Manchester City announce losses of £97.9m for 2011/12
— Sky Sports News (@SkySportsNews) December 14, 2012
This hit the Twitter only moments ago. Granted, it’s much more encouraging than the club’s £197.5m posted loss from 2010-11. Apparently a lot of has to do with “increased investment,” and, according to the BBC, a sponsorship deal with Etihad Airways raised their commercial revenue from £48.5m to £97m.
The Manchester City report adds:
“With a relatively young squad that has won an FA Cup and a Barclays Premier League in consecutive seasons, our recruitment needs have been reduced.
“As a result, the amortisation of player contracts and the net impact of player trading on the club’s bottom line has decreased by 27% (£30.3m) over the previous year, consistent with our belief that the peak of the club’s investment in its playing squad has passed.”
Except, at the same time, player wages have increased from £153.7m to £178.2m.
Anyway, the underlying point is that City’s backers have the funds to cushion a near-100 million pound loss. I’ve said this countless times, but let me say it again. Clubs that spend well in excess of what they earn in revenue help drive up the average wages/transfer fees for elite players.
A club that is willing to offer transfer fees and wages it cannot afford drives up the average transfer fees on the open market. If City can simply pull a number out of the blue to pay for an elite player, regardless of whether the club can afford said player, it raises the average cost for all clubs across the board, including those without the infinite funds of a City.
This inflation has a trickle-down effect throughout the league and lower divisions. Transfer market fees and wages have been artificially high for a long time now on the back of investors swallowing losses. It’s encouraging City have put their mad-cap spending period behind them, perhaps in order to shore up commercial opportunities with some short-term success, including last year’s dramatic league title.
But the deal with Etihad indicates a likely trend of clubs by-passing investor doping through friendly sponsorship deals from friends with common interests (Gazprom!). Despite the hope, Financial Fair Play may not provide enough heft in helping to calm wage and transfer fee inflation.