00:00the thing that most people have been talking about this summer in the most interesting angle
00:03from a Sunderland perspective. I've seen so many comments and tweets, mostly from neutrals to be
00:08fair, but also some Sunderland fans have been asking me, while also being a bit worried about
00:11the African Cup of Nations, saying how can we do this? How can we spend this much money
00:14and stay within the PSR rules? Well, the simple answer is that this is the positive of the
00:22approach that Sunderland took both during League One and the Championship years under Kirill Louis
00:26Dreyfus. Now, there will be plenty of examples of On The Whistle videos and probably some articles
00:30on the Sunderland Echo 2 that I wrote, where I was frustrated, where a lot of us were frustrated,
00:36wishing that Sunderland would push the boat out a little bit more to be more ambitious in the
00:40Championship, to go and get that experience straightened, to go and spend that transfer fee
00:43maybe on a slightly older player, to go and commit more in wages. Well, it's precisely by not doing
00:48that, Sunderland took a calculated gamble that they could get out of the league without doing that,
00:52which would then create them with a really strong platform to go and invest. And that's
00:55exactly what has happened this summer. So, to start with, just to outline how PSR actually
01:01works. So, it's the same as the AFL, it's accounted for over a three-year period. So, for this
01:10season, Sunderland will be judged on the current campaign, their financial forecast for this
01:15season, last season, of course, the year that they got promoted from the Championship, and
01:18the season before, that's 23-24. Now, Premier League clubs can lose, within the rules, £105 million
01:26over that three-year period. Now, for Sunderland, that's slightly different, because the rules are
01:30adjusted if you have spent some time in the Championship during your period, during your
01:37account period, sorry, under the PSR rules. So, for Sunderland this year, they have to have
01:42a minimum, a maximum loss, sorry, of £61 million over the three-year period, those three seasons
01:47that I mentioned. Now, you might look at that and think, well, hang on, we've spent nearly
01:51£150 million on players this summer, how on earth are we going to stay in with that £61 million
01:55loss limit? Well, actually, when you break it down, pretty easily. Sunderland is an almost
02:00unprecedentedly strong PSR position this summer. Let me dig into a little bit and explain why
02:06that is. So, obviously, we don't have the financial results for last season yet. They tend to be
02:13released around March, April time, but we do have the results for 2023-24. Now, if you
02:18remember, this was a bit of a disappointing campaign for Sunderland, they finished in the
02:21bottom half of the Championship under Tony Mulberry, Michael Beal, and then Mike Dodds.
02:26However, their financial results were, for a Championship club, relatively steady. Because
02:30of the sale to Ross Stewart to Southampton, which happened right at the kind of start of
02:35the accounting period, they were able to limit their losses to £8.1 million. Now, obviously,
02:41that is a significant amount of money for anyone, certainly for me. But actually, for a Championship
02:46club, that's a very modest loss. Most Championship clubs are posting significantly larger losses
02:51than that. And specifically for what we're talking about now, teams that are promoted to
02:56the Premier League from the Championship tend to be losing a huge amount more money than
03:00that. So, Sunderland's initial, the first year of this financial period, £8 million, that's
03:04a fairly modest loss in the context of what I'm saying is a maximum £61 million loss over
03:09a three-year period. Now, the key year here for all this discussion we're talking about
03:13is 24-25, so that's last season. Now, as I mentioned, we don't have those results yet.
03:19They'll be released next year. But we can strongly predict that this will be an almost
03:22unprecedentedly strong financial return for a Championship club. Why is that? Because
03:28of the sales that I mentioned earlier. So, Jack Clark's sale to Ipswich Town, because
03:32of the way the accounting years fall, will actually be counted in this period. So, that's
03:37an initial fee that we believe was around £15 million. They will also include Tommy Watson's
03:45sale to Brighton, and they will also include Joe Bellingham's sale to Brucey Dortmund. So,
03:49I expect Sunderland's financial results for this year, given that their transfer spend in
03:53that season was fairly small, certainly compared to the money they were bringing in, to be pretty
03:58vast. And that is what has created the headroom for them to go and make this really, really
04:02aggressive approach to the transfer market this summer. Something else that I would point
04:07out as well is that in the 2023-24 season, so that's the first period, first year of this
04:14period, their wages were only in the ninth highest in the Championship. This is something that's
04:19really, really important to understand as well in terms of why Sunderland have been able
04:22to do what they've done this summer. They have got a very, very small wage bill compared
04:28to most teams who get promoted from the Championship. That's primarily because most teams who get
04:33promoted from the Championship have been in the Premier League in recent years. So, they
04:37have a lot of legacy contracts, a lot of significant contracts that they take forward, and that
04:42can severely limit them in terms of the income and business that they do. In some cases, they
04:46actually have to offer load players before they can buy. Some of them were absolutely not in
04:50that position. Yes, they had a high wage bill, generally speaking, but compared to what the
04:55wage bill that most teams carry when they come into the Premier League already, it was
04:58minued. And that is why they've been able to be really, really aggressive in going out
05:02and recruiting players, because their headroom was significant. Their financial obligations,
05:07if you like, were very, very small compared to what most promoted clubs bring in. Now, in
05:13terms of this season, so the current season, which will be the last of this accounting
05:17period, yes, they've spent a huge amount of money on transfer fees, but it's really important
05:22to understand the way that these are actually accounted for in club finances. So, Sunderland
05:27do not have to account for an £150 million transfer spend in this year's accounts. That's
05:32not how it works. How it actually works is a process called amortisation. So, basically,
05:37what this means is that if you sign a player, the cost of signing that player in terms of the
05:44transfer fee is actually spread over the length of their contract. So, to give you an example,
05:49and this kind of puts us in the ballpark of where a significant number of Sunderland's
05:52deals have pretty much landed this summer. If you sign a player for £20 million and put
05:57them on a five-year contract, the book value each year that he's at the club is £4 million.
06:03So, you can understand now, in a PSR context, Sunderland are not accounted for £150 million in
06:09their accounts. This is actually a much, much smaller amount that should go into their accounts.
06:14And as we've mentioned, with Sunderland's massive TV revenue boost in this year's accounts,
06:19that is something that's going to be a lot, lot more manageable.
06:21So, you'll see.
06:22You'll see.
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