How Italian giants AC Milan are dealing with Financial Fair Play

UEFA’s Financial Fair Play (FFP) rules are by no means perfect, but the general idea of allowing clubs to only spend what they generate in revenues is a sensible one.

Tying spending to revenues rather than debt levels means that clubs must stand on their own two feet. No longer able to rely on sugar daddies bank rolling spending and wiping away massive debts, they have to behave a lot more sensibly than they have in the past.

No doubt for those whose clubs have benefitted from the sugar daddy model, FFP is a curse. Those dreaming of Qatari investment or a Russian oligarch will think likewise. But their self interest overlooks the fact that the rules are designed to save clubs from themselves – from dangerous overspending and from selling out to possibly unscrupulous and unstable ownership.

Ultimately, FFP means that should a rich benefactor or oil rich emirate ever lose interest in a football “investment” or suffer a financial meltdown, the impact should not necessarily destroy the club.

 

Supporters of seven times European champions AC Milan most probably take a dim view of UEFA’s new rules. After all, the club’s success through the 1990s and the status it is struggling to hold on to now owe an awful lot to the money of owner Silvio Berlusconi. The massive wages and transfer fees that attracted the cream of world football to the San Siro could never have been generated or sustained by the club alone.

But football in Italy, like the country itself, has been in serious recession. Match fixing scandals and hard economic times have seen a drop off in interest and critical investment. Many clubs have had to impose serious austerity measures in order to survive, the Rossoneri amongst them.

In the days before FFP, for clubs like AC Milan, debts were not really a cause for concern. The likes of Berlusconi would clear them with the stroke of a pen – before initiating another massive round of spending. Such largesse is a key reason why club debt is not the basis of the FFP rules themselves. Debt under such circumstances is meaningless.

In the face of the UEFA rules, AC Milan, who finished a lowly eighth last season, have had to initiate a rebuild and restructure based on lowering their prodigious wage bill – which represented an incredible and unsustainable 88% of the club’s revenues (UEFA recommends a maximum of 70%) – and shopping often in Europe’s bargain basement.

It’s been hard medicine for the club and its supporters to swallow. But on the plus side, the Rossoneri are actually pretty well placed to recover not just in Serie A but in Europe as well. After all, despite the club’s decline, it still has serious commercial clout and potential for growth.

The most recent Deloitte Football Money League (2012/13) shows AC Milan at tenth with revenues just over €260 million. The ability to generate cash is what will give clubs the edge going forward – and Milan’s global reach is a major strength.

Shirt sponsorship, for example, is an area where Milan could look to make major gains. Its deal with shirt sponsors Emirates, currently worth €12.5 million a year, is due for renewal. Given that Liverpool get twice that from Standard Chartered, a club of Milan’s standing should be able to negotiate a much improved deal this time round.

At the very least, this should improve their position against their domestic rivals – providing greater spending power in the future and improving their chances of getting back into the lucrative Champions League.

Importantly, the club hopes to follow the example of rivals Juventus in building its own stadium (within the next three years) – a move seen as critical to future revenue growth. This would allow them increase matchday revenue and throw off the €4 million San Siro annual rent. It would also allow Berlusconi’s money to come into play, as FFP has no problems with investment in club infrastructure.

So it may take a little time, and some clever financial husbandry, but AC Milan should recover. Maybe it won’t be to the heights of the 1990s, but with all clubs now operating under FFP restrictions, the Rossoneri should at the very least regain their competitiveness.

The Author

Paul Little

Freelance football columnist. European Football with the Irish Daily Star. Hold the Back Page podcast regular. Family and Renaissance Man. Dublin born, Wicklow resident.

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