Jonathan Johnson takes a look at the financial state of play in France's Ligue 1, and finds that things aren't always what they seem.

Any fans who take a passing interest in French football may have been quite surprised this summer with a number of sides enduring grave financial problems of late. Numerous clubs, including Cannes, Strasbourg and Grenoble have struggled so badly with their finances that they have had to suffer administrative relegation or worse, enter into liquidation. So how has the situation gotten so bad, despite Ligue 1’s much-heralded financial controls? 

The Direction Nationale du Contrôle de Gestion (DNCG) administers the finances of all professional French teams in the top five divisions. They assess the state of each clubs’ coffers every summer and determine whether they are in breach of the rules and those who are guilty of offending are met with a variety of punishments, normally demotion or re-assignment to the amateur leagues.

Their stringent fiscal policy prevents teams borrowing and contracting their debts to the same degree as their European counterparts, particularly in England and Spain. In France there is no such thing as creative accounting by law, so teams cannot value their players unless there is money from another club on the table. Instead French sides put faith in their long-term investments earning them suitable amounts of income for each player they sell.

Although on the face of it this is a good thing and should be adopted by other European leagues, it has hindered French teams particularly when it comes to competing in Europe. Because sides have to carefully monitor how they use their money, they are unable to spend as freely as their rivals on players to strengthen their squads and have to find other ways to compete, such as promoting young players through their youth academies and buying top domestic talent at a lower price.

Michel Platini champions the French concept of "financial fair play" which is essentially the idea that clubs are balanced in turnover and charges. Television money, ticket sales and merchandising bring in the revenue and the costs include the youth academies and player wages. The only assets in the French model are the players, the brand and the rental contract of the stadium for naming. Turnover in France depends heavily on the sale of the Ligue 1 television rights as other local investment cannot garner enough money to keep top-flights sides afloat. However, with its current uncertainty many clubs rely on ‘business fans’, e.g. Olivier Sadran at Toulouse and Waldemar Kita at Nantes.

The stadiums in France do not bring in enough income in their current form. Few clubs own their stadiums and instead rent them out from the council; which creates a problem for those with big fanbases that regularly fill their stadium and then cannot expand as they do not own their home. However in Lille, the local council have recognised the club’s contribution to the Pas-de-Calais area and the side now have a fantastic state-of-the-art stadium on the way courtesy of their local government and owner Michel Seydoux’s smart investment ideas.

Many sides have also taken the opportunity to state their case for a national team stadium for France’s Euro 2016 hosting duties but some (like Ajaccio for example) will not qualify. The Stade François Coty does not live up to Ligue 1’s stadia criteria and is rarely full despite ACA’s top-flight status meaning it is not worthwhile for the council to renovate or expand on a stadium in an area that fails to garner regular support for its team.

Many teams are from areas with little or no footballing culture so when it comes to the issue of stadiums, even for the biggest matches they never see full capacity. Take Monaco for example: their average attendance is around 3,000 in a stadium that holds 18,500. Even for the bigger matches they struggle to draw a large crowd, so the problem lies within an area where there is little footballing culture combined with a cyclical population meaning there is no regular fanbase.

Whilst it must be noted that French football generally is very good value for money as a foreigner, many French fans see the domestic game on offer as inferior and over-priced compared to other European leagues. This puts them off going to the stadium and watching and the team’s attendances suffer as a result. This explains why a number of France’s biggest companies are not willing to put their money into backing their local sides as the apathy that afflicts many French football fans regarding Ligue 1 also affects those in high-up positions in important companies such as Total in Paris and Airbus in Toulouse.

There were generally two types of club owner in French football up until PSG’s recent takeover: local entrepreneurs (e.g. Sadran) and performance-driven economic businessmen (e.g. Lyon’s Jean-Michel Aulas) who set their clubs up to be affordable and generate money by turning it into a brand. For a number of years Paris Saint-Germain were an exception, relying heavily on Colony Capital’s foreign investment following Canal+’s shareholding withdrawal in 2006. However, QSI who recently acquired the club have now set about transforming it into France’s biggest team, something that arguably Total could have done, negating the need for foreign investment.

Toulouse on the other hand have been financed by Olivier Sadran for years since he bought the club when they filed for bankruptcy in 2001. The local entrepreneur made his fortune in airline catering with his successful company Newrest and saw the club as a great financial opportunity that had been badly mismanaged. Competing in the Championnat National, the patron oversaw TFC’s successful rise through the leagues, culminating in Champions League qualification in 2007-2008.

Although le Téfécé now have no immediate danger of dropping out of Ligue 1, there is very little to hope for above regular European football without greater investment. That will not come from Sadran who has turned the club into a successful financial entity by selling some of their best talent in recent years. Andre-Pierre Gignac, Jeremy Mathieu, Cedric Carrasso and Johan Elmander have all contributed to TFC’s stable financial footing and without significant funds to retain their best players; the club will struggle to break into the upper reaches of French football.

Additionally, business family fans such as the Pinault family at Rennes have understood that it is not beneficial to their sides to spend millions of Euros on transfers and wages if the club can’t expand its turnover. Instead they have ventured down the ‘Arsenal’ route of filling their stadium for matches, selling talent at profitable rates and nurturing their youth academies to keep the side competitive on the pitch and profitable off it.

The social impact the French population has on football business is also great. French people could never comprehend a businessman of local stature such as Sadran spending millions to help make their club a success and retain its best players whilst laying off employees or shutting down local work to retain their company’s levels of profitability. Not to say that this would be more widely accepted in other countries but many of the other leagues are past this sort of club structure and now have majorly wealthy owners or investment groups who can support their teams on their own.

Grenoble Foot 38 were taken over by arguably France’s first foreign investment group Index in 2004, and the consortium of Japanese-led investors never really considered the more complex issues of team ownership in France. Failing to comprehend a lack of footballing tradition in a winter sport stronghold, a cyclical population in a student city with a limited fanbase due to being overshadowed by more successful neighbours Lyon and Saint-Etienne, they recently went into semi-liquidation and were demoted to CFA-2, one of France’s amateur divisions. 

Some teams, like Grenoble, lack the ability to make the transition from amateur/semi-pro to being a modern-day professional football club. The financial crisis of a few years ago exposed clubs who were poorly structured financially and underlined the huge difference in the way big clubs in Ligue 1 are run and how sides in Ligue 2 and below are run. Owners of lower league sides are often incompetent resulting in poor short-term decisions, bad results, relegation, loss of finance and immense pressure on the team, e.g. Nantes.

One of French football’s biggest financial disasters of the last 10 years occurred earlier this summer when RC Strasbourg, the Coupe de la Ligue winners of 2005 with a team boasting the likes of Mamadou Niang and Mickael Pagis and a fertile youth academy who were playing in Ligue 1 as recently as three years ago, dropped through the leagues and will compete in next year’s CFA amateur divisions.

The boardroom antics of Jafar Hilali ensured that the club were to go into liquidation and only saved from the heartbreak of extinction by a local IT manager Thomas Fritz who bought the rights to the club for 1. With an unknown chairman in charge and a club in financial chaos, many French football luminaries such as Arsene Wenger have stated their concerns at the plight of le Racing and their case brings to light the issue of image rights and the question of French management methods.

The image rights are subject to what Union des Clubs Professionnels de Football President Jean-Pierre Louvel describes this as an “archaic” entertainment tax, meaning clubs cannot benefit fully from any finance they may be entitled to through their players. This affects mainly lower league sides who cannot afford to miss out on 1-2 million and run tight budgets that are hard to operate on. French clubs are forced to pay players greater gross salaries so that they money they actually earn is equal to what they could receive in other leagues, putting France at a competitive disadvantage in Europe.

Essentially, the issues in French football boil down to the idea of financial fair play which is a French ideology born out of the DNCG’s stringent financial laws which means that it is no longer enough to be a rich owner of a club in Ligue 1 if there is no balance between the club’s long-term debts and profits. This encourages clubs to re-define their financial policies but questions remain over how this can be implemented throughout Europe with such dramatic differences in legislation and management approaches. A solution could be introducing a salary cap to bridge the difference between club costs and turnover but, in France in particular this could never really work as there is already disparity between different players of sides in terms of pay.

Could the issue of ownership be eased with the introduction of QSI at PSG? Unlikely, although the capital club’s money might filter down to the rest of the league, things will only get harder for the local moneymen who bankroll their sides and try to keep up with Ligue 1’s big boys.

Jon is one third of French Football Weekly, the finest Ligue 1 website out there. Follow him on Twitter @Jon_LeGossip