What does FFP really mean for the future of European football?

UEFA President Michel Platini

In 2010 UEFA announced their new Financial Fair Play regulations fundamentally requiring clubs entering European competitions to break-even. The details of these regulations are widely available. Here are the official documents:

• UEFA Club Licensing and Financial Fair Play Regulations http://www.uefa.com/MultimediaFiles/Download/Tech/uefaorg/General/01/50/09/12/1500912_DOWNLOAD.pdf

• Financial Fair Play – Media Information http://www.financialfairplay.co.uk/resources/FFP%20Press%20Kit%20EN_FINAL_en%20_1_.pdf

The idea has proved popular, with National Football Associations across Europe considering similar financial requirements for their domestic leagues. Restrictions are already in place in the English Championship and in League’s 1 and 2, whilst proposals are in the pipeline for the Premier League to have similar boundaries on over spending.

The focus of the next few posts is to examine the long-term impact of FFP, and to argue that should break-even become common across domestic leagues, far from ensuring the stability of the game the deterioration of competitive balance caused by Financial “Fair” Play will ultimately lead to the destruction of European football as we know it.

Part 1 - Why is competitive balance so critical?

Competition is at the heart of professional sport and that is no different for football. Each match is a contest between two teams trying to outscore their opponents to gain points and improve their league position, or to progress to the next round in a cup competition. The only way to achieve success is to beat opponents; thus success for one team means relative failure for all other teams. For the successful team this means an increase in reputation and prestige as well as significant financial benefits, however, sustained success for one team with the lack of a genuine challenger can have a negative impact on the sport, including the successful team.

In 1964 Walter Neale wrote about ‘The Peculiar Economics of Professional Sports’ citing the need for an even contest for the mutual benefit of competitors. He called this the Louis-Schmelling paradox. He argues that a boxer is unable to perform if there are no other boxers to fight against. Equally, he is likely to receive less if he is fighting opponents that are inferior to him because people will be less interested in the outcome; therefore the boxer is better off if he is fighting an opponent that is similar in talent because the outcome is less obvious. This concept is easily transferable to football. As a neutral fan would you rather watch Real Madrid v Barcelona or Real Madrid v Getafe? How about Manchester United v Manchester City or Manchester United v Grimsby Town? The rational person would be more interested in the more even contest that offers an uncertain outcome.

El Clasico

Competition is therefore critical for football. The revenues of professional football clubs are becoming increasingly dependant on the sale of broadcasting rights. In the 2010/11 season media income represented over 40% of the total income received by Premier League clubs, and that is set to increase with the new £3bn deal that will be in place from 2013. Equally, this enormous income is heavily dependant on the interest of supporters/football consumers, which drive the amount of money broadcaster’s are willing to pay for the rights to show games. With supporter interest dependant on the uncertainty of outcome, competitive balance is critical for the continued success of football.