Don Garber thinks Financial Fair Play is just smart

Discussion in 'MLS: News & Analysis' started by vevo5, Aug 8, 2012.

  1. superdave

    superdave Member+

    Jul 14, 1999
    VB, VA
    Club:
    DC United
    Nat'l Team:
    United States
    The same way Leeds did.

    If you have to compare the Spanish giants' financing to PSG and Man City to make your point, I think you've lost the argument.

    That's a philosophical argument. That argument lost, and that's why we have FFP.
     
  2. profiled

    profiled Moderator
    Staff Member

    Feb 7, 2000
    slightly north of a mile high
    Club:
    Los Angeles Galaxy
    So UEFA can pretend they are trying to fix the problem, and pat themselves on their backs.

    Because these teams compete in cross country/nation competitions.
     
  3. AmeriSnob

    AmeriSnob Member+

    Jan 23, 2010
    Queens
    Club:
    New York Cosmos
    Nat'l Team:
    United States
    Yeah, a lot of these TV deals are based on attendance/league position, etc. But the result for almost all cases is not one where 2 clubs split 50% of TV revenue. I don't really know how the money was split by the 12 clubs pre- or post-Rangers collapse.
     
  4. AmeriSnob

    AmeriSnob Member+

    Jan 23, 2010
    Queens
    Club:
    New York Cosmos
    Nat'l Team:
    United States
    The example of Germany was used: what exactly are the regulations regarding wage expenditures in Germany? Is there a set % of revenue limit? The only thing I could find is that to aquire a license a team must "prove its solvency."
     
  5. holiday

    holiday Member+

    Oct 16, 2007
    what makes you think that a system which has been put in place in germany implies any analogy to a different system that's put in place on a different scale? i don't quite see what you're getting at. when we mention city or real madrid, we're talking about things which don't exist in germany.
     
  6. triplet1

    triplet1 BigSoccer Supporter

    Jul 25, 2006
    I think this answers your question.

    From the Swiss Rambler:

    "As part of the German rules, clubs have to provide a balanced budget before each season in order to receive a license, which does not completely prevent clubs falling into financial difficulties (see the problems experienced in the past by Dortmund and Schalke), but it undoubtedly helps. Indeed, the Bundesliga annual report for 2011/12 noted that 12 of the 18 clubs were profitable. To place that into perspective, only four of the 20 Premier League clubs reported a profit in 2009/10.

    Conservatism is also endemic in the Bundesliga ownership model, known as the “50+1” rule, whereby club members must own a minimum of 50% of the shares plus a deciding vote. The idea is that this prevents an unwelcome owner from taking control, but it does allow considerable scope for private individuals or businesses to invest in the club, as is the case at Bayern with Adidas and Audi both featuring on the shareholder register."

    http://swissramble.blogspot.com/search/label/Bayern Munich
     
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  7. LongDuckDong

    LongDuckDong Member+

    Jan 26, 2011
    Club:
    FC Schalke 04
    Nat'l Team:
    United States
    That's a pretty good description. Clubs are also required to spend a certain amount on academy programs to ensure proper development. The reserve teams are also well funded and compete in the 4th division.

    All of these things contribute to German clubs being (more) financially responsible. Developing your own players is cheaper than paying transfer fees. It doesn't guarantee consistent success, but the culture there accepts that each club will have ups and downs.

    Also worth noting is the strength of the 2 Bundesliga. The 2 Bundesliga really isn't a huge step down. In fact, I would say that the gap between the German first and second division is the smallest in the world. The two leagues also share a TV contract and some 2 Bundesliga clubs have revenue over $60 million a year. Thus getting relegated isn't the death knell it is in other countries. There isn't an overwhelming pressure to avoid relegation by spending big money. This saves the smaller clubs.
     
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  8. AmeriSnob

    AmeriSnob Member+

    Jan 23, 2010
    Queens
    Club:
    New York Cosmos
    Nat'l Team:
    United States
    The Bundesliga doesn't restrict wages to a set percentage of revenue though (well I guess 100%, but that doesn't really count now does it); teams can spend over 70% of their revenue and still technically be solvent due to anticipated increased revenues to cover these costs.

    It is this measure that is the butt of my criticism, and is exactly the kind of measure that one can easily see as a cause for concern. How can a team be realistically expected to compete if it is promoted and cannot increase spending in anticipation of increased revenue due to their promotion? Unless I am really misunderstanding the rules here, it is significantly different to the Bundesliga license, which is why you don't see me attacking that (since I believe Bundesliga does things the right away in nearly every department).
     
  9. holiday

    holiday Member+

    Oct 16, 2007
    interesting doings, speaking of soccer finance, on the sss in nyc front.
    a league apparently willing to build a stadium for a team not-yet-to-be.
    i wonder how ffp would handle that.
     
  10. vevo5

    vevo5 Member

    Nov 23, 2011
    Nat'l Team:
    United States
    A promoted team can use "projected revenue" as long as this projection is reasonable. There could be a committee to vet this kind of things.

    It would make no sense that a promoted club be forced to use last year revenue.
     
  11. AndyMead

    AndyMead Homo Sapien

    Nov 2, 1999
    Seat 12A
    Club:
    Sporting Kansas City
    Then what do you do with a relegated club with players under contract for more than they're allowed?

    Contracts are contracts.
     
  12. profiled

    profiled Moderator
    Staff Member

    Feb 7, 2000
    slightly north of a mile high
    Club:
    Los Angeles Galaxy
    Just make every contract in the league a single year. o_O
     
  13. artml

    artml Member

    Liverpool FC
    Ukraine
    Jul 11, 2009
    Los Angeles
    Club:
    Liverpool FC
    Nat'l Team:
    --other--
    You do a garage sale. Or negotiate your players to lower their wages, and sell those who don't agree. Even better, you include this clause into players' contracts in advance.
     
  14. Clint Eastwood

    Clint Eastwood Member+

    Dec 23, 2003
    Somerville, MA
    Club:
    FC Dallas
    The smart clubs have relegation release clauses and the like.

    The moronic clubs, like Portsmouth, don't....................

    The parachute payments given to relegated clubs in England help a lot for that first initial season in the lower divisions. So you do have a year in order to either get promoted back up, or fix your wage bill problems.

    For me I'm with Garber on Financial Fair Play. It protects clubs from themselves. There are fans in England who are against it until their club is the one in danger of financial ruin due to their owners' hubris.
     
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  15. AmeriSnob

    AmeriSnob Member+

    Jan 23, 2010
    Queens
    Club:
    New York Cosmos
    Nat'l Team:
    United States
    I would hope that is true, though I don't trust UEFA to make sense. Leaving it open to interpretation like this leads to some clubs being banned (Besitkas and AEK) and some not (Man City). I wonder what the difference between Besitkas/AEK and Man City is...hmmm *cough*TV money*cough*.

    And the bigger problem is the restriction of spending less than 70% of wages. Where'd this number come from? Is it impossible to be solvent at this point?
     
  16. chapka

    chapka Member+

    May 18, 2004
    Haverford, PA
    Club:
    Philadelphia Union
    Nat'l Team:
    United States
    Have you actually read the FFP regulations? If you want to, they're here:

    http://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/80/54/10/1805410_DOWNLOAD.pdf

    Under the FFP guidelines, the revenues you can count are fairly strictly defined, and there are specific procedures (in Annex 10) dealing with transactions that are not true arms' length transactions. These are not new issues and they're not unique to soccer.

    Big clubs are big businesses, but they are still businesses, subject to IFRS reporting requirements. As long as UEFA has the will to enforce Financial Fair Play they have the tools they need to do so. The Man City/Etihad issue will probably be a good indicator of how seriously they plan to enforce the rules they've written.
     
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  17. holiday

    holiday Member+

    Oct 16, 2007
    "For the purpose of the break-even result, the licensee must determine the fair value of any related party transaction(s)."
    the 'licensee' is the club.
     
  18. chapka

    chapka Member+

    May 18, 2004
    Haverford, PA
    Club:
    Philadelphia Union
    Nat'l Team:
    United States
    Right. If the transaction is with a related party, as set forth in part E of annex 10, the club can't rely on the face value of the transaction; they have to calculate and use only the fair value of the transaction, based on IFRS standards and the guidance given in part E7. The party's calculation is then subject to UEFA review.

    "Fair value" is not a phrase UEFA used at random; it's a well-established accounting concept under IFRS accounting standards, which determine both how the value is calculated and what disclosures have to be made about the methods and data used to calculate it. Fudging these numbers doesn't just have Financial Fair Play implications; in some cases, it could also constitute tax and/or securities fraud.

    Is there some wiggle room in "fair value"? Of course--but it's not, as you seem to be implying, a case where a team can just pick the number they want. Again, if UEFA wants to enforce these rules, it will have all the tools it needs to do so.
     
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  19. holiday

    holiday Member+

    Oct 16, 2007
    i wasn't implying it can be picked at random. but there's enough leeway that the ffp parameters become a lot softer, and the superclubs are more likely in a position to exploit that.
    "In considering each possible related party relationship, attention is directed to the substance of the relationship and not merely the legal form. The following are not related parties:
    a) Two entities simply because they have a director or other member of key management personnel in common or because a member of key management personnel of one entity has significant influence over the other entity..."
    does etihad/city even come under ffp purview? tbh i don't know.
     
  20. vevo5

    vevo5 Member

    Nov 23, 2011
    Nat'l Team:
    United States
    Leagues with something similar to UEFA financial fair play, whose purpose is to cap spending.

    -Bundesliga (Germany)
    -Bundesliga 2 (Germany)
    -Championship (England)
    -League 1 (England)
    -League 2 (England)

    EPL owners will vote on UEFA financial fair play sometimes in September.

    It looks like more and more European soccer leagues are adopting a "salary cap."
     
  21. superdave

    superdave Member+

    Jul 14, 1999
    VB, VA
    Club:
    DC United
    Nat'l Team:
    United States
    Not as we understand it in North America.

    Here, the model generally is a cap that puts all teams on a more or less even footing. But a team can make a huge profit spending at the cap limit if they have great income, and they can lose money at the salary floor if their revenue is terrible. The league as a whole can balance its books, but teams within the league can lose money or make money.

    FFP is about preventing a rich king from infusing so much cash into his team it unbalances the competition, and also about preventing a reckless owner from killing a club (Portsmouth.) It's about each individual team having to balance its books.
     
  22. AndyMead

    AndyMead Homo Sapien

    Nov 2, 1999
    Seat 12A
    Club:
    Sporting Kansas City
    Moving forward, sure. But plenty of players have existing multi-year contracts.
     
  23. vevo5

    vevo5 Member

    Nov 23, 2011
    Nat'l Team:
    United States
  24. ceezmad

    ceezmad Member+

    Mar 4, 2010
    Chicago
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    I knew about the championship UEFA style limits, but did not know L1 and 2 were straight up salary cap, I wonder if that will run foul with EU labor laws.
     
  25. superdave

    superdave Member+

    Jul 14, 1999
    VB, VA
    Club:
    DC United
    Nat'l Team:
    United States
    They probably aren't. Europeans often use that phrase, salary cap, when the cap is based on a club's revenue. Here, we mean each team has the same "cap."
     

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