The Cost of Chelsea's Failure

The past 10 months have been miserable for the blue part of South West London. From the very first day, Chelsea Football Club's season has been embroiled with controversy, instability and most importantly, failure. 



In any season of the Abramovich era, the scale of Chelsea failure would have been shocking- but coming after a season of winning the Premier League/Capital One Cup double with such comfort, no one saw this coming.

It's no difficult task to quantify Chelsea's overall lacklustre performance. Last season, with 30 games played, Chelsea were cruising in 1st place, with 70 points and a game in hand over second placed Arsenal, who were 7 points behind. The Capital One Cup was in the bag. This season, after 30 PL games, Chelsea are 10th in the league. On 41 points, and for the first time in a very long time, having drawn more matches than won. Elsewhere, the Blues were disposed of with relative ease from the Champions League and FA Cup by PSG and Everton respectively, and, well, it'd be better not to mention the Capital One Cup.

Now, much is made of the excesses of money in football- something that, no doubt, Chelsea have profited from massively over the past decade or so. But while this excess has rewarded success generously, it has equally put failure at a massive cost. Especially for a club like Chelsea, who have performed so consistently in recent years.

Premier League Prize Money 2014-15
[sportingintelligence.com]

Chelsea's Premier League struggles will cost them. Last season, the club won the largest ever Premier League prize bounty of £99m. Now, of course, any estimates of this year's prize money are totally dependent upon how we predict Chelsea will finish this year. If we assume merit payments (the portion of prize money dependent upon final position in the table) will stay the same as last year (in reality it will most likely increase, a little), Chelsea will lose out on £11m.

This won't be the greatest cost of failure this season, for Chelsea, however. Had Chelsea not lost to PSG and gone on to the final of the UEFA Champions League, they could have netted an extra £30m over the £18.7m they earned this year*. If they had won it, they could have earned up to £42m more.

But to be honest, while Chelsea were expected to go far in the UCL at the start of the year, few expected the Blues to win the competition- so perhaps these aren't the costs we should be thinking about. What we should be remembering is that, thanks to a terrible Premier League season, remaining in and winning the Champions League was Chelsea's last, thin hope of playing the Champions League next year. Knocked out of that by Paris Saint Germain, and now being very unfeasible that Hiddink's men will rise up the table to fourth from 11 points behind, Champions League football will not be visiting Stamford Bridge until at least August 2017. This has serious financial consequences.

It means that as substantial an amount of money won, even from such a disappointing campaign as this year's, will not reach the club accounts until at least the 2017/18 season. Even if they qualify for the Europa League next year, the prize money amounts for the two competitions are night and day. Tens of millions will be lost from Chelsea's failure to qualify for next year's Champions League, and this will most likely be the biggest financial consequence of the team's failures this season.

With chances of Champions League football next
season pretty much gone for Chelsea, we won't be
seeing similar celebrations any time soon.

To put these losses into perspective, remember that Chelsea Football Club, despite the footballing success and achieving its second highest ever turnover of £314m, lost £23.1m last season, with no particular massive expenditures to justify the loss. It's worrying to think that what the next two years have in store for Chelsea's finance when you consider such a loss, during one of the club's successful years.

UEFA'S Financial Fair Play Regulations are tightening for the next 3 years, allowing only a loss of €30m (£23m) to be incurred in each season. Now, I'm pretty sure the club would have some sort of way to avoid substantial consequences, even if they did break this rule. But if Chelsea were to fall foul of the FFP regulations next season and be punished, it would not just be a huge embarrassment for the club, but it could restrict their re-entrance into the Champions League, worsening the financial issues.

The Blues' finances will be made worse by the fact that this failure will necessitate the club to spend more, particularly on the acquisition of players. With a new manager coming in, the squad looking weak in a number of areas, and a number of key players set to leave in the search of UCL football next season, Chelsea will have to spend big this summer to rebuild the squad. It will be interesting to see how the club manages to balance finances- after all, investment is required to open up future successes, but in the short term will only worsen the financial situation.

Chelsea have some big investments to make in the near
future- not least the £500m renovation of Stamford Bridge.

Not only is Chelsea due to invest in players, but it is also working on a drastic renovation of its stadium, Stamford Bridge, a project expected to cost over £500m. Failure to get back on to track financially over the next few years will jeopardise this grand project.

This is, you could say, a pessimistic look at Chelsea's financial prospects for the next year or two. But, it is indeed a situation that the club must be aware of, and one that teaches us the perils of failure in football as well as the gifts of success. The bigger you are, the harder you fall- and while it is unlikely (hopefully!) that Chelsea will collapse as a result of this season's failures alone, the financial effect will no doubt be felt hard.

What's your opinion on this matter? Will failure this season leave Chelsea in the lurch for the future or do you think will they bounce back quickly? Leave a comment below! 

*Estimates made from statistics from Total Sportek.

Should Footballers Be Paid So Much?

VIDEO: http://bit.ly/XHuBp8

It's debate that's been steaming up in recent years; mostly by the activity of clubs such as Real Madrid, who spent a record-breaking £85 million to purchase Welshman Gareth Bale, along with a rumoured £300,000 a week pay package. Should footballers be paid such huge amounts?

Huge investment in the last decade or so into the beautiful game has launched this debate- kickstarted here in England by Russian oligarch Roman Abramovich, whose 140 million pound takeover of Chelsea FC in 2003 sent shockwaves throughout world football- it was the first major introduction of big, big money into the sport.

According to the Professional Footballers' Association, in the 1950s an England player at the height of his game would have earned today's equivalent of £75,000 a year- a good wage by today's standards (in nominal terms, disregarding inflation and other changes)- that of a doctor or medium-scale manager perhaps.

Today, however, the story is very different. Money is being thrown about by the oligarchs, sheikhs and other billionaire owners of today's big clubs. Abramovich was rumoured to have lured Eden Hazard to Chelsea through a phone call, saying "I don't know what your wage is, but I'll triple it.".

This is simply an example of market activity- supply and demand. Numerous world class clubs other than Chelsea were after the young Belgian attacker- driving up his market price, to the point that he is being paid roughly £180,000. His sale was similar to that of an auction- Manchester United and Manchester City had been put in pole position to sign him, but the tables turned when Chelsea trumped their bids for him- paying £32million.

This attitude that skill and therefore success can be bought, and the strengthening of the impact of supply and demand this has caused in football have led to huge changes in the wages of footballers.

The average wage of Manchester City this year, the highest in the world, was £102,653. Not a year. Not a month. But per week. That's roughly £5.4 million.

Much has been made of such astronomical figures.

In a time of economic trouble and wage stagnation that has recently hit hard most of the population, footballers have been criticised for their huge multi-million salaries, 'all for kicking a ball around'. Middle and lower class wages have stagnated, whereas that of footballers has rocketed in the past decade.
While this certainly is an issue of justice, particularly in nations such as Spain where the employment rate has recently hit 26%, is a curbing of football wages the best way to correct this?

£2.3 million of income tax per Manchester City player (almost £60m altogether from the regular 25-man squad) will have entered the tax pot in the past year- and while this is not an earthshaking contribution (£105 billion was spent on the NHS in 2012/13), it is by no means useless- the tax from Manchester City players' wages alone is a fifth of the Somerset County Council's budget.

So footballers' salaries do actually have an effect on government public spending- though Manchester City alone may not have caused any particular bumps in the government spreadsheets, consider that there are 20 teams in England who pay wages of a similar (slightly lower) amount.
This is undoubtedly a positive contribution- these contributions of tax are certainly high enough in aggregate to maintain public spending in certain areas, in particular areas such as local government noted above.

We must remember one aspect of this debate- the money used to pay footballers is by no means coming without choice from the regular taxpayer. If you want to contribute to footballers' wages you buy a shirt, you buy a ticket to a game- but still, the majority of money for the wages comes from  the wealthy benefactor that is the owner- be is Roman Abramovich, or Sheikh Mansour, the owner of Manchester City.

Footballers' wages are therefore in fact a very effective way in which to funnel money from the wealthy billionaires of the world- it is unlikely that Abramovich, Mansour and the numerous foreign owners of clubs in the Premier League would invest so many millions in Britain if something the scale of the Premier League was not in place. Roman Abramovich has invested over £1 billion on his beloved Chelsea- much of which has been spent on footballers' wages- and certainly much of which has gone into the tax pot to contribute to public spending.


SOURCES:

PFA on past wages http://www.telegraph.co.uk/sport/football/competitions/premier-league/8265851/How-footballers-wages-have-changed-over-the-years-in-numbers.html

Manchester City wages http://www.dailymail.co.uk/sport/article-2604978/Manchester-City-global-sports-salary-list-ahead-New-York-Yankees-Los-Angeles-Dodgers-Chelsea-Arsenal-Liverpool-Manchester-United.html

Spanish unemployment rate http://www.tradingeconomics.com/spain/unemployment-rate

NHS Spending http://www.nhsconfed.org/resources/key-statistics-on-the-nhs

Somerset County Council Budget (£327.9m) can be found on their 2012/13 Statement of Accounts.

Roman Abramovich spending on Chelsea http://www.standard.co.uk/news/1-billion-cost-of-roman-abramovichs-chelsea-empire-6390456.html