Understanding Platini's proposal to ease the financial fair play rules
Gab Marcotti tells you everything you need to know about Michel Platini's proposal to ease some of UEFA's financial fair play rules.
Q: What's this? UEFA President Michel Platini says they're relaxing financial fair play restrictions? So they're getting rid of those pesky spending limits?
A: Not quite. They're going to consult with clubs and leagues and then vote on a proposal, most likely at the UEFA Executive Committee meeting in late June. Beyond that, as I understand it, the limits -- which this year will be €45 million over three years -- will still be there. And if anything, they're going to tighten, as next year they're due to fall even further. What they are hoping to do is to allow a little more flexibility if somebody comes to them beforehand.
Q: What do you mean?
A: So bear in mind this is just a concept; the details need to be worked out. But the idea is that if someone comes to them and says, "Look, I'm willing to put x amount of my own money into my club this year and it will mean we'll be in breach this season, but I have a three-year plan to get us back into compliance," then they'll consider it. And they may give the green light.
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Q: What's the logic there?
A: They think of it something like this: Imagine you buy a house and it's a real fixer-upper, like on those home improvement shows on TV. The house costs, say, $200,000 but there's a law that says you can't spend more than $5,000 a year on home improvement. That doesn't do you much good, does it? You want to chuck in, say $100,000 to fix the roof, reglaze the windows, build a swimming pool and paint the darn thing. And if you do that, you know your house will be worth $400,000. But if all you can spend is $5,000 a year, then it will take you forever to fix it up and you may decide it's not worth your time to buy it.
Q: Enough with the house. What does this have to do with football clubs?
A: Well, there are some clubs who are basically decrepit houses but have plenty of potential. And they either have owners who are willing to invest big in them but can't -- because of the FFP restrictions -- or investors who would buy a club but are reluctant to do so because they don't want to wait around for decades for the kind of "organic growth" -- through infrastructure and youth development -- that current FFP allows.
Q: OK. So I can buy, say, Everton or Fiorentina or Sevilla, and spend $200m on players, turn into a powerhouse overnight and compete with Chelsea, Juventus and Barcelona? All I need to show is that by spending that money I'll win the Champions League, double revenue and UEFA will allow it? Cool.
A: No, you can't. It has to be a plan that UEFA thinks is plausible. You can spend a little more, but it has to be realistic investment. So maybe you beef up your commercial operation. Or if, say, you're a new investor and you've inherited reams of debt, maybe some of that debt servicing won't count towards the total and you'll get some wiggle room there. But it has to be credible and business-led and it has to have the clear goal of reaching the parameters within a couple of years. And at every step you need to hit certain targets, otherwise you'll be in breach. So it can't just be about doubling your transfer spend and your wage bill in the hopes of earning it back via prize money.
Q: Shame. But how does UEFA know what's credible and what's not? Why do they get to judge clubs' business plans?
A: They would probably say that it's pretty much what they do now with clubs who are in breach of existing regulations. Remember how Manchester City and Paris Saint-Germain got those huge fines last year? Well, two-thirds of that withheld prize money will be returned to them if they meet certain agreed-upon financial targets. This is sort of the same thing. Except rather than being forced to hit certain stricter goals after you overspend, you ask permission to overspend and, if it's granted, you have to meet those strict goals.
Q: Wait a minute ... PSG and City aren't going to like this. If these rules had been in force a few years ago, they wouldn't have been in breach of FFP...
A: If the rules had been around and if they had submitted a credible business plan and obtained pre-approval from UEFA, then sure, they might not have been in breach, or their breaches might not have been punished as much as they were. Yeah, I'd be a little annoyed. It's like getting a citation for smoking medicinal marijuana shortly before the law changes and you can get a permit for it. Then again, those were the rules at the time. And they were pretty clear to all.
Q: So why are UEFA doing this? Is FFP not working?
A: I think the FFP part is working in the sense that it is achieving its main goal: to limit club losses. Since 2011, overall losses in Europe have gone down by some 75 percent and that's pretty huge. That's what everyone wanted. The problem is the unwanted side effect, what UEFA call "ossification." Basically, it means the rich stay rich and the poor stay poor. The biggest, wealthiest clubs also make the most money so they can sign the best players. And that then means they win the most silverware and get the most prize money and the most new fans, because, let's face it, many who are new to the sport want to root for the big clubs they see winning things on TV. So it basically creates an unbreakable cycle where the gap between a tiny elite number of super-clubs and everyone else continues to grow.
Q: And all this is down to FFP?
A: Not just FFP. There have been other factors too. Like the boom in media and commercial rights which, logically, have gone to the biggest clubs. I mean, when Chevrolet decided to sign a shirt sponsorship deal with a club, they did it with Manchester United, not some mid-table club or even a top club in a less-popular league. This new revenue has gone almost exclusively to the top. That's not down to FFP, but, coupled with the FFP restrictions, it has exacerbated the problem.
Q: So UEFA has finally noticed this?
A: I think they noticed it a while ago. And they know it's not great for business. Look around Europe. Barcelona or Real Madrid have won 10 of the last 11 Liga titles. Bayern, 7 of the last 11 in Germany, including three straight. Juventus have four straight in Serie A, PSG, three straight in France. It's further down the food chain too. Benfica or Porto have won 13 straight in Portugal; Olympiacos 10 of 11 in Greece. In the Champions League, Bayern and Real Madrid reached five consecutive semifinals; Barcelona made it four times in the past five seasons.
Q: OK, I get your drift.
A: So this is one way to address that. Allow clubs with a coherent business plan to invest a little beyond the usual parameters where there is a clear plan on how to make the money back. It's not the only thing they're doing. They've also reduced the market pool (the portion of competition prize money that is allocated based on the value of a country's TV deal, rather than performance) and seeded the top seven national champions in the Champions League group stage. I wouldn't be surprised if they also increase the home-grown player requirement, just to spread the talent around a little more.
Q: Yeah, but these are baby steps ...
A: True, it's not exactly sweeping reform. You're not getting an NFL-style equal distribution of revenue or a salary cap or anything like that. But that's not realistic either. They're looking for little tweaks that will ultimately amount to sustainable growth. They don't want to penalize the big, wealthy clubs but they realize that a closed shop at the top is bad for business. So the idea is to grow the pie so the big clubs are happy, while also growing the number of clubs who can compete by attracting investment of the right kind.
Q: What does that mean, the "right kind"?
A: Investment that brings sustainable growth. They don't want some guy who saddles the club with $300 million worth of debt thinking he'll win everything and then walks away. Or even someone who puts in $300 million of his own money and then decides to stop spending, leaving the club with a bunch of hefty contracts. All it does is drive up costs and create an "arms race" of the kind that ultimately bankrupts clubs.
Q: So is this good for football?
A: Well, it's good that they realize there's a problem and are doing something about it. Until we have more details, it's hard to judge the individual measures but it should attract more investors and, likely, better ones too. Whether it will work remains to be seen.
Gabriele Marcotti is a senior writer for ESPN FC. Follow him on Twitter @Marcotti.