Common Issues with Revenue Generated from Broadcasting Right
February 12, 2025
The creation of a financial model is like a project which has to be undertaken by the company. This means that just like any other project, testing the functioning of the financial model should ideally be included in the project. However, in most cases, testing the financial model is generally the last phase of the […]
The press releases by the United States oil companies will have you believe that fracking is the best thing that has been discovered since “fire”! The newspapers are full of praise for the new technique and how it is likely to bring back the glorious days when America was self-reliant with regards to energy. However, […]
Banks have to lend money in accordance with the amount of reserves that they have on hand. However, there is no way of finding out the exact amount of loans that a bank can give out while still complying with the reserve requirements because taking deposits and making loans happen simultaneously. Therefore, it is impossible […]
The National Stock Exchange (NSE) is one of the two leading stock exchanges in India. Ironically, the National Stock Exchange was created as a result of a huge scam which happened in the Bombay Stock Exchange (BSE). The regulators were of the opinion that the broker nexus in the BSE was too strong. Hence, in […]
Cashless society is the latest buzzword in global finance. At the present moment, only 15% to 20% of the world’s money exists in the form of currency notes. This itself is an absurdity. However, many central banks and governments all across the world have pledged to bring the cash percentage down to zero. This means […]
In the previous article, we have already seen how certain football clubs in Europe have been using their money power in order to muscle their way to the top of the league. Hence, in order to prevent this, certain organizations such as EUFA have created certain financial fair play rules.
The aim of these rules is to ensure that all teams get a level playing field regardless of the financial prowess of the people who own these franchises.
However, the idea of financial fair play rules has itself come under a lot of criticism. There are critics on both sides of the table and all of them are able to make some valid points. Hence, it can be said that the issue of financial doping as well as fair play rules is not so straightforward and it has some nuances.
In this article, we will have a look at the detailed arguments that mention the pros and cons of financial doping as well as financial fair play regulations.
The arguments in favor of financial fair play regulations are as follows:
Almost every club that is a part of the European football leagues has a rich history spanning many decades. They have a well-established brand name and a high degree of brand equity as local communities identify with these clubs.
Now, there are many financially powerful individuals and organizations who are taking over the ownership of such clubs. The financial fair play (FFP) regulations have been put into place to ensure that these new investors do not recklessly overleverage the brand name of the club, borrow heavily against it, and run it to the ground, ultimately filing for bankruptcy.
If one football club starts hiring players by paying them excessive sums of money, others are forced to follow suit in order to defend themselves. Now, the clubs that have deep financial backing will be able to navigate these issues. However, the clubs which are running as self-sufficient entities are likely to collapse. Hence, financial fair play (FFP) regulations have been created in order to prevent such a situation from happening.
However, since the financial capability of other teams is limited, their ability to bear losses is also limited and they are likely to be wiped out eventually. The Financial Fair Play (FFP) regulations have been created to prevent such predatory competition.
From the above arguments, it seems like financial fair play (FFP) is a well-intentioned and well-executed idea. However, this is not the case. There are many arguments which can be made against this idea as well. Some of these arguments have been presented below:
Many franchises find it strange that the sports league is trying to limit spending even though it has been financed by equity. Ideally, as long as the club is not leveraging itself, its spending should not matter to the franchisor.
For instance, top-ranking clubs receive more cash remuneration from the franchisor. Hence, if a new set of teams starts finishing at the top of the league, there are financial losses that start accruing to the teams that used to top the charts earlier. Hence, it has been claimed that the financial fair play (FFP) regulations have only been brought into existence in order to prevent the losses accruing to certain clubs.
Hence, the bottom line is that financial fair play (FFP) regulations are a controversial issue. There are many arguments in favor of as well as against the idea. The pros and cons need to be weighed carefully before arriving at a decision.
Your email address will not be published. Required fields are marked *