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Friday, January 27, 2006

The bottom line

The financial figures released today by Chelsea FC PLC underline the unprecedented financial power that has catapulted Chelsea to the top of the Premiership.

The announcement of a £140 million pre-tax loss for the 2004-05 season explains why some have called for serious consideration of a soft salary cap to mitigate the excesses of Abramovich's football empire in London.

This massive deficit comes on top of the £88 million pre-tax losses for the 2003-04 season. So, in all, the bottom line of securing the Premiership title for Abramovich's football club is a deficit of approximately £228 million.

Chelsea's players fully deserve their current success. Jose Mourniho deserves quality recognition for his management of the team. And Claudio Ranieri deserves greater-than-at-present recognition for building a nucleus of an excellent team for Mourinho to inherit.

But the announcement of such staggering deficits hopefully becomes the exception and not the rule - and not just for Chelsea, but for all football clubs - in future seasons. This is because fair competition is not achieved by allowing any club to excessively spend at will with no real reference to their actual income.


Blogger RedsMan said...

It does make for surprising reading, pre-tax loss in the first place and then the previous year was higher than the year before then, by an increase of more than 50%. But I don't think Chelsea will be too bothered, they have their players, they can recuperate the loss through their achievements, no?


1/27/2006 6:33 pm

Blogger T said...

Yes Reds, I'm sure its fair to say that Chelsea are not too bothered. But surely the question too ask is not how Chelsea feel about it, but how do the 19 other Premiership clubs feel about it... plus their fans who must accept the reality of it. Speaking from a fan's POV, the simple answer to this is that we can be surprised at the sheer scale of the deficits and then get on with it because there's not much else you can do.

Re your question: when you consider that the £228 deficit comes after taking account of the last two years revenues for Chelsea which were boosted by reaching the Champs league semis twice and winning the Premiership, it's fair to conclude that it'll take quite some time before the PLC can say they have re-couped their deficits.

1/27/2006 6:57 pm

Blogger RedsMan said...

Oh, I agree. Perhaps figures such as those urge the coach to reach for many heights of achievements, which sounds like a very heavy burden to accomplish. Indeed, as Mourinho stated himself when he first faced the English press, he is the special one, and we will see how much more special he can be.


1/27/2006 9:39 pm

Blogger BlindJak said...

I agree that the financial dominance that Chelsea are currently exercising is unprecedented and bares no relation to our income. However, as you mention, this isn’t really a concern as we are backed by the seemingly limitless pockets of Abramovich.

I think however that it’s funny how the pres and fans are now calling for salary caps etc when financial dominance has been a long running feature of the game, particularly since the inception of the premiership. When Utd broke the UK transfer record on 5 separate occasions there were no calls for financial parity.

Until Roman came along no team were able to compete with Utd on a financial basis. Many tried, Leeds spent and ended up in hock, Chelsea nearly went the same route while ‘Pool and Newcastle also spent heavily with differing degrees of success. And while they didn’t spend as much Arsenal still spent big in comparison to many other clubs.

But Utd swept all before them with their financial might yet there were no calls for caps. As a Chelsea fan it’s hard not to believe that the call has only come from financially strong clubs only after they have seen themselves get out muscled.

In other words the discussion only started after their competitive advantage was negated.

1/30/2006 11:04 am

Blogger T said...

Its a fair point BJ, and let me assure you there is nothing innate in me that picks out Chelsea for discussion of how we can get more of a semblence of a level-playing field. I can only reiterate my admiration for the Chelsea playing and management staff for their consistency and efficiency of performance.

It's the sheer scale of the imbalance that has initiated debate... and the figures released last week certainly prompted me to remember our discussions on the salary cap last month.

My only previous reference point for one-team relative financial dominance is Man Utd. However, although this was not ideal for me as an AFC fan, I saw (correctly or incorrectly... I'm prepared to stand corrected) that it mainly came as a direct result of Man Utd's results on the pitch and was more or less correlative to the income they earned both on and off the field. In this way it I could see it as Man Utd benefitting from the fruits of their own labours- and therefore there was really no way I should dispute their right to spend as they did.

The distinction with Chelsea is that there is no absolutely no relation between their spending and their income. A £228 million deficit over two seasons underlines this point.

Sure Leeds did much the same but it was not on the same scale as Chelsea- plus as you point out it came during a boom-time of the Premiership when many other clubs were similarly big-spending, and therefore did not catch the eye as much as if there was a general recession in football.

So it can definitely be said that Chelsea's sheer scale of financial spending looks even more accentuated because at the time Abramovich came along there was a recession in Premiership football.

So... and concluding my point... my issue isn't with the fact that AFC's competitve advantage has been overtaken... due to the cyclical nature of football you expect it. It's the nature of how it's been overtaken that troubles me- and I say that meaning no disrespect to Chelsea nor you BJ. As I said above, I would be troubled by any team that replicated Abramovich's example.

1/30/2006 9:01 pm

Blogger Abdul said...

I couldnt agree with you more T. What bothers me about the scenario is not that Chelsea can afford to buy the best players - as BJ has highlighted, there have always been clubs who have been able to buy players that most other clubs wouldnt have a prayer of signing. But Chelsea have taken this to another level by spending £24m signing players that they dont need, just so that nobody else can - SWP.

What to do? I dont really know - but I think the debate is an important one.

1/30/2006 9:27 pm

Blogger RedsMan said...

From T, Abdul and BJ, great cooments between which I see little difference to put me elsewhere other than on the fence, so to speak. I side with BJ when he says the salary cap issue wasn't one substantially until Chelsea's spending became a major talking point, though it's spending not on the same scale as any other Premiership club, part of T's comment.

Abdul raised the point of paying £24m for SWP who seems to be the most expensively under-used player, or, as Abdul stated, one whom others were priced out of obtaining. Perhaps SWP made the decision to join Chelsea as a progressive step (there isn't anything to suggest otherwise) rather than financial. I can imagine that to grace Chelsea's bench would mean being of such a value or such talent. Certainly, if it was the former, the equilibrium is swayed as Robben, Duff and Cole, SWP's major rivals for places, were bought for much cheaper than SWP's price. So one must be of talent to be on Chelsea's bench, much less the first team. SWP was bought to be of equal talent to replace the other mentioned players, and this is why I understand why Chelsea bought him. Someone of his talent must be at Chelsea, showing their big ambitions.

With the salary cap, I believe it is just one of those things in football. Chelsea have a financier with a lot of financial backing. It can be said they can potentially buy the best in the world. Perhaps at such an expense that has seen their income dwarf in relation to their outcome.

If you are a side whose players lack that pace, that turn of skill, that ability to jump across goal, then you will struggle against Chelsea, or teams like Chelsea. A salary cap may mean teams like Chelsea will have less players of world beating talent, but I'm not too convinced. The financial aspects of the club are not dealt with by the players, they simply play, to win. If they are kept on that level, then who knows where the team will go? They may surpass many achievements, and as such possibly recuperate their losses, or lose their focus and therefore incr more debts.

This is a wait-and-see issue.


1/30/2006 11:56 pm

Blogger BlindJak said...

Abdul, T fair points and I do acknowledge that the gulf in finances are bigger than they have ever been and that it does make it somewhat harder for other top teams to compete.

But what I would say is how are clubs who do not have the global marketing reach of the Likes of Utd, Liverpool and Arsenal to compete?

Despite our success in the cups in the late 90’s we were still suffering from image problems arising from our hooligan past. Therefore we could not generate the same international revenues as did Utd, Liverpool and Arsenal (although we didn’t do badly). As good as we were we were never really in danger of challenging for the title.

Only the intense media interest that Roman created and success in the league and CL has started to turn this around.

Everyone is enjoying the fairy tale that is Wigan Athletic but they would not be where they are of not for the deep pockets of Dave Whelan. Fulham would also still be in the lower reaches of (old) division 4 had not Al Fayed splashed the cash. Blackburn would also be a small provincial club had Jack Walker not live his dream and turned them into title winners. Pompy are the latest club to benefit from cash from the behind Iron Curtain (although not nearly half as much)

Through out these meteoric rises there has never been mention of curtailing of club expenditure in any way shape or form. Only once Chelsea upset the status quo at the higher echelons of the game has it come to the fore.

But as I say I do acknowledge that as yet our spending has no relation to what so ever to our current income and our financial abilities do outstrip any of our rivals.

1/31/2006 8:58 am


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