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You’re broke – we’ll fix it

May 26th, 2010 by · No Comments · Features

According to UEFA president Michel Platini the proposed rule change on european club spending will be passed this week.

At first glance this looks a decision that could change the games financial models in as significant a way as the Bosman ruling changed transfers.

Under the proposed new rules any club that wants to compete in a european tournament must ‘break even’. That means that spending on wages and transfers must not exceed income from tickets, sponsorships and TV contracts.

From 2012 the model of rich individuals covering vast debts will no longer be allowed. Although there will be be a gradual introduction to ease the pain the plan calls for balanced books, across the board, by 2020.

Under the new rules only Arsenal, Spurs, Hull and Stoke would have met the criteria from the Premiership during 2008-9. The rest would fail the test – from Blackburn’s £2.6m loss to Manchester City loss of £93m [in one year!].

Although I personally welcome the move it is sad that the response from English football’s governing bodies has ranged from derision, from the Premier League Chief Executive Peter Scudamore ['the views of a pub'], to silence, from the FA. Maybe the FA are still trying to figure out who’s in charge.

The bottom line is that English clubs will have to comply if they want Champions League and Europa League revenues. Looking at last years accounts that would seem to be a big YES.

We don’t have all the details but it has got us thinking…

1. As Barca and Real Madrid keep almost all the Spanish TV revenues for themselves, unlike the English clubs, doesn’t that mean they have a much greater ability to spend?

2. Will that potential inequality inspire English clubs to dust off those old chestnuts – Clubs owning their own TV rights and a club breakaway from UEFA?

3. As sponsorship counts for revenue what’s to stop a rich owner, who by definition has wealth and influence outside of football, leveraging a huge shirt deal to offset the rule change. Look out for Chelsea and Manchester City sponsored by Gazprom and Etihad to the tune of £100m a year?

4. How will clubs paying more in interest on loans than revenue [eg. Manchester United and Liverpool] comply without re-structuring, or cancelling, their debt?

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