Financial Fair Play and the Premier League- Iain Taker

How will club adhere to the new regulations?

Clearly without knowing what the actual new regulations will be there is no definitive answer as to the best way to meet any new test introduced. However, the increase in the domestic (and the expected increase in the overseas deal) television rights will go some way to facilitating a club’s ability to break even (for more details on the new domestic deal see www.sportingintelligence.com). Unfortunately, from the clubs’ perspective, the increase in TV revenues is likely to be met with a knock on effect on transfer fees and wages as selling clubs and players will demand higher fees in light of the increased revenues awarded to Premier League clubs.

An interesting suggestion that has been raised is to what extent will the use of naming rights continue to be developed as a method of expanding sources, and levels, of commercial revenue.  One question that has been raised is whether a Premier League club be able to sell the naming rights to the team name? While this has occurred overseas e.g. New York Red Bulls there seems to be little willingness to adopt such a change domestically. The main recent exception to this stance was the permitted change of name from Wimbledon to MK Dons but this was granted solely due to the fact the team was being relocated and not due to potential commercial gain. The Football Association Council (who approve or reject any such request http://www.thefa.com/TheFA/RulesandRegulations/~/media/Files/PDF/TheFA/FAHandbook10-11.ashx/FAHandbook10-11.pdf) have indicated that they would not look kindly on any team who wished to change their team name for commercial benefit. What is however likely to occur is that the sale of naming rights to stadia and increased sponsorship of both match day and training kits will become a more commonplace trend of increasing commercial revenues should a break-even test be adopted. Such agreements, if with a related party e.g. the owners own company, would be subject to a ‘fair value’ analysis.

Assuming that the proposals, to all material purposes, mirror those of UEFA any expenditure on youth development and stadia facilities would be exempt. In addition clubs are able to amortise the cost of the transfer across the length of the contract (much in the way business treat assets). It is therefore possible that clubs will actually look to enter into longer term contracts with players so the transfer cost per annum is lowered.

In addition to using up any equity investment that clubs are allowed to accept from their owners there will a significant drive to raise revenues while keeping costs as low as possible. The likely effect of this is that the fans will see increased ticket prices and merchandise will continue to be sold at a price well above the cost incurred to manufacturer it. Other revenue streams will be developed such as via social media and commercial agreements such as naming rights, training kits and approved partners.

Conclusion

I strongly believe that come the start of next season there will be new FFP regulations for the Premier League and that the opposition from clubs who believe they should be able to run their clubs as they see fit will be defeated.  Whether you believe that FFP is the correct system or not there is a strong demand from many that clubs spend within their means and are made to plan for the medium to long term stability and sustainability of the club.  The situation at Portsmouth and Rangers highlight the danger of being financially unsustainable.

The new FFP regulations are likely to in the large part based upon the existing financial rules currently in force with the addition of a break-even test and Financial Control Panel.  What awaits to be seen is the level of acceptable deviation that the Premier League is able to implement.  While they may seek to gap the losses at the same level, and the same allowable equity investment rules, as UEFA (albeit in pounds not euros) they may be forced to permit larger losses in the first few seasons of the new regulations and taper them down over time.

---

About Iain Taker:

Iain Taker is an associate lawyer at Kemp Little (iain.taker@kemplittle.com) and a Registered Lawyer under the FA Football Regulations you can follow him on Twitter @iaintaker or on LinkedIn

Iain Taker’s 

{jComments on}