Thursday 21 September 2017

For club or country? PSG signing is boost for Qatar as well as France

World's sixth-biggest club's €222m transfer is a political statement

Neymar juggles the ball as he poses for photos at his new club, Paris St Germain, on Friday Photo: Reuters
Neymar juggles the ball as he poses for photos at his new club, Paris St Germain, on Friday Photo: Reuters

Leonid Bershidsky

Just as European football authorities were beginning to get a warm, fuzzy feeling about their success at defeating the game's dependence on wealthy owners who spent irresponsibly, a single transfer brought home the reality: Soccer is no closer to financial sustainability. It is as wedded as ever to the easy money.

On Friday, Paris St Germain acquired Brazilian star Neymar by paying Barcelona his seemingly impossible transfer fee of €222m. Coupled with Neymar's salary, €600,000 a week after tax, it's by far the biggest transfer deal ever and an enormous burden for a club.

According to Deloitte's latest 'Football Money League' report, PSG is the world's sixth-biggest club by revenue, which reached €520.9m last season. Blowing more than half of that on one player doesn't look like a great move business-wise, especially as Uefa has a rule against big financial losses.

According to the Uefa's "financial fair play" policy, adopted in 2010, a club can spend €30m more than it earns in a season if that loss is covered by a direct contribution from owners. Uefa boasted in its benchmark report this year that "Financial Fair Play regulations have turned around football finances, creating a more stable and sustainable financial position for European top-division clubs." The teams' aggregate operating profits in the last two years hit €1.5bn, compared with €700m in losses in the two years before the rules were introduced. This, however, is a blatant case of window-dressing through creative accounting that would have been met with outrage and ridicule in the corporate sector.

PSG would need to sell off half its team, or all its most valuable players, to break even on Neymar. But it won't have to do that: More likely, we'll just see the club's revenue rocket to cover the potential loss. PSG is owned by Oryx Qatar Sports Investment, a vehicle for the Qatari government. In 2014, it declared as one of its revenue sources a €200m sponsorship contract with the Qatar Tourism Authority. Uefa didn't turn a blind eye: It discounted the contract to €100m, fined the club and limited its transfer activity. But in 2016, PSG announced a new QTA contract worth €175m.

It's also not impossible for a club to pretend that contributions from the owner are from unrelated parties. According to Uefa, Zenit St Petersburg, the Russian club owned by the government-run Gazprom, is ninth among European clubs in terms of operating profit. According to Deloitte, however, almost three quarters of its revenue - an high share - is "commercial," coming from sponsorship deals often tied to Gazprom-related companies only loosely affiliated with the gas giant.

PSG, too, has a higher share of "commercial" revenue than most top clubs - and Uefa counts it as the second best in Europe in terms of operating profit. Despite Uefa's best efforts, clubs that are essentially owned by nations - and by billionaires with diverse business interests - have largely managed to book the owners' payments as commercial contracts. That's a big reason why "financial fair play" has been so successful at fixing the economics of top soccer clubs.

There are a multitude of reasons why Qatar might want to strengthen PSG with Neymar, one of the world's best players.

French clubs underperform in tournaments such as the Champions' League. Winning can give a nation as passionate about soccer as France an enormous lift. Qatar, which is trying to fight out of isolation by its Persian Gulf neighbours, would get a lot of goodwill in France if PSG did well.

This kind of popular diplomacy is one of the best chances for the emirate to build trust in the West, which it needs like never before.

The motives of Qatar have little to do with soccer as a business, which Uefa would like to promote. Soccer has always been used by nations to stir up patriotism but that kind of pageantry should be limited to national teams and tournaments such as the World Cup

Arsene Wenger is right when he complains that "once a country owns a club, everything is possible". Clubs should be private, and they should strive to make fans and viewers their biggest revenue sources: that's how the sport thrives, and fair competition develops.

Uefa needs to take a long, hard look at the Neymar deal and at its financial rules. They may well be too lenient toward state-controlled and other vanity-motivated owners.

Bloomberg

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