How Are The FFP Impacting On Serie A’s Leading Clubs?

Last April  AC Milan CEO Adriano Galliani was quoted as saying that the FFP would unfairly harm Italian clubs relative to their continental rivals. AC Milan for example are 7th in the Deloitte money table but Real Madrid have almost double the annual revenue as AC.

A look at the finances of some Serie A sides

The financial reports for Serie A teams are frankly worrying. Over the last 8 or 9 seasons AC Milan’s spending has shown that they are attempting to balance the books more and more with the clubs net spend being a profit of 0.1 million between 2003 and 2011, compared to 260.2 million net spend between the period 1999-2003. This is represented by shrewd transfer acquisitions such as Ibrahimovich and Robinho on the relative cheap as well as the club shying away from a potential big money move for Carlos Tevez.

The reason for such a transfer policy is that the clubs finances have been in a bad way over the last several seasons. This outlay on players though with regards to Ibrahimovic, Robinho etc has led to the clubs losses going from 9.8 million Euro’s in 2010 to a massive 69.8 million in 2011, which would be outside of the FFP rules and see the club penalized were the rules to be implemented harshly. The reason the losses were lower at the end of the 2010 year were that Milan sold players like Kaka and Gourcuff for large sums which reduced the losses. Milan are an absolutely huge club but they are in danger of becoming a selling club as a result of their poor finances. This has become evident with the rumours linking two of their best players, Tiago Silva and Ibrahimovic with moves to PSG. In the end the club celebrated holding on to the players as if they’d just signed them,  a move that will likely mask what will be a quiet summer for AC Milan.

One implication that impacts both Milan clubs is their stadium which is not massively profitable as things stand, compared to some of the huge, and very profitable stadiums around Europe such as the Bernabau or the Emirates. AC Milan ranked 11th for match day revenue for the 08/09 season as a result of this with Inter 13th. This is a general problem in Italy as for that season AC Milan recorded the highest match day revenue out of any Italian side. If you think Manchester United earn 128 million Euro’s per year compared to AC Milan’s 33 million Euro’s it is a huge difference and goes a long way to explaining why Italian teams revenue is lower than other sides in Europe. The result of this has been an increase in debt for the club which has led them to sell their prized assets in Silva and Ibrahimovic to PSG.

This is an issue that drastically needs to be addressed if any Italian clubs are to work within the FFP ruling and still remain competitive in Europe. Inter’s success has been very good on the pitch of late, despite a poor showing this year, with relative dominance in the league as well as a much sort after Champions League trophy for the 2009/10 season, although this arguably came at a price with a high cost on transfers as well as the cost of hiring Jose Mourinho to deliver the trophy with the club recording huge losses for that season. In fact huge losses have been a problem for them since Moratti has been at the club and since he has began to spend large on players without the club making up for it in revenue, partially as a result of the aforementioned stadium issues.

The financial problems which were a factor in the clubs decision to let Eto’o go as well as Ibrahimovic before him were a reason why Inter, like AC Milan did not make a move for Tevez. With the clubs languishing league performance missing out on Champions League revenue will have an impact, although not a  huge one. The significance of the FFP on Inter is that they have to scale back spending to a large degree or risk failing to comply with the 45 million Euro losses permitted by the rules. Inter’s failure to finish in the Champions League places for next season’s competition will also negatively impact on their bid to break even and could see them selling a number of players, perhaps including Wesley Sneijder.

Juventus unlike most of their rivals in Serie A own their own stadium, however they still recorded significant losses last season with a 95 million Euro loss. However it should be noted that with qualification to the Champions League next season this will be significantly reduced as well as with prize money from winning the title.

Swiss Ramble note that despite losses being high a large proportion of this is down to the club ‘cleaning house’ for example releasing players as well as cutting back on staff. Much of the loss was also down to a significant reduction in TV revenue which again will increase next season due to Champions League football returning to Juventus.

The new stadium whilst costing a lot was a shrewd investment and will bring in significant income for the club helping them to break even with match day revenue predicted to double in the new stadium. Much of the revenue issues are also linked to the match fixing scandal which cost the club lucrative sponsorship deals and is responsible for the side failing to achieve Champions League football until now. With this hopefully behind them the club could return to profitability soon and despite recording larger losses than their rivals last season the new stadium and increased Champions League revenue could see them able to meet the FFP sooner than some may think, sooner even than their Italian rivals.

New stadiums are desperately required to increase revenue on match days as clubs are badly mismanaged and short of finances. Debt in Serie A rose by 14% last season as well as average attendances dropping 2.4% to stadiums only being 56% full. It is a general problem in the division for example in the 2009/10 season only four sides recorded a profit, and none of those profits were above 5 million Euros.

What does it mean?

Milan have essentially just sold two of their best players in Ibrahimovic and Silva as a result of the clubs weak finances for just £50 million which for two top players is relatively cheap. The fact of the matter is they simply cannot compete for the best players anymore and arguably cannot afford to keep hold of their own best players either. It would be unthinkable for Manchester United or Barcelona to sell off two of their best players in one transfer window, especially without looking to adequately replace them.

If we stay with Milan we can see that they have not signed any big money players for some time. This season they released several senior players including Gattuso and Van Bommel, rather than spending big on a replacement the club are linked heavily with Mudingayi, who whilst not a bad player is hardly one for the future.

Even their signings of Robinho and Ibrahimovic were cast off’s from sides with more money. It would be unthinkable for Milan to have signed Robinho from Madrid due to funds. Ibrahimovic is a big player but was only signed because Barca were eager to offload him. Milan themselves have recently stated that they will not sign any other players this season. Although they will have to spend now to replace both Silva and Ibrahimovic.

Inter are the same and with their lowly league position the loss of their Champions League revenue will impact on their spending power. Although the club have splashed out over 20 million Euros on both Palacio and Guarin. Both are good players but neither are World class. Long gone seem the days when the club would spend infinite sums of money on the likes of Christian Vieri or Hernan Crespo.

Juventus appear to be the only side out of the three who have healthy finances and as a result have been linked with a big money move for RVP. It remains to be seen whether they can offer him the wages he wants but a move would signify Juve’s intent on mounting a serious Champions League challenge next season.

For the clubs to get out of their current position they may need to follow Juve’s model and purchase their own stadiums as the stadium share is clearly negatively impacting on the Milanese clubs revenue making ability. As things stand the FFP are going to force some of the league’s better sides to adapt a policy of selling their best players in order to make ends meet. We may see a decline in the competitiveness of Serie A compared to other top European leagues.

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