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.

How?

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.

Comments (14)

  1. What’s artificially high about Real Madrid’s purchase of Ronaldo or Benzema or Barca’s buys of Ibra and Fabregas? Or United and Rooney, or Bayern and Javi Martinez?

    Besides Martinez and Fabregas, most of these guys were bought long before the City’s and PSG’s and Zenit’s showed up, and were bought for ridiculously above market value (save MAYBE Ronaldo, given that they recouped his fee in jersey sales within months).

    • none of those clubs post near 100 million pound losses

    • When it comes to Barça and Real, it’s trickier to determine, because both clubs get sweet buyouts – directly or indirectly for various forms of government. Sometimes they sell training facilities for well over market value or they simply get debts forgiven, but they seem to enjoy similar largesse.

      The Bundesliga has strict financial laws the govern how much a club can spend. Financial irregularities can lead to relegation.

      United was a PLC when Rooney was purchased, and was beholden to shareholders to keep expenditures under a certain percentage of club turnover (I believe it was around 57%). In fact, United’s PLC model was one followed closely when establishing UEFA’s FFP rules.

      It’s one thing for a club to have more money than others and spend more than others can afford to spend. It’s unfortunate for the smaller clubs, but it’s not necessarily the fault of the bigger clubs that they have and make more money. That’s capitalism, and these are businesses.

      But when you spend more money than ANY club can afford to spend, yourself included, that’s the height of reckless behaviour. It might be considered a subtle difference, but it’s a significant one.

      SB

      • All of what you say is true. However, the issue at hand wasn’t the finances of these clubs. The issue is inflated transfer values.

        • Yes, but they are inflated because the club (this time, City). Are paying more than they can realistically pay, if not for their sugar daddy. In the cases before, BM &MUFC could fit the expenses – wages as well as transfer fee – into a responsible financial model. City clearly can not, nor can Chelsea or PSG, as will be proven when the numbers come out. In City’s case, they couldn’t even make it work after trumping up sponsorship income in attempts to offset expenses.

          As SAF once said, his players are on high wages, yes, but they are also excellent players playing in front of 75k each home game. Can you say the same about Craig Bellamy who is still one of the highest earners in world football whilst plying his trade at Cardiff City? How about Wayne Bridge at Brighton and Hove?

          SB

    • Please don’t call that guy Ronaldo if you are referring to cristina. Ronaldo was actually an amazing player. This clown just jacked his name (which happens to be his middle name) and put it on his jersey. Who else puts their middle name on their jersey? He just tried to benefit from his fame. That clown is the biggest diver in the world and a disgrace.

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