Chelsea are setting a new trend in the Premier League, but nobody is following suit… yet.
Three of the club’s major additions this month — Benoit Badiashile, David Datro Fofana and Mykhailo Mudryk — have signed contracts that extend far beyond the five years most rival clubs would consider to be ‘long term’.
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Badiashile, 21, joined from Monaco for around €38million (£33.7million; $41.2m) on a seven-and-half-year contract. The fee that secured Fofana from the Norwegian club Molde was more than €10million, with the striker putting pen to paper on a contract through to 2029 with an option to extend by a further year.
Mudryk’s arrival from Shakhtar Donetsk over the weekend will cost an initial €70million, with a further €30m in potential add-ons. If he sees out his contract at Stamford Bridge, he will be a Chelsea player until 2031.
The length of the deals maintains a policy established at Stamford Bridge over the summer when Wesley Fofana, then 21, moved to Chelsea from Leicester on a seven-year deal. Yet the strategy still feels unusual in a world where four- or five-year contracts have tended to be the norm.
So why are Chelsea doing things differently?
Let’s get amortisation out of the way early…
A key motivation is the difference longer-term deals make to Chelsea’s financial accounts.
Football clubs write off the cost of a transfer fee over the length of the player’s contract, an accountancy technique known as amortisation. So the longer the contract, the smaller those annual payments become on the books.
“One of the aspects being brought in by UEFA is the cap in relation to the proportion of money spent on the playing squad with regard to the club’s overall revenue and how agents fees and transfer fees, as well as salaries, are apportioned for that calculation,” Stephen Taylor Heath, head of sports law at JMW Solicitors, tells The Athletic. “If you have a seven-year contract, then you can amortise the transfer fee over that period. So, for the accounts that year, it shows as a lesser figure, which could keep you on the right side of that equation.”
Just for clarity, we probably need a quick recap on FFP…
This season is the final year of UEFA’s current financial fair play rules, which apply to clubs competing in UEFA competition and has limited teams to spending €5million more than they earned over a three-year cycle. That limit, however, could be raised to €30m if it is covered by a direct payment from the club owner or related party.
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UEFA’s new regulations, which are what Chelsea are likely to have in mind when it comes to offering such long deals, kick in this year and will see clubs limited to spending a set percentage of their revenue in a calendar year on transfers, agents’ fees and player wages.
The limit in 2023 will be 90 per cent before dropping to 80 per cent in 2024 and 70 per cent from 2025 onwards. The new rules will be called the “financial sustainability and club licensing regulations” (FSCLR). Down the line, it may be that other elite clubs hoping to compete in the Champions League and Europa League adopt similar approaches to Chelsea.
As for the Premier League’s own financial sustainability rules, they are slightly more lenient than UEFA’s and allow for three-year losses of £105million — or an average of £35m a season. Discussions are actually underway potentially aimed at tweaking these rules, too.
Right, back to long-term contracts. Are there any ancillary benefits to offering such protracted terms?
Financial planning is one.
Chelsea now know that, for the next eight and a half years, their accounts will show they are paying a set amount per annum (presumably around £7million) for Mudryk. The same situation applies to Badiashile until 2030.
Badiashile celebrates Kai Havertz’s winner against Crystal Palace on Sunday (Photo: Mike Hewitt/Getty Images)But that would also saddle them with a set payment structure to be met over the contract, right?
In terms of the books, yes. They would have to take that into account when it comes to future transfer business. And there is inevitably an element of risk there if things do not work out for the player in the team.
“You could end up in a Dele Alli-type situation, where a player is under a long-term contract but drops out of the side and you no longer want him,” adds Taylor Heath. “The club may want to move the player on but may struggle to do so. So, in the meantime, they still have to pay his wages.
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“While he is still on the books he would be included in the squad cap (under UEFA’s new rules), but you would still need to bring in a replacement, effectively forking out on two fronts. It could end up as a similar situation to where you are paying two or three managers at one time (when you take into account compensation payments to those you have dismissed) despite only having one manager in place.”
Key players departed Stamford Bridge under freedom of contract last summer — is that likely to have influenced Boehly-Clearlake’s approach?
Definitely. Those exits were a legacy of the previous owner and no fault of Boehly-Clearlake, but the sight of Antonio Rudiger and Andreas Christensen leaving for nothing to join Real Madrid and Barcelona must have grated. That defensive pair contributed 85 starts between them last season in all competitions. Tying someone down to an eight-year contract mitigates the chance of a repeat.
“You avoid a situation that is commonplace with your better players, where you have signed them on a four-year contract and, after three years, you are either in a Mo Salah situation, where you agree a new lucrative deal, or you run the risk of that player entering into a pre-contract agreement with a foreign club in the final six months of their contract,” says Taylor Heath.
Chelsea have kicked that scenario down the road.
If Mudryk hits the ground running in the Premier League and, on the back of a productive spell at Stamford Bridge, starts attracting suitors in a few years, Chelsea will be in a position of enormous strength given the length of his contract still to run. Their investment remains protected. If they did decide to sell the Ukrainian, he would still command a considerable fee on the market. The same would apply to Badiashile and both Fofanas.
Long-term contracts have recently become more common in Major League Baseball, but are there parallels in American sports influencing Boehly and Clearlake Capital?
It certainly looks that way.
Boehly owns 20 per cent of the Los Angeles Dodgers, a Major League Baseball team, so it is no surprise he has taken inspiration regarding long-term contracts from the United States.
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Where football clubs are free to assess how much they can pay their staff (with one eye on UEFA and domestic league regulations), there is similarly no strict salary cap in baseball.
Yet those involved in running baseball franchises have recognised that, rather than pay a superstar towards the end of his peak a massive amount for a shorter period, it is better to lock in an emerging star for nine or 10 years on slightly lower annual wages. That helps spread out the cost so that teams can effectively spend more in the short term.
Boehly-Clearlake appear to have brought that philosophy with them.
Is it just Chelsea doing this?
Chelsea may be the most high-profile club offering six-plus-year deals at present, but they are not the first English team to do so — though clubs who have done so in the past tended to be extending the stints of players already on their books.
Arsenal gave Cesc Fabregas an eight-year contract extension in 2006. Manchester City’s Kevin De Bruyne signed for an additional six years in 2018, with Harry Kane doing the same for Tottenham Hotspur in the same year.
In September 2005, only months after breaking into Barcelona’s first team, Lionel Messi agreed to a nine-year contract with the Spanish club.
Would longer contracts alter how football clubs are valued?
In short, yes.
Players are seen as assets, so someone seeking to buy a club would look at the squad and when contracts are due to expire when determining the club’s value.
“If those players are on relatively short contracts, it is difficult to regard them as enhancing the value of the asset,” explains Taylor Heath. “But if you have them on longer-term contracts, you can leverage that in terms of the value of the club itself.
“It could have the effect of increasing the length of commercial deals as well because you can guarantee to sponsors and partners that key players will still be part of the club for the long term.”
Chelsea’s co-owners Todd Boehly and Behdad Eghbali address the squad before a preseason training session at UCLA (Photo: Darren Walsh/Chelsea FC via Getty Images)Does a longer-term contract suit the players?
Yes and no.
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On the one hand, it gives them a significant amount of security. “For the player and his agent, a deal this long guarantees a certain level of income for a certain period of time,” says Taylor Heath. The representative may well negotiate incremental salary increases to be written into longer-term deals, with wage rises kicking in after a set number of games, personal achievements or team honours.
Yet, on the flip side, when a player locks himself into a longer-term contract he inevitably hands most of the power to the club. He is tied into a deal from which he will find it difficult to extricate himself if things do not work out.
And there is always the risk that, given the length of the contract and even with incremental wage increases built into the deal, an agent sells their client short.
“It makes the job a little more difficult for the agent because if they are looking at a long-term contract, there is a greater burden on them to assess whether it is reasonable,” adds Taylor Heath. “They need to look at what the player might be worth in several years rather than just their value now.”
Wait, do these contracts actually comply with FIFA’s regulations?
Technically, they do not. FIFA, football’s governing body, outlines that contracts should be no longer than five years. So, in theory, they would not recognise a contract that is six, seven or eight years in length.
There is, however, a caveat stipulated in their regulations. “Contracts of any other length shall only be permitted if consistent with national laws,” its rulebook states.
So do the Football Association and Premier League have similar rules to FIFA?
As there are no national laws in the United Kingdom governing the length of contracts, the FA does not prescribe a limit for the length of player contracts.
This means clubs are not restricted when it comes to the deals they offer.
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“The Premier League rules expressly say a playing contract can be for any length of time, so there is no domestic football regulation preventing an eight-year contract,” Alexander Clarke, an employment law specialist at Onside Law, tells The Athletic.
“There are plenty of other examples of Premier League clubs agreeing long-term deals with players to protect their investment and any future transfer fee.”
While we are talking about the intricacies of football contractual law, what about the Webster ruling? Does that come into play at all?
Andy Webster, a defender who played for Scottish club Hearts in the early 2000s, became the first person to take advantage of FIFA’s updated transfer regulations, which allowed players to walk away from a contract after a fixed period regardless of the duration of the contract originally signed.
FIFA had adapted Article 17 of their regulations to bring football’s transfer system into line with European Union laws, and it was this that led to Webster cancelling his contract with Hearts in the third of a four-year deal.
All that was required for him to do this was to give his current team notice of his intentions, join a club in a different association and compensate the team he was leaving for the remainder of the contract that had still been due to run.
Webster’s subsequent transfer to Wigan Athletic was given the green light by FIFA in September 2006, therefore creating a legal precedent. As it happened, Webster was later fined and suspended by FIFA for cancelling the contract “without just cause” and for failing to give Hearts 15 days’ notice.
“The Webster case was specifically about determining what that level of compensation should be where a player terminates their contract without cause after the first three years (which is deemed a ‘protected period’),” Clarke adds. “At the time, it was heralded as a major landmark decision, but there haven’t actually been many notable cases where it’s been relied on since.”
Chelsea’s owners may be instigating long-term plans to reduce the wage bill at Stamford Bridge, but Mudryk will still earn a basic salary of £97,000 a week, meaning if he sought to walk away from his contract after the protected period elapsed, the level of compensation owed to the club would still be significant. As a result, Clarke believes it is unlikely to become a factor.
(Top photo: Joupin Ghamsari/Chelsea FC via Getty Images)
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