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 Badger

New FFP rules a game changer?

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It looks like the EFL is increasingly likely to adopt the new FFP rules (profit and sustainability). After a transition period it is expected that clubs will have  maximum spend of 70% of turnover on wages + amortisation. 

This could a game-changer for English football, with consequences  on wage levels and transfer fees particularly outside the premier league. It seems likely that parachute payments will be part of the deal (it has been bubbling under for a while now). This would make it (even) harder for newly promoted teams + give huge problems to relegated teams - so surely there will have to be some form of protection?

Of course the devil will be in the detail, but generally I think it will be a good thing - NCFC share holders might even get a return on their shares! 😁

 

https://www.telegraph.co.uk/football/2022/04/08/cost-controls-wild-west-championship-finally-sight/

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Posted (edited)
37 minutes ago, Badger said:

It looks like the EFL is increasingly likely to adopt the new FFP rules (profit and sustainability). After a transition period it is expected that clubs will have  maximum spend of 70% of turnover on wages + amortisation. 

This could a game-changer for English football, with consequences  on wage levels and transfer fees particularly outside the premier league. It seems likely that parachute payments will be part of the deal (it has been bubbling under for a while now). This would make it (even) harder for newly promoted teams + give huge problems to relegated teams - so surely there will have to be some form of protection?

Of course the devil will be in the detail, but generally I think it will be a good thing - NCFC share holders might even get a return on their shares! 😁

 

https://www.telegraph.co.uk/football/2022/04/08/cost-controls-wild-west-championship-finally-sight/

Will really ****  the likes of Fulham over when they inevitably (I know pot calling kettle) come down again. I'm intrigued to see how this will effect the approach in Delia's board room meetings.

Edited by CrankyCanary

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It will be a good thing for us but a rubbish thing for the league in terms of competition.

To give an example, Blackburn reportedly have a total revenue of around 14m. We'd likely have a revenue (even without parachute payments) of around £30m. So by these rules we could spend £21m while Blackburn could only spend a maximum of less than £10m. How does that create a remotely competitive competition?

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4 minutes ago, CrankyCanary said:

I'm intrigued to see how this will effect the approach in Delia's board room meetings.

I think that it is likely to drive down wages and transfer fees (outside the EPL). It would mean for example that we would have to limit our wage bill to the early 20s of millions with no amortisation! If we spent money on paying transfer fees (amortised over the duration of the contract) the wage bill would have to be lower.

Producing your own players will be particularly important and it may incentivise ground expansion as we will want to increase turnover.

 

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Posted (edited)
4 minutes ago, king canary said:

How does that create a remotely competitive competition?

I don't think it will reduce competition but just change it. It is likely to have the consequence that the clubs with bigger support have more resources rather than those with the richest owner. teams like Ipswich, Sunderland, Sheff Weds are likely to benefit over time, whilst there will be a relative demise of those who have done well purely because they have a rich owner.

I would argue that this is better than it being the clubs with the richest owners. It will mean that clubs will be heavily incentivised to improve their relations with the fan base + will also be incentivised to develop their own young players.

Edited by Badger
Added more to the first paragraph to explain better
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It could well help clubs refocus on developing youth, also put some semblance of power back in club hands when it comes to contract negotiations (I'm sure we'll all agree that player power has swung too far over the last two decades, although Bosman undoubtedly had a just and fair case IMO) and it will favour those who are more inventive and transparent in their communications.

As ever, such things tend to get heavily attenuated but I would certainly be up for absolutely anything that takes the play away from wealthy owners bankrolling success instead of establishing winning cultures in a more organic way. 

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4 minutes ago, Badger said:

It will mean that clubs will be heavily incentivised to improve their relations with the fan base + will also be incentivised to develop their own young players.

Let us hope.

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56 minutes ago, Badger said:

I don't think it will reduce competition but just change it. It is likely to have the consequence that the clubs with bigger support have more resources rather than those with the richest owner. teams like Ipswich, Sunderland, Sheff Weds are likely to benefit over time, whilst there will be a relative demise of those who have done well purely because they have a rich owner.

I would argue that this is better than it being the clubs with the richest owners. It will mean that clubs will be heavily incentivised to improve their relations with the fan base + will also be incentivised to develop their own young players.

As you say, it benefits legacy clubs with established fan bases. None of those clubs you mention are run remotely well but they'll benefit because they've got larger stadiums and historic fanbases. 

As a rule it should just be entitled 'minnows, know your place.'

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Does it incentivise ground development for us?

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Posted (edited)
12 minutes ago, FCC said:

Does it incentivise ground development for us?

No, not really. The cost to build an extended City Stand is estimated at £40m plus interest. That's for around 6,000 seats. That works out at roughly £6,500 per seat. Assuming the cost is spread over 20 years and you sell 80% of the additional seats it would be around 15 years before we went into profit. And if we went down to League 1 or even just stayed an average Championship side we would be in a bit of bother. 

The only way to make it pay is from one really big player sale. 

Edited by dylanisabaddog

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11 minutes ago, FCC said:

Does it incentivise ground development for us?

Yes - we need to maximise turnover, because that defines what you are able to spend. Outside the Premier league, attendances are our biggest form of revenue (excluding the less predictable source of transfers). 

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1 hour ago, king canary said:

It will be a good thing for us but a rubbish thing for the league in terms of competition.

To give an example, Blackburn reportedly have a total revenue of around 14m. We'd likely have a revenue (even without parachute payments) of around £30m. So by these rules we could spend £21m while Blackburn could only spend a maximum of less than £10m. How does that create a remotely competitive competition?

Agreed, and it also makes staying in the premier league a lot harder in some ways too.

For example, if you are limited to how much you can spend, it makes finding those inbetweenie players a lot harder. Players who may be willing to come down to a club that is in a good position to get promoted may now be unaffordable.

It means that more clubs will be doing what we are doing which is splashing the money in the summer you are promoted... perhaps saving up the excess they are not allowed to spend. Then you hope that all of the new players meld into some semblance of a competitive team and stay up.

The likes of Leeds, Newcastle, Villa, Fulham, Bournemouth etc would all struggle to do what they have done and would likely have to sell off players soon after relegation. To be fair, we may have had to do so with Buendia a summer earlier meaning we may have not been promoted either.

As I have said about these things before, they only work if everyone does the same. Otherwise other European leagues become more attractive again, the interest in players coming here to play will be focused elsewhere, with fewer restrictions and more potential in terms of earnings/income.

It also means the PL will be able to attract championship players far easier than they already do, increasing the gulf in wages and spending ability. 

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10 minutes ago, dylanisabaddog said:

No, not really. The cost to build an extended City Stand is estimated at £40m plus interest. That's for around 6,000 seats. That works out at roughly £6,500 per seat. Assuming the cost is spread over 20 years and you sell 80% of the additional seats it would be around 15 years before we went into profit. And if we went down to League 1 or even just stayed an average Championship side we would be in a bit of bother. 

The only way to make it pay is from one really big player sale. 

Or reducing players trading by at least £20m when promoted to offset the amount needed to be clawed back through season ticket prices.

Though one also has to consider the increase in matchday income that 6k extra fans would generate as well. Though mitigate that with extra stewards and match day staff.

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1 minute ago, dylanisabaddog said:

No, not really. The cost to build an extended City Stand is estimated at £40m plus interest. That's for around 6,000 seats. That works out at roughly £6,500 per seat. Assuming the cost is spread over 20 years and you sell 80% of the additional seats it would be around 15 years before we went into profit. And if we went down to League 1 or even just stayed an average Championship side we would be in a bit of bother. 

The only way to make it pay is from one really big player sale. 

The proposed rules are based on turnover not profit. 6,000 extra seats would generate c£2 million a year in extra revenue + extras like merchandise/ refreshments etc. In addition, if it is anything like the South stand it could generate revenue from office space + facility hire. Taken together it could enable us to spend iro 10% more each year.

Re profitability, I have always argued that the "payback period" is a limited way of calculating profitability (perhaps the difference between an economist and an accountant)? Assuming we can actually sell the tickets (nb!) an economist would look at the contribution made (marginal revenue minus marginal cost). If we borrowed at say 3% (Spurs borrow at less) the extra revenue would more than offset the extra costs and we would have increased profit from year one. I have sometimes, rather suspiciously, wondered whether the the payback calculation has been given by the club as an excuse for not expanding the ground.

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Posted (edited)
10 minutes ago, chicken said:

The likes of Leeds, Newcastle, Villa, Fulham, Bournemouth etc would all struggle to do what they have done and would likely have to sell off players soon after relegation. To be fair, we may have had to do so with Buendia a summer earlier meaning we may have not been promoted either.

Leeds, Newcastle and Villa have the natural advantage of being better-supported clubs and therefore would generate extra revenue.

However, you general point about it making it even more difficult for newly promoted clubs is correct imo. If you are able to spend say £80 million on wages in one year and potentially without parachute payments in year two this may be reduced to £20 million (less for the likes of Bournemouth) it is going to be even harder to recruit.

I think that they will have to make some form of adjustment arrangement or I can't see how promotion/ relegation would work. Unless someone sees something I don't?*

(*I guess it could have a deflationary effect on wages + shorter contracts with more options on contracts + bigger initial payments? I wonder what the PFA might think?)

Edited by Badger
Added last sentence

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9 minutes ago, chicken said:

Agreed, and it also makes staying in the premier league a lot harder in some ways too.

For example, if you are limited to how much you can spend, it makes finding those inbetweenie players a lot harder. Players who may be willing to come down to a club that is in a good position to get promoted may now be unaffordable.

It means that more clubs will be doing what we are doing which is splashing the money in the summer you are promoted... perhaps saving up the excess they are not allowed to spend. Then you hope that all of the new players meld into some semblance of a competitive team and stay up.

The likes of Leeds, Newcastle, Villa, Fulham, Bournemouth etc would all struggle to do what they have done and would likely have to sell off players soon after relegation. To be fair, we may have had to do so with Buendia a summer earlier meaning we may have not been promoted either.

As I have said about these things before, they only work if everyone does the same. Otherwise other European leagues become more attractive again, the interest in players coming here to play will be focused elsewhere, with fewer restrictions and more potential in terms of earnings/income.

It also means the PL will be able to attract championship players far easier than they already do, increasing the gulf in wages and spending ability. 

The rules are good if your one and only consideration is stopping clubs from overspending. However the EFL and football in general also needs to ensure their competition is actually competitive. 

As much as people seem anti this, the only logical end point is a flat salary cap.

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48 minutes ago, king canary said:

As you say, it benefits legacy clubs with established fan bases. None of those clubs you mention are run remotely well but they'll benefit because they've got larger stadiums and historic fanbases. 

As a rule it should just be entitled 'minnows, know your place.'

I think the term "legacy clubs" is a little pejorative 😁. I might say clubs with very well developed community links and strong local support and long traditions. Wouldn't you expect these clubs to do better?

It will be harder for a rich owner to buy success for the likes of Blackburn, Bournemouth and Wigan, though I agree. It then becomes a personal choice whether you think it is better that Bournemouth can buy a place in the premier league for their 10,000 fans, whilst the 30,000+ fans of Sunderland can't enjoy the privilege because they don't have an owner who is prepared to spend a billion!

Fans or owners - who should determine the strength of the club?

 

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1 minute ago, Badger said:

I think the term "legacy clubs" is a little pejorative 😁. I might say clubs with very well developed community links and strong local support and long traditions. Wouldn't you expect these clubs to do better?

It will be harder for a rich owner to buy success for the likes of Blackburn, Bournemouth and Wigan, though I agree. It then becomes a personal choice whether you think it is better that Bournemouth can buy a place in the premier league for their 10,000 fans, whilst the 30,000+ fans of Sunderland can't enjoy the privilege because they don't have an owner who is prepared to spend a billion!

Fans or owners - who should determine the strength of the club?

 

Neither. Its very simple.

Sheffield Wednesday don't deserve to have any greater chance of being in the top flight because they happen to have more fans due to historic success or happy accidents. 

It takes a particularly interesting pov to spin Sunderland into hard done by minnows drowned out by the money of Bournemouth I must say.

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7 minutes ago, king canary said:

Neither. Its very simple.

Sheffield Wednesday don't deserve to have any greater chance of being in the top flight because they happen to have more fans due to historic success or happy accidents. 

It takes a particularly interesting pov to spin Sunderland into hard done by minnows drowned out by the money of Bournemouth I must say.

The fact that they have a much bigger fan base is surely relevant though? Fans have big fan bases because their clubs are important to the area where they come from. 

I know I won't persuade you otherwise because we have had this debate before but to me football is about community and I would prefer to see those clubs with strong community roots and a deep fan base prosper rather than those who just happen to attract a rich owner.

Without getting to hifalutin about it, football to me is about my roots, family, history and community. I'm not interested in the perfectly-packaged, highly competitive franchise-based TV entertainment with wage caps etc.

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31 minutes ago, king canary said:

The rules are good if your one and only consideration is stopping clubs from overspending. However the EFL and football in general also needs to ensure their competition is actually competitive. 

As much as people seem anti this, the only logical end point is a flat salary cap.

I agree with a salary cap. However, it would need to be across the board, right across European leagues etc. I can't see that happening.

Another suggestion would be debt caps. Limit the amount of debt a club can be in and suddenly they have to spend money on balancing the debt rather than increasing it. That would impact upon wages, player spend as well as owners who want to take risks by betting it against the future of the club.

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3 minutes ago, Badger said:

The fact that they have a much bigger fan base is surely relevant though? Fans have big fan bases because their clubs are important to the area where they come from. 

I know I won't persuade you otherwise because we have had this debate before but to me football is about community and I would prefer to see those clubs with strong community roots and a deep fan base prosper rather than those who just happen to attract a rich owner.

Without getting to hifalutin about it, football to me is about my roots, family, history and community. I'm not interested in the perfectly-packaged, highly competitive franchise-based TV entertainment with wage caps etc.

It's both though isn't it? You want an owner to come in and be able to financially support a club, equally, you don't want that owner to be the only reason that club is achieving. As such you want the fans and the ethos of the club to be rewarded no matter the size of the club.

The community based appeal has to be done very carefully though. I know at a very amateur and local level, from the Sunday Leagues, that the FA used to award funds and support to well run clubs. The only problem with that is that the club already had to meet certain criteria to get that, which mean already established clubs with senior, U21's and junior sides were getting the funds and rewards which meant other sides that were not yet there but had the same ambitions were having to try and do the same on less.

There is a balance. It's never easy, but it has to be better trying to get that than what football has become in this country and elsewhere. Real and Barcelona for example. All kinds of issues around the hierarchy of the clubs, tax dodging a regular occurrence, the idea of a breakaway European super league etc. All should be punished by the governing body of football for bringing the game into disrepute. Rarely is.

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Thank you to those who responded.  I knew it wouldn’t be a yes / no answer - but interesting views from everyone.  

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43 minutes ago, chicken said:

It's both though isn't it? You want an owner to come in and be able to financially support a club, equally, you don't want that owner to be the only reason that club is achieving. As such you want the fans and the ethos of the club to be rewarded no matter the size of the club.

Obviously the devil is in the detail, but the ways in which an owner is able to support the club will be limited if the proposals are passed. I'm sure that they will allow owners to improve infrastructure etc but not on the purchase of players or subsidizing their wages.

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16 minutes ago, Badger said:

Obviously the devil is in the detail, but the ways in which an owner is able to support the club will be limited if the proposals are passed. I'm sure that they will allow owners to improve infrastructure etc but not on the purchase of players or subsidizing their wages.

That's sort of how it is now, only that rather than being not at all, investment by an owner in the playing staff side of things is only permitted to be a % of the turnover isn't it? (in sort of very layman terms).

The idea was that this encouraged the owner to invest in the money making aspects of a club which would in turn mean they could invest more money and so on.

The problem has been that many of these owners know how to find financial loopholes, hence why many of them 'avoid' tax and know of ways to make money by being able to write it off... sometimes investing it into a failing company for example. Anyway, one of those loopholes was owners selling grounds to themselves before selling it back to the club upon promotion... there are some rules against this in the long run I think.

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6 minutes ago, chicken said:

Anyway, one of those loopholes was owners selling grounds to themselves before selling it back to the club upon promotion... there are some rules against this in the long run I think.

This was not allowed for a long time ... then they allowed it ... it was exploited and now it is being stopped again! 😁

The new rules would be very different if passed though because teams would only be able to spend 70% of turnover on wages + amortisation: it wouldn't matter how much the owner put in.

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5 hours ago, king canary said:

It will be a good thing for us but a rubbish thing for the league in terms of competition.

To give an example, Blackburn reportedly have a total revenue of around 14m. We'd likely have a revenue (even without parachute payments) of around £30m. So by these rules we could spend £21m while Blackburn could only spend a maximum of less than £10m. How does that create a remotely competitive competition?

At the start of the Premier League, Blackburn were happy to buy a League title through their then wealthy owner and they come from a part of the country with many teams so no need to shed many tears for them. In principle this is a good system. Success will flow from a combination of earning ability and player recruitment ability. The latter could still out perform the former. 

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7 hours ago, Badger said:

It looks like the EFL is increasingly likely to adopt the new FFP rules (profit and sustainability). After a transition period it is expected that clubs will have  maximum spend of 70% of turnover on wages + amortisation. 

This could a game-changer for English football, with consequences  on wage levels and transfer fees particularly outside the premier league. It seems likely that parachute payments will be part of the deal (it has been bubbling under for a while now). This would make it (even) harder for newly promoted teams + give huge problems to relegated teams - so surely there will have to be some form of protection?

Of course the devil will be in the detail, but generally I think it will be a good thing - NCFC share holders might even get a return on their shares! 😁

 

https://www.telegraph.co.uk/football/2022/04/08/cost-controls-wild-west-championship-finally-sight/

Will the Premiership adopt it though? If they don’t then it will have minimal impact on our current predicament.

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18 minutes ago, hertfordyellow said:

Will the Premiership adopt it though? If they don’t then it will have minimal impact on our current predicament.

I would have thought that they are bound to otherwise the teams qualifying for Europe would have to decline entry into the competitions for which they qualified. 

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15 minutes ago, Badger said:

I would have thought that they are bound to otherwise the teams qualifying for Europe would have to decline entry into the competitions for which they qualified. 

It depends if UEFA are serious about looking at clubs books before allocating places. I’m guessing not really. A domestic regulator (recommended in the government paper) definitely would. Nothing short of creating a licence based regulator will do. We can’t let clubs pretend they have strengthened regulation, in the end they are still regulating themselves.

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