Why Financial Fair Play Doesn't Work

When Financial Fair Play was established, it was meant to do two things:

1. Protect the long-term financial stability of European club soccer, and,
2. Restore the competitive balance between both clubs and leagues

It attempts to accomplish these goals by establishing a break-even requirement, and any club that fails to break even would be fined, or even kicked out of the lucrative Champions and Europa Leagues. The stakes are high, and one would hope that this meant UEFA meant business. At the end of the day, however, Financial Fair Play is business as normal. 

The crux of Financial Fair Play is its main tool, the break-even requirement.  In laymen’s terms, the requirement states that all member clubs of UEFA must financially break even over a moving three year average in order for them to be considered to be “playing fair” in their comings and goings as a business. Clubs can’t spend $50 million more than they sell, and vice versa. It all seems pretty fair.

Until, that is, the concepts of “relevant income” and “relevant expenses” are fully understood. External money, such as that received from patrons and equity participants, is not considered relevant income, while income from TV and kit deals, tickets sales, and other brand related earnings are. “Relevant expenses,” for that matter, are things like player transfers and player wages, and not things like youth development or a new stadium. 

So, for instance, if the ultra wealthy owners of Manchester City - the Abu Dhabi United Group - suddenly decide that they want to buy Messi, they cannot finance the move using $200 million out of their own, astronomically deep pockets. That money is not “relevant income,” so it cannot be used to buy Messi, a “relevant expense.”

But, a club with a well established brand, such as Real Madrid or Manchester United, can still splurge every transfer window if they wish to. This is because their “relevant income” earned through their brand - such as kit sales and ticket revenue — is much, much higher than it would be for less popular clubs of equal or greater financial backing, a la Paris Saint-Germain and Manchester City. 

This puts a select number of clubs in a league of their own when it comes to spending power; Barcelona, Real Madrid, Manchester United, Bayern Munich, and Chelsea among others established their brand before Financial Fair Play came into effect. Their relevent income is concesquently very high, and will continue to be high because of the popularity of their brands. This does not lead to competitive balance, as these clubs can still out buy the competition, and thus will always have more talent in their squads. Make no mistake, this is a failure of Financial Fair Play. And it is no secret failure, either.

Managers such as Jose Mourinho understand perfectly well what's going on. In a recent interview, he commented, "When UEFA decided for Financial Fair Play, they were trying to do this to make every team [have] equal possibilities, but the reality is that the big teams, the big clubs, the clubs with more years at the top with more fan base around the world, with more income, are the players that keep being the big spenders.”

All of the signs point to this becoming the new status quo. Competitive balance is taking a back seat to long-term financial stability. The President of UEFA, Michel Platini, is happy with the progress Financial Fair Play has made: "Following the introduction of Financial Fair Play, the losses recorded by European professional clubs fell from €1.7bn to €800m in the space of two seasons. In other words, losses were cut by more than 50% in two years.That proves that we are on the right track.” Platini is more concerned about recovering the debt than closing the talent gap.

There will never be a day when European and National League parity is at the point where Wigan can go toe to toe with Barcelona. Cristiano Ronaldo will never make a shock move to Lazio in Serie A. And the next Gareth Bale will undoubtedly always leave the next Tottenham. The break-even requirement simply has no direct way of effecting change in these respects, because it does not even the financial playing field. It only stabilizes it. 

While Platini has voiced the need to keep Financial Fair Play constantly evolving in response to changes in European soccer, here at The18, we just cannot see Platini - or anyone, else for that matter - standing up against the giants of Europe in the name of competitive balance. After all, soccer is a business where there is only one thing worse than losing: losing money.