Newcastle look set to complete the signing of Sandro Tonali from AC Milan to get their 2023 transfer window underway. But is this just the first of many big-money deals that they'll be involved in this summer, or after 2 seasons of major spending are the club risking breaking the Premier League's Financial Fair Play rules?
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00:00 The transfer window for Newcastle United fans used to be something to be endured rather
00:08 than enjoyed. Previous seasons under Mike Ashley would see long, drawn-out months of
00:11 claim and counter-claim before a handful of affordable players would arrive late in the
00:15 window with the manager expected to simply do the best he could with them. One famous
00:20 slice of club history includes Steve Bruce frantically running around on deadline day
00:23 trying to push through a number of moves, only to be told by a local journalist that
00:27 the club's staff required to sign off the funds and organise the paperwork for any deals
00:31 had already gone home for the day. But that, to the Geordie faithful, feels like an entire
00:36 other life ago. They are now routinely and credibly linked with the best players in the
00:40 world and this summer might well see some of them arrive at St James' Park. The problem
00:45 though is that even the richest club in the world still needs to make the numbers work
00:50 under the constraints of financial fair play. This is how much money Newcastle United can
00:55 actually spend. Eddie Howe's side ended the 22/23 season
00:59 in the frankly astonishing position of fourth. Despite their tag as the quote-unquote richest
01:04 club in the world, the constraints put on Premier League spending by FFP has seen them
01:08 spend relatively modestly since their 2021 takeover. Fans of other clubs tend to find
01:13 the modest spending claim a contentious one, but thus far it's been true. Last season
01:18 they were the league's joint fifth biggest spenders with Nottingham Forest, coughing
01:21 up only £10 million more than Tottenham and Wolves. They spent £10 million less than
01:26 West Ham, over £50 million less than Man United and almost an astonishing £400 million
01:32 less than Chelsea. In each of the four seasons prior, they ranked in the bottom half of the
01:37 league on net spend. A fair chunk of the criticism directed at
01:44 former owner Mike Ashley wasn't merely that he lacked ambition for the club, but that
01:48 he actively held it back from punching its own weight. Newcastle consistently had the
01:52 highest matchday revenue for any club outside the top six, and thanks to the size of their
01:57 fanbase, enjoyed a significant chunk of the 25% Premier League broadcast revenue that's
02:03 distributed to clubs based on television appearances. And yet, if you average out Newcastle's transfer
02:08 net spend over his 14-year tenure, they spent just over £13 million per season.
02:15 Most astonishing of all, the club's commercial revenue somehow shrank 37% during this time
02:21 when every other Premier League side grew theirs by 200, 300, 400, in some cases even
02:27 over 1,000%. Newcastle weren't just not spending what
02:32 they were making, they were actively pursuing frugality as a business model. Their new owners,
02:36 however, are upfront about their ambitions to not only re-establish the standing the
02:40 club had prior to Mike Ashley's tenure, but to actively push beyond the meagre glories
02:44 of the past and become one of the most consistently successful teams in Europe. To do this, though,
02:49 requires enormous sums of money. But despite now being part-backed by PIF,
02:55 the Saudi Arabian Sovereign Wealth Fund, and having access to the estimated £500 billion
03:00 the organisation has for its various projects, Premier League teams are required to spend
03:05 within their means as a business. This is FFP at its very core. If Newcastle somehow
03:10 found themselves with a turnover in the billions, then they could spend into the billions, but
03:15 that is not their reality. At the time of the takeover, club turnover
03:18 was estimated at £140 million. Tottenham, for context, operate just below the £450
03:25 million mark. This is partly because of the greatly increased commercial revenue, but
03:28 also the income from regularly qualifying for Europe. In the 18 months since the takeover,
03:33 this has already increased by 50% to £180 million. And that's before you factor in
03:38 the minimum £30 million boost they'll receive from returning to the Champions League, or
03:42 any commercial deals signed ahead of the new season.
03:45 The appointment of Darren Eales as Chief Executive Officer was seen as vital for rapidly expanding
03:49 the club's various non-competition revenue streams, and his job is arguably as important
03:54 off the pitch as Eddie Howes is on it. The bottom line with FFP is that clubs over
03:59 a three-year rolling period cannot make a loss of more than £105 million, effectively
04:06 meaning you can spend £35 million, be that on transfers, development, wages, infrastructure,
04:11 a new stadium, what have you, beyond your income every season.
04:15 Under Premier League rules, certain costs like improving vital facilities, community
04:18 projects or developing your women's team are exempt from this, but by and large, these
04:23 are the restrictions you're working under. So if, for example, your turnover was £100
04:27 million and your wages and other footballing-related expenditure came to £60 million, then the
04:32 £40 million you have left over, plus the £35 million you're allowed to overspend,
04:36 would give you £75 million to put into transfers. However, in the season of the takeover, Newcastle
04:40 lost well in excess of this £35 million on transfers, actually coming in at over a £70
04:46 million operating loss, purely because Mike Ashley's tight purse strings had given them
04:51 that sort of wiggle room in the three-year rolling period.
04:54 They were able to do this again last season with the arrivals of Anthony Gordon and Alexander
04:58 Isak pushing their spending north of the £150 million mark, but moving into their third
05:03 year, this spending is not, as it stands, sustainable. In fact, had the club not qualified
05:09 for the Champions League or developed behind the scenes, they'd likely only be looking
05:13 at around £50 million for new arrivals this summer.
05:16 Their wage bill alone, naturally skyrocketing as they attract a higher standard of player,
05:21 now stands at around 95% of their total turnover, leaving very little left to spend on new players.
05:27 So the headline here for Newcastle fans is this. What qualifies as the club's days of
05:32 big spending are technically now behind them. The club's sporting director, Dan Ashworth,
05:37 has already said himself that the current outlay on transfers is not something that
05:42 could continue at their present level. They've incurred significant losses in the last two
05:46 seasons, but these were offset by the negligence of the previous ownership. From this season
05:50 onwards, they won't be. Newcastle spent just over £150 million last season and recouped
05:56 £20 million from the sales of John Jo Shelby and Chris Wood. The season prior, they spent
06:01 £110 million attempting to avoid relegation, but didn't bring in a single penny from
06:05 player sales. That's a net spend of £260 million over the two seasons. But factoring
06:11 in the comparatively paltry £30 million spent by Ashley in his last full season at the club,
06:15 averages the three-year period out at little over £90 million a time.
06:20 It's a huge oversimplification, yes, but presuming that the club's other football
06:24 operations like wages and infrastructure take it to around 100% of its revenue, then this
06:29 £90 million comes in at under the £105 million allowed by FFP. One thing it's worth pointing
06:34 out here though is that FFP isn't as simple as you spend £30 million on a player and
06:39 £30 million then counts towards your total. Deals are actually spread out across the duration
06:44 of the contract. Newcastle did not have, for example, £60 million spare in FFP terms to
06:49 spend on Alexander Isak last summer, but signing him to a five-year contract meant that, in
06:54 actual fact, he cost them £12 million that season. The only issue is that he'll cost
06:59 them another £12 million this season and every season after that for the duration of
07:03 the contract. That said though, what a club spends in total
07:06 outlay over a season is usually a good indicator of what spending they're committed to on
07:11 top of that. If Newcastle spent £150 million in one window, it likely means that the impact
07:16 of those buys, plus those carried over costs from previous years, add up to a similar amount.
07:21 Joe Linton, for example, signed for £40 million on a six-year deal in 2019, so is costing
07:26 them, as far as FFP is concerned, just over £6.5 million every season until 2025.
07:33 So where does this leave them? Well, the hands would have been significantly more tied this
07:37 season than in the previous two, but qualifying for the Champions League alleviates this pressure
07:41 significantly. However, shopping in the same aisles and spending the same sums as teams
07:45 who consistently qualify for this tournament would still not be a smart move. Were they
07:49 to drop out of the top four, this would leave them paying elite-level fees and wages in
07:54 seasons where they weren't receiving the income to justify them.
07:57 Newcastle ideally want to use the allure of Champions League football to attract a higher
08:01 standard of player, not merely the revenue of Champions League football. And that means
08:06 that player sales are, for the first time under the new owners, about to become a major
08:10 part of the business model. Were the club finally able to get the £40 million they
08:14 previously offered Alan St Maximan a round for, they could yet again be looking at spending
08:19 over £150 million this summer. But beyond him, there isn't an obvious, significant
08:23 saleable asset currently at the club. Big names like Bruno Guimaraes, Alexander Isak
08:28 and Sven Botman would command major fees, but have only recently arrived and will be
08:32 vital for maintaining their league position next season. But if, in the years beyond that,
08:36 the club are offered the chance to treble or quadruple their investment in them, they
08:40 would absolutely need to take that and hope they can reinvest the money smartly.
08:44 This arguably makes the signing of the aforementioned Dan Ashworth from Brighton to come in as
08:48 sporting director a more important transfer than those three players combined. If Newcastle
08:53 could become as proficient at developing players and turning a profit on them as his former
08:57 team, then that will afford them an enormous degree of spending power in the years it takes
09:01 for their commercial and other revenue streams to catch up with Europe's biggest clubs.
09:06 But what can they actually spend this season? Newcastle, as mentioned, would have been looking
09:10 at around a £50 million transfer kitty. The £25 million shirt sponsorship with Saudi
09:16 organisation CELA still puts them some way short of the £40 million commanded by their
09:21 rivals for the same thing, but is still a huge leap on from the £6 million Fun88 were
09:26 paying for that exact position. Coincidentally, the Asian betting firm are staying on as a
09:30 commercial partner, adding them to the growing list of new business ventures that would be
09:33 able to swell their spending further. This would likely take them, at a conservative
09:37 estimate, into the £70-80 million bracket, possibly even beyond.
09:42 But this growth in revenue, combined with the increased competition money from Champions
09:46 League qualification, will put them firmly over the £100 million mark this summer in
09:52 terms of what's available. Without player sales adding to this fund, and with the club
09:56 likely to keep some in reserve in case any major surgery is needed in January, they're
10:00 unlikely to have broken that £100 million barrier by the time the window closes on September
10:05 1st. However, given their previous history of going
10:08 after their top targets and not being afraid to push right up to the limits of what FFP
10:13 will allow, it's equally possible that they could surpass last summer's £120 million
10:18 if they feel the market is right for it. Regardless though, while the club are always
10:21 keen to play down their spending power when asked, and readily admit they have a lot to
10:25 learn about football at this level, if there's one thing they seem to have gotten to grips
10:28 with that the likes of Chelsea or Everton haven't, it's that it isn't how much
10:32 you spend, it's how well you spend it. And for the club's fans, even having owners
10:37 that seem to get that is priceless.