Financial Fair Play?
How Champions League revenues can devastate competition in Europe's smaller leagues
On 3 July 2012, less than two months after Chelsea dramatically clinched the Champions League title in Munich, Europe's richest club competition was underway again. Spain had won Euro 2012 only two days earlier but there are no players from the European Championship at the Stade Jos Nosbaum in southern Luxembourg or involved in either of the two other ties played on the same day, in Belfast and Malta.
The first qualifying round is a world away from the glitz and glory of Munich. A crowd of just over 1000 sit in the Luxembourg sun to watch a one-sided thrashing. F91 Dudelange's opponents Tre Penne of San Marino look what they are: amateurs. No club in Luxembourg has a squad of entirely professional players, but F91 — the number relates to the year of the club's formation from a merger of three old Dudelange outfits — have more full-timers than most. In the two decades since Dudelange were created, the club has dominated the game in the Grand Duchy and won the double again last season.
Investment from the club's owner, the financier Flavio Becca, is one reason for this dominance. The other is Uefa prize money. Dudelange have won the Nationaldivisioun title in 10 of the last 13 seasons and are regular European competitors. In 2005-06, the club became the first Luxembourg side to win a European Cup tie in 42 years by beating NK Zrinjski of Bosnia & Herzegovina 4-1 on aggregate. In 2012-13, Dudelange went even further.
After hammering Tre Penne 11-0 on aggregate, Dudelange faced a Red Bull Salzburg side then linked with a move for the German legend Michael Ballack. Awash with money, Austria's most dominant side completely misjudged F91. The tie finished 4-4 with Dudelange going through on away goals. Dudelange lost 5-1 against Slovenia's Maribor in the third round but still banked €620,000 from Uefa; their usual turnover is around €1.2 million a year.
Two decades ago, when Europe's governing body began to transform the European Cup into the Champions League, clubs like Dudelange were not on the agenda. The G14 group of major clubs were pressuring Uefa for a greater share of the income and cared little or nothing for small-fry like Dudelange. The G14's constant threat to Uefa was a breakaway pan-European league. That pressure has certainly worked but it has had unforeseen consequences.
In the 2011-12 season, Uefa paid out €754.1million to participating clubs. Chelsea's Munich victory earned Abramovich's play-thing €59.9m from Uefa to add to £54.4m from the Premier League in broadcasting payments for 2011-12. This helped produce a record annual turnover of £255.7m. So winning the Champions League was worth 19% of Chelsea's annual revenue. That ratio will be more like half at Flavio Becca's bauble in the 2012-13 season. "Uefa prize money can go a long way here," agrees Paul Philipp, head of the Fédération Luxembourgeoise de Football (FLF), choosing his words carefully, wary of openly criticising his country's dominant side.
In Luxembourg and many other places further down European football's food chain, scraps from the Champions League banquet can have a huge effect: the further away from the real prize, the more disproportionate the impact.
Last season Apoel qualified for the Champions League for the second time in three seasons. After reaching the group stages in 2009-10, Apoel received €10 million from Uefa giving the club a playing budget of €9 million in 2011-12. This helped Apoel to become the first Cypriot club to reach the quarter-final, which generated Uefa prize money of €18.1 million.
Money obviously does not guarantee success in west London, Luxembourg or Nicosia and Apoel surrendered their title to AEL Limassol and were consigned to this season's Europa League. But with €18.1 million banked, the club has substantial foundations to fund further success in the future.
Reaching the group stage is just as rare for Hungarian clubs with only two sides having done so. When Ferencváros qualified in 1995-96, the rewards on offer were vastly different to those earned 14 years later by Debrecen. In 2001, the Hungarian businessman Gábor Szima secured majority control of Debrecen. Four years later his club won their first Hungarian title and, in 2009-10, joined Apoel in the group stages. Debrecen departed pointless but with €9 million from Uefa.
That is a substantial sum in Hungary's fragile sporting economy. According to a survey conducted by the journalist Mihály Muszbek, in 2011 Debrecen had an income of 975 million forints (€3.4 million). To put the value of that Uefa money into perspective, a new TV broadcasting agreement is expected to give each club in Hungary's OTP Bank Liga around €620,000 a year.
Club owners can spend this windfall on whatever they like. Debrecen have taken six out of the last eight Champions League places available to Hungary but Szima, who owns hotels and a brand of mineral water and regularly plays five-a-side, saw a wider picture. The Uefa money built an academy — but if owners want to pocket the money or to use it ensure no other domestic club can compete in terms of wages that is up to them.
What the owners of the Israeli champions Hapoel Ironi Kiryat Shmona spend their 2012-13 windfall on will be telling. Kiryat Shmona's budget is around 25 million shekels (€4.9 million), reputedly the highest ever for an Israeli club. After overcoming MŠK Žilina of Slovakia in the first round, Kiryat Shmona cruised past the Azeri champions Neftçi PFK 6-2 then lost in the play-off round against BATE Borisov, who have taken every Belarusian slot in the Champions League since 2007-08.
Kiryat Shmona will get €2.1 million and a place in the Europa League. That is less lucrative than the Champions League but the rewards are still substantial for a poor club from near the Lebanese border whose ticket prices are in the region of €3.
When Michel Platini was elected as president of Uefa in 2007, he was backed by many smaller associations, whom he helped by tinkering with the qualification rules to make it easier for them to get into the group stages. In 2008-09 Anorthosis became the first Cypriot side to reach the last 32. The same season BATE became the first Belarusian side to do so, but plenty of Uefa's 53 members are – despite Platini's tweaking – yet to produce a side capable of doing the same. For many national associations, the prospect of a team reaching the group stage is far from enticing.
Clubs from Montenegro only entered the Champions League in 2007-08. Last season, FK Budućnost of Podgorica became the fifth Montenegrin champion in a row to fail to qualify for the group stages. Budućnost have a budget of €1.5 million and a full-time squad; according to their general secretary, Nikola Prentić, the €340,000 'compensation' from Uefa for losing after one round is not huge. But if a Montenegrin club ever reached the group stages, the impact would be immense. "It would be a football revolution in Montenegro," said Prentić.
In small, mainly part-time leagues any trailblazers reaching the group stages leave a trail of domestic wreckage. "Should a team from Iceland qualify, we would without a shred of doubt see total monopolisation of the domestic league by that team," said Ómar Smárason of the Icelandic federation (KSI).
The Icelandic champions KR got a bye to the second round this season. The only return on the pitch was Emil Atlason's 74th minute strike at home to Finnish champions HJK Helsinki, who won 9-1 on aggregate. Off the pitch, the return was better. KR also pocketed €340,000 for playing a single tie.
Icelandic sides have played in Europe for decades. Uefa money is vital in a country in which turnover at top-flight clubs ranges between €1.25 million and €2.5 million a year. "Qualifying for Europe makes a huge impact," Smárason said. "A club playing in Europe year after year, even just in the qualifying rounds like most of our clubs do, they are in a very strong position."
In the Faroe Islands, annual revenue at clubs in the Effodeildin is about €270,000. A big side turns over around €540,000. This season, B36 from Tórshavn played the Northern Irish side Linfield in the first round. No one found the net in either leg; Linfield won on penalties and B36 left with €340,000.
"There is very little money from gates or sponsors. There is some from private sponsors but Uefa money is major for them," said Brian Kerr, the Irishman who managed the Faroes national team from 2009 to 2011. Kerr also highlights another vital role that Uefa club competitions play, one that the KSI confirms holds true in Iceland. The Faroe Islands Football Association runs an Under-21 team but can only afford to play competitive matches. With clubs and agents unwilling to fly to Tórshavn, European games offer a chance to get promising players seen, such as Jóan Símun Edmundsson, who joined Newcastle in 2010 from the Toftir side B68.
At the very tip of this inverted pyramid are clubs in San Marino and Andorra, who like the Montenegrins, were allowed a first sniff of the Champions League honey pot in 2007-08. Two years later a restructuring introduced an extra qualifying round. This gave the likes of Linfield a chance to win not just the odd game but a tie. The extra qualifying round means that clubs winning a first-round tie receive another €140,000 for progressing. After beating B36, Linfield went down 3-0 to Limassol. Having failed to score in four Champions League ties, Linfield earned €480,000, a significant sum in Northern Irish football.
In 2010, the Maltese champions Birkirkara travelled to Andorra to play Santa Coloma in the first round but the pitch was unplayable. Birkirkara were awarded a 3-0 walkover and subsequently won 7-3 on aggregate. Santa Coloma were fined €10,000 and banned from Europe for two years but still had their prize money — for playing one game.
This season, Tre Penne of San Marino fielded a side including a number of forty-somethings against Dudelange. After a 7-0 humbling in the first leg, Tre Penne lost 4-0 in San Marino but earned €340,000 for doing little more in sporting terms than turning up. According to Uefa's own research, the average club revenue in San Marino is €86,000 per year. So for a Sammarinese club, just qualifying for the Champions League can quadruple their annual revenue.
What Uefa is doing says something about the European body's priorities. Clubs that can prove to Uefa and the Club Financial Control Body that their income and expenses are below €5 million in the two years before qualification are 'potentially' exempt from the break-even clause in the Financial Fair Play (FFP) regime. That could remove a whole swathe of clubs from across Europe.
"The break-even rule objectives are particularly addressed at the impact of individual clubs' behaviour on club football as a whole and to rebalance the spending and investing of larger clubs, which has been defined in the 2012 regulations as €5m," Uefa explains. "In practice a club with total relevant expenses of less than €5m a year is unlikely to have much of an influence on the sustainability of club football as a whole."
With FFP, Uefa is trying to combat big-spending patrons and make the game more sustainable; an admirable notion and one that surely still applies in places like Luxembourg.
Interestingly, when the FLF proposed a rule ensuring clubs in Luxembourg have a minimum number of players with football licences issued in the Grand Duchy, Dudelange protested. Becca's side insisted the rule was discrimination against foreign players, the best of whom were cementing Dudelange's domination. The FLF went ahead anyway and a level of local opprobrium remains focused on Dudelange, a club with little tradition but lots of money.
Dudelange and any other side qualifying for the Champions League still need a Uefa licence and are monitored in a number of areas. If any trigger an alert — if, for instance, the ratio of wages to revenue passes 70%, then more information is requested from the club, who are trusted to provide a honest answer. Whether clubs like Chelsea and Manchester City comply with FFP or not will be examined by hordes of international media and fans. Who will be verifying Dudelange's answers, or those from Tre Penne?
Crucially, to secure a licence, clubs must demonstrate "relevant income and relevant expenses". For regular European participants such as Dudelange that is not a problem: Uefa prize money from the Champions League or the smaller monies derived from the Europa League qualify as relevant income.
Those clubs wanting to keep up a domestic challenge are left scrabbling to compete against a new local hegemony funded to a significant extent by Uefa's own generosity and then left unregulated.
What happens if these dominant clubs in smaller countries then fall off the Uefa gravy train? If clubs fail at a domestic level because this money has been spirited away or mismanaged? If they no longer fall under Uefa scrutiny, are they simply forgotten? How does that meet the objective of sustainable club football that the Uefa president Michel Platini is using as a platform for his long-expected bid for the Fifa presidency? What is sustainable about creating a two-stream Europe with financially bloated smaller clubs simply allowed to pass quietly under the most significant part of the FFP radar?