Sunday, November 04, 2018

State-Owned Football?

The global reach of soccer has turned the sport into a financial behemoth, with funds flooding in from TV rights as well as gate receipts and other sources. Revenues at European clubs have tripled since 2000, according to a UEFA report published in January, and reached 18.5 billion euros in 2016. That dwarfs America’s largest professional sport, the National Football League, which some analysts estimate has annual revenue of about $14 billion (11 billion euros). The European game’s popularity is increasing in the United States, which is due to co-host the 2026 FIFA World Cup.
But clubs also face huge outlays, particularly in acquiring star players, who can cost tens of millions of euros in transfer fees – the sum paid by one club to another to release a player from a contract so that they can change clubs. On top of their purchase cost, star players can command wages running to hundreds of thousands of euros a week.
With many clubs racking up hefty losses, UEFA introduced its Financial Fair Play rules in 2010 and began evaluating clubs in 2013. The rules broadly require club spending not to exceed revenue from television rights, gate receipts, competition prize money and sponsorship. Since 2015, clubs have been allowed to lose no more than 30 million euros over three seasons, on the grounds that they should not simply be funded by big debts or super-rich owners. Before that, when UEFA was phasing in the rules, clubs were allowed to lose up to 45 million euros over two years.
The aim is to sustain viable competition between a wide range of European clubs over the long term.  Rules require clubs wishing to participate in UEFA competitions to submit information about their finances for monitoring. In 2013, UEFA’s investigatory arm, part of its Club Financial Control Body, began to question elements of accounts submitted by Man City and Paris St. Germain.
Man City is part of City Football Group, which is majority-owned by Sheikh Mansour bin Zayed Al Nahyan, half-brother of the ruler of Abu Dhabi. The sheikh is a deputy prime minister of the United Arab Emirates and has a soccer empire that also includes clubs in the United States, Australia and Uruguay. For many years, Manchester City played in the shadow of its more successful local rival, Manchester United, and struggled to stay in Britain’s top soccer league. Then, in 2008, Sheikh Mansour of the United Arab Emirates took control of Man City and began to transform it. With expensive new star players, the club went on to top the Premier League three times over the past decade.
According to the final preliminary view report by the investigatory chamber of UEFA’s Club Financial Control Body, Sheikh Mansour had “significant influence” over two of Man City’s Abu Dhabi sponsors. The report found that the amount being paid for those sponsorships was three times their market value.
UEFA’s investigatory arm determined that Man City had made losses of 233 million euros during the two-year period ended in May 31, 2013, when the club made adjustments the investigators required, including judging key sponsorship contracts at market values determined by the experts, according to the chief investigator’s report. That was 188 million of losses more than was allowable under UEFA’s rules, the report said.
Paris St. Germain is owned by Qatar Sports Investments, a state-backed body founded by the emir of Qatar, Sheikh Tamim bin Hamad Al Thani. His country is currently spending billions of dollars in preparation for hosting the next FIFA World Cup in 2022.
Under UEFA’s “Financial Fair Play” rules, clubs must be transparent about revenues and broadly balance them against expenditure. The rules are designed to encourage clubs to live within their means and prevent the sport’s richest owners from crushing their rivals, killing the vibrant competition that pulls in fans. The regulations include a limit on the losses clubs can incur. They are intended, among other things, to prevent clubs running up big debts or receiving unlimited amounts of money through inflated sponsorship deals with organisations related to the owners. In short, related-party sponsors should not pay more than the market rate to support a club.
In the cases of Man City and Paris St. Germain, UEFA’s Club Financial Control Body (CFCB), which oversees Financial Fair Play rules, accepted that the clubs could receive income from Emirati and Qatari sponsors that was far in excess of the market value estimated by independent experts hired by UEFA to assess the deals, according to investigatory reports, settlement agreements and other documents. UEFA’s investigators concluded that key sponsors were related to the club owners, the documents show.
With Paris St. Germain, UEFA’s Club Financial Control Body allowed the club to value its sponsorship deal with the Qatar Tourism Authority, a government agency, at 100 million euros a year. Yet independent experts advising the CFCB told it the market value of the QTA sponsorship was only a few million euros a year or less, the documents show.
With Man City, UEFA’s control body allowed the club to book three times more income from some Abu Dhabi sponsors than independent experts deemed the sponsorship deals were worth – about an extra 20 million pounds a year.
These arrangements helped to boost the clubs’ income, enabling them to comply with UEFA rules that limit the losses clubs are allowed to incur. That, in turn, helped the clubs to spend tens of millions more on players than they otherwise would have been able to do.
The head of the Spanish football league, Javier Tebas, last year alleged that Man City and Paris St. Germain had received “state aid” that “distorts European competitions and creates an inflationary spiral that is irreparably harming the football industry.” Last month, Tebas reiterated to Reuters that sponsorship deals from state-backed entities that were above market values were detrimental to others. “It’s about the effect it has in distorting the market of footballers on a European level,” he said.
https://www.reuters.com/investigates/special-report/soccer-files-fairplay/

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