Mis-governance 101

Good evening!

Welcome to The Playbook, a weekly newsletter on the business of sports and gaming. If someone shared this newsletter with you or if you’ve found the online version, please hit the subscribe button below — it’s free! You can unsubscribe anytime.

Programming note: We will not be publishing The Playbook next Friday on account of Republic Day (26th January) in India. Our next edition will drop on the 2nd of February.

What is it with our men’s cricketing team? As if the World Cup’s emotional turmoil wasn’t enough, the team served one hell of a match against Afghanistan. Anyway, for football fans like me, that was nothing in comparison to the drama unfolding in the Premier League. 

In November of last year, the Premier League docked 10 points off of Everton for flouting its financial rules. Now, the league has found Everton (again) and Nottingham Forest flouting financial rules. While the charges have been approved, there’s still no word on what the punishment will be. Given the league’s stand on the matter in November, a 10-point deduction is the most likely outcome, which will put the teams at the bottom of the league. But what exactly is all this mess? Let’s dig in.

Rules 

The Premier League oversees the finances of its clubs through the Profitability and Sustainability (P&S) rules. The rules were introduced in the 2015-16 season and were modelled after the UEFA’s Financial Fair Play rules. The objective of these rules is simple: to ensure that clubs don’t just buy their way to success and/or indulge in reckless spending. In the former’s case, all clubs competing in the league are bound by its rules and in the latter’s case, the clubs solely competing in UEFA’s competitions are bound by their rules. 

The Premier League’s P&S rules assess each club over three years. In that period, clubs are allowed a loss of £15 million ($19.2m). This number can be extended up to £105 million ($133 m) if the owner of the club puts the difference between the two i.e. £90 million into the club. That means buying shares of the club worth £90 million. The idea behind this is to increase an owner’s skin in the game and ensure that the club isn’t saddled with that money. 

Like every other law in the world, there are loopholes. In this case, they’re known as the Chelsea loophole because it was them who exploited it amazingly well. The club had signed players such as Enzo Fernandez and Mykhailo Mudryk for approximately $250 million 2023 on eight-and-half-year contracts and spread its cost over that period. In financial parlance, this is called amortisation. The Premier League on its part has limited this practice to 5 years now. 

Much like our tax system, the Premier League also provides avenues for deductions. So, expenses made in youth development, women’s football and community work don't count under the P&S rules. The losses incurred during the pandemic can also be written off. Once all of this is accounted for, the clubs are required to send in their financial accounts by December 31st.

A fortnight later, clubs that exceed the lower £15m P&S limit are fined with restrictions on budgets and transfer spending. Clubs that exceed the upper limit of £105m are referred to an independent commission and have a fortnight to respond to the charges. If found guilty, point deductions can be administered. This entire process has to conclude by May 24, five days after the final Premier League fixtures of 2023-24.

Everton and Nottingham Forest Case

As a Manchester United fan, I know a thing or two about poorly managed clubs. But these two are really in a league of their own. Let’s begin with Forest. The club was a Championship side (League 2 in the English football pyramid) in 2020 and 2021. During that time, the club’s wage bill was reportedly double their turnover. From the available numbers, Forest’s turnover for the 2020-2021 season was £18.4 million ($23m) and they spent £37.2 million ($47m) on wages. 

Then, in 2022, when the club finally won a Premier League promotion, the spending spree didn’t stop. In the summer of 2022, the club signed 22 first-team players (19 permanent, three loans) and seven (five permanent, two loans) in the January transfer window. Need a number on those transfers? £150 million ($190 million). That’s just on transfer fees btw. Wage bills are separate. To give you a sense of how absurdly managed the club is, just look at Harry Arter. As per The Athletic, the player is on the payroll for a contract of £40k/week. However, there’s a slight problem with that. Arter hasn’t played for the club in three years now. He’s not retired, he just hasn’t been able to make the cut… for three years running. 

Everton’s case is equally bizarre. On the field, the club was constantly in turmoil with frequent managerial changes and an unsettled squad. By 2020, the club had seen three consecutive years of £100 million-plus losses. Naturally, that’d have extended for two more years due to the pandemic. As if that wasn’t enough, the club seemingly took a loan to make improvements in the stadium but used that money to buy more players. I’m no financial guru but clearly, that’s a fraud as stark as daylight. 

For now, both the clubs have acknowledged the charges and are cooperating with the Premier League. Fans though are fuming because of…

The Elephant in the Room

Manchester City, the most dominant force in the Premier League’s recent history, has been charged with 115 counts of breaches. They go back to the 2009/10 season and also involve breaches of UEFA’s rules and its multi-club model. These charges were announced almost a year ago and yet, no action has taken place. Of course, when you juxtapose this with the swiftness of Everton and Forest’s case, you’re bound to feel a little hard done by. This week, Premier League chief Richard Masters, informed a Select Committee of the British Parliament that a date has been set for City’s hearing (with no actual mention of the date). 

Further complicating things is politics. The UK government is working on a bill to create an independent regulator for the game. If it passes, the regulator will take over the proceedings of the P&S rules from the Premier League. Many fans see this recent bout of proactiveness from the League to stave off the coming of this regulator, which makes them feel like a scapegoat. They also point to the fact that the threshold for P&S rules is outdated and not in sync with the market realities of today. 

The most pointed critique of the P&S regime is perhaps its effects on the ambitions of smaller clubs. With the rise of ‘Super Clubs’ backed by nation-states and billionaires, a hierarchical taxonomy of sorts has set into football. You have the ‘Super Clubs’ at the top and the rest down below. To break this, the smaller clubs have to spend big - which they can’t because of these rules. A deadly cycle ensues for smaller clubs, with no way out. 

For the richest football league in the world, this is a quagmire.. With so much money flowing in, any regulator would be hard-pressed to keep track of all the developments in 20 clubs. What do y’all think of this? Share your thoughts in the comments below and I’ll catch you there.

⚡️Quick Singles

🏏🎾💰: Indian cricket legend Sachin Tendulkar has invested an undisclosed amount in the Indian Street Premier League, a franchise-based ten-overs-a-side tournament. Tendulkar will also serve as a core committee member alongside Ashish Shelar, the current treasurer of the Board of Control for Cricket in India (BCCI). The tournament is slated to kick off in mid-March and has already attracted Indian film stars Akshay Kumar, Ram Charan, Amitabh Bachchan, and Saif Ali Khan as franchise co-owners.

🎾🇸🇦🫱🏽‍🫲🏽: Tennis great Rafael Nadal has signed up as an ambassador for Saudi Arabia’s Tennis Federation. As part of his role, Nadal, a winner of 22 Grand Slam titles, would promote the sport in Saudi Arabia, besides setting up the Rafa Nadal Academy. Saudi Arabia has been stepping up its involvement with tennis, with Jeddah hosting the Next Gen ATP Tour finals until 2027. The Women’s Tennis Association could also be hosting its season-ender in the country.

🇶🇦⚽💰: Sheikh Jassim bin Hamad Al Thani, the Qatari bidder for Manchester United, did not furnish proof or source of funds despite multiple requests by the club to do so, according to an SEC filing by the club. The filing also revealed that the club’s owners were willing to accept a $5.76 billion (£4.55 billion) bid from Sheikh Jassim in May last year. Sheikh Jassim pulled out of the deal in October last year. Eventually, United decided to sell a 25% stake in the club to Ineos chairman Sir Jim Ratcliffe. That said, Ratcliffe could be forced out in the next 18 months, should the majority owners — the Glazers — decide to sell the club to a new owner.

🏏💰🏆: Indian conglomerate Aditya Birla Group will challenge incumbent Tata Sons for the title sponsorship of the Indian Premier League (IPL) seasons 2024-2028. The Aditya Birla Group, The Economic Times reported, was the sole bidder before Tata’s right-to-match deadline (January 19) laid out by the Board of Control for Cricket in India (BCCI). The bid was reported to be marginally higher than the base price.

🎾🏆💰: India’s Sumit Nagal, ranked 137 in the world, stunned a seeded player in the first round of the Australian Open. Nagal beat the Kazakhstani world number 31 Alexander Bublik in straight sets. Nagal’s historic win was sweeter because it guaranteed him a cheque of $119,016 (Rs 98 lakh), a substantial improvement on his bank balance, which tottered at about €900 (~Rs 81,500) at one point last year. Nagal’s feat equalled Ramesh Krishnan’s first-round Australian Open win over defending champion Mats Wilander in 1989. Nagal, however, lost to Shang Juecheng of China over four sets in the second round.

⚽️🤝🏽💵: Major League Soccer club LAFC acquired a majority stake in the legendary Swiss football club Grasshopper Club Zurich. The 27-time Swiss champions were previously owned by Jenny Wang. Wang is the wife of Chinese billionaire Guo Guanchang, who founded Fosun International and owns Premier League club Wolverhampton Wanderers. This will be LAFC’s second major investment in a European club after it bought into Austrian fourth-division club FC Wacker Innsbruck last year. The club also has a “global soccer development” joint venture with Bundesliga club Bayern Munich.

📖 Weekend reads:

Ivory Coast, China, and the murky truth behind AFCON’s most high-tech stadium [The Athletic]

Naomi Osaka, The Comeback Interview: A tale of pregnancy, fear, and a ballerina [The Athletic]

Nike races to keep from losing ground to more nimble rivals [Financial Times]

So, You Want To Buy A Pro Sports Team? Here’s How. [GQ Sports]

That’s all for this week. If you enjoyed reading The Playbook, please share it with your friends, family, and colleagues. Please also subscribe to it (for free) if you haven’t already.

You can reach out to me at [email protected] with any feedback (good, bad, or ugly), tips, and ideas. I'd love to hear from you!

Thanks for reading, and see you again next Friday!