By Tony Attwood
I have been pondering on this site for a little while exactly how Manchester City are going to comply with Financial Fair Play. As we might expect, as FFP gets closer and closer so it seems that Manchester City are working on the problem to, and now we are getting the first inklings of what they are going to do.
Their initial approach has been to recruit people from Deloitte, the firm which worked with Uefa to set up FFP in the first place. Among their captures are Alex Byars and Martyn Hawkins and it seems that they, or those around them, have come up with a new wheeze to allow compliance with FFP.
In its simplest form Manchester City either need more income, or a dramatic cut in expenditure. The latter is difficult with their salary bill being higher than their total turnover.
Arsenal upped their turnover (enabling the club to pay higher salaries) by moving stadium and incorporating the money-making club level into the equation. But for Man City I believe there are worries in some quarters that if they expanded their ground (the cost of which would not be counted under FFP towards their losses, and so is a “good thing”) they would not sell out every match.
(When Arsenal contemplated moving to the Ems, they were able to look at the length of season ticket waiting lists, and also did the experiment of moving to Wembley for Champions League games. Both convinced the club that regular sales of 60,000 seats were quite possible.)
Big attendances lead to more money, not just from the entrance fees, but also from the marketing that goes with it, and on the marketing front Man City are a long way behind market leaders Man U. So they are looking for something else – some other way forwards.
And it seems that what they have come up with is a way of making money through buying up clubs outside England.
Now the notion of Arsenal fielding teams in leagues outside of England has been a theme of Untold almost from the start of this blog.
We have spoken about putting a side in the Scottish league, perhaps even building a small stadium and applying for a place in the league. Or maybe just investing heavily in one of the clubs that plays for ever in the bottom tier.
There has also been talk of taking over a third division club in France or Spain, or indeed any other country that allows their own clubs to play reserve teams in lower divisions.
All this comes about because the rules in England mean that one club cannot own another, and so the very sensible system that operates elsewhere, through which players can get a taste for really competitive matches, and indeed play more games, has failed to grow naturally in England.
The idea of buying up clubs in other countries however has been growing. One of the best known is that instituted by the Pozzo family who took over Watford, giving the club very strong links with Udinese and Granada. Their approach however may be more about making money than about developing their clubs, for they seem to work by buying players from around the world, playing them in their different teams, and then selling the ones who turn out to be gems for big profits. Getting Watford into the top League (as per Elton John’s tenure) doesn’t seem to me (as an outsider of course) to be on the cards.
To me, what the Pozzo’s have is in fact a model of football harvesting. Good for the owners, but it must be fairly heart breaking for supporters of the various clubs.
Now it appears Manchester City are looking at the same issue, although they are going at it in a somewhat different and much grander way.
I mentioned that when I was in Australia last year I was surprised to see just how global their owners expansion is, in terms of stadium branding. Now they want to establish not nursery teams, but rather “partner clubs” around the world.
The aim is always branding, and that is where the scheme is so different from the one some of us proposed for Arsenal.
The aim with the Arsenal junior side was to give more chance to control the development of young players, who at the moment go out on loan. With Man C the aim is quite different, although not unique, for I do recall Manchester United looking at this some time ago.
Man City want big branding and big publicity, and so they are looking at countries like Mexico, China, the rest of Asia and the USA, with the idea of taking over (or forming a partnership with) a club in each country with the aim of making enough money to placate FFP regulators in Europe.
The story began to develop when Ferran Soriano (CEO of Man City) said he was looking at “new creative ideas and business models” to forge a “historic transformation” of Man City.
Under Soriano Man City have been expanding their commercial department and branding quite considerably.
But that is just a part of it. Such an international array of companies running clubs in other countries will allow Manchester City to expand its approach in which people who work for the club are technically paid for by another company, not Manchester City. That already reduces their expenditure a little, in terms of losses (which affects FFP) but that would be nothing when compared to what could be achieved through a worldwide net of companies, each reporting to different football associations, and each paying tax under different tax regimes.
It would allow, for example, a profitable club in China, to employ staff who work in Manchester as “consultants”, thus taking them off the club’s books and so reducing the losses.
This route has been travelled before, not least by our neighbours Tottenham Hotspur who were owned by Enic, registered in the Bahamas. Enic built up investments in a portfolio of clubs including also Rangers, Vicenza, Basel, AEK Athens, and Slavia Prague. from the late 1990s.
Having initially gained control of Tottenham from Alan Sugar, and made Daniel Levy chairman, Joe Lewis and Levy (who between them owned 52% of ENIC) bought out the other shareholders.
However in order to get total control of Tottenham Hotspur ENIC needed more funds so at that stage changed the operating model and sold off its other football clubs.
So what next? Feeder clubs (as Man U have had with clubs like Royal Antwerp) are one thing – their aim is to develop new talent for the main club. But setting up partner clubs in order to spread the brand and change the accounts so that FFP regulations are met, is quite another.
I wonder if those running FFP have any answers to this.
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