• Paul Barber on parachute payments and Albion finance

    Parachutes

    Following the recent article penned on the Financial Fair Play (FFP) changes announced last week, it's fair to say that @bozza and I have been taken to task in a series of emails by Albion CEO Paul Barber.

    Paul's viewpoint is that my comments didn't deal with all of the issues raised at the Football League meeting last week, (a point I concede, but, the Football League press release didn't deal with a number of issues that Paul thinks are very significant). He was especially concerned about my criticism of 'Greater Good' comment, which in his view was taken out of context.


    Paul then spoke to NSC in a 70 minute conversation (of which he was probably talking for 68 of those minutes), on a wide range of topics. This covered the difference in playing styles under recent managers, football pricing in Germany, parachute payments, why the Albion voted in favour of the FFP changes, changes to the club since the move from Withdean, criticism of staff and management, TV deals, NSC, player wage negotiations, fan participation on the board, working for Tony Bloom and many, many more.

    Sadly I had to go out to my shed before getting the lowdown on what did happen to the 1983 Cup Final money.

    Trouble

    Under the current rules, clubs relegated from the PL receive parachute payments for four years following relegation totalling £59 million. These payments are respectively £23 million, £18 million and two amounts of £9 million.
    Under the proposed changes, this would be reduced to three years, and just two years for clubs who only spend one season in the PL following promotion.

    If those rules were applied at present, the parachute payment table would look as follows:



    (The 'New proposals' column shows whether the clubs would receive parachute payments under the changes tentatively agreed at the meeting last week).

    Paul Barber argues, as do many others, that parachute payments give clubs an unfair advantage. Personally, as evidenced by the above table, I think that assertion is not necessarily the case.

    Paul's response to the above was as follows:

    "Just because parachute payment recipients aren’t in good league positions doesn’t mean they don’t have an advantage over clubs that have never received – or don’t currently receive - them; to be frank, this is the most popular misconception of them all from people that do not work in football. League position is just one factor in assessing the benefit to parachute payment clubs.

    "They certainly have bigger buying power (fees and salary) for key players, more flexibility on structure of contracts (time period, incentives – vital if building squad over time), and more ability to subsidise loan player contracts (from PL clubs) etc

    "How clubs use their parachute payments depends on the strategy of individual clubs and how they’ve structured things while in the PL; for some clubs, relegation from the PL is truly catastrophic (e.g. Wolves, Leeds) regardless of parachute payments being spent on player wages; for other clubs parachute payments may allow clubs to avert such catastrophes by retaining key players – so it isn’t just about them bouncing straight back.

    "For other clubs, relegation means major sponsorship deals fall away or are dramatically reduced so parachute payments can also be used to support this loss in income, and for some clubs, parachute payments are used to help fund key improvements to infrastructure which helps them to stabilise, re-build or re-position before mounting a challenge for promotion etc

    "In my opinion, parachute payments undoubtedly provide an advantage – regardless of league positions or bounce-back promotion records."

    What isn't yet clear (as I believe from PB's comments the matter has not yet been finalised) is the amount to be received by relegated clubs under the new proposals.

    PB also said that the Albion genuinely agonised over which way to vote, because, as champions of the old FFP rules, it did seem to outsiders as if a vote in favour was a U-Turn.

    After a series of long and detailed board meetings, in which all the pros and cons were discussed in drawn out detail, the club went with the decision to support the proposals. One of the reasons for this was that the old (i.e. current) FFP rules were drawn up before the PL massively increased parachute payments, which in PB's views have increased the relative advantage over the likes of the Albion.

    Fix You

    Presently the PL 'gifts' FL clubs solidarity payments, which is effectively a (large) cut of the PL TV monies.

    Historically this has suited the PL clubs very well, as they have used the threat of removal of the solidarity payments when negotiating issues such as the Elite Player Performance Plan (EPPP), which allows PL clubs to pick up promising youngsters currently signed to FL clubs for a pittance.

    Under the proposals this 'gift' will become enshrined in the formal relationship between the PL and the FL. Presently the 'gift' is in the region of £2.3 million for Championship clubs, £360,000 in League One and £240,000 for those in League Two.

    These figures exceed the amounts received from FL clubs in relation to the TV deal with Sky, so are very significant, and clubs could not survive without them.

    In addition, there will be an automatic escalator in the solidarity payments, so that every time a new PL TV deal is negotiated, the clubs in the FL will benefit from, presumably as they (a bit like the PFA) are on a percentage of the sum, rather than a precise figure.

    This is again good on the face of it, although my view is that whenever a new TV deal is negotiated, whatever comes in the door automatically goes out of it, as players and their agents use the deal to gain leverage in wage negotiations.

    Paul Barber's comments on the above are:

    "Regarding your point about TV deals flowing to players, this is true at the elite (PL) level to a very large extent, but far less so at lower levels; this means the indexing of solidarity payments to PL deals is indeed very good news for the smaller clubs – and because of your main point, even more reason the vote for change was positive for the greater good as smaller clubs will see an increase in income that they can now count on, rather than pray for, each year.

    Speed of Sound

    Paul Barber also mentioned that:

    "The new rules will deliver an FFP framework that, for the first time, is bought in to by Championship clubs AND PL clubs so that future arguments should, in theory, be irrelevant and avoided. This is a very significant point that most media, including your article, has overlooked.

    "It’s far less likely that a set of FFP rules agreed by PL and Champ clubs will be abused – there will be little, if any, sympathy from any direction if they are; that’s a fundamentally different situation to the current rules which were conceived and agreed by the Championship in isolation from the PL and should not be under-estimated."

    The devil, as always, will be in the detail, and there will be individual clubs in all three divisions of the FL who will benefit to a greater or lesser extent. However, although PB would not be drawn on the issue, there are potentially massive ramifications arising here.

    Should the PL and FL formally agree a set of rules covering the nature of their relationship, then potentially clubs who agree the FFP limits set by the FL could be subject to sanctions upon promotion to the PL.

    The extent and severity of such sanctions could be similar to those applied by UEFA in relation to the Champions League, which range from fines, squad caps, points deductions and the ultimate threat of expulsion.

    If and how the sanctions could be applied would be a bonanza for the lawyers and accountants advising clubs, as they seek to cut deals, be creative with the numbers, and put all sorts of obstacles in the way. However, the intentions, if not the delivery, are a potential welcome step forward in my opinion.

    Overall this looks splendid, but, however, I remain cautious. Anyone observing the narcissic behaviour of some in control of football clubs (and I don't include either our chairman or CEO in this observation) will know that they will aim to exploit, leverage and abuse the rules as best they can, mentioning of course no 'triffic' clubs who have shown two fingers to FFP rules in the past of course.

    Yellow

    So there you have it, the results have been poor to date this season (PB opines that the performances have been less so) and fans are grumbling, at him, Tony Bloom (there's "no chance" of TB throwing his toys out of the pram and selling up), Sami, Nathan Jones, David Burke and so on.

    As far as Paul Barber is concerned, in the nature of the job you need a thick skin and it goes with the territory. We are living in a blame culture, and therefore it's these heads to whom tomatoes are first thrown.

    Paul is certainly open, eager to talk, extremely knowledgeable, experienced, knows his football onions (he's even done his coaching badges) and has in my opinion (in the words of the Monty Python Spanish Inquisition sketch) a fanatical devotion to his job.



    If you have a grumble about something to do with the club, he usually responds, and it won't be a two word off the cuff reply.

    The fans forums, emails, interviews, phone calls and so on are testament to his willingness to both listen and respond to fans. He doesn't sugar the pill, and will say things that you don't like to hear at times, so instead of moaning, why not do something positive?

    Read more about the Albion's finances.


    Comments 10 Comments
    1. Hotchilidog's Avatar
      Hotchilidog -
      Yet another informative and excellent read. Thanks very much.
    1. Brovion's Avatar
      Brovion -
      The beer's still too expensive.
    1. KZNSeagull's Avatar
      KZNSeagull -
      Very good article, again.

      Just because relegated clubs are generally not seeing the benefit of parachute payments reflected in their league position, it is still 25m quid in their first season that they do not have to find from elsewhere. You also have to factor in that the relegated team are, in effect, a bunch of overpaid charlies used to losing and it takes a while to get out of that mentality. Give that 25m to a team on the up and they would do a hell of a lot more with it. It is a huge advantage.
    1. Creaky's Avatar
      Creaky -
      Would it be fair to summarise the reasons given for BHAFC voting for the 'new' FFP rules as threefold?

      1) Parachute Payments will be made for three years rather than four.
      2) Solidarity Payments will be formalised as a percentage of TV royalty payments received.
      3) Alignment of the Premier League and Championship FFP rules.

      On the face of it strong arguments for voting in the new system BUT isn't it rather premature to do so at the present?

      1) No figures have yet been decided on the parachute payments - If it is the same total as the current 'four year' figure paid over three years then I would think that would exacerbate the current problems with these payments rather than relieve them.

      2) Again, as I understand it, no specifics have been put forward nor agreed on regarding the solidarity payments.

      3) Alignment of the two league's rules on the face of it appears to be a 'good thing' but yet again no specifics have been drawn up regarding the synchronising of penalties for breaching the rules - simply 'suggestions' of what might happen.

      All in all voting for and the introduction of the 'new' rules without those specifics being decided appears to be somewhat hasty - why could the vote not have been delayed by a 'No Vote' until they were decided?

      I understood that the main tenet for the introduction of FFP was to ensure the sound financial footing of football clubs in the League - essentially by forcing the cutting of costs, principally made up of payments to players. None of the recent changes strike me as improving the effectiveness of FFP in that regard - quite the opposite!
    1. Giraffe's Avatar
      Giraffe -
      Did you ask what effect having 16,000 through the turnstile rather than 23,000 if the 23,000 has all paid for a ticket?

      It's a serious question as I wonder if the financial ramifcation is as great as it would seem. On the face of it we are losing 7,000 punters who are not paying for pies programmes and drinks etc, but where does that sit in the wider scheme of things.

      Clearly if they were not buying the tickets that would be a greater problem, and I guess that is the main issue that would concern them. If things continue a fall in season ticket holders could be quite damaging.
    1. El Presidente's Avatar
      El Presidente -
      Quote Originally Posted by Creaky View Post
      Would it be fair to summarise the reasons given for BHAFC voting for the 'new' FFP rules as threefold?

      1) Parachute Payments will be made for three years rather than four.
      2) Solidarity Payments will be formalised as a percentage of TV royalty payments received.
      3) Alignment of the Premier League and Championship FFP rules.

      On the face of it strong arguments for voting in the new system BUT isn't it rather premature to do so at the present?
      FFP is dead, long live sustainability.

      The vote in favour of the changes is conditional on the detailed proposals from the PL, so nothing is confirmed as yet.
    1. Creaky's Avatar
      Creaky -
      Quote Originally Posted by El Presidente View Post
      FFP is dead, long live sustainability.

      The vote in favour of the changes is conditional on the detailed proposals from the PL, so nothing is confirmed as yet.
      None of the reports have seen, ncludng the statement on the Football League's own site, make any suggestion that the vote taken was provisional.

      From the Football League's site:-

      "Following the Championship’s decision, The Board of The Football League has been given a mandate by its clubs to complete a new financial solidarity arrangement with the Premier League in accordance with that currently under discussion between the two leagues."


      Where do you get your information that the recent vote is in any way 'conditional'?
    1. El Presidente's Avatar
      El Presidente -
      Because if you read the FL comment, it says the FL has been given a mandate to complete a financial solidarity arrangement. If negotiations fail, then everything will have to be renegotiated, including the proposed changes.
    1. hans kraay fan club's Avatar
      hans kraay fan club -
      Thanks El P. Interesting stuff.

      Very interested to read that PB has taken his coaching badges. Rather refutes the suggestions from some quarters that he is a purely numbers driven suit with no real interest in football.
    1. Creaky's Avatar
      Creaky -
      Quote Originally Posted by El Presidente View Post
      Because if you read the FL comment, it says the FL has been given a mandate to complete a financial solidarity arrangement. If negotiations fail, then everything will have to be renegotiated, including the proposed changes.
      Fair enough - I don't read it like that though - in the same way that if a government is given a mandate to do something and they don't do it I wouldn.t expect there to be another vote - simply that the FL had been given instructions to agree terms for a solidarity payment deal, not even any suggestion that the clubs will have to approve any deal they do make!

      . . . and what about the parachute payments. This is given as one of the major reasons by PB for voting for the new deal without apparently knowing if these are being reduced in total - not only that but those in receipt of the payments in the first two years of doing so will also be allowed to make greater losses than the rest of the League clubs - there seems to be a major lack of reasoning in that argument to vote for the changes!

      For instance were Palace or Sunderland to be relegated at the end of this season then next season they would have to comply with the current regulations limiting overall losses to £5 million whilst receiving a parachute payment that year of £30 million. Were they to be relegated the following season though they would be permitted to make a total loss of £83 million over three years, more than twice the permitted loss of other League clubs on £39 million. Not only that but because parachute payments will be made over a three year period rather than four these could also well increase in the first year.

      Personally EP I think you should stand by the last statement in your previous article:-
      That's not a bad thing for anyone who wants to see the Albion sitting at the top table, but to claim that the changes are for the greater good is about an accurate a statement as saying there were 23,000 at the Amex for the last home game.
      Whilst on the subject of your last article do you have any information regarding the proportion of losses suffered that have to be financed via equity purchase? It still looks to me that if a club makes a loss of £5 million in the 2016/2017 season, (in line with the old rules), then all of this can be funded via a loan, commercial or otherwise, whilst under the old system £3 million of the loss would have to be funded by way of new equity.

      In conclusion I am by no means persuaded that voting for the 'New FFP' is for the 'greater good'.