Chelsea And Transfers – An Evolving Outlook

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Updated: September 10, 2014

A week ago, on the summer transfer deadline day, when a host of English clubs were still scampering to finalize deals, some in the top bracket even applying for extension period, Chelsea as a club – the board, the manager and the fans – spent the evening relaxing, having seen out one of the most successful transfer windows in recent history. A lot of parameters come into play while determining if a transfer is worthwhile and contributes to the success of the club, most of it being hinged on hindsight! However, it is the approach a club and its management takes towards its handling of the transfers which speaks volumes about not just the goals for near future, but also its financial security.

Today, football clubs are not just sporting fraternities but viable business ventures, which deal with top dollars every month. The primary concern on the financial front for European clubs at the moment are the Financial Fair Play (FFP) regulations, as deployed and monitored by the Financial Control Panel of UEFA. Its aim is to prevent clubs from spending money they do not generate as revenue and create a self-sustainable business model – whether it creates a level-playing field for all clubs as it vows to, is a completely different matter!

The Chelsea Way

Going back to the last decade, when Roman Abramovich seized ownership of Chelsea, inflation in player values was still an emerging concept. In early 2000s, Chelsea were moderate spenders, not cash-strapped by any means. The club brought in the likes of Hasselbaink, Lampard and Gronkjaer as its costlier purchases in the years preceding Abramovich. With his arrival, Chelsea were ruthless in the market, a trait many people still associate the club with. Roman’s love for football and will to spend translated as Chelsea turning into a European powerhouse from a solid top-tier English side, within a couple of years.

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If taken into account without considering any other factors, the above dataset shows a certain trend – Chelsea spent big in the initial years of the Abramovich era, the expenditures dwindled gradually in the late 2000s, followed by huge monetary outlays again in this decade. How do these numbers change when we factor in the earnings from sales of players? Substantially.

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Ever since the first two seasons under Abramovich’s ownership, Chelsea have been extremely prudent in the market, with 2010-11 being the only exception. The club was trying to break into the league of the elite teams in Europe and win the Premiership circa 2004. Hence, the foray into the market! In 2010-11, the club made an impulsive buy in the winter transfer window, albeit in a position of need, which shot up the expense bill. Someone could argue that even the amounts Chelsea spent in 2011-12 and 2012-13 were quite high, but it should not be forgotten that the club generates a lot more revenue now than it did back in 2004. Plus, Chelsea were fresh off a Champions League triumph in 2011-12, which ensured the club had ready cash and also attracted quality talent from across the world.

How Does FFP Affect Any Of The Transfer Business Chelsea Conducts?

FFP does not affect the transfers of a club per se. It is mainly concerned about the accounts of the said club and looks to prevent losses suffered. How much a club spends is none of its concern, as long as the club spends only what it earns through various forms of revenues and not from borrowed loans or the owner’s money. For instance, a club of Real Madrid’s stature could buy Gareth Bale one summer and follow it up with James Rodriguez the next, still complying with FFP regulations. A club like Napoli cannot.

As the FFP regulations solely analyse the account books, the wage structure of a player’s contract and that of the squad are of paramount importance. Amortization of contracts determine the FFP hit of a particular player to the club’s accounts. For those who are unaware, amortization refers to spreading out of the player’s transfer fee over the entire duration of his contract and counting in his yearly wages. [We definitely paid Atlético the entire £15.8m sum for Filipe Luis this summer, but for accounting purposes, Luis has a seasonal FFP hit of £9.43m (£5.27m amortised transfer fee + £4.16m in wages).]

“In the winter we sold Mata; in the summer one we sold David Luiz and Lukaku. So Chelsea in this moment is not a spender – Chelsea in this moment is making more money in transfers than the money we spend. When UEFA decided for Financial Fair Play they were trying to do this to make every team [have] equal possibilities. But the reality is that the big teams, the big clubs, the clubs with more years at the top with more fan base around the world, with more income, are the players that keep being the big spenders. So Real Madrid, Barcelona, Bayern, Manchester – all these huge teams, I think they have an advantage. But at Chelsea we are so happy with the way we are doing things, with this great balance between the income and the money we can spend.” – Jose Mourinho.

Jose hammered the point home with these words a few days back. Although FFP is designed to create a level playing field, all it does is makes the richer club rich and blocks of new clubs from joining the elite giants. Mourinho probably added a dramatic flair to his observation, but the fact is in spite of not being able to spend millions any more, Chelsea have been doing well in the market. Contrary to popular belief that FFP forced Chelsea’s hands, the club has been changing its approach in the market since 2008.

The latest financial figures available is from the 2012/13 season, when Chelsea announced a loss of £49.4m, following a small profit of £1.4m in 2011/12. Chelsea had a wage bill of £179m back in 2012/13. With a lot of changes in the squad since that season, the current wage bill will definitely vary. When the finances of 2012/13 were revealed last year, CEO Ron Gourlay had said, “We are pleased therefore that we will meet the stipulations set down by UEFA in their first assessment period, and by our own analysis we are progressing from a commercial viewpoint as well as continuing to add trophies to our collection, which we never lose sight of as our most important goal.

Chelsea, as a club, are constantly growing, in terms of success on pitch, fan base and sponsorship partners – all of which equate into revenues.

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The revenues are expected to increase further over the coming seasons, as the new Premier League broadcasting deal is set to kick in from this season. Our friend Jake Cohen had predicted a couple of months back that Chelsea’s revenues for 2013-14 could increase as much as up to 30% from 2012-13. That coupled with our smart activities in the transfer market is the key to a sustained business model.

How Have Chelsea Tackled FFP?

When Financial Fair Play was introduced, the popular opinion was that it would hamper the quickly growing clubs like Manchester City, Paris Saint-Germain, AS Monaco and even might stop Chelsea from buying its way out of trouble. Many an Arsenal fan suggested now they would get the better of their London rivals. What happened was the exact opposite! In the last couple of years, Chelsea have not just bought smart but also sold players surplus to requirements in order to fund targets in positions of need. In addition, the club has made an excellent use of the loan system to develop players in England and abroad.

Let’s go back some three & a half years. On the fateful evening of 31st January, 2011, close to the deadline, Chelsea completed two purchases (one for a British record amount). Both of those players (Fernando Torres and David Luiz) made a Chelsea exit this summer. A lot has changed since that day.

When two teams play a match, the fans get a glimpse of the players, the manager and rest of the coaches, the physios and team doctors, at times even the owner of the club. But there are a host of other people who contribute directly or indirectly to the spectacle on the pitch. Transfers are one of the aspects, during which the role of these “behind-the-scenes” men become more prominent. A good player is one who has a positive impact on the results, a good transfer is one which has been co-ordinated between the manager, the scouting staff and the board.

In June 2011, Michael Emenalo took over as the Technical Director from Frank Arnesen who had served as Sporting Director for the club for previous five years. Wheels of change began to roll in at that time. Emenalo, in association with chief scout Piet de Vissier, has roped in talented youngsters, either nurturing them at Cobham or sending out the more developed ones on loans. Chelsea have also amassed quality talents from top drawer clubs in the mould of Eden Hazard, Oscar, Gary Cahill and so on. Combined with Mourinho’s shrewdness over the last three transfer windows, Chelsea have served up winner after winner in the market. Nemanja Matíc’s purchase from Benfica did not just rectify a mistake previously committed, but also provided Chelsea with one of the best young central midfielders in Europe at the moment for relative peanuts. Fabregas’ acquisition this summer was another instance of clever business. The squad needed an elite mideo who could break down parked buses and provide that cutting edge Chelsea lacked against mid-table and lower half sides last season. Many Chelsea fanatics have touted Fabregas as a player akin to Juan Mata’s calibre, but with positional awareness. If calculated purely on monetary terms, you could argue that Chelsea replaced Mata with a player who offered more attributes while making a profit of about £10m in the process.

The sale of David Luiz to PSG for a sum of £44m, an exorbitant amount for any central defender, and the purchase of Loïc Rémy (a proven goal-scorer) for less than £11m suggest how far the club has come from the day when we signed Torres. This season, Chelsea upgraded from a strikeforce of Eto’o, Torres and Ba to one of Costa, Drogba and Remy for a net expenditure of just £9m (although it is important to remember that the accounts won’t record it as a net profit/loss, but instead calculate the FFP hits).

Chelsea’s ingenuous transfer system means that for every Hazard, there is a Zouma. Arsenal are one of the other English clubs who look to develop young talent, but their failure to add the missing pieces of puzzle in their first-team squad takes the cream away from the crop. It is at this juncture where Chelsea have capitalized. The strength of Chelsea’s scouting system can be analysed from the fact that in 2012, the club secured the services of a certain young Spanish right back from a French club, when the popular names being thrown about were Gregory van der Wiel and Mathieu Debuchy. Azpilicueta was a relatively untested and unknown commodity, but as we now know, he is indispensable to the club.

The Final Word

Chelsea are still ruthless in the market! To add to the excellence, the club has been extremely effective in closing deals swiftly, allowing the players ample time to settle into the new system and prevent any uncertainty with the transfer proceedings. It is highly promising that Chelsea have the means of successfully navigating through the FFP era without compromising the club’s potential to challenge for trophies at the highest level. As Gourlay will speak in November this year at the World Football Forum in Moscow over how the FFP regulations impact football management, it is safe to say Chelsea look to grow further and gain, fiscally and success-wise, having tamed the monster known as Financial Fair Play.

10 Comments

  1. Tengey Feruz Michael

    September 10, 2014 at 9:49 AM

    I wish chelsea could demonstrate their shrewdness and fund Varane and Pogba’s release clause by selling Mikel,Ryan Bertrand, Moses and Salah

    • Anthony Osei-Brefoh

      September 11, 2014 at 4:56 PM

      Perfect. An addion of Varane, Pogba and another young top striker to Chelsea while axing Mikel, Sallah and Drogba will make us invincible for @ least 5 years. If Cezc proves loyal and stays in this team then we are a beast to say the least. Then more energy could be channeled on home grown talents to make the numbers.

  2. RK

    September 10, 2014 at 10:37 AM

    Brilliant article, well written and informative. I would say though that although our excellent scouting system is adept at finding talent to sell down the line for a profit, it does little to develop home grown talent for future first team use. I’m hoping that our first team in 2018/19 (being realistic here) will contain more names that have come through the academy system.

  3. Sam Chidi

    September 10, 2014 at 12:20 PM

    I would love to see the club do something about Stamford Bridge’s expansion or possibly move to a new ground.

    We’re talking about revenue here and if there’s one area that’d generate them for us, it has to be the ticket sales.

    I’d love you all at Chelsea Index to give us a brief rundown on what the situation is between Chelsea and CPO. Has the club made any progress so far to move to a new ground?

    KTBFFH!

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  5. Aaron

    September 11, 2014 at 12:01 PM

    Very good article!! Nice to see other perspective of modern football. Keep going on the great work.

    KTBFFH.

  6. Anthony Osei-Brefoh

    September 11, 2014 at 5:02 PM

    Well said, profoundly elucidated. Lets see how Emenalo, Jose & co. can negotiate CFX into signing Varane, Pobga and perhaps Destro or any other young top striker while selling fringe and loanees to fund these transfers. I hope management takes notice of these posts. We love CFC and can’t wait to have a bigger Stadium in future. Chelsea for life.

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