Chelsea recently lost two consecutive games in the Premier League, away to Liverpool and at home to Wolves, according to The Guardian on Feb. 6, and with previous signs of a rebound seemingly disappearing again, some fans are beginning to call out Mauricio Pochettino. But for the Blues, their problems go beyond results on the pitch.
In the short term, Chelsea's approach has not been a problem since Burley and Clear Lake Capital. Soccer finance outlet Swiss Ramble pointed out last August that Chelsea's transfers have been perfectly balanced from the start of the American owners to the present day:Their outgoings were £143 million in wages and £116 million in transfer amortization, but this was balanced by a £192 million drop in wages and £62 million in amortization income. More importantly, they made a £215m profit on player sales.
In the short term, that's great. But Chelsea's slew of contracts puts their future spending at £1.9 billion. This club has suffered losses in each of the last 10 seasons, and that has gotten worse over the last four years. Chelsea's operating losses for the 2021-22 season are £224 million, bringing the club's total losses for that decade to £944 million. However, this is offset to some extent by revenue from the sale of 706 million players.
Taking into account the reduction in the wage bill, and estimating other income and expenditure for the season, Swiss calculates that Chelsea are projected to lose £131.6 million in 2023-24, compared with £70.2 million the season before and £121.4 million the season before that, according to Ramble's calculations. "Health" costs (e.g. the costs of the youth training academy and women's soccer team) can be deducted and are estimated to be around £40 million a season. Taking into account the extra room for loss in the new Champions League season, Chelsea's losses will be slightly above the £105 million cap for the three years to 2022-23.
However, come 2023-24, it looks like the Blues will be in serious trouble, with Swiss Ramble estimating their losses at £201 million over the three-year assessment period, based on the assumption that they will finish sixth in the league - a sixth-place finish in the Premier League now looks very promising for them. The relevant UEFA regulations are not directly relevant, but are in the process of changing their original Financial Fairness Act to a cost-containment proportionality model. Under the proportionality, players' wages, transfer and agency fees will be limited to 70% of a player's sales revenue and profit by 2025. Currently, Chelsea's converted ratio is about 90%.
Chelsea have been investigated for possible breaches of the Financial Fairness Act during the Abramovich era, which could lead to a points deduction (or worse), which would make their job even more difficult. For the three years counting up to June last year, they could almost get by with limited finances, as their player sales were also high. But now things are even more difficult because they don't have much of a youth product or fully amortized player sales left. Let's say they sell Caicedo next summer for £100m value:yes they will lose that amortization and wage costs but his 8 year contract value will be the profit.
If Chelsea want to continue to make the profits they have made over the last decade, it will be extremely difficult. Youth training products such as Gallagher and Reece James, who remain in the squad, are likely to find the owner very keen to listen to their offers. This is, of course, contrary to conventional wisdom. The idea used to be that clubs would benefit from club-trained core players such as Terry and Lampard because their connection to the club was more than just wages.
Perhaps Chelsea can get an extra waiver for losses after the Abu sanctions - although this is not guaranteed - but they may not play in the Champions League next season, so it's hard to see how their revenues will increase much next season. With 12 of the team's players under contract for eight years or more, the way they are being amortized seems more and more like a burden.
This club is really messed up, but the only people who should really be blamed are the new owners who are doing a lot of damage.
