"I would like to address the speculation in media over the past few days in relation to my ownership of Chelsea FC. As I have stated before, I have always taken decisions with the Club’s best interest at heart. In the current situation, I have therefore taken the decision to sell the Club, as I believe this is in the best interest of the Club, the fans, the employees, as well as the Club’s sponsors and partners."
--- Roman Abramovich. March 3, 2022
Chelsea FC has averaged winning one major trophy a year since Roman Abramovich took over in 2003. They are also only 1 of 5 teams in Europe to win every single major trophy at least once.
In January 2005 while abroad at Queen Mary University of London, I played a semester of club rugby, met a ton of friends for life, and immersed myself in Premier League Football. There were two “gentlemen” on the team I got on really well with, Teflon John and Mr. Dyson, whom both happened to be long-time Chelsea F.C. supporters. It is often said you don’t pick your team; it picks you, and in 2005, the Blues picked me.
I will admit one very clear thing: I have had it very easy as a modern-day Chelsea supporter. Unlike most other long-term supporters, I haven’t experienced the dark days of the Chelsea Shed Boys and the Chelsea Headhunters. And I haven’t experienced the ritual sufferings of the pre-Abramovich era with the many lean years in trophies and the utterly inconsistent play. The fact of the matter is I started watching and supporting Chelsea at exactly the right time.
I once read a quote on Vice the summed up supporting Chelsea F.C. as follows:
“Chelsea F.C. in its 21st century incarnation is football support on easy mode: nice pubs, an attractive West London setting, and to top if off a team whose ability to compete for major trophies is guaranteed by the presence of a Russian oligarch with the loosest of purse strings.”
A simple Google search of “most hated English football clubs” or “where were you when we were shit?” will almost certainly return results that include Chelsea F.C. But how did a club with a history of underperformance and inconsistency grow to become one of the most vilified in all of English football?
In search of an answer to this question, I picked up a copy of Rick Glanvill’s Chelsea FC: The Official Biography. This book is a 400+ page comprehensive masterclass on the inner workings of Chelsea F.C., and is the ultimate resource on how Chelsea F.C. became the club that it is today. The following blog post is a write up on all of the things I learned about the football club I so luckily began following back in 2005.
From Gus Mears to Roman Abramovich, Chelsea F.C. Have Benefited from Two Ambitious Moneyed Patriarchs
As Rick Glanvill walks you through, Chelsea F.C. is a football club with a deep history that is sandwiched between two moneyed patriarchs. Gus Mears founded the club in 1905 with great ambitions to make Chelsea F.C. the best club in all of London, and Roman Abramovich bought the club almost 100 years later with ambitions to make Chelsea F.C. the best club in all of Europe.
But from the very beginning of its days, it was clear that Chelsea F.C. would rarely be perceived as a working-class club. From the outset it was seen as the rich man’s play-thing and the team of London’s elite. A big reason for this is simply where Chelsea F.C. is located: on the Fulham Road in the good ole’ SW6 postal club. Chelsea F.C. stand in earthly Fulham with its head pointed towards airy Kensington/Chelsea.
To give you an idea of the type of wealth the lives in and around the club, I pulled together some current pictures of the surrounding area:
A nice terraced house going for £5.8m on Britain’s priciest street
A two-bedroom flat in Drive Mansions on Fulham Road will set you back £700,000
From the inception of the club, wealth and hand me down poverty stood side by side. The fact that Gus Mears called his football club Chelsea, shows which side of the class divide he wanted the club and fans of the club to think of. All of the glitz and glam that have surrounded Chelsea F.C from its inception has created a perception in British football that showy Chelsea is not a gritty proper football club. And this is one big reason why Chelsea F.C. are one of the most hated football clubs in all of British football.
Stamford Bridge is the Crown Jewel of Chelsea F.C. but Home Support Lacks Fervor
Gus Mears’s founding of Chelsea F.C. in 1905 was the direct result of a failed negotiation with Fulham F.C. You see, Mears was a business man that was an opportunist at heart. At the time, the local Stamford Bridge Athletic Ground was used by the London Athletic Club. Naturally, Mears believed there was a huge opportunity to develop the Stamford Bridge Athletic Ground into a then world-class football ground, and thus have Fulham F.C. occupy this new ground. Amazingly, Fulham F.C. balked at the idea deciding to stay at Craven Cottage, and thus Chelsea F.C. was born and placed directly in the heart of Fulham Road.
Since the inception of the club, Chelsea F.C. and its home ground have always had a bit of a “curious” relationship. Strange as it may seem, Stamford Bridge has always been regarded as a pleasant place where fair-minded supporters generally applauded the opposition as much as their home team.
And even though Jose Mourinho over his two managerial stints turned Stamford Bridge into a fortress, Stamford Bridge historically has been a place that lacks fervor with passive, quiet, and restrained home support. On an aside speaking of fortress Stamford Bridge, under Jose Mourinho at one point Chelsea were unbeaten in 98 of 99 home games.
It’s really amazing that Jose Mourinho went unbeaten at the Bridge for so long given how tepid and inconsistent the atmosphere is. And it’s this lack of fervor that makes outsiders to the club question Chelsea F.C. as a “gritty and proper” football club.
On top of the lack fervor in home support, the fact that Stamford Bridge remains the most valuable piece of real estate in football, adds to negative views on Chelsea F.C. It’s hard to assure and secure your future as a football club when you play your home games in central London on one of the most value pieces of land. That’s why the Chelsea Pitch Owners exist.
To give you an idea of how valuable Stamford Bridge and its surround lands are and have become, the cost in 1972 to redevelop the ground outright was an estimated £6.25M. The most recent estimate of the Stamford Bridge Redevelopment project ballooned to £1B before it was shelved.
Chelsea F.C. seem resigned to live with the consequences of successive failures to resolve its home ground problem that was first created in 1905 when Gus Mears founded the club. But at least Stamford Bridge is a very attractive home ground (see here):
Chelsea F.C. Players Have Always Been a Tad Over Paid. They Just Achieve More Silverware These Days
One of the biggest things I learned from Rick Glanvill’s book is that even prior to Roman Abramovich, Chelsea have always been a team that has had the money and the large crowds. What’s different now, is the success as measured in trophies. Undoubtedly some of the best footballers of each generation have played for the club (Greaves, Tambling, Bonetti, Osgood, Bridges, Venables), but prior to Abramovich and Jose Mourinho, they have failed dismally to consistently bring home silverware. Historically, Chelsea F.C. have been seen as a club that collects talented players that don’t blend well. But all of this changed after 2003. The following is a visual representation of what Chelsea F.C. has morphed into as a result of Roman Abramovich’s and eventually Jose Mourinho’s impacts:
Chelsea have doubled the total number of major trophies won in its history in the span of just 18 years from 2000 to 2018. Under Abramovich, 15 of the club’s major trophies have been secured, and Jose Mourinho is responsible for 7 of the 15 trophies secured during the Abramovich era.
Where Do We Go from Here? Chelsea F.C. Will Always Be London’s Bohemian Football Club
Chelsea spent 10 of the first 25 years of its existence in the 2nd division. It’s a club that has sustained decades of inconsistency and underachieving and were relegated as recently as 1975 and 1979. Significant periods of a lack of on-field success and hooliganism between 1969 and 1989 blighted the reputation of the club.
But all of that changed when Roman Abramovich and Jose Mourinho came in 2003. Abramovich has spent a staggering amount on player wages (£2.8B) and net transfers (£1.0B) since 2003 to change the image of “lovable-losers Chelsea.”
As Chelsea move into the next decade of its existence it faces a real crossroads moment. There are some serious headwinds that will push the club to ask some hard questions of itself. Similar to its past, there are some themes that are rearing their head once again:
Stamford Bridge is once again a problem as the club desperately need to figure out how to expand the capacity of its home ground. Looking to their North London rivals and seeing Arsenal’s home ground and Tottenham’s new home ground each with capacities of 60K+ must not feel great, especially as their original redevelopment plans have been shelved given Roman Abramovich’s “issues.”
The club still doesn’t have a technical director. Historically, Chelsea F.C. have a history of football directors that lack knowledge of football and don’t take a back seat to those with the knowledge. With out a technical director, major decisions seem to fall on the plate of Marina Granovskaia, long-time confidant of Roman Abramovich.
Chelsea’s fortunes as an English and European power have changed in lockstep with the financing from Roman Abramovich but the days of domination from West London appear to be over. History has shown that Chelsea have never been afraid to burn themselves to the ground and start again. At times over the last decade and a half, that has probably been the smartest move, and may be the move that the need to play once again. Without the benefit of the commercial opportunities enjoyed by Manchester United and Liverpool, privileges earned by historic success and sustained by truly global fan-bases, remaining passive now would condemn Chelsea to become the new Arsenal.
With Leicester City on the verge of winning the Premier League title, a lot has been made about their title run this year. The New York Times recently revered Leicester’s title campaign as “Soccer’s Most Remarkable Season” (see link here). The Guardian recently called Leicester’s campaign the “Greatest Underdog Story Ever Told” (see link here).
In the modern era of the Premier League, since 1992 there have only been 5 teams to win the league[1]:
Arsenal (3x champion): 1997-98, 2001-02, 2003-04
Blackburn Rovers(1x champion): 1994-95
Chelsea (4x champion): 2004-05, 2005-06, 2009-10, 2014-15
Manchester City (2x champion): 2011-12, 2013-14
Manchester United (13x champion): 1992-93, 1993-94, 1995-96, 1996-97, 1998-99, 1999-00, 2000-01, 2002-03, 2006-07, 2007-08, 2008-09, 2010-11, 2012-13
“Leicester City” (1x champion): 2015-16 (pending)
The past 20 years, The Big Four of Arsenal, Chelsea, Manchester City, and Manchester United have spent a combined £3.48 billion in the transfer markets which has led to one of the Big Four winning 96% of the Premier League titles (22 of the 23) since 1996[2].
Looking to the future, as Leicester City stands on the brink of breaking this dominance and making Premier League history much in the same manner that Blackburn Rovers did in 1994-95, the question remains can they sustain their excellence much in a way that Blackburn Rovers was unable to do?
What Happens Next? A Mass Exodus of Players?
There is simply no question that Leicester City’s success this year has been remarkable and as a fan of sports I have to admit that I found myself rooting hard for them each week. But a direct result of this success has been a significantincrease in the valuations of most of their players. And this increase in valuation leads to increased interest from the Big Four clubs.
This season alone, Leciester City’s core group’s value (as shown below) has risen an estimated 84.9% this year[3]:
After Blackburn Rovers won the league there was a mass exodus of players, and their results began to slip. Four years later, Blackburn Rovers were relegated from the Premier League to Division One in the 1998-99 campaign. In a similar vein to Leicester City, Blackburn Rovers saw their player valuations skyrocket, and they were unable to avoid being pulled part by the bigger clubs who could afford to repeatedly break transfer and wage records to lure star players away. And based on recent reports regarding N’Golo Kante (see here) the summer exodus may be on its way…
Champions of England = More Money for Key Players… But Will it Be Enough?
By winning the Premier League, Leicester City stand to pocket roughly £90.6 million which is +27% more than they pocketed last year for their 14thplace finish (£71.6 million)[4]. Given this windfall, there would be room for Leicester City to comfortably increase their annual wage bill on their Key Players from £40.3 million to £51.2 million.
The following key players’ new wages would look something like this (assuming everyone got their equal share):
But even at these elevated levels, the weekly wages are far less than the wages being paid at the Big Four. Specifically, this coming year alone, Chelsea, Manchester United, Manchester City, and Arsenal will have estimated annual wage bills of £216, £203, £194, £192 million respectively.
On average, the Big Four have the ability to pay anywhere from 3.8x to 4.2x what Leicester City can pay. Given this, the Big Four could easily pay someone like Jamie Vardy, N’Golo Kante , or Riyard Mahrez £140,000 per week. Shit, Chelsea currently pays Diego Costa and Eden Hazard £185,000 and £200,000 per week to come in 10th.
Even though Leicester City will be playing in Champions League next season, I don’t believe it will be enough to keep their squad intact. For players like Jamie Vardy, N’Golo Kante, and Riyard Mahrez, they will be able to more than double their weekly wages at any of the Big Four clubs (if their intent is to stay in England). Money talks far more than Tuesday night’s in the Champions League.
So while I don’t predict the same massive exodus of all of players that occurred at Blackburn Rovers after the 1994-95 season, Leicester City will see some turnover in key positions for which, they will be highly compensated (I estimate that the transfers of Vardy, Kante, and Mahrez will easily net Leicester City £85.7 to £104.3 million).
But Leicester City is Different to Blackburn Rovers in One Key Way?
Given the significant valuation increases and the lack of weekly wages compared to the Big Four clubs for their key players, it seems on paper that Leicester City will struggle to keep their key players much in a similar fashion to Blackburn Rovers. But Leicester City is different to Blackburn Rovers in one key way: The Foxes have a Thai billionaire owner
In 2010, Leicester City was bought for £39 million by Vichai Srivaddhanaprabha, a Thai billionaire owner:
For those of you that have watched Leicester City this year, you may or may not have seen his helicopter on the pitch at King Power Stadium at the end of each match:
But more importantly than his fashionable helicopter, Vichai Srivaddhanaprabha has BIG ambitions for Leicester City even before this season. He declared after the 2013-14 season, he would willingly spend £180 million to break into the top 5 in the next three years, and since he bought the club, Leicester City have spent roughly £77 million on transfers. To put this in some perspective, since 1996 Leicester City have spent a grand total of £131 million on transfers.
So unlike Blackburn Rovers, Leicester City has a very rich owner that is on par with some of the bigger clubs. And when all is said and done, Vichai Srivaddhanaprabha will willingly dig into his deep pockets in an attempt to build upon the success of the 2015-16 campaign. With an estimated net worth of $2.9 billion[5]Khun Vichai, as he is often called, will be the reason Leicester City don’t disappear in the similar fashion that Blackburn Rovers did many decades ago.
Enjoy the Leicester City miracle for what it truly is… an underdog story but be prepared… The Foxes aren’t disappearing anytime soon.
[1]TOTALSPORTEK2. “List of English Premier League Winners Since 1992.” 15 Aug. 2015. Web Retrieved 30 Apr. 2016
[3] THE MIRROR. “Football Manager reveals staggering amount Leicester City’s title chasers’ value has rocketed this year.” 18 Feb. 2016. Web Retrieved 30 Apr. 2016
[4] TOTAL SPORTEK. “(Predicted) Premier League Prize Money Table 2016 Season.” 16 Apr. 2016. Web Retrieved 30 Apr. 2016
With all of the turmoil surrounding Chelsea F.C. due to the 2nd sacking of Jose Mourinho, and given the uncertainty regarding the future direction of this club, I wanted to take a serious look at the long-term financial sustainability of Chelsea F.C. The recent 2016 Deloitte Football Money League rankings have placed Chelsea F.C. 8th overall at an estimated £323 million in revenue for the 2014-15 season[1]. This position is down 1 spot from last year’s ranking of 7th and down 4 spots from their highest all-time ranking of 4th in the 2006-07 season.
Since Roman Abramovich took control of Chelsea F.C. in 2003, the Blues have seen their annual revenue grow from £110 million in 2003 to £314 million for the 2014-15, a compound annual growth rate of approximately +8.42%. But during this 13 year period, the Blues have only posted positive operating profits twice (in 2011-12 the year the won Champions League and 2013-14). In fact, the average operating loss during this 12 year period (including the 2 years of profit) is approximately -£57 million. Despite winning the Barclays Premier League and the Capital One Cup last year, Chelsea F.C. racked up a £23.1 million loss[2].
With Chelsea almost certain to miss next year’s Champions League (barring some dramatic/fantastic change in form), the Blues are in some jeopardy of slipping into financial uncertainty given their heavy reliance on non-controllable sources of income. The average financial hit to broadcasting revenue for failing to qualify for Champions League football has been estimated to be £35 million[3]. Furthermore, this lack of Champions League football will put a barrier on their ability to retain their top talent this summer, almost certainly forcing Chelsea F.C. to overhaul their player roster.
The easy answer is to simply just blame Chelsea F.C.’s forever growing wage bill with has grown at a compound annual rate of +10.9%[4]. But as you will see from this write up, there is far more to this story than simply reducing player wage bills. It is my opinion that the primary way for Chelsea F.C. to reduce its reliance on Champions League and to secure their long-term financial position is to invest in a larger stadium.
Revenue Sources for a European Football Club
The single most important measure of whether or not a football club has a puncher’s chance at financial sustainability is their ability to generate revenue from multiple sources. Traditionally, football clubs rely upon the following sources of revenues:
1.Match day revenue including tickets and corporate hospitality sales
2.Broadcast rights including distributions from participation in domestic leagues, cups, and European club competitions
3.Other commercial sources including sponsorships, merchandising, stadium tours, and other commercial operations
In the current world of European football, revenue sources have drastically changed over the last ten years with a majority of revenue coming from non-match day sources. This year’s Deloitte Football Money League report marks the lowest ratio of total revenue that has been comprised by match day revenue. The split between the three principle revenues sources for the majority of European football clubs is as follows[5]:
Match day generates 19% of total revenue
Broadcast rights generate 40% of total revenue
Other commercial sources generate 41% of total revenue.
In contrast for Chelsea F.C., since the 2009-10 season, the Blues have driven 27% of their revenue from match day, 41% from broadcast rights, and 32% from other commercial sources[6]. Different to some of the other elite European football clubs, Chelsea F.C. is far more reliant upon match day revenue. With such a large sum of their revenue driven by match day, it is critical that Chelsea start actively planning for the long term and focus on the single most controllable and important source of income to the club: match day revenue.
Current Chelsea F.C. Match Day Revenue
Chelsea F.C. currently plays its home matches at Stamford Bridge which has a max capacity of 41,798 and in the current season, the Blues average attendance is 41,516[7]. Opened in 1877, max capacity at Stamford Bridge ranks 8th overall in the Barclay’s Premiere League while average attendance ranks 7th.
When you compare Stamford Bridge to Chelsea’s closet financial rivals, United, City, and Arsenal all have stadiums that are much larger than the Blues’:
Manchester United’s average attendance at Old Trafford is 75,345 with a max capacity of 75,635. United’s home ground is 1.82 times larger than Stamford Bridge
Arsenal’s average attendance at Emirates Stadium is 59,951 with a max capacity of 60,260. Arsenal’s home ground is 1.45 times larger than Stamford Bridge
Manchester City’s average attendance at Etihad Stadium is 53,897 with a max capacity of 55,097. City’s home ground is 1.33 times larger than Stamford Bridge
With Chelsea’s current size limitations, at an average price of £85 per ticket, Chelsea F.C. is making roughly £3.5 million per home game and roughly £67.0 million annually for 19 home premier league matches.
Compared to its closet financial rivals, Chelsea F.C. makes £2.9 million less than United, £1.6 million less than Arsenal and £1.2 million less than City per home game. Given this discrepancy in home ground revenue, Chelsea F.C. is missing out on approximately £22 million to £30 million in match day revenue annually.
An absolute key component to Chelsea’s long-term financial stability will be to increase match day revenue on part with Arsenal and the two teams from Manchester.
A Minimum 60,000+ Capacity New Stadium is a Must
As I mentioned before, the average cost of missing out on Champions League football is £35 million, and this year’s performance by Leicester City and Tottenham shows that guaranteed top four finishes are no longer the norm for Chelsea F.C (just ask Liverpool F.C). Although this season might be a “one-time” aberration, it is absolutely vital for Chelsea F.C. to develop a bigger home ground to solidify and secure the future success of this football club.
When you look to the east of London and the north of London, you see two clubs in West Ham United F.C. and Tottenham Hotspurs F.C. who fundamentally have taken serious strides to do as much. Both the Hammers and the Spurs have long-term established plans to increase their stadium capacities from the mid-35,000 range. West Ham will be moving to the 54,000 seat Olympic Stadium for the 2016-17 season, while Tottenham will build a 61,000 capacity stadium to replace their current home ground for the 2018-19 season.
*West Ham United’s new 54,000 capacity home ground for the 2016-17 season. Their current home ground of Upton Park only holds 35,016[8]
*New White Hart Lane will cost £750 million and will seat well over 61,000 fans starting in 2018. Current White Hart Lane only seats 36,284[9]
Both of these aggressive moves will put West Ham United and Tottenham Hotspurs F.C. in a far more advantageous and financial stable position than the Blues:
I estimate that West Ham match day revenue will grow by +54% to £87 million while Tottenham match day revenue will grow by +68% to almost £100 million annually. It’s a no-brainier whatsoever that Roman Abramovich needs to double down on his belief in Chelsea F.C. and build the club a new stadium. But it wouldn’t be Chelsea F.C. if there wasn’t some wrinkle to this story…
What Is Preventing Chelsea F.C. from Building the 60,000+ Stadium of their Dreams?
In the 1970’s and 1980’s Chelsea F.C. suffered serious financial setbacks following a large scale attempt to renovate Stamford Bridge. In order to keep the club afloat, Stamford Bridge freehold (rights of ownership to the property) was sold to a property developer by the name of Marler Estates. In doing do, Chelsea F.C. ceded control of their own home ground.
This arrangement continued through the early 90’s until a group of Chelsea F.C. lifelong supporters founded the Chelsea Pitch Owners (CPO) and purchased the Stamford Bridge freehold, the pitch, and the Chelsea F.C. name. This move was made to ensure that Stamford Bridge could never again be sold to property developers not related to the club. At the same time though, it also ensured that any talk of a new stadium had to be passed by 75% of the members of the CPO.
***A quick aside… Guess who is the president of the Chelsea Pitch Owners? The one and only captain John George Terry***
This unique relationship between Chelsea F.C. and the CPO has put the club in a very tough position. They know that it is a must to increase the capacity of their home stadium, but the CPO have forced Chelsea F.C. to play their home games at Stamford Bridge or lose the right to use the Chelsea F.C. name (since the CPO own the rights to the name as well). So if you are forced to stay in your correct location but you know that you have to increase stadium capacity, what are you going to do Roman Abramovich?
Expand Stamford Bridge to 60,000+ and Move to Wembley Stadium in the short-term
Currently, Chelsea F.C. is in the planning and development stage of a 60,000+ expansion to their current home ground Stamford Bridge with the estimated cost of the project currently valued at £500 million[10]. During the three year period of construction starting in 2017, the Blues are planning to play their home games at Wembley Stadium which is a mere 10.6 miles from Stamford Bridge. Home matches at Wembley stadium will be restricted to 50,000 even though max capacity is 90,000, and the total annual cost to the Blues for rental of Wembley will be £20 million. The photo below is the current development design for the New Stamford Bridge by Swiss architects Herzog & de Meuron:
I have created a financial projection of this construction project and without question, this is absolute the right thing for the football club to invest in:
It still remains to be seen if this major redevelopment project will pass the major planning and economic obstacles that currently exist. But one thing is remarkably clear for Chelsea F.C…. In this day of rising Premiere League broadcast money and new upstart clubs like Leicester City, sustained match day revenue growth will have to be the primary means by which Chelsea F.C. ensures its financial future. With West Ham and Tottenham breathing down their necks, Chelsea’s current financial superiority is under pressure and a new stadium will go a long way to relieve some of this pressure.
[1]SPORTS BUSINESS GROUP. “Top of the table: Football Money League” Deloitte 1 Jan. 2016. Web Retrieved 1 Feb. 2016.
[2]Chelsea FC. “Financial results announced with FFP compliance maintained.” Chelsea FC Website. 23 Nov. 2015. Web Retrieved 2 Dec. 2015.
[3] KEEGAN, MIKE. “The cost of failing to qualify for the Champions League.” MailOnline. 17 Sept. 2015. Web Retrived 13 Feb. 2016.
[4] ZIEGLER, MARTYN. “Chelsea player wage bill the highest in the Premier League last season at £215.6m” Press Association. 8 Jan. 2016. Web Retrieved 1 Feb. 2016.
[5] SPORTS BUSINESS GROUP. “Top of the table: Football Money League” Deloitte 1 Jan. 2016. Web Retrieved 1 Feb. 2016.
[6] O’REILLY, LARA. “Samsung to Pull Chelsea FC Sponsorship: Turkish Airlines To Take Over With Larger Package.” Business Insider. 6 Oct. 2014. Web Retrieved 1 Feb. 2016
[7] SoccerSTATS.com. “Premiere League Home Attendance for 2015/16 Season.” Web Retrieved 9 Feb. 2016
[10] DUBAS-FISHER, DAVID. “Chelsea Stamford Bridge expansion plans: Why £500 million is good value for Roman Abramovich.” 2 Jul. 2015. Web Retrieved 13 Feb 2016.
“With 50% of clubs losing money we need to stop this downward spiral. They have spent more than they have earned in the past and haven’t paid their debts. Continued excessive spending has been justified by club executives as being necessary to keep competitive but it is this excess spending that has brought a number of clubs to the brink of financial ruin. This needs to stop and Financial Fair Play Regulation is the means.”
-UEFA President Michael Platni
Introduction
UEFA’s Financial Fair Play Regulation (FFP) was first agreed in principle in September of 2009 after a review showed that more than half of the 655 European clubs suffered an operating loss over the previous year. Introduced amid concerns regarding the heavy spending of a number of professional clubs across Europe, FFP in principle will attempt to prevent professional football clubs from spending more than they earn in the pursuit of success. Set for complete implementation for the 2014/2015 UEFA season, clubs will be forced to comply with FFP or face a variety of sanctions, the ultimate penalty being disqualification from the lucrative Champion’s League. For the biggest clubs within the English Premier League, what is really at stake is £60m in prize money and television rights given to the winner of UEFA’s Champions League.
Principles within UEFA’s Financial Fair Play Regulation
The basic principle behind FFP is for a football club to spend no more than it earns in a given fiscal year. For a football club, turnover (income) is generated through ticket sales, television revenue, advertising, merchandise sales, player sales, and prize money from tournaments participated in, while expenses take the form of outgoing club transfers, employee benefits, and player wages. FFP takes a look at the revenue a club makes and the expenses a club sustains, and applies a threshold to determine compliance with UEFA regulations (see Figure 1 below). Money spent on long term investments like infrastructure, training facilities, or youth development academies are not included in the FFP evaluation. In theory, this principle is basic enough, but the reality is European football is about winning now at all costs and overspending breeds success.
Figure 1: Financial Fair Play Monitoring Periods and Thresholds
Compliance with UEFA’s Financial Fair Play Regulation
The first monitoring period of FFP covers the 2011-12 and 2012-13 fiscal years and compliance with FFP will affect the 2014/15 season. During this period of time, football clubs that sustain losses greater than £4.1m (€5 million) must obtain equity injections from their owners. In essence, the owners of the football club must be willing to back the losses greater than the initial threshold hold of £4.1m (€5 million). The max aggregate loss that a club can sustain during this first monitoring period is £37.2m (€45 million).
As of February 28th of 2014, UEFA announced that seventy-six clubs are currently under investigation for potential financial fair play violations and consequently UEFA has required these clubs to submit additional financial information. And in May of this year Paris Saint-Germ (PSG) and Manchester City were both slapped with roughly £50 million (€60 million) fines and a reduction of their squad to 21 players for next season’s Champions League.
Given the parameters of FFP, I will examine the current state of compliance by Chelsea F.C. and argue that FFP falls short and prevents future clubs from emulating Chelsea’s strategy for success, thus ensuring the continued dominance of Champions League by Europe’s footballing elite.
Case Study: Chelsea F.C. 2003 to the Present
Since Roman Abramovich took control of Chelsea F.C. in 2003, the Blues have incurred heavy losses due to over spending and investing on new players and fresh talent. The Abramovich reign has brought in an estimated 80 different players at approximately £801m in gross transfer market spend[1](not including the additional £91.3m spent this summer on Cesc Fabregas, Filipe Luis, Loïc Rémy, and Diego Costa, and the £72.1m spent on the salaries for 10 different managers). As depicted by the graph below, Chelsea F.C. has spent heavy and often on players since 2003:
But during this time, this over-investment in players has led the Blues to unprecedented success on the pitch. Since 2003, Chelsea F.C. has won 3 Premier League Titles (2005, 2006, 2010), 4 FA Cups (2007, 2009, 2010, 2012), 2 League Cups (2005, 2007), and 1 UEFA Champions League Title (2012). During this time frame they have finished in the top 3 of the English Premier League in every single season apart from 2012, and they have reached the Semi-Finals of Champions four times (2004, 2005, 2007, 2009) also making it to the finals in 2008 against Manchester United.
To put this in context, Chelsea F.C. has won a total of 28 major trophies since the club’s inception in 1905 and 13 of these trophies have come since 2003. 46% of Chelsea’s all-time trophies have come in the span of 11 years and this meteoric rise to relevance is directly tied to the investments that Roman Abramovich has made.
As UEFA’s Financial Fair Play Regulation compliance continues to kick along, I can’t help but belief that implementation of FFP will prevent clubs outside of Europe’s elite from quickly rising to prominance. And given the penalties within FFP the days of Chelsea F.C. incurring huge losses due to overspending on players appears to be at an end.
Chelsea F.C. Key Financial Statistics: 2003 to 2014
Utilizing financial information obtained from TheChels.co.uk[2], I have compiled the following charts of key financial statistics for Chelsea F.C.:
Since 2003, Chelsea F.C. have experienced a +10.2% CAGR in Annual Turnover due primarily to signficant increases in revenue from business partnerships/sponsorships (see 10-year, $450 million kit deal with Adidas), and this past year (fiscal year ending June 30, 2014) Chelsea F.C. recorded a record breaking £18.4m profit. This record profit for 2014 ensured that FFP regulations have been satisfied for the upcoming year.
For the first time in Chelsea F.C.’s financial history, the club finances a majority of their transfer spending with money generated by the sale of players. As an example, for the 2014/2015 summer transfer period (as mentioned above), Chelsea F.C. spent approximately £91.3m, but this sum was matched with approximately £75.2m in fees generated from the sales of David Luiz, Demba Ba, and Romelu Lukaku[3].
Chelsea’s financial maturity is also flowing into its overall valuation as Chelsea’s value has risen by +84.7% from approximately £275m ($555m) in 2007 to £508m ($868m) in 2014. It took the Blues 11 solid years to reach its current level of financial stability, and now that they have established themselves as one of Europe’s elite football clubs, they stand to benefit from the very sanctions that would have threatened their meteoric rise in 2003 had they been around. And this fact is my biggest beef with FFP!
Why FFP falls short of the Mark
Chelsea F.C. is now safe in the short-term from FFP sanctions simply because their frantic over spending and investment in players to establish themselves in Europe occurred during a time period when FFP sanctions were none existent. They are now reaping the benefits of this investment as they enter a period of financial stability and maturity, the likes of which, we haven’t seen in West London during the Abramovich era. Big clubs have already spent their money investing in talent before these regulations have come into play allowing them to solidify their positions within Europe based solely on the first mover advantage.
FFP simply put benefits the teams that are already economically powerful and already have deep histories with even deeper followers. Looking at the list of European clubs atop the Forbes valuation, you start to see pretty quickly it is a who’s who of stable elite:
Of the 59 winners of UEFA’s Champions League, the trophy has been won 37 separate times by one of the 10 teams on this list. 62.7% of the time, one of European’s elite clubs lifted the trophy. And when you stop to consider this fact, you realize pretty quickly that these FFP regulations are a “contradiction” only set up to serve and protect Europe’s biggest clubs[4]. On top of this, the fines that are compiled by UEFA from the violators of the Fair Play Regulations are then distributed back to the clubs who successfully complied with the rules; in effect further robbing Peter to pay Paul!
But while FFP regulation attempts to prevent football clubs from over spending, it has done absolutely nothing to prevent owners from saddling football clubs with massive levels of debt. Leveraged buyouts continue to load European football clubs with massive levels of debt as the result of debt financing by new owners, and FFP has done little to address this problem, which in my opinion is a much greater problem to the financial stability and future of European football. As of February 2014, the top 10 football clubs with the most amount of debt were as follows[5]:
The world’s second most valuable club, Manchester United is the number one club in terms of debt accumulation. And even though they pass FFP regulations hand over fist from a cash flow standpoint, 20.3% of their valuation is tied up in debt. So in essence, FFP penalizes football clubs like Chelsea, Manchester City and PSG who finance their operations solely by direct cash injections, and rewards football clubs like Manchester United and Real Madrid who finance their operations utilizing massive debt and money from massive sponsorship deals
UEFA’s Financial Fair Play Regulation originally set out to clean up the financial activities of Europe’s biggest football clubs but if falls short of this mark. Timing of investing activities has given Europe’s elite clubs a first mover advantage and regulations have done very little to tackle the debt carried by these large clubs. FFP simply benefits the football clubs who are willing to take on more debt over those clubs who finance their operations via cash. And it is this very punitive nature of FFP that is simply maddening. FFP has placed the “new clubs” at a disadvantage compared to the historically old big clubs, in this fight for European relevancy.
Disclaimer: I am a Chelsea F.C. supporter and the opinions expressed above are solely my own.
If reports are to be believed, the Special One is on the brink at the Bernabeu. After today’s humiliating 3-2 loss to lowly Malaga, Real Madrid now stand 16 points behind league leaders Barcelona. At this point in the season, Los Blancos have already dropped more points than they did during the whole of last season’s campaign. And as a result, the Champions League showdown with Manchester United in February will all but decide Mourinho’s future with Madrid.
The ex-Chelsea boss has insisted he will not quit at any point this season even though he has all but conceded the title to Barcelona. At the same time, multiple reports have surfaced that even prior to the beginning of this season Mourinho was keen on returning to the Premier League. It is no secret that he and his family love living in London; so much so that in early February of 2012 he was caught house hunting in West London with his wife and two children. His daughter has also recently enrolled in courses at the Camberwell College of Arts in London which sits a mere six miles from Chelsea’s football ground.
It is also no secret that the Chelsea faithful have yet to warm to interim-manager Rafa Benitez (and will probably never warm to him as the signs below show), and have yet to forgive Roman Abramovich for his haste dismissal of Roberto Di Matteo (as evidenced by the 16th minute chants for Di Matteo every home game).
This is the perfect storm that I have been “patiently” waiting for since Mourinho’s shock departure from Chelsea in September of 2007. Since ’07, Chelsea have sacked 6 mangers and if you include Rafa Benitez (who has the interim tag and is not likely to get a renewal at the end of the year), an argument can be made that Roman has been searching for that “Special One” long-term manager ever since. Mourinho has been the “one who got away”, like the perfect girl for you but you where too stupid to realize it.
This is a key moment in Chelsea F.C. footballing history and Roman has an opportunity to inject a level of management stability to a club that hasn’t seen such stability since Jose Mourinho. During his three-year tenure with the Blues, Mourinho won two Premier League titles, two League Cups, and an FA Cup. There are talks that Roman craves Pep Guardiola, who in my opinion is not worth the £15 million price tag because I have doubts about his abilities to coach players not named Messi and Iniesta. Chelsea are currently third place after 17 games and 11 points off pace. They have also been knocked out of Champions League. We need a proven manager (not named Rafa Benitez or Pep Guardiola) who has been there before. We need a manager who knows how to handle player egos. We need a manager who values defense first and protects results. That manager is Jose Mourinho.
The time is now to bring Chelsea’s most successful manager back to the Bridge. Roman, give me and the Chelsea faithful what we want. Bring back the Special One! I promise you will not regret it!
This past weekend in the Barclay’s Premier League there were a number of controversial results directly tied to offsides decisions. And in each of these situations, replays showed that the offsides decisions made by the linesmen in-game were incorrect:
Manchester United defeated nine-men Chelsea 3-2 on a 75th minute strike from Javier Hernandez who was in an offsides position before scoring. This was after the Blues were incorrectly reduced to nine-men by the sending off of Fernando Torres for suspicions of diving. Replays clearly showed that Hernandez was offsides and Fernando Torres didn’t dive.
Liverpool were held 2-2 in their derby match against Everton after Luis Suarez’s game winning goal in stoppage time was disallowed by the linesman who incorrectly ruled the play offsides. Replays clearly showed that Suarez was onsides.
Arsenal crept past QPR 1-0 after Mikel Arteta scored the game’s only goal in the 84th minute from an offsides position. Replays clearly showed that Arteta was offsides.
The cliché around soccer and sport in general is that refereeing is “an impossible job” and because referees and linemen are prone to simple human errors, they deserve some level of sympathy when they do in fact make the wrong decision. Often times it is said that this is just part of the game and we as fans have to learn to live with it when things don’t go our way … Or do we?
For a league as grand as the Barclay’s Premiership, games deserve to be decided by moment of brilliance and deft skill, not simple human errors! I simply don’t buy the argument that offsides decisions and goals scored from offsides positions are just part of the game, especially given the day of age we currently live in. For each of us, technology is a part of everyday life and I see no reason why it can’t play a more influential role in soccer.
Now to be fair, the International Football Association Board (I.F.A.B.) is taking steps to come into the modern era through the implementation of goal-line technology to the game of soccer. This past July, the I.F.A.B. recommended to FIFA to allow the implementation of two technology systems that will help referees determine if the ball fully crossed the goal-line. At a cost of approximately $200,000 per stadium, once implemented the Hawk-Eye and Goal Ref systems will help referees determine whether or not the entire ball crossed the goal-line (see below):
Although this landmark decision will help with disputed goals which have marred the sport at its highest levels for years (see England v. Germany in the 2010 World Cup here: http://www.youtube.com/watch?v=HV4nc_sjW9Y), I believe that soccer can go on step further in its use of technology to help the game.
In a manner similar to the NFL, soccer should have a replay official who reviews all goals scored. His job above all is to spot goals scored from offsides positions, which will help to alleviate the pressure that linesmen currently feel to get it right.
In the time it takes to restart the game after a goal is scored, this replay official could in theory radio in to the referee and linemen that the goal scored was from an offsides position. In a matter of merely seconds, goals scored from offsides positions that change the dynamic of a game would be correctly nullified and big decisions that change the landscape of a season like the ones made this past weekend would be reduced.
In closing, the argument that these things even themselves out over the course of a season is at best bull-s*** and at worst horse-s***. Chelsea are currently atop the table but now only lead by one point. QPR is at the bottom of the table after being robbed of a potential one point that could be the difference between them staying up or going down. And as for Everton, that one point they stole from Liverpool currently keeps them in 5thplace ahead of Arsenal for a Europa League spot.
These decisions this past weekend, which I believe would have been avoided with the implementation of replay technology, will have dramatic implications for the remainder of the season. Without the further implementation replay of technology, referee and linesmen will continue to be at risk and undermine the integrity of the beautiful game we all currently enjoy … Okay that last line was a bit melodramatic I admit but you catch my drift!
Last year this time, my expectations for Chelsea F.C. were “unrealistically” through the roof. Hailed as the second coming of the “Special One”, Andres Villas-Boas was hired from FC Porto to revolutionize the Premier League and help the Blues win the Champions League. His 4-3-3 attacking formation and tactics were supposed to turn Chelsea F.C. into the “English version” of F.C. Barcelona … an attacking force to be reckoned with.
By March, AVB was on his way out and the Blues were on their way out of the top four.
Sure, Chelsea ended last season as the FA Cup holder and European Champions (which by the way, they clearly stole from Bayern Munich and by the way I’m clearly okay with that and still grateful I witnessed it).
But their sixth place finish in the Barclay’s Premier League was far from okay for a team that has an owner who has spent over £1 billion since his arrival at the club in 2003. This summer, the spending or should I say “investing” habits continued. Roman Abramovich “invested” over £70 million (roughly $94 million) to revamp his squad.
Out went old players like Salomon Kalou, Jose Bosingwa, and the big Ivorian, Didier Drogba (FYI… this shirtless picture is for a certain someone … you know who you are).
In came creative and attacking players like Oscar, Eden Hazard, and Marko Marin.
The hope is this new refreshed squad can produce a more attractive version of football that really has never been played at Chelsea F.C but do so while winning.
This morning, the Blues opened the 2012-13 campaign with a dare-I-say-it unimpressive 2-0 victory over Wigan Athletic. And to be honest, the “Revitalization” that Abramovich craves is going to take a lot of time (time that unfortunately Roman Abramovich won’t give and the fans-myself included – are not accustomed to giving).
But for what it’s worth I liked what I saw today. For the first time really ever, the Blues played the ball through the middle of the pitch. Gone is their reliance upon the long ball into the box. In, is a new reliance upon building from the back.
With their new 4-2-3-1 formation, Chelsea allowed Eden Hazard to be the playmaker that he was at Lille OSC, and he is really as good as advertised. He was responsible for Chelsea’s two goals today (an assist and a penalty drawn) and looks to be the center attacking midfielder that Chelsea has so desperately lacked over the years.
Also impressive, was Chelsea’s second summer signing, Oscar. In limited second half play, Oscar put a significant stamp on the game in the final third and proved that he really shouldn’t be left on the bench going forward.
There are clearly still a lot of concerns in the back (John Terry, John Terry, John Terry) and up top with Fernando Torres (didn’t look like he wanted to be there today). But all in all, the summer signings look to have Chelsea F.C. heading in the right direction.
Contrary to last season, my expectations are tempered and for once I am seriously looking forward to simply enjoying the Blue’s this season. I fully expect them to be competitive this year and anything less than a top four, really three finish is unacceptable.
And who knows… maybe in this “rebuilding year,” they can pull of the improbable back to back European Cup double just like the 1979 and 1980 Nottingham Forest teams……..
