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Wealthy clubs grapple with financial fair play

Will high-spending clubs like Manchester City run afoul of new laws designed to restrict spending by especially rich owners of soccer teams, such as Manchester City, which since being bought in 2008 has spent hundreds of millions of dollars on players in addition to the hundreds of millions paid to acquire the club?

According to news reports, cumulative losses in European soccer surpassed $1.5 billion in 2009 alone. Manchester City reported losses totaling $190 million for the 2009-10 season. Its city rival, Manchester United, recently delayed a proposed stock offering on the Singapore Exchange designed, in part, to reduce approximately $500 million in outstanding debt.

A new initiative called Financial Fair Play has been implemented, explains Jere Longman. With a two-year phase-in period, it is designed to rein in runaway deficit spending and provide long-term stablity. Teams will be allowed to spend only the equivalent of what they generate from so-called soccer-related income: broadcast rights, ticket sales, merchandising, competition prize money and corporate sponsorships. Is that a mandate that can, and should, be adopted?

Its legality may be questioned and tested in court. Sheik Mansour bin Zayed al Nahyan, a member of the royal family of the emirate of Abu Dhabi, paid $330 million for City in 2008 and has spent hundreds of millions more on players. That's an expensive business model, yet last spring brought City its first trophy -- the FA Cup -- in 35 years, and via a third-place finish a spot in the lucrative Champions League group phase.
 
“If a wealthy owner wants to put his own money into his own business, how is that not money devoted to football?” said Stefan Symanski, co-author of the book, "Soccernomics," and a professor at the University of Michigan. “When I go to a game, I take my money and buy a ticket and it becomes football income. When it transfers from the bank account of an Arab sheik, why isn’t that the same thing?"

Read the whole story at New York Times »

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