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Episode 454: SCR Rules, what are they?
88 Plays3 days ago
Southampton – SCR Rules come into play in the 26/27 season, so what are they? What does it mean for Saints? And what does it do to the rest of the league?!
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Transcript
Introduction to SCR and Episode Theme
00:00:13
DailySaintsPod
Hello and welcome back to the Daily Saints pod. My name is Greg and as always today, joined by my good friend, a wonderful co-host, Zach. Mate, how are you doing?
00:00:24
Zak
Good morning, good afternoon, good evening. Yeah, not too bad. Looking forward to to trying to figure out some rules. Considering that I'm not very good for mathematics, financial side of things as you are, it's going to be interesting.
00:00:36
Zak
I think this was like a user requested
Understanding SCR: Replacement for PSR
00:00:38
Zak
episode, right? User?
00:00:39
DailySaintsPod
Yeah, I think there's someone in the comments.
00:00:40
Zak
Wow, that's sharing my job.
00:00:43
DailySaintsPod
think someone in the comments asked for for us to cover it a bit. So yeah, today we're going to look at SCR, what SCR actually means.
00:00:54
DailySaintsPod
You know, it's replacing PSR. It's been voted in.
00:00:56
Zak
So it's replacing PSR.
00:00:56
DailySaintsPod
It's taken in this season.
00:00:59
Zak
Is it just in this league? Is it just in the championship or is it premier league as well?
00:01:03
DailySaintsPod
uh, Premier League have also voted in the use
00:01:05
Zak
Interesting.
Impact of SCR on Club Spending
00:01:06
DailySaintsPod
of SCR.
00:01:07
DailySaintsPod
So, uh, it is an an interesting change. So, uh, look, I guess let's just, uh, get straight into it.
00:01:17
Zak
Yeah, that's what we're doing.
00:01:19
DailySaintsPod
What is SCR? So, effectively, as of the 26-27 season, there's no longer going to be PSR at all. It is s SCR, which is Squad Cost Ratio.
00:01:30
DailySaintsPod
So, what that means is that specific costs... are sort of grouped together into this banding that that falls under this metric, and they are capped at 85% of the club's income
SCR and Financial Disparities
00:01:49
DailySaintsPod
with a flexible allowance of £33 million on top of that over a three-year period, but that's capped at £15 million pound a season.
00:01:49
Zak
Interesting.
00:02:01
DailySaintsPod
So, hope that's enough numbers to make your brain boggle. Good start. So...
00:02:05
Zak
it's it's It's more of, so it's capped by the income of the club, which surely is going to continue the problems that most people already have with Piazza, which is like, if you're a club that makes absolute bank, you can continue to spend absolute millions and millions of pounds.
00:02:11
DailySaintsPod
Yes.
00:02:21
DailySaintsPod
Yeah. oh
00:02:22
Zak
Whereas if you don't, you're screwed.
00:02:23
DailySaintsPod
Absolutely. Yeah, absolutely. yeah In fact, if anything, it actually compounds that issue more than PSR because PSR was just an allowance on how much you could lose per season, whereas this is like an actual limit on what you can...
00:02:25
Zak
Perfect.
00:02:29
Zak
Perfect.
Manipulation Concerns and SCR Calculation
00:02:39
DailySaintsPod
actively spend, right? Because if you're if you're just allowed to lose a certain amount of money over a three-year period, you could potentially plan for that and take a big hit in the first year to sign a massive player and have that as part of the allowance. Whereas under the under this, it's reported in real time. So there are checkpoints through the season for it to come into play.
00:03:05
DailySaintsPod
And it's it's in essence to do that. But yeah, so it's based off of
00:03:09
Zak
ripe for manipulation though, isn't it? Like, i' I'm just thinking of the way that Chelsea have been, like with selling their own assets back for themselves to make money. If all of a sudden they manage to artificially increase their income, they can continue to splodge wherever they want.
00:03:22
Zak
And this is exactly what clubs like Newcastle and that lot have been waiting for, right? Like, oh, how much does the club make? Well, this affiliate of the club that sells oil makes XYZ.
00:03:32
DailySaintsPod
Yes. So so i i I haven't dug into the like the actual nitty-gritty and deep detail, mostly because I don't think it's actually available in the like public sphere.
00:03:34
Zak
So you sorry, i'll let you get into it bit more.
00:03:41
Zak
Yeah,
00:03:46
DailySaintsPod
But I presume that the the way they calculate the club's income is fairly dictated and pretty well-defined.
00:03:56
DailySaintsPod
I know that they like closed a lot of the loopholes, that you're talking about with like Chelsea selling their women's team and the hotels and whatever.
Budget Challenges and SCR Exclusions
00:04:03
DailySaintsPod
I know that they've looked to specifically close a lot of them.
00:04:03
Zak
yeah. yeah
00:04:06
DailySaintsPod
So I'm sure that, it'll be incredibly well-defined somewhere. What, the the income of the club is defined at.
00:04:17
DailySaintsPod
It does make it a bit harder to analyse from an outside perspective because because it's going to change year to year, right?
00:04:22
Zak
Hmm.
00:04:26
DailySaintsPod
Depending on like various commercial deals and things like that. You know, positioning the league, what league you're in. You're not necessarily going to have a good understanding of what the club's potential income is and therefore what their their budget might be. And of course, the like the buffer of the $15 million for investment from the owner as well to presumably handle things like relegation and and the other stuff that comes with it.
00:04:56
DailySaintsPod
So the first question, of course, is what comes under the banding? What has to be at that amount that hits the 85% income? So it's player wages, first team coach wages.
00:05:10
DailySaintsPod
There are exclusions for assistant coaches and junior roles and analysts that may not be included. It's kind of ambiguous with the information I've got out there, to be honest. The amortized transfer costs, so effectively, you know, if you're paying off a certain amount a year towards a player, that comes towards it. with Most of these deals are there like... It's a £30 million pound transfer, but actually the fine detail of it is it'll be like £15 million up front and £5 million the year after and however much, £10 million the year after that.
00:05:48
DailySaintsPod
it it's all All of that comes into into it, regardless of whether that player still plays for you or not, still taken into account. And also included is agent costs, which, of course, a big talking point in some circles about the particular costs of play doing business with players and and certain things.
00:06:09
Zak
Yeah, that surely is going to like cause friction with the fact that clubs are not going to be willing to pay agents ridiculously large amounts of money anymore if it's going to if they've got like a specific sort of cap on it.
00:06:20
DailySaintsPod
Yeah, you would imagine so.
00:06:21
Zak
I don' don't really blame them either, to be honest.
00:06:23
DailySaintsPod
Yeah.
00:06:23
Zak
It's it's kind of extortionate a vast majority of the time.
00:06:27
DailySaintsPod
Yeah, absolutely.
00:06:27
Zak
right
00:06:27
DailySaintsPod
So I'm sure that that in itself is going to be a whole nother like layer of drama that we'll see come into play at some point. This player wouldn't sign for us because we wouldn't pay his agent fees.
00:06:40
DailySaintsPod
Look out for that in the next couple of years. It's probably coming.
UEFA Rules vs. SCR in England
00:06:44
DailySaintsPod
Uh, what's not, what doesn't come under the, that cap, the cost ratio are the, any costs towards the stadium, stadium upkeep, you know, the day-to-day running of it, uh, or owning it, and you know, the land or whatever, uh, anything to do with the Academy, anything to do with infrastructure.
00:07:03
DailySaintsPod
So the training ground or, or any of the stuff like the extra bits they want to add on around the stadium that we've sort of heard so much about,
00:07:12
Zak
When you say academy, do you mean specifically facilities or...?
00:07:16
DailySaintsPod
Yeah, Academy Facilities and I believe the Youth Squad.
00:07:20
Zak
interesting because that's that's obviously being a big point of contention recently with obviously players or like, you know, moving.
00:07:20
DailySaintsPod
Yeah.
Investments in Players and Staff under SCR
00:07:29
Zak
There's a lot of, can't remember where I was reading exactly, but there was like, there's a lot of investment that goes into players from like a young age now, right? So you might have a player that's like sort picked up by a club at like eight, And then, you know, they invest absolutely thousands, you know, hundreds of thousands in some cases, probably not quite to that extreme level player development.
00:07:44
DailySaintsPod
yeah
00:07:59
DailySaintsPod
Yeah.
00:08:00
Zak
However, I think it's far more, bigger in those sort of bigger clubs with bigger academies where the worst about it is the vast majority of the time players don't break through anyway.
00:08:10
Zak
so it's interesting that that's potentially not covered by it because that means that instead of investing into transfers, you could just invest into, you know, the youth instead.
00:08:13
DailySaintsPod
Yeah. Yeah. And I don't know for sure, because like I say, obviously the nitty-gritty detail isn't out and haven't been able to find it or read it, but I would presume that if you announce an Academy player in your like potential playing squad, like at the start of each season, you have to you know name your players, right? think it's 30 or something is the cutoff. I suspect that if you name an Academy player in that list, they count, and if you don't, they don't. It would be my... very loose interpretation of rules I've not seen.
00:08:52
DailySaintsPod
So, yeah, but that's taken in as specifically excluded. The women's teams don't come under this. It presumably is is all handled by different stuff on their side, on their league rules and stuff.
00:09:06
DailySaintsPod
And non-playing staff not factored into this at all. So... I guess in in a different way to PSR, where you're allowed to lose a certain amount of money, reasonably speaking, reducing club staff is is probably not of a footballing benefit.
Real-Time Financial Monitoring with SCR
00:09:26
DailySaintsPod
So that's that's a positive, I think. Certainly my interpretation of it.
00:09:31
Zak
Yeah, for sure.
00:09:34
DailySaintsPod
interestingly, this is the same like set of rules that UEFA use for their competitions. So actually any teams playing in a European competition already have to meet these criteria, except their rule set is actually much harsher.
00:09:49
DailySaintsPod
Uh, it's a limit of 70%, whereas obviously 85 is what we've gone with here in England. So, uh, just an interesting point for that.
00:10:01
DailySaintsPod
But I guess in terms of like, it's it's hard to hear percentages of numbers with chunks of money added on top and kind of contextualize that.
Financial Stability and Infrastructure Benefits
00:10:14
DailySaintsPod
So,
00:10:16
Zak
Do you think it's it's complicated for the sake of it?
00:10:16
DailySaintsPod
a ransom.
00:10:20
Zak
or like I'm trying to figure out what what the purpose of bringing this rule is in. i don't know if you've got that written down, and that's a later point. But it just kind of seems like you're just trading one set of crap rules for another set of crap rules, where ultimately the only people that are going to gain are the people that we're already gaining.
00:10:39
DailySaintsPod
I don't know. I didn't i didn't look into that, mate. I specifically looked into the gist calls and not the why, to be honest.
00:10:42
Zak
nice
00:10:47
Zak
That's fair. We can actually, we can have like a a discussion about that later date or at the end of the, you know, at the end.
00:10:52
DailySaintsPod
Yeah.
00:10:52
Zak
Carry on.
00:10:53
Zak
Apologies.
00:10:53
DailySaintsPod
In theory, like as like a brief analysis, obviously one benefit for them is that they can do like real-time check-ins.
00:11:01
DailySaintsPod
The second is that it's it's easier to like predict from a like budgeting perspective. like You know your limits, so you're able to kind of plan around that and...
00:11:15
DailySaintsPod
handle it. And it it kind of forces you down the commercial growth path, which kind of takes away from these like non-commercial side of things that that we've seen with like the the Chelsea and stuff, right?
00:11:32
DailySaintsPod
It's...
00:11:32
Zak
Yeah, I think from like my my brief looking at it, right it's because they would want to try and promote financial stability in clubs to basically stop clubs absolutely splurging.
00:11:40
DailySaintsPod
Hmm.
00:11:43
Zak
But at the same time, if you know if you could only make a specific amount of the loss, I don't really understand. I kind of feel like they've always tried to promote stability in one way or another.
00:11:55
Zak
i just feel like you can't... you're not going to be able to for predict that when you allow people to pass the owner's test who have incomes that can collapse due to quite, you know,
00:12:11
Zak
quite small things going on around it, right? Like, no no disrespect to Leicester City, but with the the King Power stuff, they have struggled, the their parent company has struggled massively since COVID, right?
00:12:22
Zak
And that has meant that they've not been able to invest half as much in the club. And that means that whilst they've not made a huge loss, right, they just haven't really made profit either, and
Club Financial Data Analysis
00:12:33
Zak
they've still dropped down to League One now.
00:12:33
DailySaintsPod
Yeah.
00:12:35
Zak
but Anyway, that's besides the point.
00:12:36
DailySaintsPod
some of the other like Some of the other benefits are like stuff that would have counted as a loss under PSR doesn't under this.
00:12:37
Zak
It's fascinating, by the way.
00:12:44
DailySaintsPod
So it's particularly like off-pitch investment, right?
00:12:44
Zak
Yeah,
00:12:47
DailySaintsPod
And like infrastructure and looking after the stadium.
00:12:49
Zak
like a lot of the stuff that Sports Republic have tried to do, right? Like there's still a lot of the idea that they could just, there's been that kind of cloud floating over the area of St Mary's for ages, right?
00:12:52
DailySaintsPod
Yeah.
00:12:59
Zak
Where the fact they want to kind of turn that area into commercial hub and there's been plans and talks about for ages and nothing, reality of it isn't. quite matching up. But it'd be good that the fact that you know clubs can actually invest in you know building up, say, fan zones and things like that and and get sources of income, regardless of whether everybody hates them or not.
00:13:18
DailySaintsPod
Yeah.
00:13:20
Zak
Besides the point, isn't it? Without scrutiny, that's a good thing.
00:13:21
DailySaintsPod
yeah Yeah. Yeah. One of the benefits that I found on looking at one of the websites is that it's a push towards punishment with fines and not points deductions because they can effectively do like these real-time report check-ins they can apply like a a rag scale to it. So if you're at 85%, you're in the green threshold. And if you go up to to red, potentially you could end up with a points deduction. But actually if it's if you've breached, but it's on a scale, you know maybe you're looking at a fine instead of a points deduction, which is because it's not retroactively applied based off of like your numbers at the end tallied up. you can You're doing it as you go along.
00:14:08
Zak
It's funny though, isn't it?
00:14:09
DailySaintsPod
and and I did find one article specifically stating that they have used it as an opportunity to close loopholes for affiliated companies and profitability stuff.
00:14:09
Zak
but we're gonna What we'll do punish you with money.
00:14:23
DailySaintsPod
It only measures income as football-related revenue streams, but that's one article I found. i've not Like I say, I've not been able to...
00:14:34
DailySaintsPod
find, like, the detailed breakdown of what counts as income and what counts as expenditure, because that probably is just never going to exist in the in the public.
00:14:41
Zak
Wouldn't wouldn't be surprised if it's, uh, if it's still being argued to be honest.
00:14:42
DailySaintsPod
Yeah. Yeah, it it probably isn't ratified and released, and maybe when you get the, like, fresh set of EFL regulations at the start of the season, I'll be reading through that again and going for it, I guess. But... But yeah, so it's interesting. but But you're right. It's hard to digest the like what that actually means without like context, right? They're just pie-in-the-sky numbers. It's just nonsense. So with the usual caveat that I am not by any stretch of the imaginary financial expert,
00:15:18
DailySaintsPod
I am not a football financial expert. I used some AI to help me generate and analyze the figures, and I did the calculations to the best that I could work it out, but I am not an expert. I am a guy who, with
Southampton's Financial Strategies under SCR
00:15:37
DailySaintsPod
my spare time, went and did it, right? So...
00:15:41
Zak
Yeah, that's fine.
00:15:41
DailySaintsPod
With that caveat out of the way. Running the calculations over the last three seasons. Retroactively applying these this rule set to the accounts that we published.
00:15:57
DailySaintsPod
And work out approximately, based off of my understanding of it, if we would have hit the benchmark or not.
00:16:07
DailySaintsPod
So obviously the most recent season, the books aren't published yet. might be for for a long time or until like July. so i don't have that. But the 24-25 season, the year we got relegated from the Premier League, our percent hit of the cap ratio would have been 90.3%.
00:16:30
DailySaintsPod
So pretty close to to the target, right? And if you're talking about thresholds, not far enough over it that we would have been hit with a points deduction, maybe a fine. But actually 90.3 probably falls within the limit of 85% plus the allowance, right? the The year we got promoted from the championship, the season, we'd have come in at 63.5%. So well under metric.
00:16:57
DailySaintsPod
so well under the metric we'd have hit it comfortably. And the the year before that, the Premier League season, we'd have been at 114.1%. But obviously that's that was the year that we panicked signed a load of players and obviously under a completely different set of rules. It's it's harder to apply the rule set of looking back because... But you know what that points out is actually...
00:17:23
DailySaintsPod
We're in a pretty good position. The the change of the rules is is almost a benefit for us compared to other teams, which i'll get I'll get to other teams a bit later on. But actually, with the the last year of parachute payments counting as part of the income,
00:17:42
DailySaintsPod
Still receiving payments from Dibling and Fernandes from their transfers last year. And of course, the potential of sell-on fees for Fernandes. And I think that we have a sell-on fee for Tino Livermento, who has been rumoured to be getting a big move this summer.
00:18:00
DailySaintsPod
you You know, that would all count as income. and But also, you know, with the wages being one of the big contributing factors to the squad cost, the stuff we did in January by, you know, moving players on like Adam Armstrong, Joe Aribo, Sulemana, or Hanachu, who are all the big, you know, the players that we signed when we were in the Premier League. So even if their contracts have reductions on them based on moving down to the championship, they are probably still higher than a wage for, you know, a player that you sign in the championship by the nature of it.
00:18:36
DailySaintsPod
So that sets us up quite well. Obviously, we've also got Ramsdale and Bozunu coming back off of loan, who are both on contracts that would have been signed in the Premier League. So, I mean, i think the club stance is pretty well described by Alfie House, right? As Ramsdale effectively being a bag of money with gloves.
00:18:57
DailySaintsPod
it's I think it's
00:18:58
Zak
Yeah, well, I mean, now we've signed Perez, like Perez, I don't really see well what else he's going to be other than being sold on.
00:19:06
DailySaintsPod
Yeah.
00:19:07
Zak
Like, he clearly probably doesn't want to drop down to the championship. Apparently lots of, you know, European interest.
00:19:10
DailySaintsPod
Hmm.
00:19:12
Zak
So, yeah, we'll just have to see.
00:19:14
DailySaintsPod
Yeah. And based off of that line of thinking, obviously we talked about potentially Baz coming back and being like the second choice goalkeeper, but actually potentially because he's on that Premier League contract that would have dropped down to the championship maybe Maybe he's paid too much to be a second-choice goalkeeper, and so we look to move him on as well. But obviously, we'll see how that plays out as the the summer goes on, and we're going be talking about transfers all the way into the start of the season and beyond.
00:19:43
DailySaintsPod
but But all of those things are going to help. Another person on the like high earner list who might come into contemplation is Cameron Archer,
00:19:55
DailySaintsPod
hey you know, obviously almost moved on in January as well and ended up staying. But with that in mind, uh, I, I think it increases the likelihood of him moving on this summer.
00:20:09
DailySaintsPod
Probably, certainly from like the club's perspective, the, the want to free up that wage bill for, for all that is, is, is pretty, you know, the rewards so much more space and ability to use that money in the cap.
00:20:11
Zak
Yeah.
00:20:26
DailySaintsPod
which which makes it interesting. But actually, it kind of puts into perspective what we've been saying for a while, right? we we Even in the the the most Sports Republic out stance that we ever took on the podcast, we said, look, I mean, the football is awful, but the business seems to be doing okay. And actually, all of that work they've put in is really going to pay off with these changes. Yeah.
00:20:55
DailySaintsPod
Because because it's it's effectively the model that we were aiming for anyway, right? To to live within our means and not be losing loads of money. And so we're set up quite well to sort of take that build it. Before I move on to the other clubs, I think I should touch on the the stuff that Dragan mentioned in his sort of round of interviews that were all towards the the
SCR's Influence on Championship Competitiveness
00:21:20
DailySaintsPod
financial stuff. i know we touched on it a bit.
00:21:23
DailySaintsPod
but He was saying that specifically relating to the like the financials, that he likes to set the championship. When we're in the championship, he he anticipates giving the the club the budget of a team in the top four.
00:21:39
DailySaintsPod
Because then if you don't finish in the top four, you know where the blame lies for the sporting director and the manager, which is just like a cheap line from there that stood out in mind because that's a fascinating insight into his mentality.
00:21:50
Zak
it's that's it's it's it's both because some of the players that we've signed aren't you know haven't haven't quite worked out so I feel like you could buy it as good as what you'd consider I'm just thinking look I'm thinking about Man City first got taken over and you know they they basically just played football manager and bought all of the good players and it doesn't matter how good the coach is
00:21:52
DailySaintsPod
Yeah.
00:21:58
DailySaintsPod
Yeah. Yeah.
00:22:07
DailySaintsPod
yeah But alas what that's what he's saying, mate, is that if if it doesn't work out and doesn't gel, then the fault of that lies with the footballing director.
00:22:18
DailySaintsPod
So it's you know it was an interesting line that that gave me a lot of insight into his mentality and the way he he approaches it.
00:22:26
Zak
Interesting.
00:22:28
DailySaintsPod
He went on to say that promotion doesn't guarantee financial security because actually... you need to spend more to try and be competitive and stay up. So initially there'll be an increased cost and an increased spend. And only by staying up and solidifying yourself in the Premier League in the years after that is where the like proper financial security would come, which which makes sense. i think we all know that, really. You know, getting promoted is not an immediate fix to all of the problems. but
00:23:00
DailySaintsPod
But it does help. he said that the parachute payments, uh, aren't really as helpful as people make them out to be because basically they just go on preexisting commitments to transfer debts and loan payments. Like it's, it's, it's literally just to not cripple you when you have to change from the amount of income you go to from the premier league to the, to the championship commercially, which, which makes sense. Right. Uh,
00:23:31
DailySaintsPod
we know that despite the, the opinions it holds, uh, across the championship and it being hard to compete with, realistically speaking, it's as far as like in injecting a cost into the transfer budget. it It doesn't really, the previous year's worth of premier league money do that. It's the, it's just, well, you're not going to miss these crucial deadlines for payments because you're not making as much money anymore.
00:23:59
DailySaintsPod
which Which makes sense. The last bit I took from it was a part that was interesting. He said that they're still dealing with some of the like financial payments and financial structures that were left over from before he took over the club.
00:24:15
DailySaintsPod
And he went on to say, this is the last year that I see a huge need to be careful because everybody knows we have much more payables than receivables from previous years.
00:24:26
DailySaintsPod
But going forward, we'll be in a better position.
00:24:27
Zak
Who are we still paying for?
00:24:30
DailySaintsPod
don't know. don't know.
00:24:31
Zak
That's what I'm baffled by. Clearly that for me says that we are still paying some outstanding transfer fees.
00:24:37
DailySaintsPod
Yeah, but I mean, not just transfer fees though, right?
00:24:38
Zak
And it makes sense.
00:24:41
DailySaintsPod
It'll be loans and the way they're structured and like other finances. I know that we've got the the big one with, is it MSD Holdings?
00:24:51
DailySaintsPod
And the, you know, loans and stuff like that. And also, don't forget that before he took over the club, also there was COVID. right like
00:25:01
Zak
Yeah, that's true. True.
00:25:02
DailySaintsPod
So there's the you know there are costs that you know we're still financially going to be recovering from that as as is the whole world. 100%.
00:25:10
Zak
just can't help but remember like, Gal being like, we're not, you know, Salampton isn't a pig that I'm here to fatten or something like that. And just looking at it now, it's like, bro, we're still paying for you now.
00:25:23
Zak
still paying for your paying the interest on loans you took out to finance this day you probably hoped you'd ever take gaff to pay back and well guess to be fair he didn't have to pay them back he made the next slot so he'd pay it so here we are
00:25:23
DailySaintsPod
hunt sam
00:25:36
DailySaintsPod
but but that's kind of my not expert opinion on how we've set ourselves up and where we're at right it's probably in the long run a rule that benefits us because it's it's a rule that benefits exactly the system that sports republic are trying to be setting up for for their whole time here effectively But that inner vacuum is is all well and good. But I thought it'd be interesting to take a look at some of the other teams that we're going to be competing with in the championship and see how they are get set up to deal with it and if it's going to impact them positively or negatively. Because, as we know, going to be a very tough, very competitive league.
00:26:23
DailySaintsPod
Probably the hardest championship year, at least in recent memory, I would say. You know, some of the teams that stayed up or narrowly missed out on playoffs last year that have come up from from League One that year and making that push. Obviously, Wolves and West Ham coming down are big teams. Burnley coming down as well, who are proven in this league.
00:26:51
DailySaintsPod
And the the separation between the teams pushing for the top and the teams pushing for survival is is definitely more weighted to the teams pushing for the top this year. And so by by definition, more of those teams are going to miss out.
00:27:08
DailySaintsPod
So it's going to be tough. Yeah.
00:27:11
Zak
Oh, yeah.
00:27:12
DailySaintsPod
So i thought I would take into case who in the league this will benefit, who it will hurt, and what effects it might have. So actually the first, the the obvious and first user case who under the PSR metrics were struggling and like right on the line, but actually under SCR, it kind of frees them up to do a lot better based on the way they are currently structured. is actually West Brom, who, of course, got a points deduction last season for but breaching PSR rules by reportedly less than £2 million pounds because of a a change in the way something was calculated, right? So, you know, the the points deduction in itself didn't necessarily affect where they finished in the season,
Financial Positioning of Clubs under SCR
00:28:05
DailySaintsPod
and...
00:28:06
DailySaintsPod
and
00:28:09
DailySaintsPod
staying well clear of judgments on punishments on this podcast for for an episode, the fact that they hit that cap, regardless of how it came about, the recalculation, whatever, shows that they were on or near the line anyway, right? So they were...
00:28:26
DailySaintsPod
they were struggling or were going to be struggling. But under this SCR rule set, they're actually in a good position to be able to to utilize their assets and and actually potentially spend some money rather than you know, having to sell to make the money to to send, which is good. Good. it's Good for them.
00:28:48
DailySaintsPod
Uh, that, that was the name that popped up in my research as the, the club in a good position to capitalize on it. but I also thought I'd take a look at like the other clubs that we're likely to be competing with and just see how they're getting on. So starting off with the relegated clubs coming down from the premier league,
00:29:07
DailySaintsPod
West Ham are in a position that it might be underselling it if I describe it as incredibly volatile.
00:29:17
Zak
No way! with their current, well, former CEO, director having some allegations maybe made against him combined with...
00:29:21
DailySaintsPod
Yeah. Yeah.
00:29:27
DailySaintsPod
well Well, actually, mate, I did all of the preparation and writing for this episode before any of that happened.
00:29:32
Zak
before that came up.
00:29:35
DailySaintsPod
And actually, I'm purely speaking from a financial perspective, let alone the rest.
00:29:40
Zak
You're right, the the cost of having that stadium and everything else. I saw that you know it between them and Tottenham, either one of them, whoever went down was going to really, really struggle financially.
00:29:51
DailySaintsPod
Yeah, for for a number of reasons, but not least because if you apply the SCR rules to this past season in the Premier League, approximately, they would have been expecting to run at about 90% cap.
00:30:05
DailySaintsPod
of the cap So, of course, obviously coming down to the championship, there is a a drop in revenue. And so by, you know, the way percentages work, the drop in revenue pushes that percentage even higher. Obviously, they're going to have a high wage bill.
00:30:23
DailySaintsPod
yeah I don't know if West Ham are the sort of team that... I would think that West Ham are smart enough to have relegation clauses in most of their big money contracts. But actually, one of the things that I didn't mention that Dragan was saying in his interview is that a reduction clause on a Premier League wage...
00:30:44
DailySaintsPod
it's still more than a championship wage, right? So it's it's still high. You're still going to have to be finding to free up money. Realistically, they are going to be facing losing a huge number of their key big players just to to make enough money to to survive and to hit that limit and to...
00:31:10
DailySaintsPod
you know a couple of big money transfers quick will give them the breathing room to try and sort it out. Obviously, we've heard numbers like 80 million batted around for Matty Fernandez that will help them, but also help us. so They will benefit from the fact that they'll basically immediately increase their spending power by making those sales. Whereas under PSR, it's it's kind of dragged out over the the course of the three years. But it'll be a really crucial window for them to to make it fall in line. And it will be fascinating to see how it all plays out. Obviously, like the direct targets of a financial perspective are not going to align with,
00:32:03
DailySaintsPod
how you want to approach it from a football perspective. Like there's a direct clash. So how they handle that and navigate that this window depends on it. But they, of the three relegated clubs, they have the most work to do to get into a position to do it.
00:32:23
DailySaintsPod
yeah
00:32:24
Zak
I feel like it's going to be tough, tough seasons for them. I think even if they get rid of, and even if they make quite a lot of money, i think behind the scenes stuff, turmoil on top of that, a massive stadium that I think, you know, yeah i think we've all got to take into account that as much as we're joking about like Lincoln away or LA, that's like a thing that's happening.
00:32:33
DailySaintsPod
Yeah.
00:32:41
Zak
And like, that's going to have to go to, you know, the Olympic stadium.
00:32:42
DailySaintsPod
Yeah.
00:32:45
Zak
And I don't think it's going to have the the same level of appeal that some of their other games have. And it's, it's mad that they were in Europe, like,
00:32:51
DailySaintsPod
But also purely from a ticketing perspective, right? Like, championship clubs don't take as many away fans to games as Premier League clubs. So even at that level, it's an immediate loss in revenue.
00:33:02
Zak
You double the games and you make most of them at midweek. Also, you lose any revenue from any sort of like midweek concerts or anything like that you would pad the stadiums.
00:33:06
DailySaintsPod
Yeah.
00:33:12
Zak
Anything like events and all that kind of stuff is going to be lost.
00:33:12
DailySaintsPod
Yeah.
00:33:14
Zak
I think, yeah, it's going to be a struggle. I think, you know, at least at least from Wolves' perspective, they've been planning it for about six months longer.
00:33:17
DailySaintsPod
Yeah.
00:33:21
Zak
Because, you know...
00:33:22
DailySaintsPod
Well, yeah. and That actually leads me very nicely in to to my next point. Wolves are positioned better than West Ham due to some preemptive trimming.
00:33:33
DailySaintsPod
there They are hindered by still having quite a lot of like outstanding transfer fees from previous years to finish paying off.
00:33:42
Zak
like to say that surprises me, but I wouldn't be surprised if this point is just Matty Fernandes' agent, right?
00:33:45
DailySaintsPod
Hmm.
00:33:48
Zak
Jorge Mendes.
00:33:48
DailySaintsPod
yes
00:33:49
Zak
Probably, they probably owe like half a billion pounds to him at this point.
00:33:53
DailySaintsPod
Wolves now, we're on Wolves. say You're right.
00:33:55
Zak
I'm talking about Wolves. You forget that when they went through that period where like they had every Portuguese guy under the sun, like you also, and also you forget people like Brazilians and you've got like Kunia and all that kind of stuff, but they had that, they had that period.
00:34:03
DailySaintsPod
yeah
00:34:07
DailySaintsPod
Yeah. I forgot that that was their period where they were just that team.
00:34:09
Zak
Yeah. Yeah.
00:34:11
DailySaintsPod
Yeah.
00:34:11
Zak
they have They had that period where like they were just like the Jorge Mendes team when Nuno was in charge.
00:34:12
DailySaintsPod
Yeah.
00:34:16
Zak
And yeah, like don't know. always had a bit of a weird small affinity to Wolves. They've got really nice kit this year, by the way, with their historical badge.
00:34:25
Zak
But yeah, it doesn't I feel they were always going to be better off than West Ham because of that reason, right? Their transfer for Adam Armstrong for us was not not for that league.
00:34:37
Zak
No offence to Armstrong, but it was not preparation for that league.
00:34:37
DailySaintsPod
No. Yes. That was, yes, it was preparation for, for this. and look, they are probably still going to be looking to move some players on and make some sales for some big money to kind of stabilize that a bit, but, but they are in a better position than West Ham for sure.
00:35:01
DailySaintsPod
Burnley, the other relegated team, of course, they find themselves in an even better position than Wolves because, well, yeah, there is that.
00:35:10
Zak
Surely they're used to this at this point. Like, obviously it's like third or fourth year of going up and down and up and down.
00:35:15
DailySaintsPod
Yeah. But also they made £59 million pounds in profit of player sales last season. which kind of goes straight on their baseline income.
00:35:21
Zak
hell.
00:35:24
DailySaintsPod
So it kind of sets them up to to be pretty active this window if they want to be and and do whatever prep they need to to do it. Of the three, obviously, I mean, it like you say, they they are prepped for this model of going up and coming down, and that will benefit them.
00:35:44
DailySaintsPod
But yeah, they are of the three teams in the best position to... to do something with it. And that's that's the relegated teams. So i've I've also got some, not as detailed notes, but some other notes on other teams that are likely to be, you know, pushing themselves to be in a position to compete with us. The the obvious name that jumps out as someone who will definitely benefit from this kind of arrangement.
00:36:18
DailySaintsPod
is Wrexham, right? They are uniquely positioned to do incredibly well because of their alternative streams of commercial income and commercial success.
00:36:23
Zak
Yeah.
00:36:30
Zak
As she as you know you know, clubs have a club version of everything at this point, right? It's like with me, it's their cold brew coffee, which I don't even know what it's called. But I know they have a club cold brew coffee. and it's like us where we have our club energy drink and club water and club club fence supplier drinks.
00:36:49
Zak
and club Club yacht supplier, et cetera, et cetera.
00:36:51
DailySaintsPod
Yeah.
00:36:51
Zak
But yeah, they they definitely have that, you know, outside income stream, right, where people just like being Wrexham fans for the sake of it as opposed to, you know...
00:36:59
DailySaintsPod
Yeah.
00:37:02
DailySaintsPod
Surprisingly, estimations that that I've seen and and ran and through the like AI bits that i've generated, it was speculated on in that. All of the speculation leads to the the two teams set to do the best with this rule set in the championship season are us and Wrexham.
00:37:22
Zak
Trusting.
00:37:23
Zak
trusting
00:37:28
DailySaintsPod
Whereas we we were obviously set up in a way to to try and deal with it. And Wrexham, of course, just... like a commercial income powerhouse. So it it immediately helps them.
00:37:41
DailySaintsPod
So it'll be interesting to see. Obviously, after narrowly missing out on playoffs last year, you know, their aim realistically was always going to be survival in the championship then.
00:37:52
DailySaintsPod
But this year, that's not going to be the aim anymore, right? They're going to be wanting to go up.
00:37:56
Zak
know, especially it's the extended playoffs this year as well, right?
00:37:57
DailySaintsPod
So... Yeah, eight teams.
00:38:01
Zak
yeah
00:38:01
DailySaintsPod
So, yeah, one to keep an eye on. Other teams of note that are are set up reasonably well to deal with it are Middlesbrough. Their model...
00:38:16
DailySaintsPod
you're basically already set up in a way to to be quite well trimmed and will sort benefit from this, be set up in a way to to do stuff with it, whether they go on and and make big investments off the back of that. I don't think they will. I think they they know their model and will continue to work to it, but they'll be hoping to get promoted as well this year. But but other than that, teams that are already in the championship that are...
00:38:42
DailySaintsPod
are going to struggle without going into kind of too much detail. You know, there are teams that were already pretty on the cusp with this PSR as well, and they're not really in a good position to navigate yet. Supposedly Stoke, Blackburn, and Cardiff. So, mean,
00:39:00
DailySaintsPod
all i mean I think Blackburn had a really struggle of a season last year as well. So, Yeah, I don't know. It'll be interesting to see what it actually means when it's kind of put in. But but the the kind of TLDR of it all...
00:39:19
DailySaintsPod
is that overall, in a lot of ways, these these rule sets probably benefit bigger clubs more than smaller clubs. But in the championship, at least, we we are a big club, realistically
SCR's Impact on Larger Clubs and Premier League
00:39:34
DailySaintsPod
speaking. So we've set ourselves well to do well, is is what I think the outcome is. But how that actually plays out, don't know, mate.
00:39:47
Zak
Have to wait and see, but it's fascinating nonetheless. but think it definitely changes the dynamic a little bit, and hopefully we won't see like another Sheffield Wednesday situation this season.
00:39:54
DailySaintsPod
It does. And and the...
00:39:58
DailySaintsPod
Yeah, well, that's it. And because of the real-time checkpoints or check-ins that they're going to be doing, they've got like certain deadlines of things they have to submit at certain points through the season. We'll see the impact straight away. We'll be hearing before Christmas, if any teams are in breaches. We'll be hearing, in I think the one after that is March.
00:40:20
DailySaintsPod
So, you know, at various points through the season, not just after the fact because of previous season stuff. So will continue, I'm sure, to be in the news and something we have to think about, despite not being the the part of the game we really love at the end of the day.
00:40:42
DailySaintsPod
i prefer it when they kick the ball at the goal, but... but the The finances are something that we we have to think about because that's that's modern football for you
00:40:51
Zak
That is me. Indeed. Well, thank you very much. Cause like, I didn't know anything about it at all. if I totally honest didn't realize as much, you know, rules were changing until we saw the comment. So I'd have a look into it like a little bit.
00:41:04
Zak
But your, your brain seems to work a lot better with the financial side than I do. because, you know, but it's i think it's going to add a dynamic to this year for sure. And I think it's going to be...
00:41:14
DailySaintsPod
Mmm.
00:41:15
Zak
I wonder how it's going to affect the Premier League as well. I know that's not really going to be our wheelhouse for at least another year. But it's still...
00:41:21
DailySaintsPod
Mmm.
00:41:24
Zak
Yeah, I think there are going to be... yeah I don't know if it's going to be helpful in the long term to keep things competitive if clubs that can make that make billions of pounds are allowed to completely or spend all of those billions of pounds. And if not, you can't. it's just But I also get that you don't want a club that makes £10 million pounds a year spending £80 million pounds on a player and then the next year immediately falling into disrepair.
00:41:48
DailySaintsPod
Yeah.
00:41:51
Zak
It's just difficult over the way in it.
00:41:52
DailySaintsPod
Well, I actually think the that the the most important part when you
Episode Conclusion and Listener Engagement
00:41:58
DailySaintsPod
apply it to the Premier League is going to be that we're going to have, I think, seven teams in the Premier League next year that are competing in a European competition.
00:42:12
DailySaintsPod
And to be competing in a European competition, you have to be achieving a stricter set of financial rules than this based on the same things. So,
00:42:22
Zak
And have to have bigger squads because you can't play, I don't know, this point they play as many games as I'm sorry.
00:42:26
DailySaintsPod
so So the bigger teams will benefit and potentially a team like, say, Bournemouth, who are you know going to be be having to deal with those European fixtures and that change of rules and you know are are limited on their stadium capacity and therefore limited on what revenue they can drive in in that manner, might get hit pretty hard with it.
00:42:53
DailySaintsPod
So it will be interesting. it hopefully won't be be too damaging, and at least with the other check-ins and the kind of red zones and stuff, any impact will be purely financial and not actually sports-based, but we'll have to wait and see how it plays out, to be honest.
00:42:59
Zak
Yeah.
00:43:12
DailySaintsPod
It'll be interesting for sure.
00:43:13
Zak
Yeah, sure.
00:43:15
DailySaintsPod
But look, that's that's it. That's all we've got time for today. so yeah, thank you, mate, for for sticking with me and going through it.
00:43:21
Zak
I thank you much. Appreciate it.
00:43:21
DailySaintsPod
i hope that I have provided some level of of education. But again, not an expert. Just to be clear.
00:43:31
DailySaintsPod
But thank you everyone for joining us. We will be back tomorrow to talk about some more football goodness.
00:43:38
DailySaintsPod
us know on socials, in the comments, your thoughts on the squad cap ratio and how you think it's going to affect next year's season. We are Daily Saints pod absolutely everywhere. TikTok, X, Blue Sky, Facebook, Instagram, YouTube, all of it. Hit us up, let us know. And while you're there, if you've enjoyed today's episode, why not give us a like and a subscribe because it helps us out so much. Uh,
00:44:06
DailySaintsPod
for sure, especially as we are a growing podcast in its youth stages. But until tomorrow, everyone, have a wonderful day, and we will see you then.