Soccer, the most popular sport in the entire world, is in a state of disarray. A large majority of the teams in the Barclays Premier League, Europe’s most profitable league soccer league, are in over $75 million of debt. Currently only 4 of the 20 teams in England’s top tier of football are making a profit, and this figure is projected to get worse with the current market. Some teams are in such a terrible state that even if the team had no expenses they would be still be unable to pay off their debts for 3 to 5 years. With teams being so uninterested in addressing their financial issues, how are they going to continue to operate with their current expenses?
One of the main reasons why so many clubs are in debt is player transfers. European football does not trade players in the same way teams in the United States do. They rarely make trades or have free agents to buy. For the most part teams buy and sell players. In this buying market the clubs with larger revenues buy and the ones with smaller revenues sell. This results in the top teams buying established players for large sums of money and the smaller teams having to sell their star players and find younger players to be able to afford running their club. This creates a huge gulf in skill between the historically great teams and the newly established teams.
This system creates a never-ending cycle of teams needing to win to afford the players to continue to win and increase their revenues. The best teams in Europe (the top 4 in England) play in the European Champions League with additional revenues of around $40 million for just taking part in the competition. This large amount of money is very attractive and spurs the best teams to continue winning. For the worse teams, motivation comes in another form. If a team falls to one of the bottom three places in the league, they get relegated from their current league into the one below them. This league drop comes at a cost of nearly $50 million in revenue due to sponsorship, television revenue, and ticket sale losses. Therefore every team must stay competitive; otherwise they will have to sell off their best players because they will be unable to afford their high wages. No team wants to find itself in that situation so they are compelled to continually reinvest, even if they don’t have the means to do so.
This is where the problem lies. For a team to be competitive they must have a significant payroll, but if they are not good enough and get relegated they are trapped in a financial model that they cannot sustain. Their profits shrink while still have to pay for their players, usually resulting in significant debt. Therefore, to avoid this fate, owners choose to invest in their teams with both cash and loans. The problem with that is that they have been priced out of the market. A few ultra rich owners have come out with their own cash and significantly changed the wage structure and the money it costs to buy players. Their insane spending habits have let to an inflated transfer market and players expecting wages that are unrealistic. Both Chelsea and Manchester City of the Barclays Premier League are spending roughly $40 million per year on player transfers with this number looking to rise substantially because of the rising market value of players. Keep in mind these enormous sums do not include player salaries. These spending splurges make it difficult for other clubs to compete when they don’t have an owner who has a personal net worth of over $7 billion. The result is that lesser teams choose to take out loans to afford the players to make them competitive, resulting in the debt problems throughout soccer.
Manchester City is the perfect example of a team to show the flaws of the current system. They have an owner who has invested over $500 million over the past 2 years. They have players costing over $35 million that ride the bench and never play for the team. When the team doesn’t win, they just throw money at new players who they believe can play even better. They have a wage bill that exceeds the total revenue they bring in. Their seemingly unlimited spending has also driven up player costs for other perspective teams. In short, Manchester City is the definition of a team that is not at all sustainable and is also ruining the game. This past year they spent over $60 million for a single player.
On the other hand, Arsenal is a club in the Barclays Premier League that tries to do things right. They are the only team who consistently makes the European Champions League, has a wage bill less than one third of their total revenue, and has posted consecutive years of net profit. Their team strategy is one of youth. They buy the best young players when they are inexperienced and give them the opportunity to play every week, a rare occurrence for other top teams.
This strategy has been chided, mostly from those critics who believe that they will never win a trophy because their team lacks the experience and leadership needed to win. This has been true for the past 6 years in which Arsenal have failed to a trophy. The fans see these shortcomings and plead for a reinvestment of those earnings. The fans feel they need to pay for players with experience and leadership because Arsenal needs to start winning it all. Their manager went into the transfer market this summer to try to find those key players who he believed would put Arsenal over the edge. To his dismay, he found the market to be overpriced and unrealistic for a financially responsible club, returning with a few players under 20 years of age and a few former stars, with a history of injuries. This did little to comfort the fans, especially after players like up and coming midfield starlet Samir Nasri held the club for ransom and refused to sign a new contract. (He ended up at Manchester City for what was reported as double the salary Arsenal offered)
Arsenal’s fans, however, must be realistic. Every team cannot afford to spend the $80, $65, and $55 million Manchester City, Chelsea, and Manchester United respectively can and did this off-season. They are in a position to be both competitive and fiscally responsible, a situation most clubs would love to have. Spending an average of $1.5 million a year on transfers is much more respectable and impressive considering the $15 million other clubs in the top four of the Barclays Premier League choose to spend every year.
This large financial gap is why Arsenal consistently finds themselves punching above their weight. A team whose opening day lineup had 2 players over the age of 24 simply cannot compete with proven superstars in their prime. The past 6 years have shown that although they can be competitive, they just don’t have the resources to win it all. Despite their lack of league titles, I stand by Arsenal and their insistence to not be bullied into pouring money into an inflated and ridiculous transfer market. By creating a model that allows them to compete and be fiscally responsible, their approach is to be admired even if they do struggle to put together a championship team consistently.
Soccer needs to find a way to make their teams more accountable and create a certain element of equity in their league. If this continues, only be a handful of teams will be in competition for the title, and most of those teams will be unable to pay their bills. I am aware that UEFA (Union of European Football Associations) is starting to make a stand with financial fair play regulations, but it will not stop teams like Manchester City finding ways around the rules. They will find ways to put their owners money onto the playing field, and no team will be able to compete without incurring large amounts of debt. To remedy this, an independent accounting firm should be employed to access their accounts and ensure that teams aren’t spending money that they’re not making or going to make in the very near future. Otherwise, the soccer landscape will soon be filled with teams incurring insurmountable amounts of debt with no true way to address the issue.
Matthew Cirillo
Social Foundations of Coaching Class
University of Notre Dame Class of 2012
