The Union of European Football Association Control on Football Club Transfer Fees and Wages - Term Paper Example

UEFA Control on Football Club Transfer Fees and Wages The Union of European Football Association, formed in 1954, and abbreviated using its acronym UEFA, literally runs football affairs across the entire European continent. Based in Switzerland, it boasts of 53 member states with its responsibility involving running club and national tournaments, controlling the tokens and prize money awarded, and regulating media rights to these tournaments. Controlling how football clubs spend money and dish out their spoils remains the sole responsibility of UEFA. This is because there is a need to create a sense of fair play between the different football clubs who could have varied financial muscle. Without a regulatory body looking into the spending habits on transfer fees and wages, most of the relatively small clubs would find it difficult to compete with the big boys. The financially well off clubs would spend lots of money to sign world class players and offer them fat pay checks (Conn 2010, p.32). Regulating how clubs spend their money in buying and paying players can only be done through wage caps. A wage cap defines an agreement that puts a lid on the amount of money that any sporting organization or club can use on paying players. A wage cap could either be per player limit or an entire team limit, or both. UEFA s response to this was to formulate the UEFA Financial Fair Play Regulation in 2009. This process got undertaken by the Financial Control Panel wing of the governing entity (Conn 2010, p.32). Over the last decade, football clubs in Europe have picked up reckless spendthrift tendencies while utterly casting a blind eye to the financial logic by spending lots of cash for overnight success. This school of thought from the football club board members, to extend enormous transfer kitties to club managers thereby allowing them to offer extortionist transfer fees and wages, has led to many clubs getting into debt. UEFA, through the UEFA Financial Fair Play Regulation, should stipulate the amount of money ought to be spent by clubs so as to protect clubs from biting off more than they can chew. This will prevent many professional football clubs from spending much more than the income, hence avoiding getting into financial problems. Without these regulations, more teams are likely to overspend in pursuit of short term winning, rather than giving priority to long term stability. This common business practice of poor risk benefits analysis risks the fortunes of the club and weakens the reputation of the whole league. With teams frequently switching markets or regularly going bankrupt, negative precedence of instability may cloud the sport. This leads to loss of interest of fans, who may opt to switch their allegiance to a stable team. Football clubs should embrace realism and stop spending money which they did not make. This will enable football clubs grow and ensure that the glory of the beautiful game as we know does not get lost. UEFA should impose spending cap laws, and spell out harsh penalties to the football clubs that do not abide by these laws. Some of the harsh penalties proposed by football experts include transfer bans, fines, withholding of prize money, and expulsion from the UEFA Champions League and UEFA cup (Rose 2012, p.9). These sentiments got echoed by UEFA president who stated that more than half the football clubs in Europe keep losing money. He explained that capping the spending of cubs is in the best interest of the club. Shocking research by UEFA has shown drastic increase in the losses accrued by European football clubs. Reports show that losses in 2010 peaked at €1.6 billion, with over 65% of the club leagues in Europe recording massive losses. This has been the case despite the fact that revenues of professional European football clubs have increased by an average of 9.1% annually, over the past six years. The UEFA president emphasized that these rules are not meant to hurt the football clubs, but in the contrary, they are meant to ensure their continued existence in the market (Smith 2012, p.25). Limiting the amount of money spent on transfers and players’ wages also prevents wealthy football team from playing big brother and signing the best players. This reduces the chances of wealthy clubs perpetuating unsporting behavior such as limiting the ability of rival clubs to signing skilled players, and ensuring victory through the use of their superior economic might. Through taming spending habits of football clubs, each team has almost equal economic ability to attract top quality players. This will lead to equal distribution of playing talent in the football clubs, which in turn increases economic benefits to both the team and league (Bensch 2012, p.2). There is a need to create and maintain a level playing field through controlling the amounts of money spent by football clubs. This will prevent football clubs with wealthy owners from making hefty cash gifts to the clubs, thereby increasing liquidity levels, and gaining undue advantage over relatively poor clubs who run on a sustainable business model. The outcome is increased competitiveness within their revenue boundaries (Parrish 2011, p.57). A certain level of parity should be ensured to ensure that no game has an outright winner from the get go, while at the same time, making football exciting for the fans to watch. Allowing the financially strong clubs to accumulate talent affects the quality of football. Think of it this way. If dominant teams consistently win tournaments and leagues in European football, the attractive nature of the sport and the excitement that comes with competition gets lost. Without protecting the smaller teams from utter dominion by the bigger teams, football in Europe will become highly predictable. Competitiveness is enhanced when teams get perceived to be evenly matched. This attracts both on the ground and television audiences, leading to more revenue generation through ticket sales and television broadcast rights. Disparities in football leagues across Europe weaken the weaker teams’ financial viability, since patrons may abandon these teams as a result of constant losing streaks (Keys 2012, p.23). Careful thinking on the issue of increased spending on wages and transfer fees has revealed that this trend could lead to the demise of football clubs, which is the exact opposite of the intended outcome. If the clubs become over dependent on their wealthy owners, there is a large possibility that these clubs would dwindle into obscurity when the owners either lose their fortunes or leave. Limiting amounts of money spent will reduce over dependence on rich club owners to fund expensive club projects (Holland 2012, p.6). This occurred when Portsmouth wealthy owner, Sacha Gaydamak, pulled out form the club after going through financial misfortunes. West Ham, which was once a highly successful club in the European football, fell into oblivion after the billionaire owner; Bjorgolfur Gudmundsson exited when his money ran out. It is pertinent to protect clubs from overdependence on wealthy owner by encouraging the use of revenues generated by the club and living within the club’s means (Taylor 2012, p.2). UEFA should place wage and transfer fee caps so as to protect European Leagues and tournaments against high inflation rates due to increased liquidity. When clubs spend heftily to acquire and maintain players, the bar gets set too high for the rest of teams. This leads to inflation since other players would begin demanding high salaries from their clubs. In order to cope with the inflation levels, football clubs will seek to increase their revenue levels. The only logical way to do this would be to increase ticket prices so as to boost ticket sales. This is already happening in England where teams such as Liverpool, Manchester United and more recently, Arsenal have announced increasing prices tickets at Anfield, Old Trafford and the Emirates respectively (Atwal 2012, p.7). Inflation in Europe has been a thorn in the flesh for UEFA. English football, as the Guardian revealed suffered the most as a result of inflation. English Premier League Clubs made a whooping £2.1 billion in 2011, but averagely spent over 68% on wages. Despite the revenues collected by these clubs, they still made £484 million in losses. This trend can be prevented through controlling how much money gets poured into football clubs in Europe (Conn 2012, p.32). Requiring clubs in Europe to balance their incomes with costs will help to improve the quality football. Given that wages and transfer fees represent the bulk of the cost element, many European clubs will be force d to keep their wage bill in check. Clubs will achieve this through either reducing the quantity of players under contract or lowering salary costs. A reduction in squad size will also limit the occurrence of player hoarding, hence making talents affordable and available. As a result, clubs get left with substantial amounts of money, which would then be injected into other programmes such as developing young talents in youth academies and improving stadia facilities. Investing in youthful players and building talent within the clubs will lead to improving the quality of football in Europe, rather than engaging in the quick fix tendency of buying expensive players (Carroll 2012, p.3). It is a common trend for football clubs to spend money meant for settling urgent financial obligations in signing new players during transfer windows. Limiting the amount of spending will help in prioritizing needs of European clubs. This will promote thoughtful spending, where financial obligations that threaten the existence of the club get addressed in time (Smith 2012, p.25). Through embracing caps on spending habits of clubs, UEFA will ensure the securing of the lengthy viability of club football in Europe. A number of football clubs wither off as fast as they come up due to funds pumped into them. When these funds get withdrawn for one reason or another, these clubs suffer a great deal and some get run down due to debts and poor management. Spending caps should be welcomed so as to promote football club longevity. This will serve to bar the enormous European clubs from controlling football through the use of financial power, and also protect the tiny clubs from involvement in ambitious efforts to match their opponents, a move that has more often than not proved futile (Taylor 2012, p.2). On the flip side, some football experts argue that capping the amounts of money that clubs can spend on players will have negative effects on the sport. They are of the opinion that if UEFA implements rules allowing clubs to spend a percentage of their earnings, status quo will be maintained. The big clubs, who rack in considerable revenues, would maintain influence and prevent the growth of the relatively small clubs. In response, it is crucial to realize that UEFA objective is not to attain financial equality among European clubs, but is to attain a status of financial stability where all clubs can be sustainable and profits out of their revenue (Matt 2012, p.5). The FFP rules that seek to cap the spending habits of European clubs are universal. They are not dynamic enough to address the needs of the different countries in Europe, all of which have varied tax regimes. Putting an overall limit on wages is unfair. A football player who wants to earn £100,000 in the UK, for example, has to be paid a minimum of £200,000. His Spanish counterpart, on the other hand, needs to be paid a minimum of £130,000, to earn £100,000 in a week. This means that the expenditure of football teams in the UK exceeds that of Spanish clubs. Creating a general limit across the board will disadvantage the players and clubs in countries with high tax rates. The caps placed should be specific to each country in order to promote fairness in the sport (Parrish 2011, p.77). Expecting clubs to spend from their generated income only will also have negative effects. Apart from limiting the growth curve of these clubs, there will be a considerable increase in ticket prices in European football. This will be the case for clubs who have enormous ambitions, but lack the finances to back them up. The outcome of this is stunted growth of football clubs, or in extreme cases, no growth at all (Holland 2012, p.6). UEFA has not looked into the loopholes that exist in the whole expenditure cap. They want clubs to spend money that they earned as revenue and reduce on borrowing. This means that the larger clubs like Arsenal, Barcelona, Manchester United and Real Madrid, who have enormous sponsorship deals from gigantic corporations, will have undue advantage over the tiny clubs. These huge clubs also benefit a lot from massive profits made from the sale of oversees rights. The disparities among European football clubs will not be effectively addressed if these loopholes are not looked into (Conn 2012, p.76). Before placing caps on European club expenditure on wages and transfer fees, UEFA should look into the cons and pros involved. There is a need to put a stop to unwarranted and destructive spending by European football clubs, so as to protect the beautiful game that is football. Effective policies governing club finances will not only create an equal playing field for European football clubs, but will also bring the competitive edge of the sport back. Bibliography Atwal, S., 2012. May 25. Disrupting sport with big data. The Kernel, p. 7. Bensch, B., 2012. April 25. Englands Football League to Adopt Financial Fair Play Rules. Retrieved May 25, 2012, from Bloomberg: www.bloomberg.com/news Carroll, A. B., 2012. April 23. High level debate on the UEFA Financial Fair Play rules at the College of Europe’s annual football tournament. Retrieved May 25, 2012, from Hk Strategies: www.hkstrategies.be Conn, D., 2012. January 25. Uefas fair play rules will help clubs reign in spending. The Guardian, p. 32. Great Britain: Parliament: House of Commons: Culture, M. A., 2011. Football governance: Seventh report of session 2010-12, Vol. 2. London: The Stationery Office. Holland, P., 2012. April 18. Ambition football. Retrieved May 25, 2012, from Ambitionfootball.com: www.ambitionfootball.com/financial-fair-play-explained Keys, A., 2012. April 12. Financial Fair Play: The only way. The Gooner, p. 23. Matt, R., 2012. May 13. The Football League to widen fair play rules. Retrieved May 25, 2012, from Football Trade Directory: www.footballtradedirectory.com Parrish, R., 2011. Sports, Law and Policy in the European Union. Manchester:Manchester University Press, p.47 Rose, M., 2012. May 2. Financial Fair Play. Football First, p. 9. Smith, D., 2012. Can Football Kick Its Addiction To Debt? Economy Watch, p. 25. Taylor, D., 2012. May 20. The Football League FFP Rules. Fc business Blog, p. 2. Read More