The Abramovich Effect

Written by Joseph Keane

Chelsea was a club that had been rising up through the table before Roman Abramovich took over. However, under Ken Bates, the club was heavily in debt. Ken Bates sold the club to Roman Abramovich in 2003; Chelsea and Roman have since been the most successful club in terms of winning trophies. 

When Roman Abramovich took ownership of Chelsea, the club certainly would not have been considered a small-time club but it wasn’t in the mix for consistently winning significant honours. However, Abramovich wasted no time spending money and pumped 150 million Euros into the playing squad. Under this investment, he brought the likes of Hernan Crespo and Cladue Makelele to the club. This was considered a serious investment in a club, at the time, and this showed to the rest of the league the financial commitment he was willing to pump into the club. This large-scale investment was nicknamed the ‘Abramovich Effect’. In his first season with the club, the revenues increased by 62%. This effect, brought about by the takeover, produced a continuous upward trajectory in regards to revenue, as in 2018/19 Chelsea brought in 513 million Euros. However, this effect has dipped off due to the recent covid pandemic. But from 2003-2018/19 season, the club's revenue has increased by 282%.  

Abramovich has also had influence on the trophies that Chelsea have won since the takeover. For the second time in their history, Chelsea has climbed to the top of European club football with their win against domestic rivals Manchester City in the 2020/21 UEFA Champions League final. With this latest trophy, the club had collected 18 major pieces of silverware for their trophy cabinet – most significantly five Premier League and two Champions League titles – the most of any English club since 2003, when Roman Abramovich took over the organisation. In addition, Chelsea has won, at least once, every trophy that they could win since Abramovich has taken over. 

Chelsea's global popularity is also well demonstrated by it’s social media following across popular platforms. The club are the second most followed English club behind only Manchester United and the fifth most followed globally. They have grown their social media fan base by 30% in the past two years by strategically focusing on a new generation of fans through TikTok, starting a new account and via Instagram, where their following increased by 57%. The club have also made calculated moves to capture the Chinese market with their following on Weibo, one of China's biggest social media platforms.

Continual improvement on the pitch and the strong revenue side have provided both an opportunity and a need for continuous investment into the playing squad. As a result, Chelsea's staff costs have increased 60% since 2011/12 to 326.8 million Euros in the pandemic-impacted 2019/20 season. Executive Director at the club since 2014, Marina Granovskaia, rules over Chelsea's rigid wage structure with an iron fist, managing to consistently remain below the 70% staff costs-to-revenue ratio recommended by UEFA despite numerous major transfers. However, Chelsea's revolving door approach to managers can be felt in the evolution of staff costs, which has caused significant additional costs. For example, in 2015/16, a slight increase is present in relation to the 11 million Euros compensation paid to José Mourinho and his coaching staff upon his dismissal, while an even more lucrative sum of 30 million Euros was paid to Antonio Conte and his staff for their discharge back in 2018/19.

Since Abramovich’s takeover, Chelsea has been England's biggest spenders in the transfer market. The club have reportedly spent 2.22bn Euros on incoming players, more than any other club in the Premier League in this time frame. Similarly, Chelsea lead all Premier League clubs in the income generated through player sales, receiving, a reportedly, 1.17bn euros since 2003/04. Currently, the Chelsea squad is valued at 1bn Euros, a significant rise from the 422 million Euros figure in 2011. The most valuable players are recent signings from Germany, Kai Havertz and Timo Werner, and homegrown talent Mason Mount, demonstrating the club's tendency to purchase ready-made players as well as to reap the fruits of continuous and significant investment in the youth teams.

A unique aspect of Chelsea's finances is a 1.4bn Euros debt, as Abramovich has supported the club by loaning a significant amount of money since his takeover in 2003. While on the one hand, the debt exposure towards related parties is substantial, on the other, Chelsea has no interest-bearing financial debt owed to other parties, such as financial institutions. This debt structure allowed the club to aggressively tap into the transfer market even during the pandemic downturn in 2020/21 in a period where most clubs were forced instead to apply for a spending review in relation to their transfer activities.

Lastly, it is essential to note that besides the running of the men’s team, Abramovich has also taken great care of other areas of the club, such as the women's team. Indeed, investments have been undertaken in this field, as Chelsea boasts the most expensive transfer in the history of women's football following Pernille Harder's signing in the summer of 2020. Rewards were also reaped on the pitch, as the team were crowned domestic champions and reached the UEFA Women's Champions League final in the recent 2020/21 season, losing against FC Barcelona.

Following in the footsteps of patrons running football clubs in the 1980s and 1990s, Abramovich and Chelsea are the modern-day examples of massively investing in a football club, as the Russian tycoon has been able to turn a club with a relevant-but-limited history upside down, turbocharging them into a European superpower. However, the advent and implementation of UEFA Financial Fair Play Regulations would nowadays limit such free investment capacity as that enjoyed by the tycoon, if not backed by the parallel growth of a club’s revenues; that's why it is unlikely to expect such a business model to be replicated in modern football

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