Perhaps one of the least shocking discoveries of 2018 was that Paris Saint Germain (PSG) and Manchester City F.C. had both routinely circumnavigated UEFA financial rules. The Qatari owner of PSG, Nasser Ghanim Al-Khelaïfi, has invested incredible sums into the club—much more than allowed by UEFA’s Financial Fair Play (FFP) regulations. At its core, FFP was designed to prevent clubs from spending beyond their means so that they would not face trouble down the road (this happened to Leeds United, a former giant that nearly collapsed due to financial missteps). Conversely, FFP is also intended to prevent the wealthiest clubs from overwhelming the transfer market and pricing out smaller clubs, thus monopolizing talent for the highest bidder.
In 2017, PSG set the world record for a transfer fee, paying Barcelona 222 million for the Brazilian player Neymar, more than double the previous record (105 million for Paul Pogba in 2016). The next year, PSG would spend another massive sum for Kylian Mbappe—180 million.
Even for a club of its stature, it is hard to believe that within a span of two years, PSG could afford to drop 400 million cash, on top of its already ludicrously large payroll of around 150 million a year (after taxes!). FFP dictates that a club cannot spend too much beyond what it earns in revenue, which includes ticket sales, TV deals, competition rewards, uniform sales and sponsorship deals. According to Forbes, PSG’s revenue for 2018 was 486 million.
Simply put, the math does not quite add up. To be able to afford deals such as the ones for Mbappe and Neymar, PSG has relied on direct investments from its owners, outside of the team’s actual revenue. This practice, of course, is not approved by UEFA and has drastically inflated the value of player transfers across the world. And PSG is not alone. In England, Manchester City F.C.’s owner Sheikh Mansour bin Zayed Al Nahyan has invested significantly more in the club over a longer period of time.
As a result, when clubs like PSG and Manchester City become interested in a player, smaller clubs find it increasingly difficult to hold onto their talent, which gets lured away by money. Even worse, they are unable to afford a competitive replacement due to inflated player values in the transfer market. As a result, the less affluent clubs have fallen behind. And by less affluent, I’m not only talking about much smaller clubs, such as Bournemouth—a minnow in the Premier League—but even a storied club like Newcastle.
Newcastle’s owner, Mike Ashley, is the polar opposite of Mansour and Nasser. Ashley extracts wealth from Newcastle United and refuses to put money back into the club. As a result, Newcastle has not signed any new players in recent transfer windows. Ashley has not made the funds available.
The team’s manager, Rafa Benitez, has threatened to resign at the end of the season due to Ashley’s unwillingness to splash any cash. Newcastle currently flounders just above the relegation zone (bottom three) of the Premier League, largely in part because the club hasn’t purchased adequate talent. The majority of the players on the team were signed when Newcastle was playing in the Championship, a level below the Premier League. In order to stay competitive, they need Premier League-level players. Newcastle is no small club; in fact, it is actually one of the largest in England. Their revenue is large, their fan base is immense and dedicated, yet they do not spend on new signings.
Perhaps part of Mike Ashley’s refusal to spend is the cost; remaining competitive in the Premier League is expensive. The price for a Premier League caliber player has increased—largely due to the dramatic rise of prices for the best players.
If relegation is likely, is it worth buying new players for vast sums, only to then lose them? There are several instances of this happening—quality players on teams that are relegated often have stipulations in their contract that activate a release clause if their team is relegated, allowing the player to leave for another Premier League team.
Is it possible that one end of the spectrum of ownership is actively pushing the other end further away? By skirting around FFP rules, Mansour and Nasser may have de-incentivized owners like Ashley at struggling clubs from fronting the investments necessary to keep their own teams up to par. I’m not saying that owners should be obligated to invest their own money similar to Mansour and Nasser, nor that these violations of FFP should be more strictly enforced (they are not).
But perhaps the most significant and long-lasting effect of driving up transfer prices is that it enlarges the performance gap between wealthy clubs and the rest, not by monopolizing all the best talent, but by discouraging everyone else from even trying.