Making the Champions League is vital – missing it could leave ‘£75m hole’ in Chelsea’s budget
https://theathletic.com/2601253/2021/05/21/missing-champions-league-could-leave-75m-hole-in-chelseas-budget/
After acknowledging Leicester City manager Brendan Rodgers at the final whistle on Tuesday, Chelsea head coach Thomas Tuchel turned back towards Stamford Bridge’s home dugout, let out a roar of satisfaction and embraced his backroom team. Three days after suffering Wembley heartache, his players had delivered the response he wanted, winning the first of what he had described as three “finals” left to navigate this season.
Some might consider it a stretch to describe the decisive stretch of the Premier League’s top-four race in such terms, particularly so soon after losing an actual final with a tangible trophy on offer, but in this of all seasons, Champions League qualification has implications beyond simply participating or missing out on Europe’s elite club competition next year.
At the end of a campaign played almost entirely behind closed doors, the revenue from simply making it into the group stage will act as a financial separator from the clubs left on the outside looking in.
The shutdown and subsequent bubble play forced by COVID-19 has hurt the finances of football clubs everywhere. In their most recently published accounts covering the 2019-20 season, Chelsea revealed their match-day revenue had decreased by £12 million, an 18 per cent drop from 2018-19. Those numbers will look much worse this season for Chelsea and everyone else, but some clubs will feel the pinch much more than others.
For the Premier League’s traditional elite, burnished by larger shares of domestic and international TV deals and lucrative commercial partnerships, match-day income long ago became the third-most important source of revenue.
“It’s marginal income,” Dr Rob Wilson, football finance expert at Sheffield Hallam University, tells The Athletic. “The running costs of the club will be budgeted against the broadcast rights deals and the commercial endorsements. Match-day revenue is a ‘nice to have’ rather than a ‘need to have’.”
But in a world where no one is filling their stadium, the financial gravy train of the Champions League presents even more of a financial boost for those who manage to board it.
“A club like Chelsea would have budgeted for playing in European competition,” Wilson adds. “They wouldn’t necessarily have budgeted for a COVID year, however, and while match-day revenue is marginal on a season-by-season basis, if Chelsea were to miss out on the Champions League in addition to the revenue they’ve lost due to COVID, that could be a £75 million hole in their budget and it becomes much more difficult to plug.”
Not even winning the Europa League, as Chelsea managed to do twice in the 2010s and what Manchester United could do this year, is sufficient to plug the gap. Victory over Arsenal in Baku in 2018-19 netted the club a total of £41 million — a figure determined by their participation fee, prize money, UEFA coefficient and TV pool. In contrast, last season’s exit in the Champions League round of 16 at the hands of Bayern Munich brought in an estimated £72 million, according to respected financial blogger Swiss Ramble.
“Winning the Champions League is worth twice what it’s worth to win the Europa League,” Wilson explains. “Winning the Europa League is equivalent financially to getting out of the Champions League group stage — it’s about £50 million for winning the Europa League and £100 million for winning the Champions League. That makes a top-four place very important and lucrative.”
In purely financial terms, it’s easy to understand why Chelsea moved quickly to sack club legend Frank Lampard in January when they lost faith in his ability to deliver a Premier League top-four finish.
“Do we want to play Champions League next season? Yes, this was the target when I stepped into this club,” Tuchel said before Tuesday’s win over Leicester. “I want to be very clear — the task was ‘let’s try everything to be in the top four’. The task was not ‘let’s try everything to win the FA Cup’ because the FA Cup, as big as it is, does not bring you to Champions League football next season. It’s top four that brings us that.”
Tuchel has vindicated that decision by leading Chelsea back to the brink of their most pressing objective. Liverpool’s win over Burnley means the top-four race will be settled on the Premier League’s final day but matching Leicester’s result against Tottenham will be enough for Chelsea, who are away at Aston Villa. Even if disaster strikes and they fail to finish third or fourth, the Champions League final itself offers a route into next year’s competition, though no one at Cobham wants it to come down to that.
Maintaining their Champions League status would make it easier for Chelsea to build upon last summer’s spectacular £220 million recruitment drive — an outlay that will feature heavily in the club’s next set of accounts, both in terms of the amortised cost of those new arrivals and their impact on a wage bill that, at £283 million, stood at 70 per cent of the club’s turnover in 2019-20.
“The interesting thing is that given how heavily Chelsea invested last summer, what’s the next phase of that?” Wilson asks. “They’ve got a new coach they want to support in the market, and I definitely think the market as a whole will be suppressed, but we’ll still see some substantial deals get through.”
Chelsea’s priorities are a new striker and centre-back, and their serious interest in Borussia Dortmund sensation Erling Haaland was reported by The Athletic in January. A deal of that size is likely to be a rarity in a summer transfer market still reeling from the effects of the pandemic but the security of Champions League participation next season is only likely to make Roman Abramovich more comfortable with the notion of spending aggressively once again.
Marina Granovskaia’s biggest challenge is likely to be outgoings. Chelsea’s accounts in 2019-20 were tipped from a £102 million loss before tax to a £36 million profit thanks to an eye-watering £143 million profit on player sales. This figure was achieved largely thanks to the big-money sales of Eden Hazard to Real Madrid and Alvaro Morata to Atletico Madrid and, according to Swiss Ramble, is the highest ever reported in the Premier League.
Profit from player sales has been a key part of Chelsea’s business model in recent years. According to Swiss Ramble, they have banked nearly £500 million in this area alone in the last six years, averaging a yearly profit on player sales of £77 million. This will be much harder to achieve in the summer ahead, with many high-profile clubs outside the Premier League compelled to focus on replenishing their own accounts through player sales rather than significant purchases.
“It will be an interesting summer because we know a number of the European clubs were struggling,” Wilson says. “That was a key driver of the European Super League proposition, so you can imagine it will be another buyers’ market and if English clubs are trading with European teams, the fees could be lower so those clubs can get those players off their books quite quickly. It also means it’ll be more difficult to sell and get good value.”
AC Milan have already signalled their intention to activate the option to make Fikayo Tomori’s loan move permanent, which would bring in £25 million plus another £5 million in add-ons. Other academy graduates such as Tammy Abraham, Conor Gallagher and Marc Guehi would also command interest if made available to buy, but the list of Chelsea’s saleable assets in the current financial climate is outweighed by the list of loanees still under contract who are much less likely to attract significant bids. Michy Batshuayi, Danny Drinkwater and Tiemoue Bakayoko all fit into that bracket.
Trimming the bloated fringes of Tuchel’s squad and Chelsea’s loan army will not be easy, but Granovskaia can approach the weeks and months ahead from a position of far greater strength if continued Champions League participation is secure. It should help the club widen the gap on the pitch to struggling London rivals Tottenham and Arsenal, as well as provide a strong foundation to compete with Manchester City, United and Liverpool next season.
Tuchel’s emphasis on the Premier League top-four race wasn’t wrong. It might not spark the wild celebrations that greet a major trophy victory but winning it is no less vital.
