|[Blog] To Deal or Not to Deal, That is the Question?|
Written by rosseden on Tuesday, 24th Apr 2012 10:05
So, my first blog, well, the first I have been brave enough to post here. The mammoth one called ‘The Business of Football and Money’ will come later in the closed season, it's massive, and far too much for a first attempt.
I have been motivated to write this based on the recent comments about our beloved club's apparent lack of ability to do early deals, or in some cases any deals, in the transfer market, and how this may pan out over time. The main catalyst for writing it, is the relatively unknown incoming Financial Fair Play rules, we will all be very much aware of in principal, even if we don’t all know the detail.
Having had a good read, the basis of the plan as far as I can work out is fairly straightforward, it means that clubs can only spend their actual turnover on an annual basis. This turnover can be boosted by player sales to offset any overspend, however, rich benefactors can’t pump money in willy-nilly. There are obvious loopholes, such as sponsoring your own shirts, your own ground etc, but it appears that these loopholes will get shut sooner or later, most likely sooner.
So what does this mean for ITFC? Well, I think there are a few things we need to consider, some which are very relevant at the moment with the current contract scenarios, each of which I will address with some comments later on:
If we firstly consider contract lengths and pay rates together, for a solid first team player, the right age 20 to 26, clubs will often have to gamble on longer contracts, three or four years maybe, not only to protect the asset, but to ensure we retain a core of players.
There is still a lot of risk here, such as injury, lack of form, relegation (which I assume would be written into the contract). Outside of these core players, the contracts will diminish in initial length I believe.There will often be extensions written in as with Carlos Edwards or Jason Scotland currently at Town.
In real terms this is last year's David Norris situation, or maybe even Gareth McAuley. We will ALWAYS lose out to people who can be fringe Premier League players, the deals will be considerably higher every time from those clubs.
However, in the future I can’t see other clubs moving to offer 30+ year old players three-year terms, Pompey are finding this out the hard way, as administrator Trevor Birch is all too happy to tell us in every interview he does.
So, if we had 11 players on £10k per week, that’s a total of £5.72m per year, or between 35 and 36% of our budget, and these guys HAVE to perform throughout their contract to ensure things work out for them and for the club, or, if they screw up, they’re OK, but the club isn’t!
We then move onto the fringe players debate. How much is a fringe player worth? Well, this is the million dollar (or pound) question. If you had ‘fringe’ back-up for each position on £5k per week, (or £260,000 per year- which is still bloody good money) this would cost the club around £2.9m per annum, or between 18% and 19% of our total budget.
So, if we pause there, for a full first team on £10k per week, and a back up team on £5k per week, we have spent around 54% of our total budget. That’s before any ground costs, management wages and so on.
We then move into the youth/unproven area. What are these guys worth? How many should we have. Well, in recent years, they often got a two or three-year deal on good money (for someone who is essentially recently out of school). If we have another 11 of these, on say £1k per week, we spend £572,000 per year, or another nearly 4% of the turnover. Or do we go for 22 of them on half the money and run the risk of them not making it? Its a tough one.
Either way, were now up at 58% of our budget and we haven’t covered anything other than some wages. We still have to pay all the backroom guys, the Ticket Office, the shops, the management, the catering staff, the ground staff, security, police, transport to and from games etc.
Most businesses write down 20% of their budget as risk too, so that’s 58% on player wages of an 80% budget, or nearly 75% of the money available, if you allow for the risk element, as I believe we should.
Now, it hopefully starts to make sense why we are only offering unproven players vastly reduced terms. Or even established players lower terms, someone who is an unproven for us, might fit in someone else’s structure as a ‘fringe’ player, our main team player might fit in as a Premier League fringe player as McAuley did, and the deal goes up in line with that, so be it, that’s just how it has to be. It's the market rate/price/what they’re worth to the payer.
If someone else feels they’re worth more, then so be it. That’s just life. This will have to drop contract lengths, and the terms offered, more performance-based pay, and appearance-based add-ons or extensions. Too right, there’s nothing wrong with that. We can then choose to reward top performers. If people in football can’t see that, then they’ll get a shock when the bubble bursts!
There are 72 league clubs outside the Premier League. If each have 30 players (some will struggle to fund that number) that’s 2,160 players in total. If you were to consider how many players are registered to play in the league this year, I would hazard a guess it's more like 40% over this number. Something has to give somewhere.
Players and agents might be avoiding the prospect of this at the moment, but it's going to get very real over the next 24 to 36 months, a lot of first teamers will drop to fringe wages, fringe players will drop down through the levels and youth will get offered lower wages until they prove themselves.
Do I think this is a bad thing? Well, if you consider some of these ‘kids’ get £100,000 a year, no, I don’t think its bad. That’s a LOT of money by anyone's standards, and a 12-year career on that could set you up nicely at worst. I think the gravy train is seriously slowing down, but it’s about time it did.
We could just ignore the rules, there aren’t any punishments for two years after all, but, let’s consider that. Three teams down each year, that’s a total of six on parachute payments over two years.
It's been speculated by the media that at least four clubs have said they'll ignore the rules until there are punishments, plus there'll be the clubs coming down. That’s 10 teams potentially all banking on getting up, 10 teams into six promotion places doesn’t go, and that’s not even considering the other teams who might cause a surprise.
We could just try to drive up turnover, but this is a double-edged sword, the volume v margin debate will rage on here, something Simon Clegg is obviously testing the water with on ticket sales, shirt designs etc.
But either way, if the club did a great job and increased revenue by 10%, that's only two more first teamers. So it has to be that we pin our hopes on a Connor Wickham every couple of years. A big big gamble.
So, as I implied at the start, do we or don’t we do deals? Unless someone is going to go straight into our first team, and on top money, then can we really expect a lot of deals early? Not really. I'd like them to be sorted early, but the greed of agents and players will often mean they don’t get done.
What I do foresee though is a lot of good players and prospects without deals at the end of the transfer window taking whatever is available. Blackpool built a good portion of their squad that way when they went up, and, they nearly survived on it! I think more and more clubs will be doing the same over the next few years.
As a caveat, we could look the option of a legal challenge, but that opens a new can of worms. Other teams seem keen on the judicial review, as outlined here.
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