Manchester City FFP Series Part 2: Analyzing the controversial Etihad deal

In 2011, Manchester City signed a sponsorship arrangement with the Etihad Airways, a company owned by Sheik Mansour's brother.

Despite initial reports stating the contract will be worth £400 million for a ten-year period, Nick Harris of Sporting Intelligence reveals the real value is a "bit less than £350m over a decade".

For easy calculation, let's take it to be £35m per year.

The deal "includes a 10-year extension to their shirt sponsorship at City, as well as financial backing for what will be known as the Etihad Campus". The Eastlands was also to be renamed as the Etihad Stadium.

The deal came under widespread scrutiny. Arsene Wenger felt it tested the "credibility" of the FFP and Liverpool owner John Henry sarcastically tweeted, "How much was the losing bid?".

City had consulted UEFA to ensure the deal didn't break any rule, yet the Council of Europe termed it as "improper".

A statement read: "Clubs will no doubt try to supplement their income if possible. They could for example call on sponsors to invest more so as to reduce or eliminate their deficits.

"A case in point is Manchester City, which has entered into a contract estimated at £400m with the airline Etihad. Etihad belongs to the Abu Dhabi royal family, and the Abu Dhabi United Group...

"In order to avoid improper transactions of this kind, UEFA should prohibit clubs from sponsoring themselves or using associated bodies to do so..."

However, City responded: "For the sake of credibility, the Council would do well to seek primary evidence through engaging with organizations rather than taking a position based on speculation." In addition, it was also to be reminded, the Council is an independent body and their conclusion was not that of UEFA's, who have a clear agenda about "fake sponsorships".

"If suddenly Abu Dhabi Tourism Authority, one of City’s sponsors, decided to sponsor City to the tune of £100 million a year. Then UEFA can clearly say that that is not the market value and [that] it’s not real and genuine," a report stated.

UEFA Can't Investigate City

Let's put it this way. Even if City did something wrong, UEFA can't investigate the deal. Period.

This is because, it "is the club - not UEFA - which must demonstrate whether a sponsorship deal represents 'fair value' if the club itself flags up the deal as a 'related party' transaction'".

And as per the UEFA Club Licensing and Financial Fair Play Regulations, Edition 2010, a 'related party' transaction is the one when "a close family member to club executives";

a) Has control or joint control over the reporting club;

b) Has significant influence over the club;

c) Is a member of key management personnel of the club or a parent of the club.

Hence, only if Manchester City report the deal as a 'related party' transaction, will they need to show that it represents fair value or else UEFA "will have no information to work with".

Not Just a Shirt Deal

As stated above, the Etihad deal is not just a shirt deal. In fact, it is described as a 'partnership' in the official lease.

Moreover, Etihad will also pay for the naming rights of the stadium and "sponsor the development of the Etihad Campus around its stadium", with the latter "exempt from UEFA's Regulations in terms of assessing the 'fair value' of a sponsorship".

Hence, as Andy Brown quotes, "City could claim that the deal is split into a shirt and stadium sponsorship that represents 'fair value' under the Regulations, and a 'partnership' to develop the Etihad Campus, which falls outside of the Regulations".

i. How does the shirt deal represent fair value?

It is believed that City will earn around £20m for the shirt deal.

If we compare this value to clubs like Manchester United (£25.4 million), Liverpool (£25 million), Barcelona (£26m) and Bayern Munich (£24m), it's not really a steep sum.

City are a global brand now. They are contesting for four trophies this season.

There has been an increase of 133 percent in global TV audience for live matches featuring the club and a 57 percent increase in the live City games telecasted across United Kingdom since 2008/09 season. In addition, on YouTube, their account garnered the maximum views of all clubs last term. Not to forget, the club has the maximum number of followers of European teams on the two main micro-blogging sites in China.

The £20m fee seemed inflated when it was signed but the Sky Blues' fan-base and presence in the football community has grown very quickly over the years and at present, it surely looks as a "fair value". Moreover, in the next two to three years, the £20m may become less than what City are capable of.

They are plying trades with the best clubs in the world, defeating them and hence, merit a shirt deal that matches their counterparts'.

ii. How does the stadium naming ights represent fair value?

This is basically something I have understood from Harris' report and will quote directly from his article.

Via Sporting Intelligence:

There is little or no value in naming rights for old venues with well-established historic names. (Emphasis on history).

There simply isn’t any major economic value in such rights – and I’ve been told this by more than one person linked to more than one of the clubs above by people who’ve explored this issue in the past.

There is a value in naming rights for a new stadium, that’s self-evident. The Emirates, The Ricoh, The Britannia and The KC Stadium are examples.

And there is a value in naming rights – albeit limited – for stadiums that are not particularly long-established.

The question, though, is how to put a price on the renaming of Manchester City’s stadium, to the Etihad Stadium, as it has become from this season?

Opened in 2002 as the City of Manchester Stadium, it was main venue the 2002 Commonwealth Games. CoMS never really caught on. It’s too long a name. And ‘Eastlands’ has always been colloquial.

So the venue does fall into the category of non-established, name-wise.

On that basis, using benchmarks from other sports (and rare cases in football), I think City could probably argue that naming rights for Etihad are worth around £5m a year, perhaps a little more.

Dortmund’s Westfalenstadion, home of the famous Yellow Wall, is now the Signal Iduna Park in a deal earning the club £3.5m a year. City could easily argue the Premier League attracts a premium, and also that their new name is already being used routinely, which can’t be said for Dortmund.

Further afield, naming rights for FedEx Field (formerly the Jack Kent Cooke Stadium) earn the Washington Redskins of the NFL £4.6m a year, while in Miami, Sun Life pay £4.5m a year for naming rights to a venue already on its seventh different name.

In Australia, the ANZ Stadium in Sydney – which was firstly Stadium Australia for the 2000 Olympics, then the Telstra Stadium- is so-called in a deal worth £4m a year.

Etihad have had naming rights since 2009 in a deal estimated locally at £4m-£5m a year.

If that works for them Down Under, as naming rights appear to work for umpteen companies in various sports venues around the world, how can Uefa deny the Etihad Stadium in Manchester holds naming rights values worth cash to City?

They can’t. And won’t. The only quibbling will be on price, and the benchmarks mentioned make £5m a year, including Premier League premium, not so unreasonable.

Look at how often Etihad Stadium is already featuring in the news.

Fair Money for Etihad Campus as well?

The Etihad Campus can change the dimensions of Manchester City.

There will be an academy that will accommodate 400 young players, with classroom facilities for 200.

There will be 16.5 pitches, with 12 of those designed for players between the ages of 8-21. Promising young players will also get accommodation. Not to forget, a 7000-seat stadium for the young players to play home games.

The first team will also be be moving to the Etihad Campus. There will be a new gym and rehab centre and the club's clerical and media teams will be based on site with lavish offices.

Etihad want to be associated with this campus and will pay a premium. A fee of about £10m is not excess- considering the popularity the campus will bring to Etihad company.

Still think City are doing something wrong? Well let's have a look at some other clubs

1. Paris Saint-Germain have a deal with Qatar Tourist Authority worth €200million ($262m) per year until 2016. Both the sponsor and the club are owned by the Qatari Royal Family. Now, this is a deal that over-values a club. Until 2013, PSG hadn't won a trophy for three years, the Ligue 1 title for nearly a decade. Their average attendance last season was just over 41,000 and their fan-base in not enough to command such money.

2. Barcelona have an 'Official logistics partner’ (Serveto), Manchester United have an official 'marine engine partner' (Yanmar) and several other energy drinks partners. Not exactly questionable deals but these are futile sponsorship agreements that just reap in extra money.

3. Chelsea have a "commercially confidential’ three-year deal" with Russian oil and gas giant Gazprom. The deal is believed to be worth £18 million per year.

So, what's wrong with this deal? Well, this is not the first time Abramovich is dealing with Gazprom, a company "heavily influenced" by political forces. He sold his controlling stake in oil company Sibneft to Gazprom in 2005. Did Abramovich have "significant influence" on the deal, something UEFA doesn't allow? From the outlook he does. Yet Chelsea escaped any scrutiny as Gazprom signed an agreement with UEFA as well.

Dodgy isn't, it Jose?

Nonetheless, the credibility of such deals is only for UEFA to decide.

UEFA general secretary Gianni Infantino once said that "UEFA’s 15 strong team of accountants (the Club Financial Control Body) would begin analyzing figures during the spring of 2014 for the years 2011-12 and 2012–13, the first period to be monitored under the new break-even regime". So, if City did any wrongdoing, it will be told.

We, the fans, are not really in a state to decide anything.