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Can Chelsea FC Really Ruin the Transfer Market?

Picture Credit: Sky Sports Ever since the rumors of UEFA’s Financial Fair Play Rules (FFP) being relaxed have surfaced, we have witnes...

Picture Credit: Sky Sports

Ever since the rumors of UEFA’s Financial Fair Play Rules (FFP) being relaxed have surfaced, we have witnessed a plethora of tweets, with the fans expecting a 2004/05-Esque transfer window. Some individuals have expressed their opinions, and their ambitions are lofty. While our fan base has already assumed that Sancho is a Chelsea player, they further expect another big name signing- especially a top striker. In this article, I will be debunking the myth that our club is flush with cash, and we should be content with bargain signings which improve us in key areas along with a maximum of one statement signing. 

To begin with, let us understand two basic rules in the world of finance. The first rule, Chelsea is a massive institution, and its revenue and corresponding expenses are not entirely attributable to the first team. Secondly, revenue and profit are two different concepts altogether. Profit is the net difference between revenue and expenses, and they are not directly related to each other. An increase in revenue does not necessarily imply an increase in profit, as the expenses could increase in a higher proportion than the revenue, hence affecting the profit negatively. In fact, this is actually what happened to Chelsea in the year 2019. Their headline while publishing their financial reports was highly misleading, and despite portraying a growth in revenue (by about 1%), Chelsea recorded a net loss of nearly 97 million pounds.

A host of factors contributed to the sky-rocketing of these expenses. Along with the rise in the cost of competing among the best in England as well as Europe, Chelsea witnessed a massive jump in the amortization costs- from 127 million pounds to 170 million pounds- mainly due to our investment in the summer of 2018. The severance package of former manager Antonio Conte, which amounted to 27 million pounds, was a highlighted figure in the financial statements. Wages for all staff also took a massive hike- increasing from 246 million pounds to 288 million pounds. Our transfer spending amounted to 188 million pounds, and we recouped just 54 million pounds from player sales/ loan fees, giving us a net spend figure of 124 million pounds.

Generally, a rise in expenses is matched with the rise in revenue, but this does not seem to be the case here. Despite revenue increasing to 446.7m from 443.4m, we have recorded a net loss for the first time in three years. This is largely due to two reasons- an exorbitant rise in expenses (which is higher than usual increase), coupled with reduced growth in revenue (massively lower from previous years). While such an event is unlikely to occur again, you can never say at Chelsea Football Club.

Competing in the UEFA Europa League instead of the Champions League brought a huge reduction in revenue to the club- Inter Milan, Napoli, Roma, Benfica, and Shakhtar Donetsk earned more than Chelsea despite failing to qualify from the group stage in the UCL (and we won the UEL, mind you). Despite the reduction being a measly four million pounds, it is terrible that the broadcast revenue has actually become lower, which usually tends to increase every year. Competing in a less lucrative European competition, along with fans boycotting “Sarri-ball” saw a seven million reduction in revenue from matchday activities (74m to 67m). Our broadcast revenue from PL increased though- as we finished third from fifth in the prior year. All these factors contributed to the net loss for the year 2019.

What about 2020?

Ignoring the current suspension of footballing action, this year has actually been pretty good for Chelsea in the financial aspect. Along with no incoming transfers for the year (apart from Ziyech), Chelsea has gained a lot of transfer fees from the sale of Hazard, along with our usual loan fees. Plus the return of Champions League football and the feel-good factor by Lampard, we could be set to record a huge profit. Some major expenses such as Conte’s massive severance package are also unlikely to occur any time soon. With our new sponsors ‘Three’ being confirmed, we could see a spike in revenue from branding activities. The signing of Pulisic is also likely to heavily increase merchandising. Our most important aim this season should be to secure Champions League football, as recording another loss could see us become answerable to UEFA under their FFP regulations. 

FFP regulations state that football clubs should break even- i.e. balance the football-related revenue (outgoing transfers, ticket sales, merchandising, broadcast), with the related expenses (transfer fees and wages). Although they exclude amounts spent on infrastructure projects, it is important to break even as the club cannot show losses for a period of three consecutive years. Failure to comply could lead to penalization, as in the case of Manchester City currently. The ‘relaxation’ of these rules as I mentioned earlier, simply means that they are permitted to show a loss only for this particular year, and the figure is likely to be insignificant. Hence it does not benefit us as much as everyone anticipated. 

Chelsea also owes other clubs 116 million pounds in transfer fees in 2020 and are yet to receive 124 million through the course of this year. Hence, there is not much difference in this field. 

Anyone who believes that our club is now self-sufficient and free from Roman Abramovic’s contribution is wildly mistaken and incognizant. The large loss figure, along with the negative balance of cash flow saw our Israeli owner inject another 266 million pounds as non-repayable debt, taking the total figure to 1.4 billion pounds since 2004. This clearly indicates his desire to continue as the owner of the Chelsea Football Club, unlike what the newspapers and rumored outlets seem to publish. 

So can Chelsea ruin the market? 

This brings us to the ultimate question- can we really splash the cash as we once did? And the answer is yes- but to an extent. Our massive bump in revenue in the year 2020, along with the sale of certain deadwood players could provide us with a big kitty, however, we must be able to breakeven the 97 million pounds loss which we recorded in 2019 over this year and the next to avoid an investigation. Increased wage expenses (in the case of Hudson-Odoi and probably Tammy Abraham) could also deplete the funds available for transfers. Hence, the best we can hope for at this point is bargain signings such as Ziyech and (hopefully) Telles, along with some smart loan signings such as Coutinho and Jovic, along with one star-signing (which is hopefully the promising youngster at Borussia Dortmund).

Written by - Ameya
Twitter - @LampardsLegacy

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