2. 1
Acknowledgements
I would like to start by thanking God for providing me with the strength and will to
complete this research project particularly in moments of difficulty.
I would like to express my gratitude to everyone who supported me throughout the
course of this M.Sc. project. I am thankful for their guidance, advice, criticism and
support during the duration of this research. I am sincerely grateful to them for
sharing their truthful and illuminating views on a number of issues related to the
project.
I express my warmest thanks to my parents for their encouragement and advice.
I would like to thank those who contributed positively towards my research in
particular my close friends on the course who provided moral support in surplus.
I would also like to thank both my tutor and my project supervisor Dr. Joe Piggin
and Dr. Borja Garcia for their assistance, support and availability for the duration of
the project during the course of the study.
Olusanjo Olutayo
3. 2
Contents
1. Introduction......................................................................................................................6
1.1 Aims and Objectives...................................................................................................8
1.2 Methodology ..............................................................................................................10
1.3 Chapter structure ......................................................................................................11
2. Literature Review ............................................................................................................12
2.1 Introduction ................................................................................................................12
2.2 Defining FFP..............................................................................................................12
2.2.1Salary caps and FFP; issues of legality ..............................................................14
2.2.2 FFP v Article 45 TFEU..........................................................................................15
2.2.3 FFP v Article 101 TFEU........................................................................................16
2.2.4 FFP v Article 102 TFEU........................................................................................16
2.3 The consequence of FFP ........................................................................................18
2.4 FFP Pros ....................................................................................................................21
2.4.1 FFP Cons................................................................................................................23
2.5 Cost Control Mechanisms .......................................................................................25
2.5.1 Luxury tax ...............................................................................................................25
2.5.2 Salary cost management protocol ......................................................................26
2.6 Conclusion .................................................................................................................28
3. Methodology.....................................................................................................................30
3.1 Research paradigm ..................................................................................................30
3.2 Research Design.......................................................................................................32
3.3 Case Study.................................................................................................................34
3.4 Data Collection ..........................................................................................................35
3.5 Reliability and validity...............................................................................................39
4. Data Analysis...................................................................................................................41
4.1 Introduction ................................................................................................................41
4.2 Transfers & Wages...................................................................................................44
4.2.1 Wages .....................................................................................................................44
4.2.2 "Unfairness" of FFP...............................................................................................48
4.2.3 Increase in “Player Power”...................................................................................52
4.3 The Impact of Television..........................................................................................54
4.4 Conclusion .................................................................................................................57
4. 3
5. Discussion and Conclusion ...........................................................................................59
5.1 To what extent do clubs feel they can challenge the legality of FFP and what
impact will that have on UEFA’s ability to enforce it? ................................................59
5.2 What problems do stakeholders in the EPL face in trying to adhere to the
demands of UEFA’s FFP regulations?.........................................................................61
5.3 To what extent is FFP an appropriate solution to regulate and ensure the
long-term stability of European football? .....................................................................63
5.4 Policy and managerial recommendations.............................................................65
5.5 Limitations and suggestions for further research.................................................67
References ...........................................................................................................................68
5. 4
Abstract
This research project investigated initial perceptions of the effects of Financial Fair
Play (FFP) on European football, using the English Premier League as a case study
to focus the research. The primary objective of the research project was to the
legality of FFP as a regulation to govern the financial stability of European football
and whether ultimately, it was the most appropriate. The case of Portsmouth FC
falling from the Premier League into liquidation was a stark awakening to the
consequence of excessive spending on transfer fees and wages. With the collective
debt of European clubs, rising, UEFA sought to impose regulations that would bring
bank equilibrium to earnings and spending. The laws would in theory provide
greater parity to European football by limiting the spending of the major European
powers. However the inflexible nature of the regulations along with some specific
requirements means that the spending of both big and small clubs are constrained,
and with big clubs already with established revenue, they in effect become
protected from challenge.
The research used a qualitative method as it sought to investigate opinions. This
would allow for greater collection of discourse on the subject matter, as the data
analysed was highly descriptive and subjective in nature. This allowed access to a
plethora of content from which opinions were collated and outstanding themes were
identified. Within these themes also were subthemes which underpinned the
outstanding themes, providing further nuances of knowledge beneficial to the
overall research.
6. 5
The research found that FFP is an inappropriate set of regulations for governing the
financial prudence of European clubs. Its contradictoriness makes it anti-competitive
by nature which is detrimental to the continued growth of European. Flawed policies
coupled with the rising prominence of television broadcasting deals have made it at
time obsolete. With UEFA set to make changes to the regulations, it is important
that they take into account the issues that have raised concerns.
7. 6
1. Introduction
In 2008, the global economic crash set in motion the need for financial reforms that
would increase scrutiny on the monetary practices of banking corporations. This
need for increased financial diligence permeated through most major industries; this
included the football industry. With a majority of professional football clubs in
Europe experiencing ‘significant losses’ (Muller, Lammert & Hoveman, 2012), there
was growth in concern for the long-term viability (Hassan, 2014). To put into context,
had the football leagues in Spain, England and Italy operated as ‘normal’
companies, they would have been met with insolvency within two years
(Rothenbucher, Mesnard, Rossi, Hembert and Ramos, 2010). Though it is widely
understood that the business of sport and football operates in a peculiar nature
(Gratton, 2000), the rate at which expenditure had exceed income, and the very real
threat of one of Europe’s major footballing institutions being faced with bankruptcy
meant a solution was required.
Though to some degree the Premier League remained somewhat “unaffected”,
mainly due to strong TV, sponsorship and spectator revenue streams, the wider
European picture -and English football’s lower tiers- had a far bleaker outlook.
There is an inherent belief that football as a business is an unstable industry
(Szymanski, 2010). Coupled with increasing financial mismanagement and the
global credit crunch, UEFA, the governing body for European football, took it upon
itself to introduce a set of rules that would protect the long-term sustainability of
European football clubs; Financial Fair Play. Financial Fair Play (hereafter FFP) was
8. 7
introduced to ensure clubs would spend within their means and that spending would
be done through revenue streams generated by footballing activities. The need for
FFP was justified in its inception as a ruling that would protect the game from
“reckless spending and financial insanity” and also “…encourage competition on a
more effective and efficient basis” (Chaplin, 2014). However, since FFP has been in
existence, many opinions across a broad spectrum have come into being; how
relevant is FFP? Can UEFA truly implement and enforce these rules both? What
effect will it have on competitiveness (Vöpel, 2011; LK Shields, 2014; Jemson 2013)?
From the perspective of the Premier League, finance generated through strong
footballing revenue streams i.e. a £5bn broadcasting deal (BBC Business, 2015)
provides some form of protection against the restrictions of FFP. However, with
more income, there is the potential for more outlay. Therefore, from a competitive
standpoint, one can already observe the conflicting nature of FFP hence giving
reason for this research project.
The importance of this research is to observe and analyse the discourse around
FFP. This will help to define it, and to provide understanding and clarity on what
impact stakeholders feel FFP may have on European football, using the English
Premier League (hereafter EPL) as a case study to better understand the
stakeholder dynamics. Justification for selecting the EPL as case study reference
lies in the fact that it has both the highest turnover and expenditure in European
football (Deloitte, 2013), and the excessive spending of clubs in this league
(European Commission, 2013) had been used to justify the need for these
regulations. The main questions the research will look to answer are the following;
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- To what extent do clubs feel they can challenge the legality of FFP and what
impact will that have on UEFA’s ability to enforce it?
- What problems do stakeholders in the EPL face in trying to adhere to the
demands of UEFA’s FFP regulations?
- To what extent is FFP an appropriate solution to regulate and ensure the
long-term stability of European football?
1.1 Aims and Objectives
These questions will direct the focus of the project by defining the existing
interpretations of FFP both on a domestic and European level. It will look at the
implementation of UEFA’s regulations alongside the regulations of the Football
League, and what effects they will have on the EPL stakeholders; what problems do
they face and how may they counteract these problems? By collating and
examining stakeholder opinions and perceptions, the researcher will be able to gain
an understanding of the current climate in regards to FFP, and what the possible
future implications for all stakeholders might be. Though this project will not look to
make a legal analysis on FFP as this falls outside the scope of the research
objectives, it will explore perceptions around the legality of FFP, its long-term
viability and what the alternative options are, whether that is a restructuring of the
current regulations, or the complete abandonment of FFP itself. This will allow the
researcher to successfully fulfil the aims of this research project which are;
10. 9
- To collate and critically analyse opinions and perceptions in football
regarding FFP and what effects it has and will have on the stakeholders of EPL
football.
- To identify and examine strategies stakeholders may employ in order to meet
its requirements and identify other factors that would affect FFP.
- To identify the long-term viability of FFP by examining claims against its
legality and exploring what alternative solutions may exist.
11. 10
1.2 Methodology
The methodology for this research project will make use of qualitative research
methods consistent with a project of a social scientific nature. The project will make
use of content analysis in order to ascertain and analyse themes, biases and
meanings. Through the use of written documents, video and other secondary
sources of data, the researcher will be able to collect substantial information that will
aid in the completion of the research objectives. The researcher will employ
interpretative techniques that will ensure content collection and analysis is
systematic and objective. The researcher will use the appropriate coding frames to
ensure true meaning can be gained from themes identified in the data collected.
This will allow for more intensive interpretation and further uphold the credibility of
this research.
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1.3 Chapter structure
The chapter structure for the research project will be as follows;
It will begin with the title page stating the topic of research and will be followed by
an abstract to provide a surface insight into the content of the project.
The introduction section will provide an explanation on what the research is about,
what questions the researcher is looking to answer and what the objectives of the
project are.
The literature review section will look critically into the existing literature on FFP,
providing definitions, and going over literature debates around FFP. It will explain
the usefulness of these literal pieces to the overall objectives of the research
The methodology will look at how the research was conducted, identifying the
research design of the project, the data collection methods, and how the researcher
ensured the validity and reliability of the project.
The results section will be a presentation and analysis of the researcher’s findings,
making reference to the research questions, looking to answer them.
The discussion and conclusion will look at the implications of the research’s findings
and conclusions, and will also look at the limitations of the project and if there is a
need for further research on the topic
13. 12
2. Literature Review
2.1 Introduction
Regulation, as a general precept, exists to enforce legislation corresponsive with
the appropriate sector or industry. In sport, it is apparent that there is a gap between
real world occurrences and its regulatory framework (European Commission, 1998).
Whereas there was once a presumed solitary European model of sport, deviation
from that train of thought strongly suggests that there is an acknowledgement of the
transformations in the governing structures of European sport (Garcia, 2009).
Such transformations have largely been influenced by the growing economic value
of football, in this case study; the English Premier League (EPL). As the financial
value of the league and the clubs within it has risen, so has the need for monetary
caution as an observation of other major leagues in Europe depicts. In both Spain
and Italy, professional football has experienced financial crisis (Lago, Simmons &
Szymanski, 2006) and from these problems the need for Financial Fair Play was
realised. The problems stemmed from an imbalance between income and
expenditure (Barajas & Rodriguez, 2010); therefore a significant portion of the issue
could be attributed to a search for competitive superiority. Competitive imbalance
can drive down league revenues (Lee & Fort, 2012) so in order to prevent such,
policy can be introduced in a preventative measure.
2.2 Defining FFP
14. 13
The introduction of FFP rules by UEFA was done in a bid to secure the long term
stability of football within Europe. A marked rise in financial problems with European
clubs was becoming more apparent including in England most prominently in the
case of Portsmouth Football Club, a former EPL club that was faced with liquidation
due to financial negligence. These regulations, according to UEFA President Michel
Platini would;
“…help clubs free themselves from the cost spiral that has seen many of them
experience severe financial difficulties in recent times” and “to put stability and
economic common sense back into football”.
The objectives of FFP were to;
• to introduce more discipline and rationality in club football finances;
• to decrease pressure on salaries and transfer fees and limit inflationary effect;
• to encourage clubs to compete with(in) their revenues;
• to encourage long-term investments in the youth sector and infrastructure;
• to protect the long-term viability of European club football;
• to ensure clubs settle their liabilities on a timely basis. (UEFA, 2009)
From a financial perspective, these regulations would ensure that clubs could not
spend beyond their financial capabilities. However, this is where FFP first opens
itself to criticism. If spending is limited by how much a club can generate, then the
larger clubs such as Manchester United -the 3rd most valuable sports club in the
world- have a significant advantage over their lesser counterparts not just from their
ability to generate larger amounts in revenue, but from also having multiple streams
15. 14
-of revenue -multiple lucrative sponsorships and global marketing- in comparison to
their cohorts (Fletcher, 2012). Fletcher see UEFA’s failure to exact distributive
justice as potentially ‘disastrous’, with the result being stagnation at the top of the
Premier League and little room for clubs to join them.
With the argument being that the new rules restrict the movement of aspirational
clubs, solutions to ensure the fairness of FFP have been suggested. Of the several
cost control mechanisms proposed (other methods are further discussed later in this
chapter) one of the most prominent is the implementation of a salary cap. However,
this has also been met with opposition.
2.2.1Salary caps and FFP; issues of legality
The policies of FFP fall between the realms of law and governance and to what
extent it can be enforced without conflict between the two. For example, player
salaries are the biggest expenditure of clubs in the Premier League - 71% as a
portion of turnover in 2012/13 season (Wilson, 2014) - therefore, in order to
exercise prudent financial governance; UEFA could introduce a salary cap.
A salary cap looks to limit the amount a sports team can collectively allocate on
player wages. That limit may be set as a general amount for all clubs, or relative to
each team i.e. as a percentage of a team’s revenue. Limiting player wages is also
16. 15
an existing element in FFP regulations. The regulations operate similarly to a
relative salary cap, being based on the revenue of the individual team.
An independent review of European sport (hereby IERS) by the European Union in
2006 identified the need for policy on cost controls “designed to promote
competitive balance between teams” (Arnaut, 2006) and championed the
implementation of a “salary cost management protocol” by the English Football
League. Authors such as Vrooman (2007) and Kesenne (2000) have argued in
favour of salary caps, with Kesenne stating that salary caps improve the competitive
balance in a league, manage the excessive salaries of top players and guarantee
the owners of both big and small clubs reasonable profit.
2.2.2 FFP v Article 45 TFEU
However, EU laws -free movement of labour- exist, preventing the implementation
of a salary cap and the sheer amount of money involved inevitably will lead to legal
challenge (Lindholm, 2010). Foraker (1985) discusses the difficulty salary caps
pose against the freedom of movement recognising that they make it difficult for
players to move between teams as the existence of cap space becomes a condition
for employment. Therefore a team with insufficient cap space will be unable to
employ either free agents or players whose clubs are willing to trade them. This
complication of player movement is where the problem lies.
17. 16
2.2.3 FFP v Article 101 TFEU
Additional arguments against a salary cap fall under Article 101 of the Treaty of the
Functioning of the European Union (TFEU), which looks at anti-competitive
behaviour. Salary caps can be anti-competitive in nature (Lindholm, 2010) and can
lead to monopsony - a situation whereby there is only one buyer in a market. Clubs
compete when it comes to buying players and the enforcement of a salary cap may
limit who a club can pursue - negatively affecting overall quality and
competitiveness.
2.2.4 FFP v Article 102 TFEU
Legal challenges by clubs against UEFA could be further strengthened by the claim
that the use of a salary cap constituted an abuse of a dominant position under
Article 102 TFEU, seeing as UEFA are the sole controller of professional football in
Europe and any actions they take against competitiveness can be done without
regard or repercussion (Lindholm, 2010). While the FFP rules implemented by
UEFA would not be considered an abuse of a dominant position (it was done with
the long term-sustenance of European football in mind), the vagueness of the edict
(does not provide a clear definition of what constitutes as abuse) (Lindholm, 2010).
Coupled with its conflictions with the other laws, the problems of a direct salary cap
are clear. As such, instead of introducing a salary cap outright, FFP employs other
financial regulations -alongside a quasi-salary-cap- seeking to improve the financial
performance of European club football and to protect its long-term sustainability.
However, financial success can be linked directly with competitive success - glory
hunter phenomenon (Sass, 2012). If a club is successful, it is able to increase its
18. 17
market size translating into revenue. The “spend money to make money” attitude is
unsustainable in relation to FFP’s requirement to ‘break-even’ meaning only
historically wealthy clubs are able to compete under such limitations; “since small
clubs cannot overspend or invest in a greater market size for the future…a
maximally uneven competitive balance in the long run, where big clubs dominate
small clubs is the resulting outcome” (Sass, 2012).
19. 18
2.3 The consequence of FFP
When analysing the consequences of FFP, an interesting phenomenon arises.
Under the assumption that FFP will only favour the big teams (Vöpel, 2011), the
vast amounts of wealth in comparison to other European leagues means that in the
competition for superior raw materials -players- clubs participating in the Premier
League have a financial advantage over their European counterparts. Studies exist
to show there is direct correlation between player quality and output winning
percentage (Jones & Cook, 2015). Historically, it has proven difficult for new teams
in the league -their place in the EPL achieved through promotion from the Football
League Championship- to sustain themselves in the Premier League due to older
and larger market clubs’ attainment of “greater levels of resources, involvement in
more competitions and improvement in television and sponsorship funding” (Jones
& Cook, 2015). The same can be said for small market clubs and teams who
perennially compete for mid-table positions. When these two factors are put
together -greater funding from TV deals and access to better quality of player- what
occurs is the compartmentalisation of the league into several ‘mini-leagues’; the
race for the title, for places in European competition, a top-half finish, and the
relegation battle (Manasis, Avgerinou, Ntzoufras & Reade, 2013).
With money distributed through television rights deals, these EPL participants can
increase revenue positionally – a higher finish in the table means more prize money.
This asymmetric distribution of prize money can help balance competition
(Szymanski & Kesenne, 2004). This readdresses the issue of competitive success
being directly linked to financial success. Such an incentive heightens the potential
for the EPL clubs to take risks which makes competitive balance an ‘inherently
20. 19
unstable’ objective (Vöpel, 2011). Empirically speaking, the argument comes full
circles against UEFA that by implementing FFP, they negatively affect competition
by inhibiting the ability of all teams to attempt compete on an even scale; behaviour
which is anti-competitive in nature. FFP effectively monopolises competition for the
haves against the have-nots; “it unintentionally protects well-established clubs from
being challenged by non-established clubs…confirms an unbalanced competition
rather than making it more even” (Vöpel, 2011).
This provides an explanation for the occurrence of ‘segregation’ into mini leagues in
the Premier League. However, this isn’t necessarily detrimental to the ability of the
league to provide entertainment and attract television audiences. Uncertainty of
outcome was once viewed as the most relevant factor for sports viewing
(Rottenberg, 1956) but the quality of playing talent is now the preference (Buraimo
& Simmons, 2015). Therefore, as the overall quality of talent increases, so to,
empirically speaking, do the viewing figures which translates itself into the ability for
the league to negotiate huge television deals such as the one recently attained.
While it doesn’t redress the issue of competitive imbalance in totality, it does
increase the competitive balance within these quasi-divisions.
However, the enhanced buying power of clubs in the Premier League has
counterbalanced the restrictive nature of FFP. With clubs seeing a significant
increase in ‘relevant income’, their ability to spend is unhindered by the constrictions
of FFP. While it doesn’t dramatically raise competitive balance in the Premier
League -as previously discussed- its effect on the wider circuit of European club
football is a more telling. The discrepancy in television rights deals compared with
other European leagues -for example, TV rights are negotiated individually in Spain,
puts the Premier League, financially, in a position of power. If the quality of player is
21. 20
the most desirable factor in attracting viewership, then the Premier League is in a
position to attract better players, with their ability to pay higher wages. Andreff (2011)
speaks of the league bargaining for increased TV rights revenues which enables
teams to inflate their payrolls. This theoretically makes the Premier league a more
attractive destination for players and as the quality increases, so too does the
marketability maintaining the cycle. Better players lead to higher wages, which
leads to increased spending - the same issue that FFP created to reduce. This
reflects the conflicting and contradictory nature of FFP in the sense that in
attempting to enact a law, they may be inadvertently breaking one. And in
attempting to create parity in European football, they are widening the gap. Chelsea
FC manager Jose Mourinho echoes this sentiment;
"I think Financial Fair Play is a contradiction because, when football decided to go
for Financial Fair Play it was exactly to put teams in equal conditions to compete.
What happened really with the Financial Fair Play is a big protection to the historical,
old, big clubs, which have a financial structure, a commercial structure, everything
in place based on historical success for years and years and years.” (ESPN, 2014)
Consequently, FFP appears to be an inappropriate regulation, lacking, and
uncertain to be effective. However this does not draw any final conclusions as there
are pros and cons the weighed up before casting a final verdict.
22. 21
2.4 FFP Pros
Both Manchester City and Chelsea are valid examples of how vast expenditure has
transformed non-contenders into competitively successful clubs both domestically
and in Europe. In addition to the traditional league powerhouses -Manchester
United, Arsenal and Liverpool- their presence has created competition at the
summit of the Premier League that in turn has translated into sizeable revenue
evidenced by the £5.14bn television rights deal recently negotiated (BBC Business,
2015). In the Premier League money from television rights is distributed quite fairly
between all 20 teams, which, in relation to competitiveness, is the only practice that
might have an impact on narrowing the competitive gap (Buraimo & Simmons,
2015). With FFP looking to encourage teams to only spend revenue they generate
through footballing activities, the television rights deal becomes a significant player
in the goal of achieving competitive balance. The ability to reinvest their turnover
into their teams not only leaves teams materially stronger, but also financially
stronger. There is no literature to confirm that FFP may lead to more aggressive
negotiating by the EPL, however, tighter financial restrictions may lead to the EPL
pushing for bigger revenue from its streams including television. The National
Football League (NFL) generates nearly double the EPL in revenue (Chemi, 2014;
BBC News, 2015), and with almost half of that accounted for through media rights,
Rosner & Shropshire, 2004) state it wouldn’t be much more profitable than the NHL
(National Hockey League) - they currently make less than the EPL.
On the other end of the table, in recent years, the battle to avoid relegation has
provided as much entertainment as the race for the title itself. This could be
attributed to the overall increase in quality of player in the EPL (Buraimo and
23. 22
Simmons, 2015) outside of the traditional title contenders. This creates parity
between the teams competing within these ‘mini-leagues’, with the importance of
this being that a semblance of parity existing within the league may potentially be
displayed. In other words, larger market teams maintain and possibly extend the
gap between them and smaller market teams, while the smaller clubs are under the
impression that they can catch up. While this may sound disadvantageous, the
interest generated within these mini-leagues adds to growth of television income.
FFP may not even out competition in the Premier League, but it will put clubs in a
stronger financial position. The case of Portsmouth FC is a scenario that UEFA, the
EPL and the Football League do not want a repeat of and increased financial gains
makes that less likely. Additionally, with FFP looking to encourage long-term
investments in the youth sector and infrastructure, money generated from these
media contracts can be directly invested into youth and facility development for
which the benefits of this are obvious.
24. 23
2.4.1 FFP Cons
Despite the restrictions that FFP poses, it may not be completely prohibitive. One
specific issue that FFP was made to counteract was the heavy financial influence of
foreign owners, evidenced by the specific outlining of ‘relevant income’ in the
regulations - direct investment from wealthy owners was excluded (Peeters &
Szymanski, 2012). The impact of foreign ownership has manifested itself in several
aspects; player quality, club performance, which in turn has reduced the competitive
balance of the Premier League (Jones & Cook, 2015). Undesirably, in some cases
this has led to an increase in individual club debt and in addition to this, in order not
to fall further behind, clubs (both foreign and domestically owned) have “had to
increase their own spending both on transfer costs and player’s wages to stop
getting left behind” (Jones & Cook, 2015).
This highlights the difficulty of implementing FFP regulations. Aside from the
monetary factor, any challenge by UEFA for what could be perceived as a violation
of FFP would be futile without strong legal backing (Lago, Simmons & Szymanski,
2006). Even in regards to foreign ownership factor, FFP hinders their ability to make
direct investment into clubs, therefore if they cannot affect performance directly in
order to increase financial success, an alternative must be found. The emergence of
American professional sporting influence in the Premier League illustrates this. The
exponential trajectory of commercialism and greater focus on profit maximisation in
the Premier League is in line with American model of sport (Andreff & Staudohar,
2000) which “is more commercially oriented than the traditional English structure
with key roles for advertising, sponsorship and particularly television” (Duke, 2002 in
Hassan and Hamil, 2013). This has manifested itself in things such as match times
25. 24
which “occur at various times during weekends as well as mid-week as pay
television searches for content that will attract viewers to sign up” (Nauright &
Ramfjord, 2010). The globalisation of the game has seen match day tickets turn into
a valuable good with average prices greatly increasing, and a greater focus on the
affluent has in turn led to an increase in “corporate hospitality with raised ticket
prices, renovated stadiums, and luxury suites and corporate boxes” (Nauright &
Ramfjord, 2010).
While this approach towards profit-maximisation is tempered by the win-
maximisation characteristic embedded in European football leagues, the importance
of attaining a higher quality of player - in relation to win maximisation, means that
clubs take on a more aggressive approach in securing these players (Solberg &
Haugen, 2010). This can be translated into spending large sums of money in
transfer fees. FFP is actively looking to decrease transfer fees and player salaries
so again, there are contradictions. This coupled with the rational fear of sharing with
weaker clubs, mainly due to the promotion-relegation structure of the EPL and the
thought that a team that is weak today, might be strong tomorrow (Vöpel, 2011).
Subsequently, bigger teams will pay more to maintain the gap.
26. 25
2.5 Cost Control Mechanisms
As FFP looks to bring discipline and rationality to European footballing finance, it is
important to identify and understand the cost control mechanisms clubs may employ
to ensure they are in compliance with the laws. Discussed earlier is one such
mechanism; salary caps. However, with the potential difficulty in its implementation,
it is important to explore what other alternatives there are;
2.5.1 Luxury tax
Luxury tax in sport is a system which can used to discourage teams from greatly
exceeding an agreed salary cap, with the goal of maintaining parity between large
and small market teams (Dietl, Lang & Werner, 2010). Within salary caps, there are
hard caps -maximum salary that can’t be exceeded and soft caps - a set limit on
player salaries, but with exceptions that allow teams to exceed that cap. While all
employ a set limit, a league which employs a luxury tax has no limit on what can be
spent on player salaries. However, if a team goes over the pre-determined limit set,
then they are required to pay a surcharge. How this acts as a deterrent for even the
richest of teams, is that the money derived from this tax is distributed among the
financially weaker teams. This theoretically would aim to create a better competitive
balance within league, because redistribution among clubs counteracts financial
imbalances (Dietl, Lang & Werner, 2010). The luxury tax hypothetically slows the
growth of salaries and prevents larger teams from signing all of the top players
within a league. This is in line with FFPs aim of decreasing wage and transfer fees,
however, factors such as the pre-determined limit before the tax comes into effect
27. 26
could be issues of contention, further, while it may deter financial imprudence, it
does not totally prevent it.
2.5.2 Salary cost management protocol
Salary cost management protocol (hereby SCMP) is a regulation in place in the 3rd
and 4th tiers of the Football league. It stipulates that clubs operate within a
constrained spending framework which limits spending on player wages to a
percentage of the club’s turnover - 60% in League 1 and 55% in League. Clubs
forecast their projections for the spending for the coming season
(financialfairplay.co.uk, 2015). The biggest benefit of SCMP is its flexibility. Clubs
provide regular updates on turnover and their wage bill throughout the season.
Clubs that then spend within 5% of the forecasted amount are then inspected. If
club is on course to exceed the limits, the Football League will impose a transfer
embargo on said club. Currently in place in the EPL is the Short-term Cost Control
Measure, a form of FFP, but it is restricted to teams earning over certain amounts in
certain seasons and certainly lacks the flexibility of the SCMP. Most significantly,
the embargo can be placed on the team before they overspend if they are indeed
heading towards overspending. This could be an effective method of cost control in
the Premier league. Applying the conventions of SCMP to the Premier League the
2013/14 season the wages-to-turnover ratio would be at 67%. While this is more
than the actual 58% wage-to-turnover ratio in that season, it is less than the 71% of
the 2012/13 season, and much of that reduction can be attributed to the large
broadcasting deals (BBC News, 2015).
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This is where the impact of television is even more telling. Even more so than the
legal issues that plague FFP, is the fact that it can be undermined or bypassed in
the event of club earning a windfall sum, thus the Premier League becomes a
league of ‘haves’ versus the ‘have-nots’ of the other European leagues. Burdekin
and Franklin (2015) argue that the top tier teams in the Premier League (teams in
place to qualify for European competition) have pushed transfer spending to the
point where not much is gained in performance for each additional € spent and that
for the smaller teams in the league, there is a much more noticeable effect on
performance in terms of earning more. Nevertheless, these smaller clubs cannot
invest the same financial resources as the top tier into strengthening their club.
These problems though greatly alleviated from the incredible amount of financing
from large television deals, cannot mask the fact that despite FFP, the net outlay of
Premier League clubs may increase.
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2.6 Conclusion
It is conclusively apparent that television plays and will continue to play a major part
in the FFP narrative and on footballing finance in general. This has several
implications for all parties involved; UEFA, the Premier League (both the body and
the clubs within it), the owners and the players themselves, implications which are
bound to conflict. For owners, operating in the EPL, the win-maximisation feature
means they will incur higher player costs and greater demand for talent (Fort &
Quirk, 2004). Players additionally will look to seize the opportunity to earn as much
as their talent dictates (and with powerful enough agents, probably more) which will
drive up costs for owners and the clubs they own. The EPL will benefit from the
quality of talent being introduced into the league but will forfeit competitive balance
in the long run - although as long as profitability isn’t affected then this is not an
immediate concern.
There is currently a delicate dichotomous balance between the profit maximisation
aspects of the league and its win maximisation aspects. In profit maximisation
leagues, revenue sharing increases competitive balance (Kesenne, 2000) however
the EPL has found a paradoxical niche whereby the competitive balance that exists
within the league actually highlights how imbalanced it actually is.
But as quality increases within the lower tier, so will their opportunity to at least ‘put
up a fight’ against the league’s elite, a current narrative that has proven financially
lucrative. For UEFA, the question is whether FFP needs a restructuring of its
regulations. Many argue that it is anti-competitive and even its core purpose of
establishing financial diligence is under threat from the growing monetary
investment into football from sponsors and television companies. Vöpel calls
30. 29
competitive balance an inherently unstable objective and questions its need in
European football. If it continues to be ineffective in its role, it may soon cease to
exist.
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3. Methodology
3.1 Research paradigm
In looking at FFP, the researcher sought to look at what effects the implementation
of such policy would have on the identified stakeholders of the particular law. It also
sought to look at what possible strategies these stakeholders would employ in order
to circumvent or operate in accordance with FFP, and what that would ultimately
mean for the regulation. The interpretivist approach chosen by the researcher was
done on the assumption that reality of FFP is constructed intersubjectively. This was
underpinned by a relativist approach towards ontology depicting FFP as something
to be studied through social observation. Relativist ontology can be defined as the
construction of reality through social interaction. It challenges the idea of
established universal constructs through said interaction, with value being
something can be relatively and subjectively added, through differences in
perception (Jupp, 2006). Opposing this ontological perspective is the realist
approach, defined by Phillips (1987) as “the view that entities exist independently of
our theories about them”. What this essentially means is that there is an objective
reality in which specific characteristics can be perceived, but we cannot take in the
totality of reality (Almaas, 2000). This however was not an appropriate ontological
perspective for this research. The nature of the research question indicates a study
of perception and opinion. It requires the understanding of FFP from multiple
sources with both consistent and conflicting views. Jonker and Pennink (2010),
discuss the importance of selecting the appropriate paradigms to aid with the
structuring of the project, while Wahyuni (2012) identifies its substantial influence on
32. 31
the undertaking of a social and how it is important for framing and understanding
social phenomena. Through different meanings and understandings i.e. the need for
greater financial prudence, it’s understood how FFP comes into being. However, the
great amount of differing opinions and interpretations of FFP show that knowledge
regarding the topic is not an objective reality, but research that may be analysed,
through reason, socially and theoretically in order to reach a subjective answer.
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3.2 Research Design
In order to successfully accomplish these objectives, the appropriate
methodological research approach was employed. In the case of this research
project, the approach chosen was qualitative, and this rationale was justified
because the project employs an analysis of opinions and perceptions. Such data is
not easily quantifiable and therefore a qualitative approach was the more
reasonable analytical aid in the processes of collection and analysis. This is a
consequence of the relativist ontological perspective, as its characteristic of
understanding through social interaction is more applicable with a qualitative
method of research.
Qualitative research is a form of inquiry that seeks to understand the why and how
in decision-making (Wilson, 2010). Denzin and Lincoln (2000), identify the
qualitative approach as beneficial towards research looking to understand the
‘socially constructed nature of reality’, and highlight the value of inquiry. Theory
exists which provides the existing opinions of how FFP is perceived. What is crucial
to achieving the research objectives is to understand how the stakeholders have
arrived at that opinion, why they have, and what the implications for UEFA and FFP
are.
Further justification for the use of qualitative research is that it allows for multiple
interpretations, such is the nature of the research question. As the interpretivist
paradigm allowed the researcher to approach this project open to the various
constructs on FFP, qualitative analysis is better suited for this research. Dialog is
important for the collection of data, and qualitative methodology employs more
conducive methods of successfully doing this.
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The design strategy employed by this research was inductive in nature. While basic
theory on FFP already exists, the research is looking to provide a conclusion to the
existing theoretical premises. An inductive approach aids with building the theory
(Wilson, 2010) to make strong conclusions. Armed with the knowledge that FFP
exists for the purpose of reducing financial mismanagement and ensuring the long-
term football of European football, the research intended to find whether the
proposition differed from reality, and if it did, then to what degree. Extrapolations
regarding the role of FFP can be made due to the existing theory on FFP and
through observation of the impact it has already had in its short existence
nevertheless, further observation of existing opinions and perceptions will aid in the
development of probable outcomes. It will help to provide an understanding of what
themes currently exist in regards to FFP, and what that indicates for its long-term
objectives. The role of theory in this project is to establish a grounding from which
we can either check findings against, or as a platform from which probable results
can be derived. Creswell (2009) states that theory can be used as a perspective
‘that shapes what is looked at and the questions asked’. The argument for choosing
an inductive approach over a deductive method for this research is rooted in the
nature of the research itself. The research seeks to determine the probability of
success for FFP and what -in the case of it being improbable- the alternatives might
be. It does not seek to determine whether FFP is right or wrong, but uses empirical
research to comment and add to the existing conceptual approach.
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3.3 Case Study
Existing discussions on FFP show that it is a broad topic. It is also apparent that
FFP can affect teams differently which is determined by a number of factors i.e. the
size of the club, the league it operates in etc. By choosing a case study, the
researcher was able to make the project more quantifiable by isolating its analysis
on a sole entity, the English Premier League. This was done in order to ensure that
the discussion did not become convoluted due to numerous stakeholders of FFP.
Case study approaches are usually synonymous with projects rooted in theory-
building (Dyer & Wilkins, 1991) and aids the researcher in in specifying what they
are exploring (Yin, 2003). Further justification for choosing a case study using the
EPL is the possibility of applying the findings to other European leagues. Themes
may arise from stakeholders in the EPL which also convey the perceptions of their
European counterparts and this could aid in the process of making future
comparative studies (Berg, 2006). This entire researcher is underpinned by a
relativist approach which makes emphasis on the non-existence of universal
constructs and adding value through dialog. Case studies can provide “extremely
rich, detailed and in-depth information” (Champion, 2006).
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3.4 Data Collection
In research, it is important that the study is undertaken with the need to find cause
and meaning as critical underpinning aims of the project (Easterby-Smith, Thorpe
and Lowe, 2002). It was important that the area of knowledge and the way by which
said knowledge was gained was justified in this project. Content analysis was used
as the main research tool, thus it was important that the claims of the content were
assessed critically. The nature of the research means that there is a plethora of
material to be used by the researcher in an attempt to answer the research
questions and fulfil the research objectives. Content analysis is typically performed
on various forms of communication (Berg, 2006) such as written text, videos,
audiotape etc. It was important that before undertaking analysis, the researcher
considered what needed to be analysed and how best to approach it making use of
this analytic technique. The first thing to consider was the qualitative nature of the
project. That content analysis can be employed to examine any type of
communication (Abrahamson, 1983) means it was a suitable method of collection to
use within this project. While considered by some as a data collection tool more
suitable to a positivist approach (Berg, 2006) and has been described as ‘objective,
systematic and quantitative’ (Berelson, 1952), it is also very beneficial for the
analysis of qualitative social communication which aided the researcher in making
data interpretations (Bogdan and Biklen, 2003) and developing ideas based on the
information from the emerging themes and patterns.
For the criteria of selection the researcher ensured that the chosen criteria were
consistently and comprehensively applied to the content being analysed. Choosing
the right criteria was important to the research as it helped ensure the reliability of
37. 36
the measures (Berg 2006), which helped to authenticate the findings. Holsti (1968)
explains that by doing such, ‘it eliminates analysis which only supports the
researcher’s hypotheses’, thereby providing a more balanced piece of research. For
example, the identification of key words over several pieces of text would be
important for understanding would the content is trying to communicate. Within this
however, the researcher also had to take into consideration using either (or both)
manifest content analysis or latent content analysis. Manifest analysis looks at what
the data is blatantly conveying, while latent analysis looks for sub-meaning - what
the data may really be trying to convey. This research looked to collect and analyse
perceptions on FFP, a controversial topic, but one that participants can be open
about. Therefore, extending analysis to find latent content is not entirely
unnecessary.
Before analysis, it was important that the researcher developed an existing theory
which would aid the coding process. The inductive nature of the project is what
dictates this. Abrahamson (1983) discusses the importance of this in order to
identify themes. This is more beneficial than a deductive approach due to the
epistemic uncertainty attached with the research paradigms of this project. The
researcher sought to identify themes and concepts surrounding FFP during the
process of content analysis. In order to successfully do this, the researcher had to
decide on the sample size. This helps with narrowing the research in order to
objectively answer the research questions. Due to the specificity of the subject,
there was a select amount of data that the researcher could employ in sampling.
Marshall and Rossman (1999) identify that it is crucial to the research that the
researcher considers the rationale and that the population from where the data will
be collected is an appropriate one (Berg, 2006). The researcher made use of
38. 37
nonprobability sampling specifically purposive sampling and convenience sampling.
The specific nature of the research -FFP- means that though there isn’t a shortage
of information available, in order to successfully answer the research questions, the
content selected for sampling was required to be directly relative to FFP. As the
researcher could not gain access to conduct interviews with a suitable number of
relevant individuals, the most easily accessible data was chosen. As such the
researcher made use of interview transcripts with individuals directly involved in the
world of football, newspaper articles on FFP, and video interviews with individuals
directly involved in football. The investigative and exploratory nature of these
sources of data is valuable to answering the research questions, as they provide
ample amounts of theory which consists of “plausible relationships proposed among
concepts or sets of concepts” (Strauss and Corbin 1994).
For the coding process, the researcher made use of open coding. The overriding
objective of the research project is to determine whether FFP is the most
appropriate solution for regulating finance in European football and identify specific
reasons why it may or may not be. However, in the process of research, there may
be unanticipated benefits (Pearson, 1987) which may produce results that the
researcher had not originally intended to discover. The discourse surrounding FFP
is inextricably linked with other issues such as competitive balance, financial ethics
and several other topics. Therefore, the researcher must be open to findings that
although may lead away from the research question, may still prove to be useful.
Coding is necessary for organising and interpreting data (Berg, 2006) and to
successfully do this, the appropriate coding frame needs to be selected. The
researcher made use of axial coding. Axial coding is method by which the
researcher relates the themes and concepts to each other (Strauss & Corbin, 1998).
39. 38
This allows the researcher to introduce relevant theoretical perspectives, which
bring together the established theory, and the researcher’s grounded theory (Berg,
2006). The discourse surrounding FFP raises many theories on its effectiveness in
regulating, the efficiency of the process itself, and whether it may cause more
problems than it intends to solve. The codes were created using these and other
analytic categories shaped by the research questions as were data grounded
themes.
40. 39
3.5 Reliability and validity
Generalizability in qualitative research can be difficult -particularly in comparison to
quantitative research. Therefore, the researcher had to ensure that the study
produced was both valid and reliable in order to ensure its potential replicability
(Wahyuni, 2012). For this to transpire there must be consistency in measurement.
With quantitative research, it is easier to measure the empirical data due to their
statistical nature. Qualitative research seeks to interpret phenomena to produce
credible information and greater understanding on the topic (Wahyuni, 2012), and
as such the concepts of reliability and validity are difficult to apply to the study
(Bryman, 2012). King and Horrocks (2010) suggest that the there are three types of
criteria which can be employed; using criteria from quantitative research, using
alternative criteria to quantitative, and the stance whereby no fixed criteria is used at
all. The researcher made use of alternative criteria to ensure reliability and validity,
specifically Guba and Lincoln’s 1989 model for research worthiness. This model
uses four criteria to assess the standard of qualitative research; credibility,
dependability, transferability and confirmability. Credibility looks at how much the
researcher’s interpretation is certified by the research participants (King & Horrocks,
2010). Dependability is relative to reliability and is concerned with the setting in
which research is being conducted and if there is a consistency in that framework
i.e. repeatability (Wahyuni, 2012). Transferability looks at the ability of the
researcher to provide adequate detail that would allow for the transfer of that
framework into a different topic of qualitative study (Lincoln & Guba, 1985) and
confirmability (like credibility) looks at how much others can confirm the results of
the research and how much do the results reflect the observations from those
interviewed (Wahyuni, 2012).
41. 40
The researcher chose these criteria to measure reliability and validity because of
the inductive nature of the study. This approach focuses on attaining information
through the building of theory. Therefore it is critical that the information attained is
credible as a reference point for future bodies of work relating to this topic. The
individual criterions ensured that careful examination and analysis was applied at all
stages of the analytic process. They provided a framework that forced the
researcher to observe the process carefully in order to ensure an objective body of
work was produced.
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4. Data Analysis
4.1 Introduction
Using content analysis, outstanding themes were uncovered in regards to the
discourse of FFP. The overall aim of this research (as stated in the introduction)
was to look at the problems surrounding FFP, in terms of its effectiveness as a tool
of governance, and ultimately its viability. The themes that arose from the data
analysis were particularly pertinent as they indicated issues that were fundamentally
detrimental to the success of FFP. Two encompassing themes were identified to
depict the complications FFP faces; Transfers and Wages & the Impact of
Television. These two main themes identified include several sub-themes which will
be expanded upon in depth within the analysis. Within the discourse, these two
main points though interconnected, were each individually posed several problems
towards the functionality of FFP. Regarding television, its trickle-down effect into
salary and wages (and inevitably player power) presents an evident problem for
UEFA. With UEFAs president and general secretary - Michel Platini and Gianni
Infantino - declaring the regulations a success (Slater, 2015), such a statement
must be looked at objectively. While net European debt has fallen from 1.7bn euros
in 2011 to 400m euros in 2014 (Slater, 2015), it must be considered how much of
this owed to the mega broadcasting deals being attained in both Europe, and
domestically - in particular the Premier League. Discussed within the literature
review was the effect the television deals had on reducing net debt in the league.
This effect is reflected in the wider European picture, however while a picture of
increased financial prudence is painted, in reality, the spending behaviour of
43. 42
European clubs has not changed. This is evidenced by the new Premier League
record net expenditure of £870m - £1bn in the calendar year of 2015) (BBC Sport,
2015). For the Premier League, this clearly indicates a greater ability to attract
playing talent than other European leagues, which in the long-term, may be
detrimental to the overall competitiveness of European football. Clubs having more
money effectively means that they are able to pay players more. This segues into
the theme of player transfers and wages. One of the objectives of FFP was;
“…to decrease pressure on salaries and transfer fees and limit inflationary effect”.
(UEFA, 2009)
It is clear however that this has not been the case, most certainly in the case of the
Premier League. Take for the example Dutch international Georginio Wijnaldum
who forwent the opportunity to play Champions League football with current Dutch
League Champions PSV Eindhoven (for whom he was captain), to sign for
Newcastle United who finished 15th in the 2014/15 season. This example is highly
indicative of the financial pull of the Premier League. While in terms of
competitiveness, the Premier League is recognised by UEFA coefficients as a
stronger league than the Dutch counterpart, providing a motive for such a move, the
sacrifice of Champions League football is telling. It is not improbable to assume the
player could have moved to a team in a more competitive league, offering football in
international European competition. However in terms of spending power i.e. the
ability to offer higher wages; no league can compete with the Premier League. This
sentiment is echoed by Bayern Munich CEO Karl-Heinz Rummenigge;
44. 43
"Their income from the TV pot is much, much bigger than our income in Germany or
Italy or in Spain…”
“The tsunami wave will probably get bigger next year because the TV pot will be
bigger than this year, and so the transfer market will be totally dominated by the
English clubs, that is a fact." (Homewood, 2015).
The data analysis will look further into the themes and subthemes that arose from
the content alongside the theoretical expectations from the literature review which
will help to answer the proposed research questions.
45. 44
4.2 Transfers & Wages
4.2.1 Wages
Surrounding the discourse of FFP, one of the most consistent themes that appeared
during coding and reduction was the topic of player transfers wages. Discussed
extensively within the literature review was the use of cost control mechanisms as a
preventative measure against the consistent rise in footballer salaries. This was
relevant as one of the objectives of FFP is to decrease player wages and stop the
snowballing of transfer fees. Within the initial analysis of broadsheet newspapers, it
is apparent that player wages is one of the more prominent reasons for clubs
struggling to adhere to FFP regulations. Lynam’s (2013) article on FFP states that;
‘The time has come for Premier League clubs to control players' salaries and that
must involve performance-based incentives.’
There is recognition that the rise in expenditure of wages -parallel to the rise in
revenue- has made the EPL a highly attractive destination for players. As stated in
the literature review, the quality of playing talent is now the preference of the
viewership, which has contributed to an overall increase in the quality of player
(Buraimo and Simmons, 2015). However, while players of quality might be attracted
to a huge wage packet it won't necessarily keep them motivated or satisfied. If this
translates into a decline in performance and subsequent loss of playing time, then
the club effectively begins to sink costs. The data reflects this sentiment;
46. 45
‘Guaranteed income can have a negative impact on motivation and even a huge
salary can cause unhappiness if it happens to be less than a team-mate of
perceived similar ability.’ (Lynam, 2013)
‘…the league’s [EPL] drawbacks continue to be the absence of measures to
constrain wages and provide competitive balance.’ (Blitz, 2012)
As FFP was introduced as a measure to improve the financial behaviour of
European clubs, it comes as no surprise that thematically, this was one of the most
prevalent issues. One of the questions the research sought to answer was what
methods might clubs employ in order to adhere to FFP regulations. The literature
discussed salary caps, SCMP and luxury tax as methods which could be employed.
Performance-based pay was identified as a cost control mechanisms in the data.
Performance based pay is a system currently employed at FC Barcelona and in the
EPL, Manchester City and Liverpool FC. In a performance-based system, two-thirds
of the salary is fixed, while the remaining third is based on the success of the team,
and a player playing at least 60% of first team matches. This approach has been
implemented successfully at FC Barcelona, and has not hindered their ability to
attract players of superior quality (it is worth considering that the storied history of
the club and the prestige of playing for Barcelona could be a more crucial part of
their ability to recruit top players). In the case of Manchester City (hereby MCFC),
the club was one of the teams to fall foul of FFP regulations when sanctions were
first introduced. The literature review discusses glory hunter phenomenon, the
theory that links finance directly with competitive success. MCFC’s recent
47. 46
successes were financed by foreign owners and that they were successful indicates
that there is truth behind Sass’ theory. While, ‘winning the talent war’ by attracting
and retaining key personnel is important to competitive success, there is a
substantial benefit to applying a performance based structure (Sturman, Trevor,
Boudreau & Gerhart, 2003). And as FFP negates non-football related finance
alternatives must be implemented. Liverpool FC managing director, Ian Ayre
describes the clubs’ incentivised pay package;
“…from the football club’s perspective, our view has to be that people are rewarded
for contributing towards what we achieve. As long as contracts are structured in that
way then everyone wins. If a player performs then he will be rewarded.” (Berry,
2014)
While theoretically speaking, this may be beneficial to all stakeholders, it is
important however to first look at this pay structure objectively. In the case of bigger
teams such as MCFC they are competing at the top end of the league and so not
only are they likely to perform better and hence successfully meet the criteria
required to attain the third of wages based on performance, the guaranteed two-
thirds operates on a higher budget. For teams with a much smaller wage budget,
any action further limiting player wages may have the effect of driving away and
keeping away talent as;
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“At the end of the day, there will always be a club willing to offer more money or at
least more guaranteed money” (Berry, 2014)
Similar sentiment is echoed by West Ham co-owner David Gold;
“You chase a player, offering a million pounds a year, and your competitor offers
£1.2m and you offer £1.3m and so it goes on…we can protect clubs from gambling,
borrowing, running up debts by for instance insisting on a certain percentage of
wages against turnover.” (Tongue, 2012)
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4.2.2 "Unfairness" of FFP
The literature review discussed the positive correlation between player quality and
winning percentage therefore in a league (EPL) that is predominantly a win-
maximiser, it is difficult to expect teams to engage in behaviour they perceive to be
detrimental to their competitiveness. The resulting opinion is reflected in the
literature review, with FFP being thought of as inherently unbalance as it protects
well-established/financed clubs from being challenged.
"...criticism of FFP has grown over the last two seasons as many observers have
pointed out that stopping clubs from spending more than they earn cements the
status quo - without the ability to speculate with their own money, ambitious owners
of smaller clubs can never compete with more established clubs for the best
players." (Slater, 2015)
The quote from Slater reiterates Vöpel's (2011) sentiment about the anti-competitive
nature of FFP expressed in the literature review.
With one of the principle requirements of FFP being that clubs break-even, the
prevention of investment from sources outside of footballing activities, increases the
difficulty for teams to meet these requirements. Stated within the literature is how
the contradictory nature of FFP is detrimental to the competitive ability of smaller
teams. However, content analysis revealed that it can also be constricting of the
bigger/growing teams, particularly those that are looking to expand their global
reach. The argument for these teams is that if they are unable to make use of
50. 49
monetary investment from non-footballing activities, then they are unable to expand
their consumer base, which would have the effect of increasing their footballing
revenue. This again is testament to the contradictory nature of FFP. Discussed in
the literature review was the case of Portsmouth Football Club going into
administration, and how FFP sought to prevent such an occurrence again, but the
investment approach from Man City's owners has been markedly different to that of
Portsmouth. An example of this is the £200m training complex opened in December
2014. Such investment was made with the aim of providing facilities that could
attract the very best players including youth players. According to Man City reserves
coach Patrick Viera;
"If we go into the market and we compete to bring young players or first-team
players in, having a facility like this can only help. When you are a young, talented
player from Manchester - or worldwide - you want the best possible facilities to
challenge and improve yourself." (BBC Sport, 2014)
One of the main objectives of FFP was to;
"...encourage long-term investments in the youth sector and infrastructure". (UEFA,
2009)
It is apparent that Manchester City have fulfilled such objectives, and there is the
belief that FFP was designed to stop clubs such as Man City or PSG (non-
51. 50
traditional European powers who have come to the forefront of European football
through foreign investments) from competing with the "old order";
"City have never been in danger of going out of business since the 2008 takeover.
The transfer deals that have been put in place haven't been funded by promises
and the club's owner is investing in his business rather than saddling it with debt.
Sheikh Mansour has always provided the capital up front, which is now a
contributing factor in whether spending beyond one's means is allowed."
"There's a big case of double standards going on here...FFPR is stifling competition
among the European elite and has been implemented as nothing more than a way
to stop the likes of Manchester City circa 2008 getting ideas above their station. It's
UEFA's way of telling everyone to know their place." (Mooney, 2015)
Manchester City captain Vincent Kompany echoes similar beliefs on the design of
FFP;
“For me, it is protecting those few clubs who were already geared up to be
successful. It’s the clubs who were already able to generate the most revenue that
wanted FFP the most. So I just look at it in terms of the established order protecting
themselves."
"Our owners have invested to build a successful club. That in itself will bring in more
fans and create more revenue. Is that so bad? Just because a club is part of the
52. 51
established order doesn’t mean they should be guaranteed success forever.”
(Jepson, 2015)
These quotes are in direct correlation with the discussions in the literature review on
how FFP unintentionally protects well established clubs from being challenged
(Vöpel, 2011). It is apparent that from the data, that while FFP was structured in a
way that would increase the financial prudence of European football, its inflexible
nature inadvertently favours clubs with large already-established footballing revenue
sources. As journalist Martin Samuel iterates in an interview with Platini;
"I don’t think for one second that your idea was to protect Manchester United or to
protect Barcelona, my point is that the way that the financial fair play rules have
been set up, that is what is going to happen". (Samuel, 2013)
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4.2.3 Increase in “Player Power”
Within this discourse of transfers and wages one sub-theme of particular note was
how FFP has led to an ever greater increase in player power. Noted in the literature
review was the aim of decreasing player transfers and salaries as a primary FFP
objective. In order to comply with FFP rules and avoid fines and sanctions, clubs
must be more aware of cost control. With the highest cost to clubs being player
salary (Wilson, 2014), there is a greater awareness to keep the wage bill at a
manageable level. Therefore, theoretically speaking, if a player were to seek a
bigger wage from the club, if the club are not willing to match what that individual
feels they are worth, then there are 3 options; a) accept the club’s offer, b) run down
the current contract and leave for free, or c) try to force a move to a club willing to
pay the wages the player is demanding. It is circumstances where option b and c
have both been factors, that player power is most prominent. If a player is about to
enter the 4th year of a 5 year contract, though waiting two seasons might be too
long, they are still in a position to force the transfer. With clubs’ spending limited to
revenue directly from footballing activities, the risk of losing a player on a free
transfer when a lucrative transfer fee could have been gained is a scenario they
would look to avoid. However, if the wages being demanded are too high for them
to pay, then they may effectively be forced to sell. This puts the power in the hands
of the player. Clubs may look to redress the balance of power by perhaps asking for
a transfer fee that might be considered “too high”, but if the interest is coming from
one of the bigger clubs i.e. Manchester United, then money becomes less of an
issue.
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“This is the age of ‘player power’ in football, and there is little doubt that in transfer
deals, it is they who hold the key.” (Jones, 2015)
“It’s just another example of player power. That’s how football’s going now - there’s
not a lot you can do about, whether you like it or not.” (Jones, 2015)
FFP has unintentionally given players a greater ability to leverage their positions at
clubs in order to secure better financial deals for themselves. Once again, it is
another example of how FFP rules contradict their intended aims. The rules sought
to have a deflationary effect on player transfers and wages, but by doing so, it
doesn’t allow clubs who don’t have high revenue streams to offer players
completive salaries which would allow them to keep the players at the club. Player
will invariably move elsewhere, where they can get a bigger contract. As such, the
aim of keeping player wages low is circumvented. Additionally, as the selling club
are forced to part with a player they may perceive as a valuable asset, it is likely
they will inflate the price of the player in a bid to either ward off offers, or recoup as
much from the player as possible. Again, this is in contrast with an FFP aim of
reducing transfer fees. However, in the case of the Premier League, this has
become far less of an issue for clubs due to the great sums of money coming in
from television broadcasting rights.
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4.3 The Impact of Television
Thematic analysis of the data brought to the fore two main themes; Transfers and
Wages, and the Impact of Television. Discussed earlier in this chapter was the
effect of FFP on transfers and wages, and how it has failed to keep the figures for
both lower. Also mentioned, is the decrease in European footballing debt. As
television broadcasting figures have risen remarkably, it provides an explanation for
both occurrences. Discussed in the literature review was the impact of broadcasting
finance and its ability to enable teams to increase their wage bill (Andreff, 2011).
While this is contradictory to one of the main objectives of FFP, broadcasting
finance has also helped also increased the footballing revenue of European clubs,
most especially the Premier League. This creates a false reality of increased
financial prudence as more clubs are able to declare profit. That the Premier
League was able to declare £3.26bn in profit (Deloitte, 2015) shows how heavy the
impact the broadcasting deals the league has been able to bargain have been. So
much so that it has positively affected the net debt of European football. However,
in relation to competitiveness, while the Premier League is able to attract greater
playing talent, the rest of Europe suffers. This again highlights the anti-competitive
nature of FFP. While anti-competition within a league may be less of an issue (in
the case of the Premier League this is due to the “quasi-divisions”), in the wider
Europe where ‘old order’ teams are involved, it is a far greater issue. As Arsene
Wenger points out;
“It looks like there’s an international pressure to make these rules more flexible
because of potential investors in other countries. I believe the television contract in
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England has pushed some other clubs in Europe to want this to be a bit more
flexible for them so they can compete better with investors investing in their clubs.”
“I believe it’s more down to counteracting the potential investments of the English
clubs by the other European clubs. The pressure came more from the other
European clubs.” (Hytner, 2015)
Content analysis shows evidence of this. Bayern Munich (considered one of the
biggest European superpowers) CEO Karl-Heinz Rummenigge noted that television
revenues left English clubs better equipped to deal with Financial Fair Play;
"I believe we all can just congratulate the Premier League and the income they are
able to generate from the TV pot. It is, of course, a big advantage of the English
clubs, especially for the big ones but also for those in the second row."
"We have to recognise it is a motivation for all clubs especially, in the four big
countries, to do better in the future, to be more competitive otherwise we will
probably have a problem.” (Homewood, 2015).
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There is further data to support such sentiments;
UEFA president Michel Platini has told RMC he will not consider changing financial
fair play (FFP) rules despite the Premier League's five billion pound TV deal,
despite complaints from Ligue 1 clubs.
Lyon president Jean-Michel Aulas recently asked UEFA to reconsider how they
share out European competition prize money as a result of the English top flight's
new agreement.
The deal will see the team that finishes last in the Premier League earn three times
as much as the club that wins Ligue 1 during the three years of the deal between
2016 and 2019. (Holyman, 2015)
From the data, one of the most pertinent things to take from the quote is the
emphasis on the advantage that not just the big teams in the Premier League seek
to gain from increased television revenue, but also teams in the “second row”.
Conferred in the literature review was how lucrative broadcasting deals put the
Premier League in a position of power. As Premier League clubs are able to offer
more in wages, and then they are able to attract more playing talent. This hereby
continues to increase the overall quality of the league, and thus, the ability to
continuously negotiate for even more lucrative television deals. Ultimately, spending
on transfers and wages does not decrease, but instead will increase as clubs can
afford to do so, remaining in compliance with UEFA’s profitability and sustainability
rules.
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4.4 Conclusion
It is conclusively apparent that television rights have had an encompassing
influence on FFP rules both positively and negatively. The net debt of European
football has decreased, and this may be attributed to increased television deals
around the continent. The Ligue 1 (French league) deal rose from a £447m share
between 2012 and 2016, to £551m 2016 and 2020 (Holyman, 2015). In La Liga
(Spanish league), a more equitable TV rights deal –which sees 50% on the pot
shared between teams equally (BBC Sport, 2015) was agreed. The combined
revenue for the ‘Big Five Leagues’ in Europe rose by 15% to over £8bn (Deloitte,
2015) It is worth noting that in the Premier League, the Short Term Cost Control
restrictions are in place to prevent broadcasting money going straight to clubs’ wage
bills. Future wage expenditure to a club’s 2012/13 spend, an exceeding the set
limits are not permitted except from finance through footballing revenue, not
inclusive of central funds i.e. broadcasting (Shapiro and Rees, 2015). However,
these only serve to window-dress the actuality of the situation. The goal of Financial
Fair Play was to restore financial judiciousness to European football as clubs spent
more and more and dragged themselves further into debt. It looked to reduce
transfer fees, wages, debt, and encourage clubs to compete within their means,
limiting them to spend from their footballing income. Analysis of the data has shown
that while European clubs are becoming more profitable, it is due instead to their
abilities to generate more money than it is their ability to spend less. Spending on
both transfers and wages has increased particularly in the Premier League and the
financing from the large broadcasting deal has allowed English clubs to plunder
Europe for the best playing talent. Of the record £870m spent on transfers in the
2015 summer transfer window, £585m was paid to clubs overseas. With preference
59. 58
Buraimo & Simmons (2015) declaring that playing talent is the most relevant factor
for sports viewing, the ability of the premier League to attract the best playing talent
with undoubtedly strengthen the league, but to the detriment of the wider Europe.
This is another failed goal for FFP as it sought to level the playing field between
clubs. Even for established clubs outside England, the ability to compete with the
big English clubs continues to diminish as they face the combination of revenue
streams from both broadcasting and commercial activity. However, this might in
effect be the legacy that FFP sought to leave upon review of its underpinning
principles. Seen as legislation that protected the haves from the have nots, it is a
case of the have nots become the haves. To quote UEFA President Michel Platini;
"Financial fair play has one principle: you spend the money you make.”
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5. Discussion and Conclusion
5.1 To what extent do clubs feel they can challenge the legality of FFP and
what impact will that have on UEFA’s ability to enforce it?
The answer to this research question is that to a very large extent, FFP can be
legally challenged by clubs as a regulation that is unfair, contradictory and anti-
competitive in nature. UEFA are already facing several legal cases, challenging
FFP as a ruling which they perceive to be detrimental to footballing operations. The
Association of Angry Fans against Financial Fair Play backed by numerous Paris
Saint-Germain (PSG) fans have taken legal action against UEFA, demanding
“complete change” of some of the underpinning provisions of the regulations, most
especially, the requirement that clubs must break-even through the use of football-
related revenue only. The data collected and analysed showed that this particular
requirement of compliance with FFP laws was favourable to clubs that already
generated significant income through their commercial revenue streams and thus
was inherently anti-competitive. The data showed conclusively that this law served,
in effect, to establish a status quo between the traditional powers and the rest of the
European clubs. This was particularly detrimental to clubs such as PSG and
Manchester City (both were fined and sanctioned for failing to meet FFP regulations)
who possessed owners of significant financial wealth that were willing to invest
heavily in making both teams European contenders. While UEFA might argue that
such investment is dangerous evidencing Portsmouth FC as an example, the cases
with Portsmouth and these aspirational clubs are entirely different. In the case of
Manchester City, financing and investment hasn’t been restricted to just the playing
61. 60
squad. Investment in expanding the stadium and building world class training
facilities, as well as in bringing in and developing youth players and elite coaching
staff show a club that is committed to success in both the short and long run.
In regards to the implications it will have on UEFA enforcing the rules, pressure
from clubs have already seen the organisation declare that there will be an easing
of the rules. Whether or not this is an inconspicuous admission that there were
faults with FFP, UEFA opens itself up to further legal challenge from clubs that were
sanctioned. If significant changes are made, then these clubs could rightfully argue
that they were punished by laws that were flawed. In summary, it is the inherently
anti-competitive nature of FFP that makes it very open to legal challenge, and it will
be difficult for UEFA to enforce what are perceived from a widespread footballing
audience as flawed laws. And in regards to the Premier League, as colossal
television deals begin to financially augment the footballing income of English clubs,
the implementation of FFP becomes even more difficult as the rest of the European
clubs will struggle to compete if they are shackled by FFP laws. This will more than
likely be met with challenge from Europe’s traditional powers once FFP begins to
hinder the clubs it was effectively protecting.
62. 61
5.2 What problems do stakeholders in the EPL face in trying to adhere to
the demands of UEFA’s FFP regulations?
The answer to this research question is that clubs in the English Premier League
face little problems in adhering to UEFA’s FFP regulations, and this is thanks in
large part to the lucrative television deals the league has been able to negotiate.
FFP looked to will restrict investment in clubs by no longer allowing them to operate
at a loss. However, in the 2013/14 season, all but one of the 20 Premier League
clubs recorded an operating profit, 14 recorded a pre-tax profit and with a £5bn deal
set to kick in from 2016/17, it is hard to envisage Premier League teams facing
problems complying with FFP laws. The FFP laws were enacted to ensure financial
frugality by way of limiting clubs to break-even through footballing revenue solely.
Counteracting the inflationary nature transfer fees and players wages, it would force
clubs to spend within their means. However, as the means of Premier League clubs
has increased significantly they are able to purchase more. More money means
being able to afford bigger transfer fees and pay higher wages. As there is more
money to be made positionally, investing in a better quality of player helps clubs to
be more successful. As they are still in compliance with UEFA regulations Premier
League clubs have a significant market advantage over their European counterparts.
Where they may face slight concerns are to do with the adherence to Short Term
Cost Control which seeks to ensure that money from broadcasting revenue is not
entirely spent on wages and transfers. However, clubs that surpass the allocated
“wage floor” are nearer the top end of the table, and as such generate high
commercial revenue which counterbalances the issue. The only other issue that
stakeholders (in this case smaller teams) of the Premier League face is that while
they are able to spend more and increase their quality, bigger teams are also able
63. 62
to spend more as the earn equal shares from broadcasting revenue, more from
finishing higher in the league, and even more from large commercial streams. As
such, even though the league increases in terms of “competitiveness”, it doesn’t
allow for teams to make significant steps to challenge the established order. Even
though broadcasting goes someway to conceal the deficiencies of FFP, it cannot
hide its most fatal flaw, and that is its inherently anti-competitive nature.
64. 63
5.3 To what extent is FFP an appropriate solution to regulate and ensure
the long-term stability of European football?
The answer to this research question is that FFP in its current format is not an
appropriate solution to regulate and ensure the long-term stability of European
football. While it was seen as a necessary object to curb the exponential spending
of European clubs, its central laws were flawed. It unintentionally protected the
bigger clubs from being challenged, establishing a status quo, and gaining the
perception that is sought to protect traditional big teams from money-backed
challengers. In doing so, the very nature of FFP renders it an anti-competitive law. If
clubs have the means to cover their loses in a bid to break the hegemony that a few
clubs have over European football, then FFP should be able to take that into
account. This is not to say that clubs backed by billionaire owners can spend care-
free, but the inflexibility of FFP indicates a structure for teams focused solely on
short term progress, and therefore, in danger of spending too much too soon. For
clubs with both a short and long term plan to be successful, FFP is detrimental to
the short-term growth. If teams cannot be successful in the short-term, then it is
harder to attract a better quality of player both at youth and senior level. It is that
characteristic anti-competitiveness that prevents FFP from being an appropriate
regulatory solution. Moreover, with broadcasting deals increasing to incredible
amounts, FFP is being made redundant, as its central laws are no longer barriers to
entry, particularly for teams in the Premier League. The fundamental requirement to
break-even is no longer much of an issue as shares from the league broadcasting
pot supplement footballing income greatly, allowing many teams to declare profit no
matter how small. As UEFA’s FFP has no limit on wages or transfers, it fails to meet
its objective of curbing spending as the financial outlay of clubs increases slightly
65. 64
behind the income. In conclusion, FFP is an imperfect regulatory solution for the
stability of European football something UEFA may have realised as they look to
make changes.
66. 65
5.4 Policy and managerial recommendations
Policy recommendations for FFP would first be the removal of the break-even
requirement. This feature of FFP particularly when coupled with the demand for
clubs to break even using only footballing revenue is detrimental to competitiveness.
As such, clubs should be allowed to operate at a specified loss, with the aim of
breaking even within a set time period –potentially 3 to 5 years.
Clubs making significant investment in infrastructure and youth development should
be granted further leeway to make operating losses as there is indication of long-
term investment. What is considered ‘significant’ may be difficult to quantify as
teams have varying budgets, however if it is done as a % of total revenue, then it is
more likely to even out the financial imbalance.
Owners looking to invest non-footballing capital should have a short and long-term
plan (1-3 years and 5-10 years) detailing how the financial injection is to be
allocated. Such a plan would need to be approved by the Premier League as is with
the ‘fit-and-proper test’.
Managerial recommendations on this case would be for UEFA to make significant
changes to the rulings. As different clubs wield varying degrees of power in Europe
and each will look to push their agendas, it is important that all European clubs are
represented and included in the policy-restructuring process in order to attempt to
create as balanced a set of regulations as possible.
Greater flexibility in these regulations is advised as inevitably the regulations will be
faced with challenge even if positive changes are made. Additionally, the issue of
67. 66
broadcasting and how it paints a false reality must be addressed and taken into
serious consideration as it is unfavourable to the core aims of FFP.
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5.5 Limitations and suggestions for further research
As this is an analysis on perceptions on the effect of FFP, the opinionative nature of
the research may affect the total validity of the findings. While inclusive of quotes
and articles from central footballing figures and respected journalists, the data is
secondary in nature, and as such sometimes is subject to interpretation by the
research which may on occasion give for subjective reasoning rather than objective.
As changes are to be made to the FFP regulations, it would be beneficial to find out
whether these changes will take into consideration the widespread opinions on the
nature of FFP. It will also be beneficial to see how these changes address the issue
of broadcasting deals, as they have had a major impact on the implementation of
FFP. If the expected changes are more stable, it would then be of value to see
whether FFP can be used to indeed lower the spending of European clubs, through
observation in an allocated time period.
69. 68
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