Another day, another study on football finances. No, not the Deloitte and Touche one (which we will come to later), this study comes from Spain, the Football Transfer Review.
Yesterday we had a look at the first part of the study, which analysed the general health of football in the 5 biggest Leagues. The conclusion is that, despite the economic crisis, these Leagues are in rude health … if we judge the revenues generated by the clubs in the Leagues, not to mention the state of the transfer market, which is in constant progression. The Premier League is in a particular state, however, of constant growth (there seems to be no levelling off of our national game). It continues to be head and shoulders above its nearest competitor, the Primera Liga, and that despite the relative terms of trade having changed to the detriment of the Premier League as a consequence of Sterling`s slump.
The report carries out a case study of Chelsea, with an interesting tableau of annual spending in transfers between, 2004 to 2009. It shows pretty much a constant drop in our spending: whereas Chelsea spent some €91,6 million in 2004 (that was the first year of Mourinho, and he was indulged with Ferreira, Kezman, Drogba, Tiago and Carvalho as well as Čech and Robben who signed the winter before but were only available when José took the reigns), we spent only €28,5 last summer (on Yuri Zhirkov, Daniel Sturridge, and Nemanja Matic). Already by 2005-2006, spending had tailed off: that was the year of €54,4 million on Asier Del Horno, Lassana Diarra, Shaun Wright Phillips, and Michael Essien. In 2006-2007, Chelsea spent €46,5 million (Kalou, Boulahrouz Ashley Cole and Andriy Shevchenko), and 'only` €40,2 million in 2007 (Malouda, Anelka, Ivanović and Belletti). Actually the low point was 2008-2009, when €24,1 million was spent on Bosingwa and Deco.
These figures, considerably less than most of our rivals spent, contradict a myth of Chelsea being a chequebook team. Even in England, Chelsea are outspent by any number of our rivals: in a list of the 10 biggest spenders this year, Chelsea come only 8th. Needless to say, Real Madrid, with their €260 million, come first, followed by the €140 million of Manchester City and €112 million at Barca. In England, ManU spent more (44 million), as did whinging Liverpool (43 million). Bayern spent €51 million.
Then again, it is interesting also to compare the purchases with player sales, to give an idea of the investment potential of clubs. If we look at the 2009 figures, ManU clearly come first, with the €100-odd million they made selling Cristiano Ronaldo to Madrid: they made €103 million in player sales, so made a net profit of €59 million. Madrid, surprisingly, comes second, with €89 million in sales. Then again, Madrid had to offload a load of players. Most of their profit comes from the sale of Arjen Robben. However, net spending at the Bernabeu comes to a loss of €166 million, which is still an appalling figure.
Third comes Inter Milan, who made €84 million in sales (mainly Ibrahimovic) whilst paying €83 million in purchases. That`s a profit of €1 million. Milan also made a profit: they mugged Madrid for Kaka, trousering €78 million in total for €15 million in purchases, ending the exercise €63 million up. Arsenal also made a profit: €46 million (mainly Adebayor and Traore), whilst spending €13 million. That`s plus €35 million for Arsène. Liverpool managed to make €38 million in sales (Xabi Alonso) whilst spending €43 million. Therein lies the nature of Tubby Benítez` whinges: he only had a net €5 million to play with.
In this exercise, Chelsea recovered only €3 million in player sales, so our net outlay was €26 million. That still puts us in a rather modest situation compared to the big spending plans of Madrid, Barça (€90 million spent net), or Manchester City (€118 million net). We spent almost as much net as Bayern (€24 million for €51 million in purchase), and less than Juventus (€35 million for €48 million in purchases).
This gives a general idea of where Chelsea stand in overall spending, i.e. 5th overall. Chelsea are far from being the big spenders of yesteryear, and this picture is all the more restrained in that 2008-2009 was a very atypical year for the transfer market. Transfers were dominated by 2 clubs going on an insane and unsustainable acquisitive spree. Those two clubs were Manchester City and, particularly, Real Madrid. It is a spree that has been profitable for a number of other European clubs: Manchester United, Milan, Arsenal, and Liverpool.
Chelsea were one of a few European clubs (Bayern was another) that managed to resist losing our best players to this onslaught. The result was helpful from the point of view of squad stability, but other clubs made a handsome profit from selling players to mugs for overinflated prices. In addition, the consequence was that Chelsea had to strengthen a number of contracts of our existing players, which has not been positive from the point of view of our balance sheet. A good example of this was that Chelsea resisted selling John Terry to Manchester City. We could have received upwards of £30 million for the guy. Instead JT stayed at Chelsea, with the help of a £150,000 per week new contract, or €8,5 million per year. In light of recent events, we could ask whether it wouldn`t have been a good idea (and not only financially) to have offloaded our captain?
Since this is a Spanish study, the report ends with some interesting considerations about La Liga. This is pertinent to Chelsea since we are effectively competing with La Liga`s big clubs. The interesting considerations are to heighten the uncompetitive nature of La Liga, and how Real Madrid have smashed the market with their unsustainable practices. For whilst La Liga increased its overall transfer spending last ear from €257 million to a whopping €455 million, if you take off Madrid and Barça, there has been a net decrease, from €131 million to €79 million for the remaining 18 clubs. Most of this increase is Madrid`s (who only spent €31 million the summer before last), but Barça also increased their spending, spurred on by their capitol rivals. Whilst Madrid spent €265 million and Barça €111 million, the only 2 other Liga club to spend over €10 million were Villarreal (€16,9 million) and Sevilla (€12,5 million). This is reflected in the top 10 transfers last season: the first 8 are for Madrid and Barça between them. The report concludes that this is a 'worrying increase in polarisation`. It is worrying if two clubs weigh more than the other 18 in the League.
On a more global observation, the report points out that a number of clubs (ManU, Milan and Arsenal) spent the money they received from their exorbitant sales to Madrid and Manchester City. That is hanging over the market. The clubs probably thought that should they reinvest this immediately, all prices would be multiplied by 2, it was therefore in their interest to wait.
In addition, the report remarks the increasing importance and size of clubs in Russia and Ukraine, who are now regulars in the Champions League, and who are flush with oligarchs` cash. This is on top of the growth of Turkish football. Some of these clubs are in a position to compete with the medium-sized European clubs. Finally the report points out that regulations (particularly tax rates, but also nationality rules) are increasingly considered to be factors in competing between Leagues. It recommends that contracts be somewhat rationalised to be shorter in duration, but also a more results-oriented salary: many players are on contracts that simply don`t correspond to their results. Deco springs to mind.
In the longer term, the report points out that the new tax rates will apply in Spain (closing a loophole whereby foreign players pay advantageous rates). In the UK, however, there is a new 50% band which is going to make the Premier League less competitive. Also to note are the new FIFA rules of 6+5 (in terms of locally-developed players), and whether the EU will concede to a restriction on the free movement of workers. In addition, we have to consider that 2009 was particular in that there were elections in Real Madrid, which lead to the explosion in signings there. 2010 sees elections at Barça, which could lead to an inflation of electoral promise in Cataluña.
The full 2010 analysis will come in our assessment of the Deloitte and Touche Money League report, which has just been published.
