Following Todd Boehly’s purchase of Chelsea, the football club have been very busy in the transfer market. Not only have they spent an absurd amount of money, bringing the likes of Cole Palmer, Enzo Fernandez and Mykhailo Mudryk to Stamford Bridge, but they’ve also been locking these players down to unusually long contracts. Deals that some of the players regret signing, according to The Athletic. This is all down to trying to avoid breaching financial regulations, according to a football finance expert.
The last few years have been very up-and-down for Chelsea. They’re spending more money than they ever have, recruiting some of the most promising footballers on the planet, but that hasn’t translated to success on the pitch. They’ve finished outside the top four in the last two seasons and while they’ve been tipped to bounce back this year, there’s no guarantee the club will turn things around.
They’ve yet to find a winning formula on the pitch, but they’ve put a lot of trust in the figures that they’ve signed recently. Palmer’s recent new deal saw him sign a nine-year contract, while Fernandez and Mudryk signed deals of a similar length when they joined the club. Trust in the stars to play key roles going forward wasn’t the only reason for the deals, though, as Tom Bason, a football finance expert at Coventry University revealed, via the Mirror.
When selling a player, the total fee is recorded immediately and added to a club’s financial records. That’s not quite the case when buying a player, though. Instead, the fee is stretched out across the length of the contract. So, the longer a deal is, the more years the money is spread out across. As a result, this means that they spend less each year according to financial regulations, according to Bason.
“Football transfers are recorded asymmetrically. That means that they’re not recorded in the same way when selling a player as they are when buying a player. When you buy a player that goes into the accounts and with the cost of the player, the transfer fee spread over the duration of the contract, it’s amortised over the duration of the contracts.
“Say a club buys a player for £20million and that player signs a five-year contract, instead of that costing the club £20million in the accounts up front, that £20million is spread over the five-year contract, a £4million amortisation charge each year for the five years of that contract, adds up to the £20million transfer fee.”
In theory, it’s a smart logic. In practice, though, Chelsea’s strategy could come back to haunt them in the future, as Bason goes on to explain.
With the deals stretched out over so many years, the players’ values are viewed differently than they would be in most normal cases. Bason revealed that the issue with this method is that the Blues are paying a portion of the player’s value each year, so they will struggle to turn a profit on players should they sell them on.
“Where Chelsea are potentially falling foul is that because they’ve had such long contracts, relatively little value is dropping off each year. So say someone like Mudryk, for example, say he cost £80million on an eight-year contract, he loses £10million a year.
“He [Mudryk] would now be valued at £65million in the accounts [having signed 18 months ago]. That means for Chelsea to make any sort of profit from moving him on, they have to sell him for more than £65million. So that’s perhaps an issue that Chelsea have got by having such long contracts and if a player does not work, they are amortising less each year and are retaining a higher value in the books.”
From what we’ve seen from Chelsea under Boehly’s reign, though, it doesn’t seem like the club will mind losing their money too much as long as they figure out a way to compete in the Premier League.
