Over the last few days, speculation has increased that Lionel Messi may be thinking of leaving Barcelona. Whether he does or does not, this brief blog sets out the financial implications for any buying club.
For any club thinking of buying Messi, there would be some eye-watering numbers to consider. A no-doubt world record transfer fee would be required; even as high as £200m+ and a hugely lucrative long term contract of perhaps £3m-4m per month. All of this adds up to a possible total outlay of close to £500m.
How Purchasing Clubs Account for their Spending
In sexy accounting speak “when a player is purchased, his cost is capitalised on the balance sheet and is written-down (amortised) over the length of his contract.” In laymen’s terms, transfer fees for accounting purposes are spread over the length of a players’ contract. If for example Messi was sold for £200m and he signed a 5 year contract, £200m over a 5 year contract is amortised by a club in its accounts to the value of £40m per season.
A transfer occurring in the 20014-15 season will have an impact on a club trying to break-even in subsequent seasons for FFP purposes too. A buying club will amortise Messi’s transfer fee over the length any potential contract. If we assume a 5 year contract, any buying club will have four further €40m amortisation charges in their 15-16, 16-17, 17-18 and 18-19 accounts. All of those amortisation costs will have FFP significance in addition to his annual wages.
Who Could Afford Messi?
Practically, the yearly accounting ‘cost’ to purchase Messi for FFP compliance purposes would include his annual amortised transfer fee ( e.g. £40m) plus his wages, bonuses and loyalty payments of, for example, another £50m. As such, a club would have to possibly find an extra £90m per season (from an accounting perspective) to fund such a purchase. There are only a few clubs that have such deep pockets. Manchester City and PSG with their UEFA imposed FFP spending restrictions would be hard placed to finance such a transfer, yet it may not be beyond the realms of possibility for Chelsea, Manchester United or Bayern to finance such a deal through profits made, selling existing players or finding additional revenue streams to cover such expenditure. It goes without saying that Barca would not want to sell to Real nor presumably would Messi consider such a transfer either.
In the case of the Premier League clubs, there may soon be an additional TV windfall if Sky and BT competition for live domestic Premier League rights ramps up the costs for the broadcasters which in turn means higher distributions for the clubs. Similarly, BT’s new Champions League deal starting next season may potentially bring in £20m-30m in extra revenue to those Premier League clubs who qualify too. Such TV deals could add up to £50m extra per season in revenues for the top Premier League clubs and may go someway to making the financing of such a deal a possibility.