Recent newspaper reports have begun to speculate the unthinkable: Lionel Messi is linked with a transfer away from his boyhood club Barcelona. It is not the intention here to give any merit to this rumour – this article aims to discuss whether such a transfer could make financial sense if all parties did agree to it within the next year or so.
The cost of the transfer
So what could be the possible cost of acquiring the services of the world’s best footballer? Barcelona would probably not consider an offer of less than £200m for Messi (Messi has a £200m buy-out clause, so this would be the starting point for any negotiations). Such a transfer fee would not only be the first break the £100m barrier, but would also smash the current record (around £85m paid by Real Madrid for Gareth Bale). Messi’s salary is also astronomical: he is currently earning €20m per annum (around £15.6m), and would want this to continue if he agreed to transfer to any other club. Over a 5 year contract, the total amount which is needed to obtain Messi’s services would be around the £278m region. The size of the sum would seem to end all hope of a transfer ever being possible, especially when considering the Financial Fair Play Regulations.
However, it must be noted that the general accounting practice is that the transfer fee paid by the purchasing club is amortised over the life of the contract: if player A cost £x and is given a contract of y length, the buying club records a sum of £x/y for each year of the contract. The player’s salary would also need to be accounted yearly. This would mean that if the cost for obtaining Messi’s services is £278m over 5 years, the purchasing club would need to account for around £55.6m per year. This new figure seems much more manageable, but to put it into perspective, the amount is more than double the yearly account cost of Chelsea’s current attacking midfield trio of Eden Hazard (around £8.2m), Willian (around £6.8m), and Oscar (around £4.5m). In fact the sum is equivalent to the book sum for about 7 of the current first team players at Chelsea. This would make it a mammoth expenditure.
Can Chelsea afford Messi?
Chelsea recently filed their accounts for the 2013/14 financial year at Companies House. Despite a 36% rise in commercial revenue from the previous financial year, Chelsea only made a profit of £18.9m (in the previous financial year Chelsea recorded a loss of £50.9m). The profit was largely due to an increase in the Premier League television money, but was also augmented by the sale of players. Unlike purchase fees, sale income is recorded all at once on a football club’s accounts. So any profit that is left after deductions on all of the outstanding book value of the departing player is recorded on the financial accounts for the year of sale. The sale of Juan Mata (for £37.5m), Kevin De Bruyne (for around £20m), and David Luiz (for around £42m) would have greatly contributed to the profit of £18.9m. In fact Chelsea would have made a loss similar to the amount of 2012/13 without the income from player sales.
Though the club currently has 30 players out on loan – most of which will probably be moved on to realise a profit – Chelsea do not currently have expendable players, the sale of which could help to make a similar profit to that which was made from the sale of Mata, Luiz and De Bruyne. With the acceptable deviation from the Break Even requirement in the UEFA Financial Fair Play Rules set to decrease to €30m (from €45m) for the monitoring periods starting from the 2015/2016 season, Chelsea will need to be mindful of the need to comply with the regulations if they do not want to be faced with sanctions from UEFA. The days of lavish spending are over.
There is not suggestion that Chelsea cannot compete for top players if they are available. For example a top player such as Marco Reus (who is likely to demand a transfer fee of £20m plus wages in the region of £7.2m a year) is affordable at an FFP cost of £11.2m a year (presuming a 5 year playing contract is signed). Similarly, even slightly more extravagant transfer fee outlays on a player such as Pogba (transfer fee likely to be £50m with wages around £7.5m a year) amounting to an annual cost of £17.5m are affordable for Chelsea provided they generate some funds from the sale of fringe players, or continue to grow their commercial income at the same rate. However, a major outlay of around £55.6m a year on Lionel Messi seems too extravagant and unfordable.
Possible sponsorship contribution
One possible way in which Chelsea could raise the funds required to acquire Messi is through sponsorship contributions. Coincidentally, Chelsea’s kit sponsor, Adidas, also sponsors Messi. On the other hand, Messi’s current club, Barcelona, are sponsored by rival sportswear manufacturers Nike. It is therefore ironic that a player which Adidas has invested heavily in contributes to the largest number of Nike football shirts sold in the world. For this reason, one can see why Adidas might be prepared to help to fund Messi’s transfer to a club which they also sponsor. This would allow them to unlock the full marketability of the Argentinian.
Chelsea is currently the fifth largest seller of replica shirts worldwide, and the third largest seller of Adidas shirts. However, the kit sponsor currently only pays Chelsea £30m per year. To put this into perspective, this is closer to the amount paid by Adidas to Juventus (9th highest shirt sellers in the world), than the £75m per year Manchester United (2nd highest shirt sellers) will be getting from them. There is already room for Chelsea to negotiate a higher shirt sponsorship, but if they can acquire Messi, they will become more marketable and hence more valuable to Adidas. It would make commercial sense for Adidas to ensure that the biggest shirt seller they sponsor actually contributes to the sale of their own shirts.
Even more coincidentally, Messi is also sponsored by European airline giants, Turkish Airlines, and famously has appeared in a campaign comprising of various television adverts. Turkish Airlines is widely expected to replace Samsung as Chelsea’s shirt sponsors from the 2015/2016 season onwards. The marketability potential of being linked to both a major European club and arguably the best player in the world, who plays for the same club, would probably persuade Turkish Airlines to also contribute towards a potential transfer.
For Adidas and Turkish Airlines, Messi playing for Chelsea could be a match made in heaven in terms of marketability. It is not beyond the realms of possibility that both sponsors could contribute enough in order to make Chelsea’s acquisition of Messi affordable.
By Andi Terziu
Law and Football 
How sponsor contributions differ from the owner contribution through their own companies? For example, could Roman Abramovich plough millions through Gazprom to Chelsea? Or the Qatar government through Etihad?
Hi Nicamede. Thank you for your question. There is nothing to stop any entity or person from investing any amount they wish into a football club in any capacity (whether as sponsor, lender or owner), so long as they pass due diligence tests set by relevant regulators the, e.g. the Premier League has the ‘fit and proper person’ test.
However, for the purposes of the Financial Fair Play rules (‘FFP’), UEFA have specific rules on sponsorship. Essentially, a sponsorship agreement needs to be an arms length transaction. This means that individuals connected to the club (e.g. the owner) cannot simply use a company they are a majority shareholder of to pump a very large amount into their club via overinflated sponsorships. Where UEFA deems a sponsorship to be not an arms length transaction, for FFP purposes it will deem the value of the sponsorship to be only what would usually be paid by an unconnected sponsor in similar situations.
Having said all of that, I am not aware that Abramovich owns any shares in Gazprom or has any other official connections to the Gazprom group. So I am sure that a Gazprom sponsorship of Chelsea would be deemed an arms length transaction. I am not entirely sure of the Etihad holding structure, but I believe that the Etihad sponsorship of Manchester City was also deemed to be an arms length transaction.
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