Do football wages simply win trophies?

Manchester City Owner Sheikh MansourWe are often told that football is a game between two teams, that there are no easy matches and that each side plays every game to win – pass the cliché  sick-bucket please. Football is now more than just a global sport, it is also the world’s largest consumer entertainment revenue and this shift has increased not only the demands on each individual club, but the pressures of  achieving success. There is no cast-iron route to glory, however, there is an irrefutable correlation between the sides that pay the highest wages and success out on the pitch and this is just as key as anything else in the modern game.

Total wages across the Premier League rose by 14% last season according to Deloitte which is the equivalent to more than 80% of the £241m increase in club revenues for the entire season, to give a final salary bill of £1.6bn across all 20 teams. Gambling on wages isn’t always a sure-fire way to success, but it sure helps. Manchester United spent 46% of their revenue last season on wages, while champions Manchester City in comparison spent 114%.

In 2009-10, Chelsea spent £174m on wages over the course of the season, a truly staggering figure and the highest in the top flight at the time. as they went on to clinch the title. Last season, Chelsea again had the highest wage bill in the league with £191m and they went on to win both the FA Cup and the Champions League.

Dan Jones, author of the Annual Review of Football Finance for Deloitte stated this upon completing his report: “The Premier League’s key wages to revenue ration, which had stood at around 60% for most of the 2000s, has risen sharply in recent seasons to exceed 70% for the first time.”

The Financial Fair Play rules, the brainchild of UEFA President Michel Platini, are a direct consequence of the amount of money that clubs spend on wages, as they look to combat this spiralling problem. The current climate is simply unsustainable, with some clubs spending upwards of 70% of their revenue on players’ wages.

It reduces a level playing field as richer clubs will always offer more to a player they desire, certainly more so than their competitors can afford, hence distorting the competition, while simultaneously creating financial instability. Spending more than you earn is not a viable business model in any other industry, but it’s common practice in football. This means that in order to bridge the gap with clubs that can afford to spend big, such as Manchester City, others will overstretch themselves in an attempt to compete.

Manchester City are an extreme case in point. Last year they reported the single greatest loss in English football history of £197m, trumping Chelsea’s previous record of £141m recorded back in 2004-5 in the infancy of the Roman Abramovich era as the club sought to make its mark. It’s rare for clubs to lose this much money, but it was a necessary by-product of catching up with the likes of Manchester United, Chelsea and Arsenal in the league.

Their wage bill has tripled since 2008 and has gone from £54m to £173m. They spent 68% of their revenue on wages back in 2008, which is a figure about par with the rest of the league, but it now stands at 114%. They are the only Premier League club operating at the moment whose wage bill exceeds their turnover, by the sizeable sum of £21m, yet they’re the ones who go back to their fans with the league trophy in tow. A level playing field this is not, with Manchester United spending 46% of revenue on wages, Arsenal 55% and Chelsea 81% and Liverpool’s rose sharply from 62% to 70% in just one season. None of those clubs can hardly be considered paupers, they are global businesses in their own right, so pleading poverty would seem a tad fatuous.

With the Financial Fair Play (FFP) rules coming into effect in 2013-4, Manchester City face a huge task in curbing their spending and meeting the requirements in time, despite the huge increases that they are making in turnover, otherwise access to future European competition may be cut off.

Chief of Football Operations at the club, Brian Marwood stated as much last summer: “We’ve got a huge amount of work ahead of us to make sure we are sustainable.” Meanwhile Platini obviously has them in his sights saying: “Manchester City can spend £300 million if they want to, but if they are not breaking-even in three years, they cannot play in European competition.”

Luckily for City, the £197m loss isn’t taken into account as the FFP rules only look at the two years before the rules come into effect, but they have to start breaking even and quickly. Getting rid of fringe players such as Emmanuel Adebayor, Roque Santa Cruz, Wayne Bridge and Kolo Toure off the wage bill should reduce it by (quick estimation) roughly over £20m alone, which is a step in the right direction. It’s an uphill task but not an impossible one, with the club’s wealthy owners also able to take on some of the loses for the first few years – as much as £39m per yer for the first two years to be precise, before it reduces from then on.

In Spain, Barcelona and Real Madrid are the two biggest clubs in La Liga and the two best footballing sides in the world. Barcelona’s average yearly pay packet is £5.2m while at Real Madrid it stands at £4.7m – even Manchester City trail in third with £4.4m. In Germany, the top three spending clubs on wages are Bayern Munich with the average at £3.5m per player per year, while Schalke came in second with £2.5m and Borussia Dortmund were the third highest with £1.8m. It will come as no surprise to you that while not in the exact same order, those three clubs occupied the top three spots in the final table Bundesliga last season. While in Scotland, Rangers and Celtic, before the former’s financial collapse this summer, raked in 67% of the SPL’s revenue last term – this hegemonic duopoly have shared the last 26 league titles between them and that is no coincidence.

In Italy, Juventus clinched the Scudetto in Serie A, spending £2.8m per year on average per player, the third highest in the league while AC Milan spent the most £3.6m per year on average and finished second. Roma and Inter completed the top four in monetary terms but were hindered by their underperformance on the pitch – with the resources at their disposal, the likes of Udinese, Lazio and Napoli face an uphill struggle to beat the battle of the budgets forever, with bigger clubs hovering around their best talent like vultures waiting for a meal.

Of course there will all be exceptions to the rule. Montpellier’s title triumph in France last season ahead of PSG being one, Newcastle’s splendid performance last season on their way to finishing fifth in the Premier League,  and the minor miracle that David Moyes continues to perform at Everton to name but a few. However, these are merely examples of overachievement in the face of financial adversity –  none are sustainable in the long-term, which is part of what makes the achievement in the first place so special.

Conversely, the opposite is also true if clubs fail to meet expectations when compared to how much they are investing in their playing staff. Liverpool spent on average of £3.1m per player for their yearly salary last season – the fifth highest in the league and tenth highest in Europe – but due to their underperformance on the pitch, they finished eighth in the league and manager Kenny Dalglish lost his job – a perfect example of when investment doesn’t match results and what operating with a Champions League budget can do without the revenue of Champions League football. In Manchester City’s case, though, the expense was clearly worth it.

It may sound like an obvious point to make, but wage budgets dictate the quality of a team and therefore the success it has out on the pitch. It’s no coincidence that the most successful teams in Europe at the moment and in their respective leagues over the past few years have been the ones that spend the most on wages. To adjust an old adage – money can’t buy you happiness, but it can certainly buy you success.

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