Summer 2017 and Wages

[Lallana's Left Peg]

FFP has greatly affected how clubs build their squads now. There are limits on how much you can increase your wage bill each season no matter how much spare cash you have in the bank. These limits have in part impacted how Saints have spent their money the last few seasons. There are many scenarios based on a clubs situation but a summary of Saints' case is that we can only increase our wage bill by £4m (80k a week) a season plus any increase in commercial revenue.

 

There are a few weeks left of the transfer window but lets assume at the start of this month we had the maximum wage bill possible that we are allowed (which is highly likely). This means in the summer we only have the following money that can be allocated to wages for new players or new contracts:

 

1. Players freeing up wages who leave the club

2. £4m allowed as per the rules

3. Increase in commercial revenue

 

It's worth calling this out for Saints because I see this summer as a big opportunity for the club. Every club will see an increase in TV money but TV money does NOT count towards commercial income which can be used against wages. Therefore whilst lots of clubs will have spare money for transfer fees, the amount they will have to spend on wages will greatly differ. My own interpretation of Saints' position:

 

1. Players freeing up wages who leave the club

I predict the following leaving the club (and wages are pure guesses):

Martin Stekelenburg (£40k a week)

Stephen Caulker (£30k a week)

Gaston Ramirez (£60k a week)

 

We have the added bonus that all three will leave the club with no issues for replacements - the first two were loan cover and the third never plays. So that's an estimated £130k a week back in the kitty which is a good start.

 

2. £4m allowed as per the rules

Any club that does not take advantage of this is stupid. The new TV money will more than cover the extra cost and this must be used. That's another £80k a week in the kitty.

 

3. Increase in commercial revenue

This is where Saints could have a real advantage. Our current commercial income is so bad (despite the recent improvements post-Cortese) that anything over and above we get now (even just to get to average for a club of our size in this league) can be spent on wages for new players under the rules. We know that this summer we will be getting a new shirt sponsor, and a new kit manufacturer. The average sponsorship deal is worth £5m a season. Our current one pays £1m. Assuming we get an average deal that is an extra £4m in revenue and another 80k a week towards wages. Onto kit manufactuer - it's hard to pitch what an average deal would be but back in 2014 Underarmour did a deal with Spurs for 5 years for £50m. We are nowhere near as big as Spurs but lets say we signed a deal for £5m a year there. Not sure how much we get from Adidas today but lets be generous and say we get £2m. The new deal is guessed at giving us £3m more a season (60k a week for wages).

 

Overall these rough estimates (and you can argue against the reasoning behind any of them which is fair enough) give us an estimated £350k a week that can be spent on wages.

 

Some of that figure must be amended for wage increases for players already at the club. I suspect a decent amount of that could already be accounted for within contracts for young players and recent signings. Lets say another £80k a week of that has gone. That still leaves £270k a week within the FFP rules for players purchased by a club with no transfer debt and a massive increase in TV money. That gives us massive potential to attract some good players to improve our team and that is why I am excited about this summer.

 

Other clubs will be at it of course - any club that doesn't already have a wage bill of £60m has extra space and the promoted clubs will have unbelievable spending power (but will have a big quality gap in their current team to one they need to have at the start of the season) but as a Saints fan this is a huge summer where we can spend big without compromising the security of the club and it will be interesting to see what we choose to do. From my perspective - if we talk about ambition then this is the summer to prove it as we won't have many financial handicaps. And that is before any other outgoings.

[Fan The Flames]

Good work. But you have forgotten the big money from Mary's Meals that has appeared on the matchday bench clothes.

[Saint Garrett]

Hasn't this FFP thing been massively relaxed this season....?

[Lallana's Left Peg]

Hasn't this FFP thing been massively relaxed this season....?

 

I think it has for clubs in Europe but not for the Premier League. They are two different sets of FFP.

[Saint Charlie]

Luckily we have a huge potential to increase our relatively awful commercial revenue which lags behind similar and smaller clubs.

 

Over to you Ralph...

[stevegrant]

It also all changes completely this summer with the new TV deal. That £4m annual increase limit won't apply because that was based on the existing broadcasting deal, so every club will be increasing their TV money by around 70%.

[Lallana's Left Peg]

It also all changes completely this summer with the new TV deal. That £4m annual increase limit won't apply because that was based on the existing broadcasting deal, so every club will be increasing their TV money by around 70%.

 

So if that £4m limit is raised to £8m (for example), that would apply to every club to in the league with a wage bill over a certain amount, but we could still make decent gains in wage budget through our new commercial deals and getting rid of those three players highlighted?

[diggers]

Good work. But you have forgotten the big money from Mary's Meals that has appeared on the matchday bench clothes.

I believe Mary's Meals is a charity supplying meals to kids in Africa - not quite Unicef but I assume it's a charitable thing?

[stevegrant]

So if that £4m limit is raised to £8m (for example)' date=' that would apply to every club to in the league with a wage bill over a certain amount, but we could still make decent gains in wage budget through our new commercial deals and getting rid of those three players highlighted?[/quote']

No, I don't think any restriction would be that low. QPR got £65m last season in last place, next season's bottom team will get more than £100m, so every team's financial strength is increased by at least £35m.

 

They might even draw up a completely new set of thresholds, so the "base" wage bill where the rule kicks in rises from the current £52m, perhaps in line with the increase in the broadcasting pot. If that went up 70%, that would make the new base £88m, which I think we'd still be under, so in theory could increase our wage bill in the first year by as much as we wanted.

[VectisSaint]

I assume 2017 is a typo, you are talking about this summer, right?

[Lallana's Left Peg]

No, I don't think any restriction would be that low. QPR got £65m last season in last place, next season's bottom team will get more than £100m, so every team's financial strength is increased by at least £35m.

 

They might even draw up a completely new set of thresholds, so the "base" wage bill where the rule kicks in rises from the current £52m, perhaps in line with the increase in the broadcasting pot. If that went up 70%, that would make the new base £88m, which I think we'd still be under, so in theory could increase our wage bill in the first year by as much as we wanted.

 

So basically it is highly likely that the summer we make ground in commercial income that any advantage we may otherwise get from that will be dwarfed by the new TV deal which will cause a change in FFP budgets

 

I assume 2017 is a typo, you are talking about this summer, right?

 

Yep

[Noodles34]

id say **** FFP and take our chances in court afterwards, because going on what happens to other clubs, we would get a £100K fine or something like that. Real and Atletico get fined 900,000 Euros (I know its not FFP related), but really, thats like a parking ticket to the likes of me and you!

 

But then, its not like Ralph and Co are going to go 'hell for leather' on wages anyway, so i guess its pretty irrelevant anyway.

[spyinthesky]

Interesting debate

 

Has any English club been fined over FFP?

 

All sorts of sanctions were threatened on QPR and more recently Bournemouth

 

Don't believe any real sanctions have been applied but could be wrong

[Saint Garrett]

id say **** FFP and take our chances in court afterwards, because going on what happens to other clubs, we would get a £100K fine or something like that. Real and Atletico get fined 900,000 Euros (I know its not FFP related), but really, thats like a parking ticket to the likes of me and you!

 

But then, its not like Ralph and Co are going to go 'hell for leather' on wages anyway, so i guess its pretty irrelevant anyway.

 

TBF, They also got a transfer ban for the next two windows...

 

As for English prem clubs being punished, I think the only one was City and they had their quota of players reduced in the champions league....

[stevegrant]

Interesting debate

 

Has any English club been fined over FFP?

 

All sorts of sanctions were threatened on QPR and more recently Bournemouth

 

Don't believe any real sanctions have been applied but could be wrong

Loads of Football League clubs have had transfer embargoes imposed, although they've been with the caveat that they can sign players on what the league determines "a reasonable salary" if their squad size drops below a certain level, but they're not allowed to pay a transfer fee.

 

Man City were fined around £50m by UEFA and had their Champions League squad size reduced last season.

 

Nobody has failed the Premier League's FFP criteria, so we've no idea what sanctions would be imposed there.

[Noodles34]

TBF, They also got a transfer ban for the next two windows...

 

As for English prem clubs being punished, I think the only one was City and they had their quota of players reduced in the champions league....

 

Which they both will appeal and then get the chance to stock up in the next two windows before the ban.

[Redslo]

FFP has greatly affected how clubs build their squads now. There are limits on how much you can increase your wage bill each season no matter how much spare cash you have in the bank. These limits have in part impacted how Saints have spent their money the last few seasons. There are many scenarios based on a clubs situation but a summary of Saints' case is that we can only increase our wage bill by £4m (80k a week) a season plus any increase in commercial revenue.

 

There are a few weeks left of the transfer window but lets assume at the start of this month we had the maximum wage bill possible that we are allowed (which is highly likely). This means in the summer we only have the following money that can be allocated to wages for new players or new contracts:

 

1. Players freeing up wages who leave the club

2. £4m allowed as per the rules

3. Increase in commercial revenue

 

It's worth calling this out for Saints because I see this summer as a big opportunity for the club. Every club will see an increase in TV money but TV money does NOT count towards commercial income which can be used against wages. Therefore whilst lots of clubs will have spare money for transfer fees, the amount they will have to spend on wages will greatly differ. My own interpretation of Saints' position:

 

1. Players freeing up wages who leave the club

I predict the following leaving the club (and wages are pure guesses):

Martin Stekelenburg (£40k a week)

Stephen Caulker (£30k a week)

Gaston Ramirez (£60k a week)

 

We have the added bonus that all three will leave the club with no issues for replacements - the first two were loan cover and the third never plays. So that's an estimated £130k a week back in the kitty which is a good start.

 

2. £4m allowed as per the rules

Any club that does not take advantage of this is stupid. The new TV money will more than cover the extra cost and this must be used. That's another £80k a week in the kitty.

 

3. Increase in commercial revenue

This is where Saints could have a real advantage. Our current commercial income is so bad (despite the recent improvements post-Cortese) that anything over and above we get now (even just to get to average for a club of our size in this league) can be spent on wages for new players under the rules. We know that this summer we will be getting a new shirt sponsor, and a new kit manufacturer. The average sponsorship deal is worth £5m a season. Our current one pays £1m. Assuming we get an average deal that is an extra £4m in revenue and another 80k a week towards wages. Onto kit manufactuer - it's hard to pitch what an average deal would be but back in 2014 Underarmour did a deal with Spurs for 5 years for £50m. We are nowhere near as big as Spurs but lets say we signed a deal for £5m a year there. Not sure how much we get from Adidas today but lets be generous and say we get £2m. The new deal is guessed at giving us £3m more a season (60k a week for wages).

 

Overall these rough estimates (and you can argue against the reasoning behind any of them which is fair enough) give us an estimated £350k a week that can be spent on wages.

 

Some of that figure must be amended for wage increases for players already at the club. I suspect a decent amount of that could already be accounted for within contracts for young players and recent signings. Lets say another £80k a week of that has gone. That still leaves £270k a week within the FFP rules for players purchased by a club with no transfer debt and a massive increase in TV money. That gives us massive potential to attract some good players to improve our team and that is why I am excited about this summer.

 

Other clubs will be at it of course - any club that doesn't already have a wage bill of £60m has extra space and the promoted clubs will have unbelievable spending power (but will have a big quality gap in their current team to one they need to have at the start of the season) but as a Saints fan this is a huge summer where we can spend big without compromising the security of the club and it will be interesting to see what we choose to do. From my perspective - if we talk about ambition then this is the summer to prove it as we won't have many financial handicaps. And that is before any other outgoings.

 

Nothing you have said here is exactly wrong, but it is incomplete.

 

First, everything I can find says Osvaldo was released and paid off on July 1, 2015. If true, his salary counts against this year and, therefore, would also be freed up for next year.

 

Second, net profits from transfer activities can also be used to increase salary. Given our trading profits from the last couple of years--and the likely profit from this year--we have not really been limited by the salary cap plus 4 million limit upon which you are focused. We have been limited by the apparent intent of our owner to run the team on a sustainable (which I think means break even) basis. If this is correct, nothing else really matters. We will be at a significant disadvantage compared to owners willing to kick in money or willing to move to a bigger and more lucrative stadium. In other words, we are going to be losing ground (relatively speaking) on Tottenham, Chelsea, West Ham, Crystal Palace, Liverpool, and both Manchester United and City.

 

Third, any club that is hoping to make Europe needs to meet the UEFA FFP rules. Any club that is merely competing for survival or midtable status need only meet the much less stringent Premier League rules. Thus, we are likely to be in a position where we will routinely be outspent by clubs who are not currently as good as us.

 

Fourth, growing our commercial income will help but not a lot. Certainly not as much as West Ham's new stadium or any likely influx of cash from Crystal Palace's new investor.

 

If Southampton FC is to continue you compete successfully at any particular level in the Premier League, it will have to be by being better at scouting, recruitment, coaching, and playing that the other clubs trying to compete at the same level. There is no reason we should not be able to out compete the relegation candidates this way, but mid-table is going to be tough from now on.

 

I discussed related issues in a couple of my blog posts last summer. Nothing significant has changed since then except we have had a suboptimal season:

 

http://redsloscf.blogspot.com/2015/05/shattering-glass-ceiling-part-five.html

 

http://redsloscf.blogspot.com/2015/07/the-new-financial-fair-play-rules.html

 

Hasn't this FFP thing been massively relaxed this season....?

 

I think it has for clubs in Europe but not for the Premier League. They are two different sets of FFP.

 

No, it has not. There was a lot of talk about the relaxation of European FFP, but when you look at the rules as published--not so much. It is possible that there is greater relaxation in the rules that will come out when they are interpreted for eligibility in next year's European competition but those changes are likely to all be to the detriment of English clubs. I discuss this in the second blog post listed above.

 

It also all changes completely this summer with the new TV deal. That £4m annual increase limit won't apply because that was based on the existing broadcasting deal, so every club will be increasing their TV money by around 70%.

 

We do not know this yet. As far as I can determine, the Premier League has not yet decided on the size of the new automatically permitted salary cap increase. However, it is not going to be massive. Very likely they will do something like they did for the last TV contract and increase it by X pounds each of the three seasons. Since the increase in the TV money was larger, the increase might be more than 4 million pounds but we do not know yet. One thing that is certain, however, is that the owners of the Premier League will be happy to make a rule that stops them from giving all their new money to the players. The salary cap will certainly not jump 70% in one year.

 

No, I don't think any restriction would be that low. QPR got £65m last season in last place, next season's bottom team will get more than £100m, so every team's financial strength is increased by at least £35m.

 

They might even draw up a completely new set of thresholds, so the "base" wage bill where the rule kicks in rises from the current £52m, perhaps in line with the increase in the broadcasting pot. If that went up 70%, that would make the new base £88m, which I think we'd still be under, so in theory could increase our wage bill in the first year by as much as we wanted.

 

The current base salary total is 56 million a year. There is no way the increase from the new TV contract is going to be put entirely in the first year. If the total increase over the three years is 2 billion that works out to about 30 million per club per year (allowing for the fact that not all money will go directly to EPL clubs--parachute payments, for example). Not all of that is going to be allocated to salary and, as I stated, I think the increases will be spread over the full three years so maybe an increase of 8 million a year would be right--so 64 million next year and then 72 and 80.

 

But again it doesn't really matter for Southampton FC because the limit that applies to us is that imposed by our owner's willingness to invest her own money.

Edited 16 January, 2016 by Redslo
to put all my responses in one big post