The Impacts of Financial Fair Play

This week Tom Cairney became the most high profile sale of the summer so far for Blackburn Rovers as he completed his move to Fulham, making him the sixth player to leave the Lancashire club so far this summer – and it is only June still. Rumours are still abound that both Rhodes and Gestede will be following him out of the door this summer as the club look to claw back money to pay off dates and comply with Financial Fair Play. Considering that earlier this year the total net debt of the club was believed to be up at £79.8m, and with FFP permitting clubs to make a total operating loss of £8m (2013/14), the club will still be some way off that target even if all saleable and profitable assets are sold for large sums – arguably, selling the first choice 11 would not make much a dent into this figures. The result, Blackburn will continue to be a club in debt and with a transfer embargo. It is a catch 22 situation – unable to buy players, so our best players will have to be sold to pay the debts, but then the goal of promotion (and the pay packet it brings) disappears further and further in to the distance. For Blackburn, arguably the only way back up, is to drop down, create a sustainable financial foundation and with it a business model which allows the club to only operate within its means, and then start a crusade back up the table, or potentially, leagues.

Blackburn aren’t the only team to fall foul of the FFP rules, last season Leeds United and Nottingham Forest joined them in the no-buy club. Had QPR not gained promotion the season before last they would be in the same situation, possibly with greater debt, however, by getting out of the Championship they exempted them from their FFP rules and the fines which would have followed – but now they are back in the Championship, and with a heavy fine to pay. Only they are not paying it, they are refusing to acknowledge that they owe the money back to the league, and the sucker punch: they are even looking to bring players in. Which raises the question: what is the point of FFP if not everyone is going to abide by it? By ignoring the rules and fine QPR have an unfair advantage over the other clubs in the league who have slaved to comply, most likely taking a heavy blow to their ambition. Why should QPR be any different? Look at the Premier League and Champions League: for almost a decade Arsenal went trophy less as they sought to move in to their new ground and balance the books without going massively in debt. So they didn’t spend huge amounts on transfer’s season on season, and instead paid of their stadium. Now they’ve paid back the majority of the monies owed for the stadium they are able to pay high values in transfers and wages, without falling foul of FFP. Look across London to Chelsea and it has been apparent that over the previous few seasons they have not been the free-spending club they were in previous years under Abromovich – the outcome, last year they posted a profit. Now, look to the North West to the Etihad, and similar to QPR, Manchester City have completely ignored the impending doom of FFP, and continued their endless spending to ensure they make the top four every season and challenge for the title. Across the channel PSG have done pretty much the same. So when UEFA and their FFP campaign came knocking, what was the heavy penalty they paid – reduced Champions League squad numbers. Is this a crime fitting of the punishment, of un-levelling the playing field? I don’t think so. If UEFA were serious about FFP large fines and bans would follow the breaking of the rules, acting as a lesson to keep within the guidelines and operate more sustainably. Funny how two of the richest clubs in Europe spent their way in to the UEFA Champions League, contravening all the rules, only to be hampered by a couple less players in their tournament squads. FFP isn’t hitting the big clubs competing in Europe, who, let’s face it, can probably manage the debt they are in; but it is crippling other smaller clubs who have never had, or who no longer have, sugar daddies to finance them. I’m not saying the likes of Blackburn, Leeds and Nottingham should be given a free reign – but the punishment currently imposed is not only hampering clubs who are already in trouble, but driving them down the leagues down a path they may not be able to recover from.

Looking specifically at Blackburn Rovers, a review of recent seasons performance on and off the pitch shows that the event that started the demise of the club was not the buying of the club by the Venkys; it wasn’t the sacking of Sam Allardyce; it probably wasn’t even the hiring and retaining of Steve Kean; or the clubs relegation; the biggest impact on Blackburn financially was the attempt to get back up to the top division at the first go. Before relegation, Blackburn had maintained a wage to turnover ratio of less than 100% – the highest being 93% the season prior to being relegated, and the highest before that being 90.6% the season Paul Ince started as manager and was eventually replaced by Sam Allardyce (arguably the high percentage here could be attributable to the fact that this was the first season in a few the club was not in the Europa League so would have had reduced revenue and also the cost of firing and hiring). Similarly, before relegation, the clubs net debt had been £21m and below – apart from the season the Venkys bought the club when it increased to £26.3m. Following relegation the net debt of the club has spiralled from £30m to £70m in the space of just 3 years.

It could be argued that if you are going to get promoted back to the Premier League the time to do it is in your first season down, retaining the bulk of the Premier League squad and using the parachute payments wisely. When they were relegated it can be assumed that Blackburn had a reasonably high wage bill – this is a problem in itself. The second problem was the additions the club made to the squad. Despite this only being 3 years ago, only two players from that summers spending spree still remain at the club: Jordan Rhodes and Leon Best. That summer crippled the club in three ways: the owners stuck with the manager who got them relegated, Steve Kean; then they offered high wages to bring relatively big names with Premier League experience to the club to try and get them back up; and finally, they searched Europe for good young cheap talent and then allegedly paid agents a small fortune to bring them to the club – the summer of 2012 saw no fewer than four Portuguese youngsters join the club.

Of the points raised above, points one and two link in to one almost. The club should never have kept Steve Kean. Regardless of whether he was a good coach and was ultimately the man to get the club promoted, he had lost the fans. No matter what he did that summer, or who he signed, they would always be his signings and signings that he should never have been in a position to make. From the minute those players he signed (I’m thinking of Murphy and Etuhu) put a foot wrong they were Steve Kean’s players and unlikely to win the hearts of the fans (similar to when Paul Ince signed Keith Andrews who never grew out of that shadow). Giving Steve Kean money to spend was a poor decision, an even worse decision was giving him the power to offer them ludicrously high wages in the hope of getting the team straight back up – they were on a hiding to nothing. By all reports, Leon Best was offered a decent wage and he is still at the club despite there being little to no chance of him playing again (not that he has played much anyway). Point 3 links somewhat to this as well – all the Portuguese players bought were again linked to Steve Kean and the time he spent earlier in his career in Portugal at Academica, it is not surprising to see that since Kean departed playing time has been somewhat rare for these players.

There is a lesson to be learnt here: if you get relegated don’t throw all your eggs in to the basket of aiming for an immediate return – if you don’t achieve it, that one summers decisions could take decades to recover from, as is being seen now at Ewood, were ironically Blackburn cannot even buy players for a penny to get them out of the situation they are in. Bide your time, trust in your youth and look to build a squad on a sensible footing, letting them grow in to a team capable of challenging for promotion rather than forcing square pegs in to round holes in the hope that experience (and money) shines through. Look at Bournemouth rather than QPR.

So what is the solution? I believe there whilst under transfer embargo Blackburn have two options:

1. Trust the academy. Blackburn have one of the best academies around and produce a great number of quality youngsters, some of whom have gone on to represent their country and win titles. However, in recent years there has been very little to shout about from the academy at Brockhall, with any seemingly bright sparks being shipped out on loan never to be seen again. At a time when the club has no money to spend on transfers, a good youth policy is a sensible option. The hope is that the previous few seasons of sending players out on loan has been to get them the experience they need to cut it in the first time if, and more likely, when, required. At Championship level, there is no reason a player cannot come in to the team between the age of 18 and 20 and be able to handle the pressure and demands of the league. It would be nice to see more appearances from the likes of Mahony, O’Sullivan, Raya and, fingers crossed, a bright young striker.
2. The ‘Moneyball’ alternative. In the book (and film) ‘Moneyball’ by Michael Lewis, the plucky Oakland A’s go from season to season with little money but still managing to compete with the likes of the New York Yankees, under the control of General Manager Billy Beane. Although he doesn’t spend anywhere near the likes of the Yankees or the Red Sox, each year he competes, and at the end of each season has to sell off his best players. He does this by finding value in the market and finding players who help him achieve what he needs. He doesn’t look to superstars, he looks at players with attributes which help him score runs (“get on base”) – in most cases these are players who have been overlooked for one reason or another, but who statistically are good enough to make it in the big leagues, which Beane proves in their 20 game unbeaten run. Another aspect of this is the American draft system and the potential to exchange players for players in addition to sums of money – selling a star player for money and a player the buying party doesn’t see as key. Blackburn can look to this model as a way out of the mire. Search the lower leagues and the academies and find these players who aren’t superstars, or who don’t have all the boxes ticked; they may only be good at one thing, let’s say crossing, but as long as they deliver on that one attribute and contribute to the rest of the team, they are an asset. The second stage is exchanges: Blackburn cannot buy anybody, but what they can do is ask for players as part of transfers – get money for an asset and get a player as well. If this method is managed well, very good players, and players eager to prove they shouldn’t have been shipped out of their last club can be snapped up for nothing – potentially filling the gap left by the outgoing player.

In my eyes a mixture of the above two methods needs to be employed – keep the core of the team if possible, sprinkle some youth in there and use the transfer of assets to your advantage. The battle to keep Blackburn Rovers alive and competitive may ultimately be won on the pitch, but a lot of the work to make this possible will be done in the stands scouting, on the training ground integrating youth, and in the boardroom thrashing out deals which ensure the club doesn’t suffer too greatly when assets are sold on. Let’s see what happens in July/August…….