FIFA to discuss fallout of burst financial bubble

When FIFA's finance committee sit down for their extraordinary meeting on Tuesday they do so against a backdrop of uncertainty barely imaginable when the soccer tills were merrily ringing a couple of years ago.

A seemingly limitless supply of money from TV companies, advertisers and sponsors was pouring into the game -- with FIFA leading the way when it came to collecting.

However, even the Zurich-based governing body found it was not immune to financial troubles when Swiss marketing giant ISL went bankrupt last May with massive debts, at the time leaving the TV rights to the 2002 World Cup in chaos.

As if that wasn't enough to set the alarm bells ringing, plunging share prices across the globe -- and the subsequent squeeze on advertising and sponsorship -- certainly were.

TV executives have admitted that they have paid far too much for domestic rights and that the major leagues should prepare for more modest deals in the future.

DRASTIC CHANGES

The leading clubs, aware of the future cutbacks, are warning of the need for drastic changes as, even in the current climate, salaries continue to outstrip income.

President Sepp Blatter said FIFA had lost around 30 million pounds ($42.55 million) because of the ISL collapse -- though some of that could be recouped.

"It is a bad situation but FIFA's rights are safe and secure and we have all the correct guarantees from the Swiss bank for that," Blatter said at the time.

Blatter says that the Kirch Group, which stepped in after the ISL collapse, has given assurances that the worldwide TV rights deal is totally secure.

However, many of FIFA's executive members want an investigation to establish how badly FIFA was hit by the collapse and Tuesday's meeting should go some way to answering that question.

Kirch too is in crisis. Weighed down by debts of 6.5 billion euros ($5.65 billion), it has admitted its pay-per-view scheme in Germany has been a failure.

Kirch paid 1.4 billion pounds for World Cup rights but struggled to capitalise on its investment as TV companies shied away from the huge feeds demanded.

The firm wanted 170 million pounds from the BBC for coverage in Britain but instead had to settle for a combined fee of 160 million from the BBC and ITV.

ITV are also desperately trying to rationalise their own domestic commitments after viewers failed to sign up for their new digital packages for non-premiership soccer -- a 315 million pound deal they are now hoping to renegotiate -- while cable operator NTL pulled out of their 328 million pound investment in pay-per-view altogether.

Sky TV paid more than a billion pounds for the current rights to the English premier league but Rupert Murdoch has admitted the league can expect nothing like that figure next time they sit down to talk.

In the ever-changing and hugely confusing non-terrestrial market, viewers don't know where to turn and many are opting out altogether, waiting for the muddied waters to settle.

RUNNING SCARED

After the fat years, now come the lean. The leading clubs, many of whom are now forced to look after shareholders before fans, are running scared.

The influential G-14 lobbying group of European clubs warned last month that the current spiral of wage increases for players would have to be curtailed.

AC Milan are in a financial hole and their vice-president Adriano Galliani is to lead a study into ways that clubs can cut their costs.

He said that G-14 had stopped short of recommending a US-style salary cap system, but made it clear that a solution must be found.

"All the clubs are worried about this," Galliani said after a recent meeting. "It is clear that at the moment our costs are too high, with very high salaries. I'm sure that there will be a reversal of this trend."

Barcelona president Joan Gaspart agreed. "Football can't continue on the current spiral," he said. "Our costs in terms of players have increased spectacularly.

"We haven't said that salaries must go down. It's more that the system has to change and that may mean the basic salary becomes less important, with variables on top of that."

Lazio president Sergio Cragnotti, who is a strong believer in a salary cap, has warned that the financial problems experienced at a number of Italian clubs in the past months could spread throughout the game.

"We must contain costs if we want to get economic results otherwise, after the crises experienced by clubs like Napoli, Sampdoria and Fiorentina we could have other important clubs in trouble," he said.

BLEAK PICTURE

The latest Deloitte and Touche report on English football finance, dealing with the 1999/2000 season and published last August, painted a bleak picture.

It revealed that 16 of the 92 English league clubs paid out more in salaries than they received in income.

Several lower division clubs are on the verge of bankruptcy with the gap between rich and poor growing ever-wider.

Manchester United, the richest of the rich, seem the only club able to buck the trend, although even they are expected to report a drop in profits this year.

For all their talk of curbing salaries, the English champions and G-14 members have just agreed a new contract with their captain Roy Keane that will net the Irishman more than four million pounds per year.

David Beckham is close to signing up for something similar while local media has claimed manager Alex Ferguson's three-year extension will net the Scot 11 million pounds over three years.