Parachute payments

[BTRFTG]

5 minutes ago, Harry said:

I don’t leave the supermarket with 4 tins of beans and say “I’ll pay you for one now, cuz I’ll be having it tonight, I’ll then pay you for the 2nd tin next Sunday, then the 3rd tin next month etc”. 

The vast majority in my supermarket pay via means of a credit card and should you do as well not only are you failing to pay for tonight's beans, but there's little guarantee when you'll first make sufficient payment on any of the tins.

Your argument also requires that clubs should only purchase in cash terms, structured payments being essentially the same as borrowed credit. Save of course that only benefits the very wealthy, with all but a few clubs being able to buy anyone....

[Davefevs]

26 minutes ago, billywedlock said:

Add in that that transfer fees need to be accounted for immediately in the accounts . 

They are today….just amortised across the life of the contract.

6 minutes ago, Harry said:

100%. 
This is something that should be applied across the board. 
If you’re gonna pay £20m for a player, you pay it now. All of it. Upfront. 
Not spread across 5 years or whatever. 
I don’t leave the supermarket with 4 tins of beans and say “I’ll pay you for one now, cuz I’ll be having it tonight, I’ll then pay you for the 2nd tin next Sunday, then the 3rd tin next month etc”. 

Transfer fees should be paid in full, upfront. 
That’ll solve cash flow issues if you haven’t got the money you can’t buy the player. 

Don’t you ever use a credit card, or buy something on HP, or take a loan?  Not for a tin of beans admittedly.  Did you pay upfront for your house?

Seriously though, it’s a commercial decision.  Do I take a loan out with Macquarie Bank (secured against something like future tv money) to fund my new player or see if the selling club will let me make staged payments for a larger fee?  You can take the loan, and pay up front.  It doesn’t solve all of the problem really.

I do not agree that loans with obligation to buy should not be allowed.  They are there to circumvent the rules.  Loan with an option to buy is very different.  Harry Wilson’s loan to Fulham should not be allowed.  He’s either a loan, a loan with option to buy, or a perm transfer.

 

[Pezo]

Let’s face facts PP and FFP and just attempts at medication to the problem of income inequality caused by TV deals targeted at 1 particular league rather than the game.

Edited November 30, 2021 by Pezo

[Harry]

12 minutes ago, BTRFTG said:

The vast majority in my supermarket pay via means of a credit card and should you do as well not only are you failing to pay for tonight's beans, but there's little guarantee when you'll first make sufficient payment on any of the tins.

Your argument also requires that clubs should only purchase in cash terms, structured payments being essentially the same as borrowed credit. Save of course that only benefits the very wealthy, with all but a few clubs being able to buy anyone....

 

8 minutes ago, Davefevs said:

They are today….just amortised across the life of the contract.

Don’t you ever use a credit card, or buy something on HP, or take a loan?  Not for a tin of beans admittedly.  Did you pay upfront for your house?

Seriously though, it’s a commercial decision.  Do I take a loan out with Macquarie Bank (secured against something like future tv money) to fund my new player or see if the selling club will let me make staged payments for a larger fee?  You can take the loan, and pay up front.  It doesn’t solve all of the problem really.

I do not agree that loans with obligation to buy should not be allowed.  They are there to circumvent the rules.  Loan with an option to buy is very different.  Harry Wilson’s loan to Fulham should not be allowed.  He’s either a loan, a loan with option to buy, or a perm transfer.

 

Re credit. 
I’m not buying beans off of a competitor in the same industry and my purchase from Aldi doesn’t have any cash flow impact on Asda, Lidl, Tesco etc. 
I’m also not in financial difficulty and having to rely on selling something I own in order to pay for the beans. 
Transfers should be paid for upfront. No money, no deal. 

[sh1t_ref_again]

As a totally radical different solution, if we accept that PP is needed and that its very difficult to alter players contracts, but the PP clubs have a huge advantage over the clubs without PP and you don't want to remove FFP, what about what happens in other sports, eg golf, horse racing

A Handicap system, relegated prem clubs can decide level of PP support it requires to maintain its squad, with a formula devised to equate to PP = points deduction at the start of the season. E.g. 10 million PP = starting the season on -5 point, 20 million on -8 points etc, not saying the numbers are correct, but sure it could be looked at to see what is the average number of points archived extra over the last few years with PP. This would incentivise clubs to reduce the need for PP and come in line with FFP. Of course the yo-yo teams would not want as removes the massive advantage they have, but at least we would get closer to a fair competition.

[BTRFTG]

3 minutes ago, Harry said:

 

Re credit. 
I’m not buying beans off of a competitor in the same industry and my purchase from Aldi doesn’t have any cash flow impact on Asda, Lidl, Tesco etc. 
I’m also not in financial difficulty and having to rely on selling something I own in order to pay for the beans. 
Transfers should be paid for upfront. No money, no deal. 

?

Aldi's competitive advantage comes from them paying suppliers far quicker than their competitors. If everything was cash only for all supermarkets that advantage would quickly erode. With average UK indebtedness (excluding mortgages) at £32k per adult and adopting your 'cash first' proposal most of the population would starve within weeks.

In football (not sure how anybody could afford to go if unable to eat,) the market would also be miniscule as with nearly all clubs in debt few could buy players. Prices would plummet, few transfers concluded, little circulation of funds and all to the advantage of those cash rich outfits who'd lever their advantage.

[Maesknoll Red]

27 minutes ago, sh1t_ref_again said:

As a totally radical different solution, if we accept that PP is needed and that its very difficult to alter players contracts, but the PP clubs have a huge advantage over the clubs without PP and you don't want to remove FFP, what about what happens in other sports, eg golf, horse racing

A Handicap system, relegated prem clubs can decide level of PP support it requires to maintain its squad, with a formula devised to equate to PP = points deduction at the start of the season. E.g. 10 million PP = starting the season on -5 point, 20 million on -8 points etc, not saying the numbers are correct, but sure it could be looked at to see what is the average number of points archived extra over the last few years with PP. This would incentivise clubs to reduce the need for PP and come in line with FFP. Of course the yo-yo teams would not want as removes the massive advantage they have, but at least we would get closer to a fair competition.

That’s not the worst idea, but I’d still prefer the PP to stop.

[Bristol Rob]

32 minutes ago, Harry said:

 

Re credit. 
I’m not buying beans off of a competitor in the same industry and my purchase from Aldi doesn’t have any cash flow impact on Asda, Lidl, Tesco etc. 
I’m also not in financial difficulty and having to rely on selling something I own in order to pay for the beans. 
Transfers should be paid for upfront. No money, no deal. 

You'd ruin the liquidity of clubs, most - if not all - structure their finances to build not to lump, if you had a 5 year plan of which years 1 and 2 saw a rebuild and then hopefully the following years, success; you would fall down after the first transfer window, but by structuring finance over a number of years you can continue the build without having to immediately sell someone so you can make payroll in 3 months time.

[BTRFTG]

32 minutes ago, sh1t_ref_again said:

As a totally radical different solution, if we accept that PP is needed and that its very difficult to alter players contracts, but the PP clubs have a huge advantage over the clubs without PP and you don't want to remove FFP, what about what happens in other sports, eg golf, horse racing

A Handicap system, relegated prem clubs can decide level of PP support it requires to maintain its squad, with a formula devised to equate to PP = points deduction at the start of the season. E.g. 10 million PP = starting the season on -5 point, 20 million on -8 points etc, not saying the numbers are correct, but sure it could be looked at to see what is the average number of points archived extra over the last few years with PP. This would incentivise clubs to reduce the need for PP and come in line with FFP. Of course the yo-yo teams would not want as removes the massive advantage they have, but at least we would get closer to a fair competition.

In the 'land of the free' look at how ultra tight, protectionist legislation keeps professional sport competitive, promoted, entertaining and participated to the n'th degree, all delivering wealth in abundance to players and owners alike.

As morally corrupt as it sounds, it works. Bosman has much to answer for.....

[Hxj]

I think that all of the above simply demonstrates the problems in changing the current system!

 

[ExiledAjax]

6 minutes ago, BTRFTG said:

In the 'land of the free' look at how ultra tight, protectionist legislation keeps professional sport competitive, promoted, entertaining and participated to the n'th degree, all delivering wealth in abundance to players and owners alike.

I had the mental idea that you could have all players contracted not by the Clubs, but by the League. Let the Leagues retain the broadcast revenues rather than distribute them to their Clubs. Then let the Prem and the EFL contract enough players to supply each team in each division with a number of, let's say 25, players. They'd also have a reserve of other players to fill injuries or other gaps. The Leagues would pay the wages, which would be stratified into bands based on age, experience, position etc.

Clubs would use match day, commercial, and their other revenue streams to simply cover their overheads, non-footballing staff, and other costs.

Every season clubs would bid for a 25 man squad. Every team would get the same budget of credits with which to bid. Picture it as fantasy football, done by auction, and with only one copy of each player. As with the American drafts, the worst performing team in the prior season would get first bid. So in the Prem, that would be the winner of the Championship play-off, then 2nd in the Champ, then winner of the Champ, then starting upwards from 17th.  You'd have to have 3 goalies, and a certain number of other positions. You would bid to have Player X for just one season. At the end of the season that you'd bid for, you'd have first option to renew before Player X went back into the pool.

Mid-season transfers could happen, but would be administered by the league. Summer transfers wouldn't happen as you'd either renew a player, or they 

Upon relegation/promotion you'd have the option to reserve a certain number of players, but the rest of your new squad would have to be won through you're new division's auction. 

Clubs could still have an academy, but a youth player's first professional contract would be with the League not with the club. However, the club that had trained the guy would have first refusal when he first went for auction. 

It's a clearly ludicrous idea, no doubt with dozens of holes, issues, or problems, it's from a parallel universe, and is impossible to implement, but in my mind it sounded quite fun. Sketching out ludicrous solutions on a napkin can be quite fun.

[robin_unreliant]

We all know that they are bound to scrap PP just before bcfc finally get promoted. Inevitably the gravy train is derailed just as we are about to get aboard. So it won't be in the next year or two, that's for sure. 

[Bristol Rob]

4 hours ago, billywedlock said:

But if the same for all it does not matter . Would reduce transfer fees too . It forces you to manage your cash flow . It will all even out . 

Then it would need to be adopted globally, and I'm not sure the PL have that power.

Cash up front for a 100mil player - paid by the club  - non starter - paid in installments over 4 or 5 years....

[Waconda]

7 hours ago, Harry said:

I haven’t thought this through in any detail, just off the top of my head now, but is there some way of incorporating something into a players contract. A clause that MUST be legally added to all contracts. 
 

If you get relegated, and there is no relegation salary reduction clause in the contract, then the contract should be renegotiated, and if no renegotiation can be reached, the contract can be cancelled immediately. 
 

So promoted teams can still sign someone on £100k per week on a 5 year deal, but if they go down, they have to restructure the contract to, say £40k per week, or completely cancel the contract and the player becomes a free agent. 

As said, not thought through in any detail, but there surely must be a way of putting this back on the players heads - otherwise they are essentially being paid ridiculous wages for failure. Get paid loads, get relegated, still get paid loads. 
Surely there must be something that says you must reduce the wage in line with projected income. 

Many people in football get paid for failure, not just players.

[Waconda]

Some sort of wage cap is the only answer.

[Davefevs]

1 minute ago, VT05763 said:

Some sort of wage cap is the only answer.

The previous proposals were a good starting point for discussions….think tank to find the loopholes, etc.

If you control all wages through something like PAYE or akin to PAYE with real-time reporting, you pick up issues very quickly.

A moratorium on existing contracts at the capped amount, not just PL relegated clubs.

I like the financial penalties being redistributed to the compliant clubs.

Think there is a gap around fees and losses that needs exploring, e.g. amortisation of fees can be no greater than x% of income.  But it’s a good starting point.

[Waconda]

2 minutes ago, Davefevs said:

The previous proposals were a good starting point for discussions….think tank to find the loopholes, etc.

If you control all wages through something like PAYE or akin to PAYE with real-time reporting, you pick up issues very quickly.

A moratorium on existing contracts at the capped amount, not just PL relegated clubs.

I like the financial penalties being redistributed to the compliant clubs.

Think there is a gap around fees and losses that needs exploring, e.g. amortisation of fees can be no greater than x% of income.  But it’s a good starting point.

Yep something like this.

All I ever hear is "it will never work" "clubs will find a way round it"

Well not if if it is implemented and policed properly IMO.

[Davefevs]

2 minutes ago, VT05763 said:

Yep something like this.

All I ever hear is "it will never work" "clubs will find a way round it"

Well not if if it is implemented and policed properly IMO.

Yep, if once implemented and a club does something not in the rules, they must raise it asap, ideally before they do it, and it goes to a vote as to whether it’s compliant, non-compliant or should result in a rules update.

For example, Mel Morris didn’t just decide to change Derby’s amortisation policy overnight, he would’ve worked with his accountants etc to come up with the plan over a period of time.  At that point under the new rules, he would have to lodge that idea and accept the decision as per the vote.  In fact Mel should’ve raised it during the initial review / consultation period.

It doesn’t need to be “impossible”.

[Mr Popodopolous]

13 hours ago, BTRFTG said:

As and when parachute payments cease shortly thereafter will follow removal of promotion to / relegation from The Premier, else what might be the point?

FA golden share should block that tbh. Independent Regulator might also supersede such risks.

Edited December 1, 2021 by Mr Popodopolous

[Mr Popodopolous]

9 hours ago, Davefevs said:

They are today….just amortised across the life of the contract.

Might vary- the amortisation is the non-cash expense bit and that's relevant for FFP, the installments bit- well Derby to take an example e.g. owe some for Bielik and Jozwiak- payment up front would prevent such issues and might force a bit of rationality on clubs but I dunno, not entirely comfortable with all transfers have to be paid for up front. Positives and negatives to all of it tbh. I pick on Derby but tbh pretty sure all clubs- outside of Non League- will have transfer debtors and creditors.

It could be a good idea, but it could also further erode competitive balance. If your club are owned by a guy with more money than sense who just is happy to pour it in, let alone a sovereign state then they can just pile up the full fee up front- those clubs who are run more along business lines are then penalised. Then again it disincentivises aspects of risky behaviour but at what cost to competition? It's a hard one IMO.

[Olé]

13 hours ago, Harry said:

100%. 
This is something that should be applied across the board. 
If you’re gonna pay £20m for a player, you pay it now. All of it. Upfront. 
Not spread across 5 years or whatever. 
I don’t leave the supermarket with 4 tins of beans and say “I’ll pay you for one now, cuz I’ll be having it tonight, I’ll then pay you for the 2nd tin next Sunday, then the 3rd tin next month etc”. 

Transfer fees should be paid in full, upfront. 
That’ll solve cash flow issues if you haven’t got the money you can’t buy the player. 

The trouble is clubs use future earnings to increase their buying power, if I can offer £1m now or £3m of future earnings the latter offer is more attractive to selling clubs unless they are in a short term hole. In a competitive transfer market that is a significant advantage, and the selling club is keen on it too as it offers them a bigger return.

Also, your tin of beans example is pretty standard accounting regardless mate - even if you do pay all up front, after your first night of beans you still have 3 tins of beans to come and so only account for the cost of one. Putting aside your love of beans, it is amortization that means selling clubs know a club can pay much more over time.

On parachute payments as a whole - I wonder if Norwich have broken the model?

To my mind it only exists to encourage promoted teams to splash out on improving the Premier League product (literally being willing to jump even higher) - Norwich have been up several times and just banked the money and left (literally gone up in the plane and said I don't fancy it and come straight back down in the plane).  

They're not really using an expensive "parachute" and no doubt the PL would prefer to distribute it to teams like Villa who are only too ready to spunk it everywhere, sometimes before the plane has even left the runway (complex mixed metaphor this one)

[Davefevs]

2 hours ago, Olé said:

The trouble is clubs use future earnings to increase their buying power, if I can offer £1m now or £3m of future earnings the latter offer is more attractive to selling clubs unless they are in a short term hole. In a competitive transfer market that is a significant advantage, and the selling club is keen on it too as it offers them a bigger return.

Also, your tin of beans example is pretty standard accounting regardless mate - even if you do pay all up front, after your first night of beans you still have 3 tins of beans to come and so only account for the cost of one. Putting aside your love of beans, it is amortization that means selling clubs know a club can pay much more over time.

On parachute payments as a whole - I wonder if Norwich have broken the model?

To my mind it only exists to encourage promoted teams to splash out on improving the Premier League product (literally being willing to jump even higher) - Norwich have been up several times and just banked the money and left (literally gone up in the plane and said I don't fancy it and come straight back down in the plane).  

They're not really using an expensive "parachute" and no doubt the PL would prefer to distribute it to teams like Villa who are only too ready to spunk it everywhere, sometimes before the plane has even left the runway (complex mixed metaphor this one)

The problem is @Harryhad suggested Heinz beans to Mrs Harry, but have given her the £5 note, she saw some cheaper Cross & Blackwell ones and slipped the change into her purse, and ran off with the kids to Suffolk!

[BTRFTG]

7 hours ago, Mr Popodopolous said:

FA golden share should block that tbh. Independent Regulator might also supersede such risks.

Why would they want to block if both clubs, fans and, most importantly, TV viewing figures demand it?

We already know the gulf in Premier to Championship and it's been demonstrated the only way to break into the top flight and stay there is to flit between the leagues for a few seasons. Without PPs there's insufficient scope to improve a promoted squad to be remotely competitive at the higher level. That's why lesser Premier players are OK when having to drop down a playing level as their wages don't.

It's already the case that promoted teams have become whipping boys and removal of PP will only make that worse. A few seasons down the line it'll be the case of whether or not clubs will pick up a point all season, games being uncompetitive exhibitions and few will pay to watch that. If that's a threat to Premier income, all will act swiftly to protect.

We already have some who say they prefer to watch their team playing competitive fixtures in the Championship than getting thrashed week in, week out. Further exacerbate the divide and we'll start toward the continental model of having 'feeder' clubs and I've no desire to support Bristol City (In association with Brighton & Hove Albion) FC.

[SecretSam]

On 30/11/2021 at 08:27, Bristol Rob said:

Obvious fix is to increase the solidarity payments so the playing field is level, but that won't help relegated clubs cope with the wage bills and transfer installments they'll be liable for, and whilst you could build in relegation clauses to players contracts, if you were signing a contract with a bottom 5 club in January, you would probably request that your top flight wage is unrealistic to compensate for the likely drop in salary.

My preferred option would be that parachute payments be held centrally and can only be used to pay the difference between the Premier league salary and the expected Championship salary for players relegated and signed no later than the penultimate transfer window. Purely to stop clubs from starting their Championship assault in their last Premier league season, with one flurry of last window activity.

(Edit. Obviously, with the unclaimed money being evenly distributed across all clubs).

That's an interesting solution. Alternatively, they could just say "suck it up", and force clubs to take the risk, same as they do moving from L2 to L1, L1 to Championship, etc. This would mean that clubs promoted would have to weigh up risks.

There would still be a financial gap from the TV revenues earned in the Prem, but it would be up to clubs whether to spend this all in year 1 to keep them in the Prem, or invest it in the future.

[Harry]

5 hours ago, Olé said:

The trouble is clubs use future earnings to increase their buying power, if I can offer £1m now or £3m of future earnings the latter offer is more attractive to selling clubs unless they are in a short term hole. In a competitive transfer market that is a significant advantage, and the selling club is keen on it too as it offers them a bigger return.

Also, your tin of beans example is pretty standard accounting regardless mate - even if you do pay all up front, after your first night of beans you still have 3 tins of beans to come and so only account for the cost of one. Putting aside your love of beans, it is amortization that means selling clubs know a club can pay much more over time.

On parachute payments as a whole - I wonder if Norwich have broken the model?

To my mind it only exists to encourage promoted teams to splash out on improving the Premier League product (literally being willing to jump even higher) - Norwich have been up several times and just banked the money and left (literally gone up in the plane and said I don't fancy it and come straight back down in the plane).  

They're not really using an expensive "parachute" and no doubt the PL would prefer to distribute it to teams like Villa who are only too ready to spunk it everywhere, sometimes before the plane has even left the runway (complex mixed metaphor this one)

 

2 hours ago, Davefevs said:

The problem is @Harryhad suggested Heinz beans to Mrs Harry, but have given her the £5 note, she saw some cheaper Cross & Blackwell ones and slipped the change into her purse, and ran off with the kids to Suffolk!

On reflection, my idea doesn’t amount to a hill of beans in this crazy world! 

[cheese]

3 hours ago, Davefevs said:

The problem is @Harryhad suggested Heinz beans to Mrs Harry, but have given her the £5 note, she saw some cheaper Cross & Blackwell ones and slipped the change into her purse, and ran off with the kids to Suffolk!

Is that another Mark Ashton link?

[Davefevs]

44 minutes ago, cheese said:

Is that another Mark Ashton link?

He was toast when he reached 57 varieties of players!