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Tottenham Talk - Money for the layman



Summary of Tottenham Hotspur's Financial Results

Tottenham Hotspur Football Club's financial results for the year ending June 30, 2022 showed improvement in several key areas. 

Total revenue increased by 22.7% to £444.0 million compared to the previous year, while the profit from operations (before taxes, depreciation, amortization, player trading, and interest) rose by 15.7% to £112.3 million. 

The loss after tax also reduced by 40% to £50.1 million. 

The increase in revenue was due to various factors such as more match receipts, commercial revenues from sponsorship and merchandising, and resuming full matchday operations. 

The Club also saw a capital increase commitment with its majority shareholder of up to £150 million. 

In the sports department, the Men's First Team qualified for the lucrative UEFA Champions Leaue, essential if the club Wishes to progress under new coach Antonio Conte.

The Women's First Team achieved the club's highest finish in the Women's Super League. 

The Chairman, Daniel Levy, highlighted the importance of investing in the Women's game for its future development.

Positive financial results such as increasing revenue and profitability can indicate financial stability and strength, which can be beneficial for attracting new players.

Depreciation, amortization, and interest are all expenses that affect the bottom line. Depreciation represents the decrease in value of a company's assets over time, while amortization represents the gradual reduction of an intangible asset's value over time. 

Interest refers to the cost of borrowing money. If a football team has enough revenue to cover these expenses and still maintain profitability, it may have more money available to invest in new players.

Ultimately, whether a football team has enough money available to buy new players depends on several factors, including its overall financial health, future revenue projections, and the cost of acquiring new players (all fees, signing-on fees, agents fees and wages, not just transfer fees). 

The team's management have to consider all these factors and make an informed decision about how much can be invest in new players without putting the financial stability of the club in danger.

Financial Glossary

A a glossary of terms used in my summary:

• Total Revenue: The amount of money earned by a company in a specific period of time.

• Profit from Operations (EBITDA): A financial metric that calculates a company's profit by adding back the costs of depreciation, amortization, interest, and taxes to the earnings before interest, taxes, depreciation, and amortization.

• Loss after Tax: The amount of money a company has lost after paying taxes.

• Match Receipts: The money received from tickets, food and beverage sales, and other matchday-related activities.

• UEFA Prize Money: The money awarded by the Union of European Football Associations (UEFA) to teams participating in European competitions such as the Europa League.

• TV and Media: The money received from broadcasting rights and other media-related activities.

• Commercial: The money received from sponsorship and merchandising.

• Operating expenses: The costs incurred in running a business.

• Football trading: The transfer of players from one club to another.

• Interest: The cost of borrowing money.

• Taxation: The amount of money paid to the government as tax.

• Borrowings: The amount of money a company has borrowed.

• Capital increase commitment: An agreement between a company and its shareholders to increase the amount of capital available to the company.

• Dividends: A portion of a company's profits that is paid out to its shareholders.

  • Depreciation: This is an accounting term that refers to the decrease in value of a fixed asset over time, due to factors such as wear and tear, obsolescence, or economic conditions. A player is a fixed asset. In other words, it is a non-cash expense that is recognized over the life of an asset to allocate its cost to the periods in which it is used.

  • Amortization: This is a term that refers to the gradual reduction of a debt or liability over time, through regular payments of principal and interest. It is similar to depreciation, but it is typically used to describe the process of paying off a loan or bond over time, rather than the decrease in value of a physical asset.

  • Interest: This is a fee that is charged by a lender to a borrower for the use of money. Interest is expressed as a percentage of the loan amount and is typically paid on a regular basis, such as monthly or annually. The rate of interest is usually determined by the lender based on factors such as creditworthiness of the borrower, the size of the loan, and the current market interest rates.


What fees are involved for a buying club purchasing a footballer, both one in contract and one out of contract?

When a football club buys a footballer, there are several fees that are involved in the transfer process, both for a player who is in contract and one who is out of contract.

For a player in contract, the buying club typically needs to pay a transfer fee to the selling club. This transfer fee is negotiated between the two clubs and can be a fixed amount or based on a percentage of the player's value.

In addition to the transfer fee, the buying club may also need to pay compensation to the selling club for training and development costs of the player. This compensation is commonly known as training compensation or solidarity contribution.

For a player who is out of contract, the buying club only needs to pay a signing-on fee and salary to the player, as there is no transfer fee to be paid to the selling club. 

However, the player may also receive compensation from the selling club if they had been under contract with the club before it expired.

It is also worth noting that buying clubs may need to cover agent fees, which are fees paid to the player's agent for their role in negotiating the transfer. 

In some cases, these fees can be substantial and are usually paid by the buying club.

Why do image rights have to be negotiated, who with?

Image rights are a type of intellectual property that pertains to a player's likeness and image, which can include their name, signature, likeness, image, logo, and even the way they play. 

These rights are separate from the player's contract with a football club and must be negotiated separately.

Image rights are typically negotiated between the player and the club or a third-party company that specializes in managing image rights. 

The cost of image rights can vary greatly depending on the player's profile, popularity, and negotiating power. 

For a top player, the cost of image rights can be substantial, with fees reaching into the millions of pounds for some players.

These are the hidden cost of a transfer, hidden to the public that is.

The reason why image rights have to be negotiated is that the club or the third-party company will use the player's image to generate income through various commercial activities such as advertisements, sponsorship deals, and merchandising. 

As such, the club or the third-party company needs to secure the rights to the player's image in order to monetize it. 

The player, on the other hand, wants to ensure that their image is used in a way that aligns with their personal brand and reputation.

In summary, image rights are an important aspect of a player's financial portfolio and must be negotiated carefully to ensure that both the club or third-party company and the player benefit from the arrangement.

Paulo Dybala had a problem with his image rights when Tottenham tried to sign him. 

A third party claimed they owned poart of or all his image rights, which he disputed, so Spurs couldn't agree an image rights deal without knowing who legally held the image rights.

Player Insurance

The cost of player insurance can vary greatly depending on several factors such as the player's position, age, value, injury history, and the level of coverage required. 

Generally, insurance premiums for top footballers can be substantial, ranging from hundreds of thousands to millions of pounds per year.

The cost of insurance for a player depends on the type of coverage being purchased. 

For example, injury insurance, which covers the player in case of injury, will likely have a higher premium than personal accident insurance, which covers the player for accidents outside of football. 

The cost of insurance can also vary based on the length of the policy and the amount of the coverage.

It is important to note that some clubs purchase insurance for their players as part of their overall financial planning and risk management strategy, while others require the player to bear the cost of their own insurance. 

In either case, the cost of player insurance is a significant financial consideration for both the player and the club. 

Selling Club Negotiating Strategy

If you were the chairman of a club in Italy selling a player valued around €60m to Tottenham Hotspur, your negotiation strategy would likely depend on various factors such as the player's contract situation, the club's financial position, the player's market value, and the club's transfer policy.

Here are some key considerations for your negotiation strategy:

Contract situation: If the player is under contract, you may have leverage in the negotiation as Tottenham would have to pay a transfer fee to secure the player's services. 

On the other hand, if the player's contract is close to expiring, you may have less bargaining power as the player could leave for free at the end of the contract.

Financial position: If your club is in a strong financial position, you may be able to negotiate a higher transfer fee or more favorable terms for the player's transfer. 

Conversely, if your club is in a weaker financial position, you may have to accept a lower transfer fee or more favorable terms for the player's transfer.

Market value: You should be aware of the player's market value and ensure that the transfer fee offered by Tottenham reflects their value. 

You may be able to negotiate a higher transfer fee if the player is in high demand or has a strong track record.

Transfer policy: Your club's transfer policy may dictate the terms and conditions of the player's transfer. 

For example, you may have a policy that requires a portion of the transfer fee to be paid upfront, or a policy that requires a sell-on clause to be included in the transfer agreement.

In summary, your negotiation strategy would depend on various factors such as the player's contract situation, the club's financial position, the player's market value, and the club's transfer policy. 

You should aim to secure the best deal for your club while ensuring that the player's transfer aligns with your club's transfer policy.

Buying Club Transfer Strategy

Tottenham's negotiation strategy would be based around a detailed analysis of the circumstances surrounding a player.

  1. Assess the player's value: Tottenham would conduct a thorough analysis of the player's abilities, recent performance, and future potential to determine his value to the club.

  2. Evaluate the player's contract: Tottenham would carefully review the player's current contract, including its length, wages, and performance-related bonuses.

  3. Analyze market conditions: Tottenham would take into account the current state of the transfer market, including the demand for players with similar skills, to determine the player's market value.

  4. Make an offer: Based on their assessment of the player's value and market conditions, Tottenham would make an offer to the selling club. The offer would likely be based on a transfer fee, as well as any additional incentives such as performance-related bonuses and wage contributions.

  5. Negotiate: Tottenham and the selling club would engage in negotiations to reach a final agreement. The selling club would be looking to maximize the transfer fee, while Tottenham would be looking to minimize the cost of acquiring the player.

  6. Finalize the deal: If both clubs can agree on the terms of the transfer, the deal would be finalized.

In summary, Tottenham's strategy would be to conduct a thorough analysis of the player's value and market conditions, make an informed offer, and engage in negotiations to reach a mutually beneficial agreement with the selling club.

OK, having gone a little through transfers, as it is rather a minefield and it would take a lot longer to explain all it's complexities and the fact that a whole series of circumstances have to align for all three parties, who have different agendas, for a transfer to successfully take place.

It is fine if all parties have the same goal, a transfer can be quick, but if they don't and most don't, then it can take time, often months.

Anyway, before I love you and leave you, a quick reminder.

Spending on Transfers

The 3% anti-Spurs crowd throws the 'Spurs are the 9th richest club in Europe' at you, without putting it in any context of course, like not being in a one-team league with the guarantee of trophies and Champions League football, thus lacking the pull of foreign climes.

What they don't understand is money.

Tottenham are the 4th highest 'net' spenders in Europe since 2018/19, a fact produced by an independent football observation company CIES, a source widely quoted throughout Europe.

Spurs Net Spend

Above us are three teams with more money than us, all in the Premier League, two of whom have roughly 50% (£200m) more income than us, yet apparently Daniel Levy and Spurs don't spend.

And Tottenham had to build a £1 billion stadium to increase income by around £200m and pay for it, interest expenses others don't have.

Now, don't you think the Tottenham Hotspur Supporters Trust (THST) should be aware of this, instead of moaning that the club are not backing the team?

This is partly why this organization is a joke and why Tottenham issued the abrupt letter to them that they did, which basically said, 'you don't know what you're talking about'.

Until it is populated and run by the 97%, it will continue to have an agenda for and campaign for the 3%.

Even with £450m incoming, there are still limitations of what you can afford, even Manchester City had a summer where they could only buy one player, with Pep telling us there was no money for more.

Everyone seems to have forgotten that Juventus, under Fabio Paratici, spent years picking up free transfers so it is only natural that he looks to do the same at Tottenham and looks for players with only a year left on their contract too.

It is sensible business practice and the business side of football has to be run as a business, otherwise, the football will suffer.

Bye for now.

Spanish = Adios. Italian = Arrivederci. French = Au Revoir. Portuguese = Adeus. German = Auf Wiedersehen. Japanese = Sayōnara. Russian = Do svidaniya. Korean = Annyeong

COYS


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