Why We're Selling Academy Talent & Why Clearlake Need Chelsea to be winners again

Explaining the whys and wherefores of Chelsea's financial strategy

There’s understandably a lot of frustration at the recent and potentially future selling of academy talent to comply with the Premier League’s Profit and Sustainability Rules (PSR). As many of us know by now, due to their lack of amortisation, home grown players go on the books as pure profit.

In an article in the Athletic this week, it was reported that in the absence of European football (especially Champions League), and the big commercial deals which come with it, Chelsea have had to adopt this strategy in order to compete in the transfer market.

Chelsea aren’t the only club doing this either, Manchester City have sold almost as many academy prospects as us in recent years. Ironically, Chelsea have benefitted from this, last summer signing the likes Cole Palmer and Romeo Lavia, both former City academy talents. Then there’s the likes of Jadon Sancho and Douglas Luiz, both of whom had success after leaving City, and there’s others.

I think the majority of Chelsea fans are hugely frustrated that many academy players are leaving the club. Especially as Conor Gallagher, who has been one of our best players this season, seems to be up for sale. Not to mention with the shameless, classless briefings to push Armando Broja out of the club this window.

At times the tone I see on social media is this is part of some big conspiracy to destroy Chelsea and Cobham, when the reality is much more simple and pragmatic.

Put very simply, Chelsea are not, currently able to compete financially with the likes of Manchester City, Manchester Utd or Real Madrid. In fact, even Tottenham and Liverpool now are capable of eventually making more revenue than us. Spurs and Liverpool make about £50-60m more per year in matchday revenue, even without CL football.

This can’t continue of course, hence the push for a new, bigger stadium.

But in the meantime, for us to compete with them as quickly as the owners and fanbase want, we have to find alternative ways of making revenue.

Firstly, though how have we spent so much? Well, the ownership have actually been very smart with this in a few ways:

• Long contracts: The use of long contracts to amortise big transfer fees was our initial tactic, and it helped us secure the likes of Enzo Fernandez, Wesley Fofana, Benoit Badiashile, Carney Chukwuemeka, Nicholas Jackson, Christopher Nkunku and others for relatively low annual amortisation costs. Obviously UEFA and the Premier League put a stop to that very quickly.

• Wage Structure: The owners have completely changed the wage structure. It’s been reported in multiple places that contracts at Chelsea are now structured with a low base salary, with the big money coming in bonuses for league position, achieving European/Champions League football, and winning trophies. It was also reported last year, there is a significant wage reduction (said to be between 20-30%) written in all new contracts (bar Raheem Sterling’s) for not achieving European/CL football. Obviously this would have come into play this season, so there would have been a huge wage reduction from the off.

• Clear Out: Beginning last January with Jorginho and continuing in the summer, we did a mass clear out. We sold a lot of players on big contracts, or with time left on their contracts, for fees either matching or above the remaining amortised costs. For example Kai Havertz had £28m remaining of his amortised costs. We sold for £65m so we made a £37m profit on Kai, which essentially paid for Cole Palmer. We made profits on Kai, Jorginho, Mateo Kovacic, Edouard Mendy and Christian Pulisic. Others like Kalidou Koulibaly, we essentially broke even or made a very small loss at worst. This obviously reduced the wage bill considerably too as many of these were huge earners.

• Singing Young Talent: If you want an answer to why we sign young talent, this is it. Their plan is to scout well and recruit the best young talent in the world. The best players come and play for our first team or are part of the first team or squad for a long time, improving every year, on long contracts, and becoming an elite team, with only a few additions needed. The young talent we sign who don’t make it, we can sell for significant profit to help the club finances. This is actually a genius idea for sustained success. The only problem is the owners were, being new to football, unaware of the importance of leadership and ‘good’ experience to creating a competitive team. If they can balance this out, this is potentially a very good strategy. The problem we’ve had is not the owners or their plan, its the people executing it.

This brings me to the area where fans are most upset. The “pure profit” sales of academy talent.

Last summer, we made pure profit from the sales of Mason Mount (£60m), Ethan Ampadu (£7m), Callum Hudson-Odoi (£4m), Ruben Loftus-Cheek (£17m), with more to come from the Lewis Hall deal which is likely to go through, for £28m and counts on this year’s books. So we’ve made £116m cash in selling academy talent since last summer. We’ve also made £2m from Ian Maatsen’s loan fee this month on top of this.

Of course any sales we make before the end of June - potentially Armando Broja, Trevoh Chalobah and Ian Maatsen also go on this years books. They could total up to £95m cash on the books (plus any potential loan fees, say £2m).

So that would be £225m pure cash from academy sales in one year. Add to the other profits from sales last year, around £66m, you’re looking at a potential total of £291m cash profit on players in one financial year.

I’ve criticised the sporting directors, but the area of sales is one area they have excelled, getting big fees for players we probably couldn’t have dreamed of. As annoying as it is to lose these players, it helps keep Chelsea compliant with PSR and avoid points deductions.

Of course normally, you’d expect us to have Champions League football, which gives an income of between £50-70m every year, enough to cover half our amortised costs, or pay for one or two big signings in terms of amortisation. CL football also helps get big commercial deals. Under Roman Abramovich, we didn’t maximise our commercial side, partly because we didn’t need to so much, as Roman would often intervene and inject his own cash to cover costs.

However, even Roman knew we had to keep to the rules, hence the massive sales of academy talent under his ownership. Lets’ be clear, under Roman we sold far more and arguably more talented academy talent than the current owners have, and it was for the same reasons.

But Roman was a one off. If Chelsea are to be successful, we need to invest in players, and we need to generate our own revenue as a football club to do it. Our new owners understand this, and have said their goal is to achieve an annual revenue of £1 billion sometime in the next 7-8 years.

To do this, they need:

• success on the pitch (men and women), to give us CL money, and prize money

• big commercial deals (which come with on pitch success)

• a bigger stadium (with potential stadium sponsorship) to increase match-day revenue

This is what’s required for us to be successful both on an off the pitch in a sustainable way. As Behdad and Feliciano have both said, Chelsea need to be a winning club to maximise our commercial potential.

If this is achieved it means we’ll likely never be in a position where we’re at risk of liquidation again. It also increases the value of Chelsea by two or three times, which is good for Clearlake, as the value of their investment is up.

Clearlake/Boehly aren’t allowed to sell the club until 2032, my guess is they will not sell the entire club (it would be too difficult/expensive, unless its an actual nation state who purchases us), but will instead sell a controlling interest and remain as minority investors, so it would still part of the Clearlake investment portfolio.

So this is where we are, and why we’re having to sell academy talent.

One more thing to briefly cover, is the commercial side of our club. To maximise our commercial side, we obviously need best in class people with a track record of commercial success at big clubs, and growing revenue.

Ironically, in contrast to the football side, we’ve actually hired some best in class talent to help maximise our commercial revenue. They have experience at Milan, where they achieved their highest ever revenue figures. They’ve also worked Man Utd and Arsenal. The du only began work in November 2023, and have already agreed a deal for sleeve sponsors for this year, and new training kit sponsors for next year, at an increased rate. Here’s some info on them:

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Casper Stylsvig - Chief Revenue Officer

Role: Chelsea made clear when announcing his appointment in November 2023 his role at Chelsea will be similar to one he held at AC Milan, where he “oversaw the club’s commercial transformation and return to profitability.” Clearly, that’s his role at Chelsea, given the owners stated desire to grow revenue to £1 billion in the next decade. His focus will likely be on finding new commercial partners and improving our revenue streams.

Background: He was at AC Milan between 2019 and 2023 in the same role. Milan’s revenue’s reached the highest levels in their history under his leadership. Prior to AC Milan, Stylsvig spent three years at Fulham as Chief Revenue Officer, and eight years as Manchester United’s Global Sponsorship Director, having started his career in football at FC Barcelona. Clearly a best in class appointment with big club experience.

James Murray - Chief of Staff & Head of Business Operations

Role: There’s no job description given on the Chelsea website, though Murray confirmed himself on LinkedIn he began his role at Chelsea in October 2023. He says of his role at AC Milan, with a similar job title to his current one, was “a mandate to help the CEO and the ownership define what the club needed to do better, where we needed to invest, what our priorities should be.”

Background: Worked in club football for a decade. Spent 4 years at AC Milan, and previous to that just over 5 years at Arsenal. He stated his achievements / role at Milan included “Commercial deals, a lot of the planning behind our new stadium project, more branding-led initiatives like our partnership and work with Roc Nation to budgeting and financial planning”. In his last year at Milan, overall revenue reached the highest level in the clubs history. Another elite level appointment, who worked successfully with Stylsvig at Milan.

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As you can see, our owners have gone for the best they can find in terms of a commercial team. A proven track record of success at big clubs, and tons of experience in the field. Well connected, well respected, good at their job.

So I think we can be confident we’ll see a gradual increase in big commercial deals in the next few years, which will be good for the club (and good for the academy).

I hope this explains a little why Chelsea are doing what they are doing with player sales. Without CL football and until we grow our commercial side and build a new stadium, Chelsea need to make big sales in order to finance squad building.

Hopefully, the CL football and commercial growth will come in the next year or two. Academy sales will still happen, but hopefully, not to the same extent in future.

Bottom line for Chelsea fans, to achieve the goals of Clearlake, Chelsea need to be a winning team again. We need to be CL regulars again. We need to be winning big trophies again. That’s where the big bucks come from, and they know it. So ultimately, they’ll do what’s necessary to achieve this. So one day, we can pay for our own success with massive revenues, instead of finding loopholes and racking up debt.

The Score