A curious development from the Premier League (via the Guardian):

Premier League clubs could soon be under much tighter financial control after chairmen met on Thursday to discuss a potential cap on player wages and a break-even rule.

Uefa’s financial fair play regulations are due to come into effect next season, but the Premier League is considering directives of its own, including an implementation of a maximum salary percentage increase year on year.

The chairmen and chief executives of top-flight clubs met at a shareholders meeting in London, where the break-even rule was also on the agenda, in order to prevent sides not spending more cash than they can generate. Premier League clubs made cumulative losses of £361m for the 2010-11 campaign, the most recent complete financial results.

This could signal an increased understanding from owners that spending well in excess of turnover year-after-year in the hopes of instant success isn’t just risky business for individual clubs; it’s flat out bad business for the entire league.

Why? Simply because both wages and transfer fees are artificially high on the back of owner money. For clubs that can afford to go well into the red like Manchester City, this isn’t a problem. But the inflationary effect extends to even middling players, and affects all clubs attempting to balance competitive viability with financial responsibility.

The major question here is why did it take until now for clubs to come to the realization?

The cynic would say the reason big clubs like Man United, Chelsea and Liverpool have come out in favour of the restrictive measures is because their commercial reach is far in excess of aspirational clubs. Their brand is secure, which yields a non-financial advantage in transfer deals over other clubs. In other words, big clubs might be using Financial Fair Play and salary caps to shore up their built-in advantage against clubs with ‘new money.’

That same cynic would also say that the Premier League’s big clubs, already facing FFP limitations in Europe, want to extend the effect to clubs attempting to compete for their spots in Europe so they don’t have an advantage.

This cynic would likely be onto something considering the fact the Premier League didn’t lead on this issue until FFP regulations came into place. Still, if the measures manage to burst the transfer/wage bubble in Europe, and in turn force smaller clubs to look to development or *gasp!* analytics rather than transfer deals to shore up their rosters, then maybe it shouldn’t matter if the PL’s intentions are good.

Comments (4)

  1. Dumb.Teams should be allowed to invest however they like.Let the market sift out shitty owners.

  2. Ya because everyone noes how an unfettered free market works so well for the little guys…

  3. It may be semantics, but I have to argue with “Simply because both wages and transfer fees are artificially high on the back of owner money.”

    Wages and transfer fees are currently (or until FFP recently) determined precisely by supply and demand. FFP and this initiative is an attempt to artificially LIMIT them.

    Chelsea and City, with their ongoing growth in turnover, are proving that these spending sprees can pay off in the future, growing a brand exponentially in a period of 5-10 years.

    • You’ve misunderstood. The artifice is the fact that, unlike most companies that are required to earn profits based on turnover, clubs spend well in excess of actual revenue. The difference is made up of owner money. This effect distorts the market, and artificially inflates market prices. And great for Chelsea and City, but in any other field, 10 years of excessive losses would be severely punished, whether in terms of share price or viability of the business. In football, it’s routine.

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