Who's Scoring Goals with Financial Fair Play

The concept of fair play was born in England in the Nineteenth century. It is not simply a set of written rules, but a healthy behavioral model to be adopted in the practice of various sporting disciplines. It is no coincidence, therefore, that the program to promote sound finance in football clubs is named FFP, Financial Fair Play. Deliberated by the UEFA Executive Committee on the basis of a proposal made by Michel Platini, FFP stated that starting from the 2010/11 season, all European clubs qualifying for the Champions League and the Europa League had to balance their accounts. In a nutshell, the FPP aims to foster the financial equilibrium and economic sustainability of clubs, by prohibiting them from repeatedly spend more than they earn. They are therefore encouraged to develop new ways to raise revenue, so they can continue to afford the best players without increasing their indebtedness.

There are two fundamental questions with reference to FFP. The first: was it necessary? Clearly the answer is yes. We have all read the news of football companies in deep red with financial losses accumulating which then generated unmanageable debts, creating a vicious circle difficult to break. The real question then is: who is it for? And this opens the field to a broader issue that has to do with the nature of football clubs and soccer as a product, characterized by strong social connotations, from joint production between competitors, competitive balance in championships, to a vast public of heterogeneous stakeholders. These elements could suggest that football clubs cannot be evaluated and managed according to the usual economic criteria. However, the spectacular and symbolic dimension of football shouldn't be a reason to justify spending follies and unsustainable business models. In fact, the pursuit of sporting success at all costs puts at risk not only the survival of individual clubs, but the sustainability of the football system as a whole.

The idea behind FFP is that proper competition between clubs starts outside the playing field, with the adoption of sound management models aimed at meeting the principle of cost-effectiveness and long-term investment in areas such as sports infrastructure and youth leagues. Financial Fair Play should therefore be seen not only as a set of rules to ensure stronger financial discipline in the management of football clubs, but also as a form of protection for the long-term sustainability of European soccer. And the latter is a goal that finds everybody in agreement and will benefit all parties concerned, also considering the growing competition coming from other forms of sports and non-sports entertainment.

The second question is: does Financial Fair Play work? A recent study has compared the financial performance of 175 clubs belonging to the five major European leagues (Premier League, Liga, Ligue 1, Serie A and Bundesliga) in the 2005-2006 and 2014-2015 football seasons. Research findings highlight the fact that FFP has had a positive impact on the financial sustainability of football clubs, measured, in line with the break-even requirement of the provision, as the difference between their revenue and cost of personnel. Such value increased after the introduction of FFP, especially for clubs with UEFA ambitions, in particular as a result of revenue growth. In addition, Financial Fair Play seems to have have been especially effective for French and German clubs, which prior to 2011-2012 experienced growing financial leverage, and after that date show a reversal of the trend. So the answer to the question is yes. To date, the Financial Fair Play seems to have contributed to the attainment of more stable and sustainable financial positions by major European teams and, most likely, this is just the beginning of the process.