Booked and Blue

For nearly a decade, Manchester city’s footballing dominance positioned them at the top of English football. But following a multi-year investigation they have received a guilty verdict about their ‘sham’ contracts which have brought about many questions for the future of the club. Though they have appealed the ruling, and therefore no punishments can be enforced at the moment, the talk surrounding the topic and the potential consequences has been rife. Their top goal scorer, Erling Haaland, is encouraging fans to ‘stick together, and enjoy the ride and smile’, but football fans who feel they have been cheated and deceived are set on punishment for them. 

State of play

Manchester City was bought in 2008 by Sheikh Mansour bin Zayed Al Nahyan through his private equity fund Abu Dhabi United Group (ADUG). This fund has been repeatedly reported as an alleged state-run investing instrument. 

The story broke that it disguised owner funding as commercial income from for the 9 subsequent seasons after the purchase from 2009 to 2018. They supposedly recorded £949.94 million sponsorship income, but 830.69 million of it was allegedly paid by ADUG. This breaches Premier League rules mandating that clubs must submit honest financial statements. Additionally, they breached the PSR limits: these limits are meant to be based only on commercial income so that uber wealthy owners can’t channel their funds into the team, giving them an unfair advantage, which is allegedly the case here.

Asterisk era

Since 2008 and the beginning of these so called ‘sham contracts’ they have also seen massive success, winning 8 premier leagues in the last 18 years. This success is largely attributed to the numerous world class players, including the likes of Kevin de Bruyne, that city paid an arm and a leg for (£1.2bn between 2009/10 and 2017/18). Is that fair? A lot of people don’t think so. The extra money funneled in went a long way to making City the powerhouse that it is. But that success has now been dubbed with an asterisk to signify the illegitimacy of the era. But is illegitimate the right word to use? Many say that their legacy has been tainted, but the money doesn’t take away from the moments on the pitch – the team was highly skilled and did win those games off their own backs. But the question is whether the club deserves those titles.

The debate around the next steps for the club is widely contested. Some rival clubs want them to be stripped of their titles. Not to claim those titles for themselves but to ‘take honors away’. Clubs are becoming increasingly concerned about the image of the Premier League, as this damages their reputation and integrity. For years City has allegedly fooled the Premier league and cheated the system to their advantage, so it is understandable that clubs are calling for some accountability. Most teams seem to not be happy with a simple points deduction, as that could see them return to the top after only one season – a punishment that simply does not fit the crime. Another thought up in the air is being relegated or expelled from the league entirely. This would of course benefit other clubs as it opens up a spot in the League and takes out a major rival. 

Is City too big to go to jail?

The outcome of this case will also have widespread effects on the finances of the league. The relegation or expulsion of Manchester City and its star power threatens league wide earnings from broadcast rights. The international broadcast rights of the league brings in 30% more than domestic rights, at £2.17 billion per year with a renegotiation looming in 2028. Each club receives a share of the earnings for both participation and for their rankings. Therefore, having a star team being removed and excluded from the broadcast deal may have league-wide consequences. For instance, the Rangers in the Scottish league were liquidated and restarted at the fourth division in 2012 due to financial troubles. Following this news, the new deal was reported at about a 10% reduction from the league’s planned broadcast deal. 

We can scale the impact for an illustrative upper bound effect on how excluding Manchester City from a broadcast deal negotiation can change the total sum based on the Ranger’s case. We use cross-platform total follower count as a proxy for proportion of league popularity and assume the clubs with the 5 biggest followings dominate the negotiation in the broadcasting rights (Manchester City, Manchester United, Liverpool, Chelsea, Arsenal). At the time, we treat the Rangers as half the league’s draw as the league had a two-team title race between Celtic and Rangers perennially, known as the “Old Firm”. Scaling it for Manchester City (they hold 21% of the social media following the big five) would result in a 4% reduction to the international broadcast deal. This would result in an £87 million reduction in the contract per year (or a £4.3 million reduction in revenue per club).

There is also an incentive to over-punish from the other club’s perspective; the pivot to sports-business operator and private equity ownership of clubs means that there is an incentive to seek returns, with a removal of one of the most dominant clubs being a road to more prize money, Champions League qualification, and stronger sponsorship terms. However, unfair or overly harsh punishment may deter future investors from pouring money into clubs, which some have argued has been a major factor in “[making] the Premier League better and more competitive.”

Champions league?

There is potential for city to continue to play in the champions league next season, even if the appeal fails due to a loophole in UEFA licensing regulation. The license to play in the league is focused on current financial performance and since the commission’s findings are focused on historic misconduct, City can technically still be awarded a license if their present-day finances are in order. City has almost been banned from the champions league before for similar reasons, but due to UEFA’s statute of limitations of 5 years on financial breaches, the club escaped the ban. The question is, will they get away with it again? The Premier League does not have a statute of limitations on this, but the results of the appeal are yet to be seen. Whatever the outcome may be, undoubtedly someone is going to be unhappy. City is still urging fans to stay strong and stick together, but everything is still up in the air, and consequences are yet to be decided.