Saturday, August 26, 2017

Solidarity payments: helpful or harmful?

Let's play a game.
Suppose you conditionally receive a sum of money - let's say £100. You have to propose how to divide that sum between yourself and another person. The other person chooses to either accept or reject this proposal. If the other person accepts, the money is split according to your proposal. If the other person rejects, neither of you receive any money.

How much money would you propose to offer that other person?

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As expected, Celtic secured their Champions League play-off victory against Astana last Tuesday with their 8-4 aggregate victory over the national champions of Kazahkstan. In doing so, they can expect to earn over £25m in central distributions from UEFA for their participation in the group stage of European football's premier tournament.

Those central distributions comprise a 'participation bonus' of at least £12.5m for qualifying for the Champions League group stages, plus a share of the 'market pool', which will be distributed according to the proportional value of that country's TV market. (While the market pool is shared between the Champions League participants from each country, since Celtic are Scotland's only participant in the Champions League they will receive the entirety of that share.) In addition, Celtic can boost their earnings by bonus payments of £1.5m per win and £500,000 per draw in the group stages.

As part of Celtic's Champions League qualification, a further £3m will be shared between the Premiership's other 11 clubs in solidarity payments from UEFA. This means that each individual club will receive around £270,000 as a result of Celtic's progress to the group stage.

Last week, BBC Sport Scotland ran an article on its website on how Celtic's Premiership rivals were welcoming the potential Champions League 'windfall', with Partick Thistle boss Alan Archibald and Hearts interim head coach Jon Daly both saying this was "great" for their clubs, while Aberdeen assistant manager Tony Docherty said that this "can only benefit the clubs and the standard of Scottish football."
But is that really the truth?

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Let's return to the game I mentioned at the start of this article.

Now let's suppose that the Scottish Premiership conditionally receives a sum of money of £30m and UEFA get to propose how to divide that sum between Celtic and the other Scottish Premiership clubs. The Scottish Premiership clubs have to either accept or reject this proposal. If the clubs accept, the money is split according to UEFA's proposal. If the clubs reject, none of the clubs receive any money.

In this game, you are no longer the proposer but are now the responder. If you represented the Scottish Premiership clubs and the proposal was for Celtic to get 90% (£27 million), with the other eleven clubs getting 10% (£3 million) to share between them (roughly £270,000 per club) should you accept this proposal? In other words, is it better for the Scottish Premiership clubs to receive this money as currently apportioned, or for none of the clubs to receive any money at all?

(Note that the question here is whether this money better or worse for the Scottish Premiership clubs; this issue often gets conflated with whether this money benefits Scottish fitba' as a whole, however given that 32 of the 42 SPFL clubs will receive SFA – as with the SFA itself – any benefits they would receive can only ever be incidental at best.)

Now, from an objective (albeit restrictive) perspective, your initial response may be to accept the proposal. All but the most avaricious of Celtic supporters would surely be happy with getting 90% of a £30 million pot of cash. Supporters of other clubs may also be happy with getting £270,000 (just less than 1% of the total amount) for their own club as it's still more directly beneficial to their club than receiving no money at all. For example, Aberdeen – the second placed team in the Scottish Premiership for the last three seasons – reported a turnover of over £13.4 million for the year ended 30 June 2016; an additional £270,000 would represent an additional 2% - not a future altering figure for the Dons, but not an amount to be sniffed at either. By contrast, Inverness Caledonian Thistle – who finished bottom of the Premiership last season – had a turnover of around £4.35 million in the year to 31 May 2016; an additional £270,000 would represent over 6% additional revenue. For a club that has subsequently been relegated to the Championship and is currently struggling financially to the extent that they recently held an EGM to create £1m worth of new shares, this is the kind of cash that could make a hell of a difference.

However, while the Scottish Premiership (or, indeed, the Scottish Professional Football League in its broader context) is a collective, the main objective of the SPFL is to operate its league competition. It is here, when we come to the 'competition' aspect of the league, that the current distribution of payments from UEFA sees its league champions get exponentially richer than its fellow Premiership clubs; competitively, every other club in the Premiership is losing out to Celtic by a factor of 100.

Also, this 'game' is not played only once; it is replayed on an annual basis, with the most successful club in the Premiership receiving the opportunity to compete for qualification to next season's Champions League and - if successful in that subsequent venture – entitling it to the lion's share of any subsequent central payments from UEFA; this is where the lack of reciprocity in the benefits that Premiership clubs receive from these payments becomes far more apparent. To witness the deeply corrosive effect this has on national competition, it is worth looking at the impact that UEFA central payments has had on other mid-ranking domestic leagues in Europe.

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As of 2009, the UEFA Champions League began with a group stage of 32 teams which was preceded by two qualification 'streams' for teams that did not receive direct entry to the tournament proper. The two streams were divided between teams qualified by virtue of being league champions, and
those from top-ranking domestic leagues which finished in Champions League qualifying positions from their national championships.

Between the 2009-10 to the 2017-18 competitions, with the format of two qualifying route – the Champions Route and the League Route – in place, the clubs listed below qualified on more than one occasion from the Champions Route:

Multiple 'Champions Route' Qualifiers between 2009/10 & 2017/18:
APOEL; BATE Borisov; Celtic; Dinamo Zagreb (4 times)
Basel; Copenhagen, Malmo, Maribor, Olympiacos, Ludogorets, Victoria Plzen (2 times)

In that same time period – between the 2009-10 and 2016-17 seasons to date - here is how those same teams have fared in their own domestic league competitions:

Domestic League titles since 2010:
Basel (Switzerland); Celtic (Scotland) (8 titles each)
BATE Borisov (Belarus); Dinamo Zagreb (Croatia); Olympiacos (Greece) (7)
APOEL (Cyprus); Ludogorets (Bulgaria), Maribor (Slovenia) (6)
Copenhagen (Denmark) (5)
Malmo (Sweden); Viktoria Plzen (Czech Republic) (4)

You can clearly see from the above information that there is a clear correlation between the number of times that national champions have gained qualification to the group stages of the Champions League qualification – and the riches associated with this – and the dominance they have concurrently exerted over their own domestic competition. Nor does it seem to be a fluke, given that the same effect can be seen – to a lesser or greater of lesser extent – in each of these mid-ranking European leagues impacted.

Of the eleven examples listed above, Basel from Switzerland, BATE Borisov from Belarus and Olympiacos from Greece have won every domestic league title since 2010, while APOEL & Ludogorets have been reigning Cypriot & Bulgarian champions, respectively, since 2012. (Remarkably, Ludogorets won their first title in 2012 during their inaugural season in the Bulgarian First League and have retained the title ever since, displacing traditional powerhouses such as CSKA & Levski Sofia.)

Meanwhile, in Croatia, Dinamo Zagreb's run of eleven consecutive league titles was only ended last summer when HNK Rijeka won their first ever championship. Aberdeen fans will fondly remember their historic 3-0 win at Rijeka during Europa League qualifying. They would not lose another home game in either domestic or European competition for over two years, finally losing that record just a fortnight ago in a Croatian First League fixture – to Dinamo Zagreb. In Slovenia, Maribor – who knocked Aberdeen out of the Europa League qualifying last season and have also previously ousted Celtic, Rangers and Hibernian from European competition – have won the PrvaLiga 6 of the last 7 seasons, rectifying their only blip (losing out in 2015/16 to Olimpija Ljubljana) by regaining their title last season and parlaying that into a return to the Champions League group stages this week.

While the Scandinavian representatives have been less dominant in the above context, they have still won their respective domestic leagues more often than not - Copenhagen have won the Danish Football Championship in 5 of the last 8 seasons, while Malmo currently have a 10 point cushion in the 2017 Allsvenskan (which is 20 games into their summer league) that would also be their fifth title in 8 seasons.

Even the 'least' dominant example, Viktoria Plzen of the Czech Republic, is a textbook example of the extent to which the inadvertent timing of a club's success with the exponential rise of Champions League riches available to league champions in recent years has led to the skewing of a domestic competition that is entirely out of proportion to historical results. Viktoria Plzen, a club from the fourth largest city in the Czech Republic, bounced between the Czech First League and 2. Liga for most of its history. In 2010, they recorded their joint highest league finish (5th) and won their first ever Czech Cup. The following season, they won their first ever league title and, with it, entry to the Champions League, where they qualified for the group stages at the first time of asking. Since then, Viktoria Plzen have won 4 of the last 7 Czech titles and are the earlier pace-setters again this season with 4 wins out of 4.

As for Scotland, Celtic have won the last six Scottish Premier League/Premiership titles and have used the 'Champions Path' during that spell to enjoy smooth passage to the Champions League group stages in four of those six occasions. (The consecutive failures under Ronny Deila proving the exceptions to the norm.) However, they were not originally occupying the box seat...

For the 2009/10 season, Scotland was ranked as high as number 10 in the Association Ranking and had two teams in Europe's premier competition. In the first couple of seasons of the 'Champions Path' era, Rangers actually received direct entry to the Champions League group stages, while Celtic twice tried (and failed) to qualify through the 'League Path'. By 2011/12, Scotland had dropped to number 16 in the Association Ranking, meaning only got to enter one team via the 'Champions Path' - Rangers failed to qualify, going out to Malmo before the play-off round before subsequently going out to Maribor in the play-off round for the Europa League. 2012/13 was the last time Scotland had two entries into Champions League qualifying. Celtic, taking their first opportunity through the 'Champions Path', qualified; Motherwell, taking the place of Rangers following in the 'Non-Champions Path' following Rangers' administration and eventual liquidation, did not.

Which brings us to now. Champions League qualification is set to be reformed for the 2018/19 season, with the number of qualifying rounds that next season's Scottish title winners will have to
negotiate likely to be increased, while the number of teams qualifying from the champions play-off route are likely to be reduced. However, the distorting effect of the Champions League 'windfalls' have already taken root. Celtic now enjoy the pre-eminent position in Scottish football, with Brendan Rodgers' recent successes in qualifying for the last two Champions League group stages meaning that the club today holds a financial foothold so secure that its domination over its domestic competition is effectively unassailable for the foreseeable future.

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This brings us back to the original question: is it better for the Scottish Premiership clubs to receive Champions League 'windfall' payments, even if those payments benefit one club a hundred times more than any other club?

The game that I introduced to you at the start of this article is an economic experiment that is used to work out whether an offer represents a 'fair' or 'unfair' proposal; the more 'fair' the proposal, the more likely the responder is to 'accept' the proposal.

The most 'fair' result would be a 50:50 split between all of the interested parties. Before Celtic fans berate me here by saying that a 50/50 split wouldn't be 'fair', seeing as it is Celtic that earned the Champions League windfall by qualifying for the Champions League group stages in the first place, let me be clear that I am looking at this purely in terms of distributive justice (i.e. who gets to decide who gets more money, and on what basis) and there are many different schools of thought here.

During the same Radio Scotland interview where Tony Docherty said the Champions League windfall "benefits everyone in Scottish football", he went on to joke that while the £3 million will be shared between the Premiership's other 11 clubs, he'd prefer the £3 million just for his own club and went on to discuss the difference this kind of cash would make to other Premiership clubs. Imagine the benefits to domestic competition if instead of Celtic pocketing their prize money, that cash was redistributed evenly? What difference could £2.7 million make to the playing resources of the likes of Hamilton Accies, for example. Indeed, taking that example even further, imagine of that cash was redistributed evenly across all the SPFL clubs? A windfall of over £700,000 per club would make a radical difference to virtually every semi-professional club country in the country, and be a boon for most fully professional outfits too.

Too radical? OK, how about something a little more tempered, then? Well, when the aforementioned game was carried out in real life between members of social groups, offers of less than 30% were more often than not rejected. (It should perhaps be source of embarrassment for the Directors of other Scottish clubs that even members of remote villages and tribes have routinely held out for better offers than the amounts that they seem more than happy to accept in solidarity payments.) Taking 30% as an arbitrary benchmark, how about if Celtic – as a gratuitous gesture for the benefit of improving our domestic competition – agree to release a further £6 million pounds of its own prize money to the SPFL to redistribute to the rest of its clubs in a manner that was agreed to be fair and equitable amounts by its own members?

Just last month, Brendan Rodgers suggested that a lack of competition in Scottish football may stop him from adding a third "top striker" to his squad; on the more recent evidence of last Tuesday, an extra central defender or two wouldn't go amiss either. Brendan wasn't suggesting that Celtic's current resources were an issue to procuring another top striker – this view was expressed before Celtic had even negotiated their previous qualification round against Rosenborg, so Celtic have presumably now secured an additional £25 million that they won't be spending on bringing another top striker to Scotland.

I may be monumentally naïve, hopelessly unrealistic, or indeed a combination of both, but it seems there is a 'middle-ground' that could be reached whereby improving the resources available to Scottish clubs would lead to an improvement in the level of competition in this country, which in turn would embolden the top clubs in this country to improve their own playing squads, which in turn should improve the chances of those top clubs to perform better in Europe and potentially earn more prize money that could be invested back into Scottish football clubs as further cash windfalls.

Is anyone else interested in playing this game?

Martin Ingram (MI) is our Aberdeen Correspondent.  Legend has it that he is the tallest man in the Red Army, and he has the greatest beard that Lawrie has ever seen.  He writes regularly for Aberdeen fanzine The Red Final.

4 comments:

Anonymous said...

Definitely harmful.

Perhaps Celtic, Rangers or other Scottish contenders in some future time should reflect on the fact that making Scottish football more competitive could help their abilities to progress further in the Champions League, as it seems UEFA are determined to freeze out smaller nations and smaller clubs from their cash cow and having a quality team that can compete at higher levels may be the only way to ensure participation beyond the earlier and less financially rewarding rounds.

David said...

Your numbers appear to be a wee bit out - you appear to have added an extra zero in some places.

"If you represented the Scottish Premiership clubs and the proposal was for Celtic to get 90% (£270 million), with the other eleven clubs getting 10% (£30 million) to share between them (roughly £270,000 per club) should you accept this proposal?"

If there were a £300m pot of cash and the eleven clubs got 10% to share, they would get £2.7m each. There is, in reality a £30m pot, of which Celtic get £27m and the rest share £3m, hence £270k per club.

Despite this, I agree with the sentiment. The whole argument gets to the nub of where Celtic fans and the rest usually disagree. Celtic, at the top of the tree, are naturally looking upward and outward. For them, the league is a formality and they want to compete in Europe. This is the yardstick by which they measure progress and so it shold be, they are an elite club.

This is fine, but they do not understand what drives the rest of us. We will never be competing deep into Europe (any time soon), so we are more inward looking because competing in the league is all we have (and even at that, we are not going to win it). What Celtic fans fail to realise is, I would rather watch 11 league 2 standard players win the top division than 11 Premier league standard players be relegated. It makes no odds to me what the standard of the competition is if I have no realistic chance of winning it. Competition is about competition and at present there is none. Whilst I do not begrudge Celtic their money, which they have rightfully earned, they cannot expect me to be happy with a situation that drives the gap between competition and procession yet wider.

The media, it seems, along with their ever eager cadre of ex-players who earned millions from European football themselves, also cannot grasp this simple economic fact. Celtic being successful will always be to the detriment of the league they play in and therefore difficult for fans of other teams to get behind (and I should add that I cheer Celtic on in European competition, just as I cheer on Rangers, Aberdeen, St Johnstone or any other Scottish club that makes it there).

As a final thought, let me put this to Celtic fans who disagree. Imagine the long awaited Atlantic League is finally formed, and Celtic are invited to join a 12 team league. Uefa sanction the league and allow a single Champions League place for the winner of the league. Weak, due to the poor general quality of the SPFL, you fail to win the league in your first season and fail to make the champions league. The winners of the league, let's say Ajax, make £100m from the champions league due to the huge TV market it generates. Don't worry though, you and the other 11 league members are going to get £10m of that to split between you to have a crack at Ajax next season. Who do you think you will buy with your £900k that will challenge Ajax with their £90m?

Martin said...

Hi David,

You are right regarding the figures in the article - a friend also pointed this out to me just after the blog posted. Thanks for flagging this up though - I have asked Lawrie if he could kindly update the blog accordingly.

This is why I don't do accountancy...

Lorry said...

I've amended it - obviously my proof reading wasn't good enough...