Financial Climate Makes French Clubs Nervous

Faced with the economic crisis, a depressed transfer market and the prospect of lower television rights, French clubs are going through a delicate financial period.
As a sign of the nervousness, the union of professional clubs has for the first time refused to endorse a report by the national directorate of management control (DNCG), the financial police of the professional league, for the 2009/10 season.

"The accounts are not good. However, it is necessary to keep our heads," league president Frederic Thiriez said.
"This report will be submitted to the union so that it can make its observations," he told reporters, adding that he would go back to talk to his members in a month.

In its annual report, the DNCG announced a cumulative deficit of nearly 130 million euro (111.7 million pounds) for clubs (114 for Ligue 1 and 15.8 for Ligue 2) for the year ending June 30, 2010.

The losses for the 20 clubs in the top flight were reduced to 114 million after write-downs by some shareholders but the widening of the deficit, which has more than doubled from 2008/09 (57 million), still worries the league.

The phenomenon is not limited to France. More powerful and more structured European clubs do not feel this financial threat any less, especially those who rarely make it into the lucrative Champions League.

The leaders of French football, in creating the DNCG, have taken an innovative approach and want it to be an example for the other championships in Europe, with Italy's Covisoc operating in a similar way.

TRAINING CENTRES

Michel Platini, president of European football's governing body UEFA, was also inspired to set up the "financial fair play" initiative aimed at imposing discipline on the financial accounts of European clubs.

The programme, which includes a salary cap and seeks to compel clubs to achieve financial balance, comes fully into force on June 1 and is paradoxically partly to blame for the current difficulties of French clubs.

Due to the quality of its training centres, French football is one of the principal breeding grounds for top European teams who have come to do their shopping here, alongside French clubs who are financially incapable of competing for the best talent.

Then the economic crisis arrived, forcing European football's big clubs to tighten their purse strings and depriving French clubs of one of their main sources of revenue.

The crisis has equally led to a drop in match ticket sales, notably season tickets, the withdrawal of local authority help for clubs because of budget problems and a decrease in sponsorship by companies.

There are also penalising tax measures, including the abolition of collective image rights which allowed clubs up to last season to enjoy an exemption of 30 percent in the charges of the remuneration of certain players.

TELEVISION RIGHTS

However, the most serious threat hanging over French sides is the renegotiation of television rights, with the current contract up next year having generated 668 million euros per year from 2008-2012, an average of 57 percent of club budgets.

The next deal will be radically changed after the decision of existing broadcaster Orange to withdraw, leaving a shortfall of 203 million euros with Canal+ now the league's only partner.

This virtual monopoly has prompted French professional football to create its own channel, CFoot.

The tender for 2012-2016 will be launched no later than May 15 when each of the two camps, league and broadcasters, will engage in a tense game of poker.

"I would say the financial state of French professional football is serious given the uncertainties in the short term, including TV rights," Didier Primault from the Centre for Law and Economics of Sport (CEDS) in Limoges told Reuters.

Highlighting the virtuous behaviour of clubs thanks to the control exercised by the DNCG, he refuses to be overly alarmist.

"Overall, the difficulties are quite moderate and under control, especially when you see what is happening elsewhere in Europe like in England or in Spain for example," Primault added.

He underlines the low debt of French clubs compared to some European counterparts and the prospect of additional resources from the construction of new stadiums for the 2016 European championship in France.

"The current tensions (between the clubs and the inspection body) are the result of the crisis," Primault said.

"But in the medium to long term, if common sense remains and if the stadiums projects are going well, France may challenge big European leagues like Italy and Spain."