In a bid to eliminate the growing number of money-losing soccer teams, the J.League will implement a club licensing system in fiscal 2013.
The system will remove the right to participate in the J.League if clubs fail to meet new finance-related standards.
As Japan's professional soccer league celebrates its 20th year this season, it plans to push financially sound management of teams.
The J.League was formed in 1992, and made its official debut a year later with 10 teams. In 2012, the number of clubs has reached 40. The league has successfully worked to expand soccer nationwide, but in doing so, many clubs are facing financial difficulty.
For example, second-division side Thespa Kusatsu has had to take out a 50 million yen ($603,900) loan from the J.League fund, while J2 team Mito Hollyhock took out a 30 million yen loan in 2011.
FC Gifu took out a 50 million yen loan in 2008, but couldn’t repay it a year later when the deadline came up. It sought an extension on the loan and finished repaying the debt in April 2010.
Even former soccer strongholds are struggling financially. J2 team Oita Trinita, which won the Nabisco Cup in 2008 while competing in the top flight, sought 600 million yen in loans in 2010. In 2010, there was also an unusual case where J.League administrators had to manage Tokyo Verdy on behalf of the Verdy management.
The club license system’s biggest goal is to detect potential financial crises as early as possible and avoid management crises such as the Verdy case.
The J.League will be monitoring each team based on its own management standards related to soccer, venues, human resources, structural management, legal work and finances.
The regulations concerning finances includes rules stating that clubs cannot be in the red for three consecutive fiscal years, and clubs cannot have liabilities exceeding assets starting in fiscal 2014. Sides that do not comply with these rules will be kicked out of the league. Based on team fiscal 2010 financial statements, 18 out of 37 clubs have booked losses, and 10 sides had liabilities exceeding assets.
This season, J2's Roasso Kumamoto shrank its budget from 700 million yen to 630 million yen in a bid to tighten its finances. For fiscal 2011, the team is expected to book 70 million to 80 million yen in losses, and its liabilities are expected to exceed assets by 50 million to 60 million yen. To have its assets exceed liabilities by fiscal 2014, the team needs to book 30 million yen in profits each year until then.
“We want to aim for J1, but we had to honestly tell our general manager and manager about this situation," said Hideo Oka, club president. "All we can do is do our best.”
In Germany, the club licensing system was established in the 1960s. It was rewritten in 2001 to emphasize that spending exceeding revenues will not be permitted.
The Deutsche Fussball Liga (DFL) former board of directors and now university professor Christian Muller, who helped revise the rules, said, “The rules are there to protect the clubs. Avoiding reckless investments like obtaining top-level athletes by booking losses will benefit clubs in the long run.
"This also is intended to guarantee that all league games can be played as scheduled.”
Each year, the DFL inspects all 36 clubs in the league’s first and second divisions over a span of roughly four weeks. If teams cannot renew their licenses, they will be relegated to the third division, which is an amateur league. Last season, second-division team Bielefeld failed to pay athletes’ salaries for a month, borrowed money from the league and lost 3 points in the standings as punishment.
Germany has punishments depending on the amount of money each team borrows. Muller says that it is not fair for teams that practice fiscal soundness to compete with teams who spend more than they can afford. Following Germany’s example, the J.League will be deducting 10 points on the league table from each J.League team that takes out loans from the J.League starting the next fiscal year.
Andreas Rettig, general manager of Augsburg, which got promoted to the Bundesliga top flight for the first time this season, and for which Japanese national team midfielder Hajime Hosogai plays, said, “We didn’t raise our sponsor contract money just because we got promoted to the top division. In fact, we asked that a certain amount of money be guaranteed if we get relegated to the second division.”
This shows strict risk management styles in which even strongholds create their budgets based on the assumption that they may not win the league tournament.
Muller adds, “We also don’t allow billionaires to make up for a team’s losses using their own pocket money.”
In Germany, a club is considered in violation of the rules once it posts losses in revenue. As a result, there is a smaller gap in each team’s level of soccer, resulting in many exciting tight races for the league title.
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