Premier League approves spending controls

As of yesterday the Barclay's Premier League voted to approve fairly strict spending controls for the member clubs. This is a different than the much talked about FFP, which is sanctioned by UEFA, specifically for teams that play in European competitions.

The vote needed a 2/3rds majority and passed 13-6. Reading decided not to vote. West Bromwich Albion, Swansea, Southampton, Manchester City, Aston Villa, and Fulham voted against the measure.

What does it mean?

For the clubs, there will be restriction's on wage growth and restriction's on losses that a club are allowed to have (to limit transfer fees)

From next season, clubs with total player costs of more than £52m (13 of the 20 according to latest figures) can only increase the total bill by £4m from their pot of additional TV revenue. The following season, they can add an additional £8m and another £12m in 2015/16. But additional money earned from commercial deals and match-day income can also be put towards the total.

Arsenal are of course well over £100m for their wage bill, but with the 2nd highest match-day and the 2nd highest commercial revenue, they should have no problem increasing the wage bill if so desired.

Clubs can lose a total of £105m over a rolling three-year period, starting next season. Losses must be covered by owners and future funding guaranteed for the next three years – arguably the most significant measure as it will prevent clubs being left in the lurch with unsustainable wage bills. As with Uefa's rules, investment in infrastructure and youth development can be written off. The hope is that it will discourage short-term splurges and encourage more sustainable investment.

This part of the measure is all about protecting club's from their owners. A team like Portsmouth borrowed heavily to pay transfer fees and wages to be competitive. When they missed out on Europe and revenue did not meet obligations, the team was forced to go into administration. Chelsea on the other hand have their money come directly from Roman Abromovich. This will still be allowed under the new rules, but the amount that can be spent is limited. As you can see it averages out to £35m a season. This is of course after spending and revenue or cash on hand. Teams with high revenues will still be able to spend on big transfer's without having big loses. Gone are the day's of the £100m window for Manchester City and Chelsea. QPR will certainly have to spend less since their tiny stadium does not produce much revenue.

How will it be enforced?

Point deductions. This is a fairly strong threat as it can keep a team from winning the title, making it to Europe, or even mean relegation.

*Update: Upon further reading, it is unclear whether point deduction will be included. The "enforcement" may be as minimal as stricter financial oversight, which would not be nearly as effective.

What will we see in the next few years?

Many people fear(think) that this will mean a virtual enforcement of the status quo. Team's with high revenue, United, Chelsea, Arsenal, will benefit greatly form this measure. They are all but guaranteed to be able to spend more than any one else now. Manchester City will have some issues, they lag behind the other "big clubs," and while their revenue has been on the rise, much of their success has come from taking massive losses to fund transfers. They will still be able to spend big, but you will see transfer windows more like this past summer than the summers previous. It will be extremely challenging for another team to challenge for the top, even if Carlos Slim were to buy Norwich, he can only spend £105m over a rolling 3 years to make them better. This is still possible but it would take many more years of buying than it took City.

Arsenal fan's should happy about these new rules as no club is in better financial position to deal with them. It should have no visible affect on the team's operation or transfer policy. The importance of the new commercial deal's are vital to Arsenal's purchasing power, and if the rumor of decreases in the amount if Champions League is missed are true, then Arsenal really need to focus up and secure that 4th place trophy.

*Another item mentioned in these rules is limiting agent fees. Undoubtedly a good thing, but I have yet to run across any confirmation of exact rules for this.

Good info can be found here and here.

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