In a revealing interview with Ferran Soriano in the Telegraph about the investment in New York City and the future of Manchester City, he claimed that "this project [NY City] has nothing to do with FFP". That may be true, that the investment is not designed to help with Financial Fair Play (FFP), but it surely has FFP implications for Manchester City.
The first and most obvious implication is how would the initial investment in the new franchise be accounted for? And will this spending be counted when City are assessed for FFP? Initial reports suggest that the fee to buy the franchise is $100 million, and a stadium will be built at a cost of of $340 million. Combined with the inevitable start-up costs this means a total investment in the region of $500 million looks likely. While this will be shared with the partners in this, the New York Yankees, and there may be borrowing against the stadium to finance its construction, it is inevitable that this will mean Manchester City spending a considerable amount of money in the short term.
So from an FFP point of view this looks like it should make it harder for Manchester City to pass. Under Financial Fair Play, clubs losses are limited to €45 million in the initial monitoring period so additional investment such as this, which is unlikely to see any return for a few years, should make it harder to pass. But the regulations are not straightforward and contain rules allowing the exclusion of certain types of expenditure from the FFP calculations.
One of the exclusions covers investment in infrastructure. This is designed to allow investment in new stadiums, training facilities etc. At face value it looks like investment in a new football team and stadium could be discounted from FFP under this exclusion. However, I'm sure that when the regulations were written, the intention was to exclude investment in the teams own stadium and training facilities. Additionally the new team is outside of UEFA, who are behind the regulations. This means this may well fall into a grey area within the regulations. It's likely it will be excluded (as I'm sure City will have had lawyers and accountants checking this) but this isn't certain.
Once the initial investment has been accounted for, there is the ongoing implications due to the day-to-day operations of both clubs. Firstly any profits from the new team should be able to be counted as they are from a football related activity. Secondly there is a great deal of scope for mutually beneficial commercial cooperation between all three parties in this (Man City, NY City and NY Yankees). For example, I would not be surprised to see all three selling each others merchandise. These should all have a positive impact by providing additional revenue, assuming NY City are financially successful.
There is also much scope for cooperation in player transfers, loans etc. This is unlikely to be a blatant mis-use of the system. For example, we won't see NY City buying Cristiano Ronaldo for £100 million then selling him to Manchester City for £1. The MLS single entity structure, and the involvement of the Yankees, mean this will not be possible. While the majority of the benefits are outside the scope of this blog, there could be benefits financially from the cooperation, one example being Man City having somewhere to send players out on loan easily (thereby reducing the wage bill). But this impact will be small and I'm sure UEFA will check any transfer fee's between the two clubs for 'fair value'.
It's the role of the NY Yankees that makes me think this won't have a major impact on FFP. There will be a temptation for some to think Man City could play financial games, shifting revenue and costs between the two in a similar way to what we have seen from other companies. But this would mean the Yankees losing out which should mean it won't happen. So as long as the initial investment can be excluded from FFP, it looks like this deal will only have a small positive effect as it will help increase revenues from the commercial side of the football club.
No comments:
Post a Comment