Transfer Fees & TV money

[SB_90]

put this here because i know their is always someone with knowledge on here. who will know more than me in this subject & Finances. so to best of what we know havent paid a due installment on 1 of historical transfers.

but what i dont know, it stems from conversation i was having with friends about the embargo, we got on to the topic installments, i realised i dont why its so commonplace for it to be in installments i must be missing something technical & loved if some knew how to explain is why is it the preferred method for transfers like Chelsea thats been in the news alot, & with us assuming Berge, Brewster & Mcburnie. that you would pay installments & why is it so rare to pay full amount upfront. because dont you get the Premier league TV / Merit money of 120m in 1 lump sum so you would have the money to pay upfront. or am i wrong & the TV money is in installments as well

are there advantages if so what are the advantages to installments instead of upfront

 

[steve26272]

Simple, FFP & cash flow

The mudryk deal for example

£87m in one go is cash out of the bank in jan 2023

However agree to pay over the 8.5 yr term of the contract (amortisation) and all of a sudden your bill for jan 23 is now £10m, then another £10m jan 24 and so on

Meaning Chelsea could but 9 players in Jan 23 on this system for a cost of £90m, or 1 upfront deal for about the same amount

That’s why the rules are been changed to a max of 5 yrs

As the players value decreases as he ages and gets nearer to leaving on a free, so does the amount owing

Bit like buying a car on finance

The selling club will accept the spread payments in exchange for ‘interest’

So if Mudryk is worth say £60m cash, it’s £87m over instalments

Buying club bends FFP rules
Selling club creates long term financial stability
Player gets huge £££ contract and job security

 

[71Blade]

I knew Simon Jordan was on our forums UTB

 

[SB_90]

Simple, FFP & cash flow

The mudryk deal for example

£87m in one go is cash out of the bank in jan 2023

However agree to pay over the 8.5 yr term of the contract (amortisation) and all of a sudden your bill for jan 23 is now £10m, then another £10m jan 24 and so on

Meaning Chelsea could but 9 players in Jan 23 on this system for a cost of £90m, or 1 upfront deal for about the same amount

That’s why the rules are been changed to a max of 5 yrs

As the players value decreases as he ages and gets nearer to leaving on a free, so does the amount owing

Bit like buying a car on finance

The selling club will accept the spread payments in exchange for ‘interest’

So if Mudryk is worth say £60m cash, it’s £87m over instalments

Buying club bends FFP rules
Selling club creates long term financial stability
Player gets huge £££ contract and job security

ah i get it. FFP makes alot of sense & i see why selling clubs would want that. also it also will make sense at why its clubs can get in such dire straits.

because we know football & using Chelsea fans or manager as an example none of them are going to happy next season. saying signing nobody is fine, because we bought 600m of players last season. they will expect new signings. so does it end up in a pyramid scheme as thinking if you spend £80 on food at tesco you can stretch it over 5 weeks. but what happens when you have go food shopping next week. youve got to find a to pay for this weeks & 1/5th of last weeks.

 

[Houston_Blade]

It’s mainly to do with cash flow and affordability as FFP works the same whether you pay the whole lot up front or in instalments.

The ‘cost’ in the accounts each year is the total fee / number of years of contract (e.g. £10m fee and 5 year deal = £2m per year in the accounts). This is the ‘amortisation’ that is widely discussed and is the same as depreciation but it’s not for an object (like a car or building etc.) so it’s called something different.

Like the poster above says, if a club is willing to pay up front then they might get a discounted price as the cash is received all in one.

Most businesses don’t have loads of spare cash sat around so they pay for things in instalments. Football transfers are the same.

The point on the TV money is partly relevant, but if you’re a football club and you have a wage bill of £100m over a season and know that over the course of the season you’ll get £120m in tv money. Then it’s prudent to use this to pay the wages and other running costs with (e.g. receive £40m August, £40m December and £40m March) but don’t go and blow it all in transfers the day each instalment comes in as you’ve got wages to pay each month as well and the other costs of running the club, including transfer instalments etc.

These are simplistic examples and there are many other things to consider but it illustrates the point.

 

[Sean Thornton]

It’s mainly to do with cash flow and affordability as FFP works the same whether you pay the whole lot up front or in instalments.

The ‘cost’ in the accounts each year is the total fee / number of years of contract (e.g. £10m fee and 5 year deal = £2m per year in the accounts). This is the ‘amortisation’ that is widely discussed and is the same as depreciation but it’s not for an object (like a car or building etc.) so it’s called something different.

Like the poster above says, if a club is willing to pay up front then they might get a discounted price as the cash is received all in one.

Most businesses don’t have loads of spare cash sat around so they pay for things in instalments. Football transfers are the same.

The point on the TV money is partly relevant, but if you’re a football club and you have a wage bill of £100m over a season and know that over the course of the season you’ll get £120m in tv money. Then it’s prudent to use this to pay the wages and other running costs with (e.g. receive £40m August, £40m December and £40m March) but don’t go and blow it all in transfers the day each instalment comes in as you’ve got wages to pay each month as well and the other costs of running the club, including transfer instalments etc.

These are simplistic examples and there are many other things to consider but it illustrates the point.

It’s amortisation of an intangible asset. Which is a recognised asset that has no actual physical substance such as a football stadium has.

For an example of an intangible liability, think FallowfieldBlade s brain.

 

[Houston_Blade]

It’s amortisation of an intangible asset. Which is a recognised asset that has no actual physical substance such as a football stadium has.

For an example of an intangible liability, think FallowfieldBlade s brain.

Yep, was trying to keep the jargon to a minimum!

 

[Sean Thornton]

Yep, was trying to keep the jargon to a minimum!

That sort of talk leads to 100 plus page threads…….

 

[Le Cynique]

Simple, FFP & cash flow

The mudryk deal for example

£87m in one go is cash out of the bank in jan 2023

However agree to pay over the 8.5 yr term of the contract (amortisation) and all of a sudden your bill for jan 23 is now £10m, then another £10m jan 24 and so on

Meaning Chelsea could but 9 players in Jan 23 on this system for a cost of £90m, or 1 upfront deal for about the same amount

That’s why the rules are been changed to a max of 5 yrs

As the players value decreases as he ages and gets nearer to leaving on a free, so does the amount owing

Bit like buying a car on finance

The selling club will accept the spread payments in exchange for ‘interest’

So if Mudryk is worth say £60m cash, it’s £87m over instalments

Buying club bends FFP rules
Selling club creates long term financial stability
Player gets huge £££ contract and job security

As Sick Boy said: "Beautifully fuckin' illystrated".