“There are three clubs in world football that can do whatever they want financially”Liverpoolsaid manager Jürgen Klopp in October. "It's legal and everything is fine, but they can do whatever they want."
In the context of the question, it is widely believed that he was referring to itManchester City, Paris Saint Germain andNewcastle United— three clubs owned by state investment funds.
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Klopp is right about thatSaudi ArabianNewcastle's Public Investment Fund (PIF), which owns 80 per cent of Newcastle, is among the wealthiest owners in the world in terms of net worth.the athletehas exploredThe acquisition in detail here.
But Klopp is wrong when he claims Newcastle have been able to play with passion. Financial Fair Play (FFP) has had an impact on the club's expansion after underinvesting in the Mike Ashley era while the board was conscious of unsuccessful spending spreesEverton(transfers),Leicester City(wages) and lastChelsea(both).
Paris Saint-Germain and City were able to spend enormous sums - although not unlimited.as the Premier League inquiry into the latter suggests– partly due to their participation in theChampions League, competition that is driving up their sales, impacting their profits and consequently their FFP limits.
Back then, as Klopp spoke, it seemed like a pipe dream that Newcastle would join the other two in the lucrative Champions League. Well, it's anything but.
Monday night's goalless draw against Leicester City confirmed Newcastle's return to UEFA's elite club competition for the first time in 20 years. They are a Champions League club again.
Eddie Howe has been publicly reticent about the impact of the qualification. "No matter what happens, we're not going to have a bottomless pit," he said last Friday while discussing the summer ahead. "We will be under strict conditions."
But despite Howe's message, Newcastle are encouraged in the transfer market. Qualifying for the Champions League raises the club's financial ceiling, giving them access to funds from property previously blocked by FFP.
Under Mike Ashley, the ceiling resembled a bungalow. For the past 18 months it has been a two story house. Champions League doesn't mean they're a skyscraper just yet - but they can start building the scaffolding to get there.
How much can Newcastle earn in the Champions League?
Last season, UEFA's club competitions generated €3.5bn (£3.04bn; US$3.8bn), most of which (€2bn) went to Champions League contenders. The division is the complex part.
25 per cent is earmarked and paid equally to all 32 clubs that reach the group stage. Based on this season's numbers, that's worth €15.6 million alone. A further 15 per cent is divided according to the size of a club's domestic TV market.
Thirty percent is distributed according to a club's coefficient –explained in more detail by The Athletic here– according to their 10-year record in Europe. Newcastle, who last competed in UEFA competition in 2012/13, would end up at the bottom of the scale. The lowest-ranked team will receive a single share worth €1.14 million, while the top-ranked club will receive 32 shares (€36.38 million).
Newcastle co-owners Amanda Staveley and Mehrdad Ghodoussi (Photo: Alex Livesey via Getty Images)
Only the last 30 percent depend on the performance itself. A team receives €2.8 million per group stage win and €930,000 for a draw, an amount that increases with each round. City vsInter Milanin the showpiece of this season will earn an additional 20 million euros.
"The Champions League is transformative," says Kieran Maguire, Lecturer in Football Finance at the University of Liverpool and presenter ofThe price of footballpodcast,said The Athletic last month. "The Champions League would be worth at least £30m."
Although any European competition would have helped Newcastle, the Champions League is far more lucrative than its smaller counterparts.
Manchester City's TV earnings in the Champions League will be almost four times as muchArsenal(€29.7 million) andManchester United(€28.6 million) earned from theEuropa Leagueand more than sixfoldWest Hamwere awarded from the Europa Conference League (€13.7 million).
What impact can it have on Newcastle's overall finances?
A senior club source - who, like others in this article, spoke on condition of anonymity to protect their positions - described the prospect as "game-changing" and allowed Newcastle to go "outside" their current FFP restrictions.
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FFP is based on profit and loss – thePremier Leagueallows for cumulative pre-tax losses of just £105m over three years. Newcastle's latest tally (see below) shows a loss of £70.7m, turnover of £180m and a wages-to-turnover ratio of 94.6 per cent.
Newcastle's balance sheet figures 2021-22
| Figure | 2021-22 | 2020-21 | Change |
|---|---|---|---|
Sales volume | 180,0 Mio. £ | 140,2 Mio. £ | 39,8 Mio. £ |
operating loss | 71,7 Mio. £ | 13,7 Mio. £ | 58,0 Mio. £ |
loss after taxes | 70,7 Mio. £ | 12,2 Mio. £ | 58,5 Mio. £ |
Ratio of wages to sales | 94,6 % | 76,2 % | 18,5 % |
cash at the end of the year | 5,1 Mio. £ | 17,5 Mio. £ | - 12,4 Mio. £ |
While this may at first seem problematic - with Newcastle suffering two-thirds of their allowable losses in a single year - FFP includes several exceptions, for example for infrastructure, academy, women's team and community project costs. There are also ongoing remedial actions for lost sales due to the COVID-19 pandemic.
With only part of the £70.7million loss taken into account, Newcastle are within FFP forecasts - but had no significant wiggle room beforehand.
The Champions League will change those parameters – the club's budget was designed purely to get them into the top 10 ahead of the season – by taking Newcastle's earnings from previously just £180m or 11th in the Premier League , were rapidly increased.
Members of the 'Big Six', some of whom have been overtaken by Newcastle this season, averaged £513.8m in revenue, almost triple that. European competition will help bridge this gap through prize money, commercial opportunities (more on that later) and match day revenue.
Despite playing at one of the Premier League's flagship stadiums, Newcastle ranks eighth in the latter category, earning £27.5m each year, just a quarter of Manchester United's total revenue. Although Newcastle are looking at expanding St James' Park, additional European games will help in the near future.
A note of caution - albeit an issue - is UEFA's FFP restrictions, which differ slightly from those in the Premier League. For one, they cover calendar years rather than football seasons, potentially affecting payback (the distribution of transfer payments) and giving more weight to transfer spend and wages relative to revenue.
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Newcastle have taken both regulations into account when making their spending and are confident UEFA's restrictions will not be a problem.
What happens to player wages?
After narrowly missing out on the Champions League in consecutive seasons from 2019 to 2021, Leicester City's payrolls skyrocketed. Uncontrollable under FFP, the plight of their opponents on Monday night affected the rigid wage structure of the Newcastle hierarchy.
Last month,the athleteThat's what David Ornstein reportedSeveral Newcastle players have included European bonuses in their contracts, introduced after acquisition by PIF. While some clubs include an automatic increase of 20 or 25 per cent for playing in Europe, Newcastle's contracts are negotiated on a case-by-case basis.
The annual bonus list, agreed between the club and the senior players before the start of the season, also provides additional incentives for the team and staff to achieve key milestones during the season. This represents a major departure from previous ownership and seeks to reward success rather than just avoid failure. (In the summer of 2018, Rafael Benitez's side went on strike and refused to honor their media commitments for the club following a dispute over bonuses for the 2018–19 season.)
UEFA regulations stipulate that spending on transfers and wages must be below 70 per cent of revenue by 2025–26 (gradually to 90 per cent in 2023–24 and 80 per cent in 2024–25).
Newcastle's current wage-to-sales ratio is 94.6 per cent (the second highest in the Premier League after Everton), but it is expected to drop to around 80 per cent for 2022-23, even after factoring in player bonuses.
What about your transfer budget for the summer?
Newcastle had varying long lists depending on where they would play next season - these have now been reduced to shortlists, with the Champions League dominating their market.
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Even ahead of qualifying, in the ideal summer Newcastle would recruit six players: one left-back, one right centre-back, two midfielders and two attackers. Howe hasexpressed his desire to have two XIs for Europe next season.
The financial relief allows Newcastle to enter the premium segment of the market. Previously, the club capped their spending in January due to the knock-on effect into the summer - despite spending £40million on itAnthony Gordonand a record £60m club fee forAlexander Isakin the two windows of this season exceeded their plans. Reaching the Champions League eliminates any regrets regarding the FFP.
An absolutely stunning template by Alex Isak. 🤤🇸🇪pic.twitter.com/NTO1AzoZBQ
— Newcastle United FC (@NUFC)27. April 2023
Expectations were closer to a budget in line with the original £60m-80m planned for last summer and not a huge increase, although Howe will be asking for a higher budget with his side finishing in the top four. Last fall. Athletic director Dan Ashworthhad described Newcastle's current level of spending as "unsustainable".However, qualifying means the club will not be forced to sell potentially high-value assets to comply with the FFP.
"They don't want to make the same mistakes as Everton and screw it up completely by spending everything at once and handicapping themselves," Maguire said last month. "You will not signKylian Mbappe, but Newcastle can be competitive this summer, especially if they qualify for the Champions League.”
From a chemical point of view, too, the members of the club are cautious when it comes to large-scale changes. "Six new players could easily destroy the dynamic in the dressing room," said a senior sourcethe athletelast month, while another added, "The team culture we've fostered, everyone together needs to be at the center of it. No prima donnas."
Will there be a commercial boom?
Absolutely. Newcastle know they can massively increase their commercial earnings. It grew little under Ashley, only rising from £27.6million in 2007 to £29.1million in 2020.
The club hired Peter Silverstone as its new Chief Commercial Officer last October, who will lead work in this area. Several new sponsorships are currently being negotiated, with the Champions League offering the opportunity to work with far more prestigious brands, and at a far higher price due to the additional presence.
The effect of the competition can also be observed at other clubs – for exampleManchester United's contract with Adidas will be cut by 30 percentIf they don't qualify for a second year in a row, that's a total reduction of £22.5million.
The chances are obvious. Kit supplier Castore has four seasons left on a six-year deal that is expected to be worth around £5million a year. Spurs' deal with Nike is reportedly worth £25million a season.
how about next year
As Maguire points out, the danger for Newcastle is to spend the winnings immediately and then depend on continued success.
Despite the progress, that's far from guaranteed as Newcastle's squad is still far thinner than many of their top six rivalsTottenham, Chelsea and Liverpool should all improve next season. For the first time in 20 years, the club also has to deal with the equalizer between Europe and the Premier League.
However, qualifying for the Champions League next season could be easier. In May 2022, UEFA confirmed that the number of teams would be increased from 32 to 36, with two of those extra spots going to the associations with the best national coefficient. As it stands, so it will beEnglandAndItaly– meaning fifth place in the Premier League could reach the Champions League next season.
(Top Photo: Owen Humphreys/PA Images via Getty Images)