sky tv goes? would they be in a position to bid for the exclusive rights or would you speculate that bigger players might move into the market or that teams will negotiate their own viewing rights? {Ed002's Note - It is far enough away not to be able to comment with any confidence.}

11 Sep 2012 13:22:36
Ed002,
First UEFA FFP penalties.
A taste of things to come, or picking on the minnows ?
Ta, Icky

{Ed002's Note -

The Demystification of the Financial Fair Play Rules (FFPR)

Introduction

I will try and simplify and summarise the FFPR and give examples where I can.

Putting aside all of the “mother country” fluff, the fundamental purpose of the FFPR is to:
(1) Ensure that clubs are operating within their means with transparent financial reporting. Example: Arsenal has debt which they can manage from the money they make as a club (good). Anzhi has a very low turnover given the amount of money they spend on players through donations from wealthy owners (bad).
(2) Protect creditors. Example: When Portsmouth went bust they owed money for players (the extreme case being Glen Johnson who had moved to Liverpool but Portsmouth still owed Chelsea for), money to local businesses (tradesmen who had worked at the ground, newsagents etc.), utility companies, the police et al (bad).
(3) Encourage responsible spending. Example: Liverpool under Hicks and Gillett borrowed money against the value of the club in order to buy players (bad).
(4) Protect the long-term viability of European club football. Example: They want to avoid the scenario of clubs entering administration or going out of business.

The FFPR apply to all UEFA club competitions and will actively come in to force from the end of June 2014 taking account of the financial monitoring period (the season just finished) and the two prior reporting periods (the two seasons before that). So when they first start, the FFPR will look at the 2013/2014 returns, and they will give consideration to the 2011/12 and 2012/13 figures.

I should make clear that it is not the full accounts of a club that are being considered, but just the “relevant” income and the “relevant” expenses. “Excluded” expenses are critical to the FFPR calculations. To this end, all clubs will need to effectively produce two sets of accounts. An audited set which are provided to Companies House and the relevant revenue organisations, and a second audited return laying out the “relevant” income and the “relevant” expenses for the purpose of the FFPR.

Relevant Income

(1) Match day gate receipts. Example: The money made by the club from paying fans attending games. This includes income from cup games when played away from home – where a proportion of the gate money goes to the away side.
(2) Broadcasting rights. Example: Television income for games, money provided for radio broadcasting.
(3) Income from commercial activities. Example: Sales of bobble hats and rattles, club shop income, licensed income (e.g. DVD sales). In the future you can expect to see income from other media (e.g. streaming of games on a pay-per-view basis to the web and phones) increase.
(4) Prize money. Example: income from the Premier League, Champions League etc..
(5) Sponsorship. Example: Shirt sponsors (Standard Chartered, Samsung etc.), shirt manufactures (Adidas, Warrior etc.).
(6) Advertising. Example: Companies who buy time on video screens during games or hoardings at the stadium.
(7) Other operating income. Example: Payments made to a club for playing friendly matches in the Far East.
(8) Income from transfers: Example: All income from the sale of a player regardless of payment being due to previous clubs, the player himself etc. as they are allowable expenses which will later be deducted.
(9) Excess proceeds on the sale of tangible fixed assets. Example: The money Arsenal from converting part of Highbury in to apartments and selling them.
(10) Other income: Example: Interest on investments.

Relevant Expenses

(1) The costs of running the business (confusingly referred to as “the cost of sales” by accountants etc.). Example: Wages, ground maintenance, lighting, telephones, IT equipment, travel costs, policing costs etc..
(2) Employee related benefits and associated costs. Example: Costs of providing insurance, dental care, medical, employer NI contribution, housing, loyalty bonuses etc..
(3) Other operating expenses. Example: Payments for advertising, legal fees, agent fees, accounting fees, payments to players in relation to transfers, payments to player’s previous clubs, etc..
(4) Amortisation or transfer costs. Example: The total amount of money paid to another club to transfer a player or, if a club decides to do so, the amortised cost for that year (where a club is spreading the cost of the transfer out over the length of his contract for accounting purposes).
(5) Finance costs. Example: Bank charges, interest on loans etc..
(6) Dividends. Example: The owners may take a dividend from the profits a club makes as income.

Excluded Expenses

(1) Depreciation of tangible fixed assets. Example: The loss, if any, in value of the stadium, cars, IT equipment etc..
(2) Costs associated with the intangible fixed assets (other than player registrations). Example: goodwill, franchises, trademarks, copyrights etc..
(3) Expenditure on youth development activities. Example: All youth development expenses (housing, schooling, travel, medical etc.) are excluded from the calculations.
(4) Community development activities. Example: Outreach programmes, donations to the local community and charities, provision of equipment etc..
(5) Tax expenses. Example: Monies paid to the Inland Revenue, VAT etc..
(6) Finance costs related to construction of tangible fixed assets. Example: The interest on the £300M loan to build a new stadium.
(7) Interest payments on old loans (pre June 1, 2011). Example: Any interest due on a loan taken out for whatever purpose before June 1, 2011 is excluded from the calculations.
(8) Certain expenses from non-football operations. Example: This does not really apply to British clubs, but in other European countries clubs are often “sporting clubs” and have basketball, football, hockey team etc. all under one business.

The Calculation

FFPR calculates from a club’s “relevant” income and the “relevant” expenses whether the club is running at a surplus (profit) or deficit (loss) within a Monitoring Period (e.g. 2013/14). From this the FFPR decides if a club has met the “break even” requirement or not. This is not met if the “relevant” expenses exceed the “relevant” income by more than 5M euros (an acceptable deviation).

If the club exceeds this acceptable deviation, the owners of a club may contribute toward correcting it to a maximum of 45M euro over a rolling three year period (30M euro from 2015/16 on). Example: If Club X made a loss of 50M euro in 2013/14 due to the purchase of players, the calculation will ignore the first 5M euro and assume an owner contribution of 45M euro and there would not be an issue. However, for the two years following, there would be no allowable owner contribution as the full allocation had been used. If Club Y made a loss of 30M euro in 2013/14 due to the purchase of players, the calculation will ignore the first 5M euro and assume an owner contribution of 25M euro and there would not be an issue. But in this case, for the two years following, there would still be 20M euro allowable as owner contribution to cover further losses.

The Punishment

The Threat: If a club has been determined to have violated the “break even” requirement for a season it may be excluded from the next season’s UEFA competitions.

Likely Situation: If a club can show it has been moving in the right direction and doing what it can to overcome financial issues, perhaps brought on by a recession (e.g. in Spain) then I would expect a strongly worded letter as a warning. Perhaps by then end of the 2016/2017 season, If a club has been determined to have violated the “break even” requirement for several seasons then it may be excluded from the next season’s UEFA competitions.

UEFA are willing to make some exceptions to the rule and have already said they will consider:

(1) The quantum and trend of the break even result. Example: Chelsea has spent a lot this summer rebuilding an aging squad, so even with considerable additional income from winning the Champions League it could violate the “break even” requirement. However, spending less next season will show the club moving in the right direction. Expect a strongly worded letter in a couple of years time.
(2) Debt situation. Example: A possible “get out” for Barcelona, Real Madrid and Manchester United should they have a bad season and need to violate the “break even” requirement. Consideration will be given to the existing debt and the ability of the clubs to service that debt. The trend of the debt reducing and an excuse of “one bad season” and “need to rebuild the team” would likely result in a slapped wrist.
(3) Fluctuating exchange rates. Example: All non eurozone countries need to report the FFPR figures in euros which could fluctuate due to the exchange rate, whereas a number of the UEFA figures are fixed amounts (e.g. the 5M euro acceptable deviation).
(4) Projected figures. Example: UEFA will allow clubs to show that they are moving in the right direction if they provide projected figures showing that the “break even” requirement will be met in the following season.
(5) Force majeure. Example: Any extraordinary events or situation arising that is beyond the club’s control will be taken in to account.
(6) Until then end of 2014/15 only - Ongoing reductions in wage costs. UEFA will be flexible over the “break even” requirement if a club can show that their wage bill has been reducing and with the exclusion of wages of players signed before June 1, 2010 they would have met the “break even” requirement. Example: An escape route for the likes of Chelsea prior to this season with Drogba, Anelka, Bosingwa, Kalou, Cech, Terry, Lampard etc. wages excluded from the calculations. A possible future escape route for the likes of Barcelona.

The Issues

There are a number of matters that UEFA still need to figure out and a number of concerns that certain clubs and certain national associations have. Off the top of my head:
(1) Loopholes: Whilst UEFA has done what it can to block any potential “loopholes” it is well aware that exclusion of wages for players signed before June 2010 is one it has introduced itself, and one that will be popular with the higher paying clubs as a short term escape route through to the summer of 2015. The matters of excessive sponsorship will be addressed via a cap to thwart the concerns over the likes of Manchester City abusing the rules. The cap has yet to be finalised but will require ratification.
(2) Soft Sponsorship: UEFA are concerned at the aggressive approach to obtaining sponsorship some clubs are taking. Questions are being asked about the ethics in clubs having airline travel partners, photocopier partners etc.. The Spanish clubs have raised this as a concern.
(3) National Sponsorship Variations: As we have seen tobacco sponsorship leave Formula 1 UEFA would like to see alcohol sponsorship out of football. We already have a situation where sponsorship by alcohol related businesses are forbidden in certain countries. Wealthy breweries are now focussing their sponsorship in other countries thereby creating a perceived imbalance in what income clubs are able to obtain in sponsorship. The French and Russian clubs have raised this as a concern.
(4) National Financial Distribution Variations: Concerns exist in countries where different models are used for distributing prize money, contributing to the grassroots game and distributing income from television and other media broadcasting. This led to an original request (rejected) from a number of clubs to restrict the FFPR to only the wealthiest of clubs, those with a turnover in excess of xM euros.
(5) National Taxation Variations: There is a considerable difference across UEFA nations in taxation, and this is seen to be reflected in the wages paid to players. The Spanish clubs have raised this as a concern.
(6) Third Party Ownership: Countries that allow third party ownership of players are seen to have a distinct advantage in being able to keep the costs of transfer fees low as they are only paying for a proportion of a player. The English clubs have raised this as a concern.

The Great Fear

Without going in to too much detail: (a) A number of clubs take the opportunity a once or twice a year to discuss various issues including changes in rules, television rights, the power of UEFA, exploitation issues for new technology streams, etc.. These discussions, the last of which were in late August, also always turn to the possibility and structure of a breakaway pan European league. Several are ex-G14 clubs, several are not, and some clubs decline involvement in such discussions. (b) The plan is that at some point a number of clubs would break away from their national leagues and UEFA. They accept that they would be banned from all existing club competition and the players would initially be banned from all FIFA competitions as well, but know that FIFA would be looking to negotiate in any case. It would be the end of UEFA in all probability and UEFA are very aware of this. It would also result in a restructuring of many of the national leagues. (c) The clubs would renegotiate their television rights, rights of distribution via other streams etc.. (d) It remains the greatest fear of UEFA and all major national authorities that one day this will happen.

Great post Ed thanks for taking the time.

All in all, how do Liverpool stand ? {Ed002's Note - When time allows I will do some examples.}

Though i dont really understand some of it, but i thank u for taking the time to write this ed002.

Kaizer

That was a spectacular toilet time read, but now I'm well behind on the paper.

Thanks though Ed002 you've cleared that up excellently

Rob

Hi ed,just e.g here,so man city owners can basically get there airline to sponsor naming rights of there stadium for 300million,and go crazy spending,and uefa cant touch them,no matter what there income is,if i am right saying this the clubs with the billionaire owners will always find a way around this,going further ahead of other clubs.ray {Ed002's Note - They can sponsor them as much as they like but UEFA will look to cap the sponsorship for the purposes of teh FFP calculation. For example, it may be the case that for the purposes of the FFP rules the sponsorship taken in to account is £75M meaning that anything above that is seen as excessive and excluded from the calculations.}

"Without going into too much detail" :DDD

Had to laugh at that sorry Ed02, do appreciate your effort in bringing this info to us

SAMUILFC

But can you explain FFP via the medium of dance? {Ed002's Note - I have mime and sock puppet versions.}

Thanks alot ed, much appreciated. Cleared things up nicely. If a group of "big teams" did break away would Liverpool be invited into this new league?
Andrew {Ed002's Note - We wills ee. Back in the day Moores was involved in some of the discussions.}

Fantastic overview, Ed002, and much appreciated. A couple of questions/comments, if I may-

- You mentioned youth development activities may be excluded from consideration. Would this include youth salaries/fees as well? If so, what would qualify as youth? It would seem for the clubs with big spending owners this would be a fantastic place to invest, no?

- I realize this is an attempt to make things more level, I guess, but to me it really seems more designed to keep the smaller clubs, well, small. It would be exceedingly difficult, for example, for another billionaire to purchase a mid-table club and take them to the top via massive investment, or at least a less attractive proposition. Thoughts?

- It seems to me that most punishments will be toothless and likely be nothing more than harshly worded reprimands rather than actual removal from UEFA competitions except for perhaps the most egregious offenders (Anzhi, possibly PSG, although I imagine they'll back off spending moving forward). In reality I can see this maybe affecting future behavior slightly (possibly reducing enormous transfer fees and salary a bit even) but overall I think it will have very little impact and I can't see it actually leveling the playing field, so to speak.

Thanks again for your time on this- it is appreciated!

RDL {Ed002's Note - Salaries are not excluded. UEFA count all players registered for any of the minimum of four youth teams under the age of 21 to be a youth. (2) This is a common fear - that it would effectively keep "the elite" as they are and make it more difficult for others to make the step up. (3) Anzhi has already excluded themselves from the FFP rules and opted out. PSG will need to get their act together as you say.}

Brilliant- thanks Ed002!

RDL

Simplify? Bloody hell mate

I would normally never repeat something someone else has said on this but in this case I feel it is warranted. Thanks very much for a compressed and never the less comprehensive explanation. I only really come on here for what the eds say. another job well done.

cheers

Colin

Thanks ed002 much enjoyed read

2xboo

'And Your chosen subject for round one Ed002 is.....'
'Financial rules of world football'
That is as good an explanation as ive ever heard for anything, even the time my father explained sex through the mediam of porn.

Just a thought;

Perhaps these FFP will indeed hinder smaller teams from growing via massive investment from some ultra rich new owner.

However, what it might also do is allow teams without deep pocketed owners to buy better players as the uber wealthy teams won't be able to price other teams out of the market with huge wages and mega transfer fees anymore.

SpudRed

I got half way through and got bored... Jayzus..

Previous poster: Ingrate! Ed002: Wow! Respect! Thank you. And finally to the comment about explaining through dance: Thanks for a real good laugh! :D

I got half way through and got bored... Jayzus..


-------------------------------------------------------
You'd get half way through Playboy and get bored.

Are UEFA competitions CL and Europa. Im only asking because, where is the threat if your not in a CL or Europa spot?. And with the brake away league, I don't see the point of it unless. the teams that are in in can compete with the "sugar daddy clubs" like man city and Chelsea.
Cheers Murray {Ed002's Note - Those are the competitions. There is no threat if you are not interested in playing in either competition. The point of the breakaway lague would be purely financial - although this is not how it will be dressed up. Any breakaway league would likely involve the likes of Chelsea.}

Can't see how this will keep the small teams small - from what I understand if you aren't taking part in the European competitions anyway, then the stick that you can be hit with is somewhat limited. Granted, billionaire owners will need patience in seeing their 'investments' becoming European Champions, but if Bill Gates wants to buy Blackpool and spend big money rejuvenating the club, then the threat of a strongly worded letter from a competition that they aren't actually in, is not going to put a stop to it. {Ed002's Note - The issue would come when a club does qualify for Europe.}

11 Sep 2012 09:57:12
Question,how true is it that were looking at bringing in the highly rated marc andre-ter stegen in january?.I think reina is well past his best,and it seems easy for opponents to score against him. {Ed002's Note - I would doubt he would move in January.}

Answer: Doubtful for January, but who knows?

Way past his best, eh? One lapse in form in half a decade representing our club and you suggest he is past it. Blurt.

Ed002 - is that doubtful because FSG will not release a cent again in the Jan window? {Ed002's Note - The owners spent more that £30M net including fees this summer. It is doubtful as (a) I don not know that Liverpool are looking to replace Reina in January; (b) I don't know of any confirmed interest in ter Stegen from Liverpool; (c) I doubt that Borussia Mönchengladbach would have any interest in selling ter Stegen.}

Brad jones better than reina, and probably more gratefull to wear the shirt

Reina has played well for ages now,probably since rafa left!.

Reina should have gone two years ago, his heart is no longer at the club.He has'nt played well for quite a while now.

Baz F

Have to agree with baz f,it's time reina went,think we would still get a good fee for him,and there are some fantastic up and coming keepers out there.