Eddie Howe quits Newcastle... Why now?

0:02This is a global production. He didn't have enough to give to really rail against what could be quite a negative environment if Newcastle start the season poorly. Where do you think the fan base, and maybe Eddie Howe as well, think Newcastle should be? If we were to break squad cost rules now, are we looking at fines? Maybe he's also looking at the fact that Newcastle missed out on players and then also sold Gordon and Tonali. There's been an idea that Newcastle were just going to keep growing and progress, but actually it feels like there's going to have to be at least one step back before they can move a few steps forward.

0:34And I think what's happened over time is the Premier League has kind of lost its will to go to war with its clubs. The days of sporting sanction in the Premier League probably have ended.

0:52Hello and welcome to the Sports Agents, and there will be only one place to start this podcast and that's with Newcastle United's head coach, Eddie Howe, leaving the club. After five years in charge, we'll explore everything behind his departure and also look at what Newcastle's immediate future looks like. Chris Woff, Newcastle United correspondent for The Athletic, joins us another day. Another day, another Newcastle United. Bombshell, I don't know how you want to term this one. This one definitely is. even by the club standards over the last few years this is pretty dramatic news I think. A bombshell in the sense of the timing i.e.

1:33coming after a 4-1 defeat in a friendly at Bristol City after which he did post-match interviews or a bombshell in other ways because there have been a lot of rumours for quite a while about his future. I think the timing not so much the defeat at Bristol City, although obviously people will look at that and say that's not great. Start the pre-season, Newcastle drew 1-1 with fifth tier Gates in their first pre-season friendly and then lost 4-1 against Bristol City. But that wasn't the reason that this came about. It isn't an immediate reaction to that. I think it's more that we are already two and a half weeks into pre-season training, that there was a decision taken at the end of last season by Howe and the Newcastle board that he was going to continue.

2:15and actually how has come to them. And this seems to very much be head coach led. He's come and decided that, no, actually I'm no longer the man to lead Newcastle forward, that he's given his all really for the best part of five years. It'll be five years in November since he took charge post-takeover. He's been the only permanent head coach Newcastle have had in that time period. And he's been a transformative head coach for them. But last season, there were a lot of issues on and off the field, didn't go according to plan in many ways. Newcastle finished 12th, got to the last 16 in the Champions League, but really their league form suffered and they've lost some very big players and the minute you've got a cloud over the future of their captain, Brunigam Raich and signings-wise, Newcastle have signed four players, all of them aged 20 or under and maybe just the way the last few weeks have gone with, it's not just who Newcastle have sold in the future of Brunigam Raich, the two players who Newcastle have missed out on in Victor Munoz a forward who ended up going to Liverpool Liverpool goes up to him and Johan Manzambi a midfielder both of those players would have improved Newcastle's 11 would have come straight on the side the four players have signed as much as Newcastle feel they're going to be very very good players in the future they're probably not ready to start the first game of the season so if anything it didn't feel like how necessarily had so much of a chance as to really grasp this and turn this around and I think my assumption is that he's come to that conclusion as well that he didn't have enough to give to really rail against what could be quite a negative environment if Newcastle start the season poorly.

3:42A sort of bigger picture question then. Where do you think the fan base, and maybe Eddie Howe as well, think Newcastle should be, if you are looking in the different Premier League bands, where they should be? And where do you think... Sorry, Chris. And where do you think the ownership think they should be, given they have obviously had frustrations at rules and regulations and what they can spend. I read one article in the last couple of weeks which basically said they're viewing themselves as a sort of Borussia Dortmund now when it comes to transfer policy, player policies, you know, get them in, build them up, sell them for a lot of money, repeat the cycle.

4:29Now, when this investment came in, the hope was in the long run that they'd probably be more Bayern Munich than Borussia Dortmund. there's almost been existential questions certainly post takeover but over over the course of the last year or two since football's financial regulations have forced newcastle to act in the way that they have done basically the last three summers in various different ways have been very damaging for newcastle that psr trouble in 2024 had to sell players obviously elia lands and eventually moves to man city for 116 million pounds newcastle sold them for 35 last year their sporting director leaves in they spent they lose isaac at the very end of the window having said he won't go and spend a lot of money, which they are now paying for with UEFA fines going this summer.

5:09So this summer, they have to sell some of their big players, and they've tried to change the model. And the current hierarchy seat is unpicking the mistakes of the past. But the problem has been that both takeover, because Newcastle were branded the quote-unquote wealthiest club in the world because of the ownership they had, it was never actually the model that they would necessarily do that. They do want to eventually be number one in the world, as Yasser Amai and the chairman says. And as David Hopkinson, the current CEO, says by 2030 they'll want to be in the conversation to be among the biggest clubs in the world he talks about wanting to to compete credibly for major trophies but i think the way the situation the castle are in right now with the uefa sanctions they have very not just the sanctions they've already suffered they also have an agreement moving forward where they basically to a degree and it's not as fast as hard and fast as they have to sell to buy or sell to finance the what they want to do in the transfer market which means they're going to lose more of their best players they're going to see in younger players which given that they've been in the Champions League twice post takeover given that they've won a major trophy I think that understandably that there's been an idea that Newcastle were just going to keep growing and progress but actually it feels like there's going to have to be at least one step back before they can move a few steps forward and looking at it from the how point of view I think that he felt and this is I'm not trying to speak for him but but sort of conversations in around people around I think that maybe he felt that there needed to be a realignment publicly of what Newcastle are trying to achieve, because going into the next season, if Newcastle fans think they're suddenly going to get back into the Champions League, if you look at the business they've actually done and the weakening of the team in the short to medium term as these younger players come in and try to develop, there probably hasn't been that full reset.

6:47Supporters look at it and I don't think they quite know what to expect because of what has been said publicly from both the ownership and at executive level as to where Newcastle wants to get to. So it feels like there's a bit of a disconnect there when they're signing these young players. And yet in four years' time, they're meant to be competing for all these, potentially these major trophies going into the 2030 decade. And then for the hierarchy, I think in the next couple of years, the idea is to get back into Europe and build so that by the end of this decade, revenues have progressed to a certain level so that Newcastle can spend more.

7:20Because they don't actually, financial issue, they don't have a funding issue. What they have is a regulatory issue. Their ownership put in the maximum amount of money that they can within the regulations that exist. But UEFA rules are even more stringent than Premier League rules. And despite Newcastle not being in Europe, ironically, it's the European rules which are governing what they can and can't do in the market. You look at the here and now, and the reality of the situation is that a team that finished 12th last season in the Premier League has lost two of its best players. And they've signed four young and exciting players, but who probably aren't ready for the here and now.

7:53They had a fundamental problem in goal and up front. Both positions haven't been strengthened yet this summer. And so it's difficult to see where Newcastle do progress in the short term. And so for that reason, I think there is still a disconnect that needs to be communicated better from Newcastle as to what it is moving forward. Where are they going to move? What are they going to try and achieve over the course of the next few years? and maybe the end goal is no different, but clearly the pathway to get there has changed dramatically to what maybe expectations were even two years ago. You've mentioned the players they've missed out on this summer.

8:27There are a lot of clubs who are missing out on players because a lot of Premier League clubs seem to be going for the same type of player. Is there a pattern in Newcastle missing out on players? Is there a concern? Is it just one of those things? I think there is a pattern. I don't think it's necessarily that. I mean, last summer, there was a lot of arguments by, I think, supporters and other people within football that Newcastle set their sights too high on the players that tried to get in. A lot of the players I went for were Premier League experience or came with a premium, but also they basically tried to go head-to-head with Chelsea for João Pedro, with Man City, as it turned out to be, for James Trafford, and Benjamin Seshko going to Manchester United, Hugo Eketike going to Liverpool.

9:13And really, Newcastle were always going to miss out to those clubs because of the cachet of them, but also because of the wages that could be offered. And so I think there's been a reassessment going at this one. It's been slightly different with Victor Munoz. They got very close and thought the deal was basically done. The player wanted to come, and then Liverpool, who had been there in the background, suddenly came on strong. And again, Newcastle, when they go head-to-head with a club like that, they do miss out on players. The same happened with Manzambi and Aston Villa. Newcastle tried to get that deal done, really pushed aggressively, and eventually a club who are in the Champions League this season managed to pip them to Manzambi.

9:49Maybe, and I can't speak for Manzambi, so I don't know, maybe he's also looking at the fact that Newcastle missed out on players and then also sold Gordon and Tonali and questioned the direction of that when at Aston Villa they're obviously in the Champions League for next season. It feels like they're a bit more settled, even if obviously players are leaving there as well. So there is a consistent thread of whenever they go head-to-head with another club, but the issue Newcastle have is, if they don't go for for a player of a certain quality if they just settle for players who they don't think that the top or the top club or a club of a certain rank are going to go for then can they realistically massively improve that's what they're trying to navigate at the moment you can argue with the strategy they've gone for the players have actually signed they're trying to sign younger they're trying to pick off players that may be brighton or brentford or the other warm with the clubs who people look at and say they sign players young they do well they're trying to almost take on that model but you mentioned earlier on them being compared to sort of Borussia Dortmund or the like is that really the model does that fit with the idea that Newcastle in five six years time are going to be competing for loads of trophies I think there is still a disconnect there what do you want to say about the the favorite for the for the job to replace them and I'll caveat this from my perspective which is I'm always wary about doing too much on who a potential new manager is or who the new manager ends up being ever since southampton got rid of nigel atkins after two promotions into the premier league and replaced him with marizio pochettino and everybody went what the hell are they doing how can they get rid of nigel atkins who on earth is this guy etc etc etc so we always even though and let's be honest not many people are going to be across his career here, and we'll be going, who on earth is this?

11:31You know, we have to say, well, there must be something in his makeup here that Newcastle have seen. As things stand, Newcastle, who are going to a pre-season training camp in La Manga in Spain in the next couple of days, it is expected that Matthias Jadzl will join them out there. He is German. Coach, he was at Hoffenheim for a long period of time, but he's been in Saudi Arabia, won the Asian Champions League twice I believe and he's renowned for high pressing intense sort of style so there are parallels to a certain degree with the players who Newcastle and style that Newcastle have had under Howe and the way that they would they would want to play it so it seems that from the top that they're quite excited about this potential direction of travel they've known for a couple of weeks the best part of a few weeks that Howe was going to go and they had their list of potential options and the Arsenal's the one who they've decided to go for and maybe with the current players who are there, the current players he has, a fresh insight may bring more out of them.

12:29I suppose the counter-argument to that is, given the quality of playing Newcastle have lost, given the inexperience of the players that they've signed more for promise than necessarily the here and now, how quickly can a new head coach extract a lot from them? And do they need a strong start, really, to get the positivity of everyone? Because it is huge that the tower's gone. I think that even if there was a fair amount of negativity, certainly towards the back end of last season from sections of the sport base, there is also still a huge amount of affection and love towards him for what he achieved at the club and for how he's handled himself generally.

13:05What do you think their ambitions are then? What do you think their ceiling is for this coming season? Is that impossible to say at the moment? And finally, what next as well for Eddie Howe? It is very difficult to know what Newcastle hope and expect to achieve next season. I mean, budget-wise, they certainly would expect to be in the sort of top eight if they're going to ever reach the sort of goal that they want to get to and really get back into European football. They took such a massive hit from not being in Europe because of a conservative estimate, 40 to 60 million from not being in any form of European football.

13:36And that's before you take into account merit-based payments and finishing low in the Premier League and the likes. Revenue-wise, they desperately need to. But if you look at where the squad is, as I mentioned to you right now, when I speak to you right now, it's weaker than the back end of last season. So that is a concern. They insist more business will be done. They are still looking for a goalkeeper. They need multiple fullbacks, really, maybe other positions. Maybe there'll be players in and out. So I think it will be a challenge, given you've got obviously Chelsea outside of European football as well.

14:06They've got Xabi Alonso who's come in. You've got a lot of other clubs who want to get into those European positions. And it's very competitive. Spurs as well have spent a lot of money. so definitely top half as a bare minimum but ideally get back into Europe thank you Chris we'll let you go you've probably got a busy afternoon and days ahead thank you thank you all the best guys and a quick reminder you can catch up on our previous episodes on YouTube or Global Player or wherever you get your podcast subscribe or follow and please leave us a review as well and we will follow the money next so how did Newcastle get themselves into that financial situation that Chris was talking about are the Premier League's new fiscal rules creating even more of a wealth gap between the big six and the rest we will try and make sense of it all and it is not easy football finance expert Stefan Borson will join us

15:01Stefan thank you very much for joining us we've just done a whole load of stuff on Newcastle there and the different regulations that they are trying to adhere to. Before we get into it all, this is not an easy subject to explain, maybe even adhere to or understand. Yeah, look, we're working in a matrix now of multiple regimes across UEFA and the Premier League and they have different time periods, they have different rules, they have different nuances. we don't actually even have the Premier League SCR rules published. So that's squad cost ratio. Yeah, sorry. That's all right. So squad cost ratio, which is the replacement for PSR, which is the profit and sustainability rules.

15:50The other complexity about the Premier League is at the moment we don't actually know what the rules say because the handbook that's due to be published literally any day, I did check just before we came in, has not yet been published so the clubs all have all of the detail but remember these are rules that were actually agreed many many months ago and there was a view that they would publish the rules you know well in advance so boring people like myself could actually have a look at them and try and work out how it how it fits together both with UEFA but also more generally with how they're currently reporting but we're not yet in that position.

16:29Just explain if you can as as succinctly as possible what squad cost ratio is how how that is worked out because then everything else can go from yeah so you basically whereas we were doing a three-year test and a psr we're now doing a one-year test and that one year looks at what's your revenue and against your revenue so you look at the total revenue on the bottom of the equation and then at the top you'll have your Your wages, but not the wages that are in the published accounts that everybody talks about, not that number, the number of the first team. And only one Premier League team splits out what the first team get paid, and that's Crystal Palace.

17:16But we know, generally, the rule of thumb is to work on about 75%. So 75 % of the total wage bill tends to be the squad. You then add on the manager's remuneration. it's plus minus so you 75 is a is a fair estimate um and then agent fees but half of the agent fees are already elsewhere within the equation right yeah so there's a slight complexity there as well uh so when you see these published the agent fees in the fa published all the agent fees you probably take about half of those um and then you add on amortization which everybody has become an expert in this accounting methodology for how you account for footballers.

18:06So you add on the amortisation amount. And then the final amount that you get the benefit of is in addition to the turnover, you get the benefit of player trading profits averaged over the past six windows, i.e. three years. So at the bottom of the equation, you have as big a number as you can get as a football club. So that's turnover plus player trading profit averaged over the last three seasons. And then on the top of the equation, squad cost, not just your total wages, plus amortisation, plus effectively half the agent cost. So when we look at transfer fees now, are we still looking at whether clubs sell academy players and whether that's pure profit?

18:58Is that still relevant? So when Morgan Rodgers, who admittedly was not an academy player at Aston Villa, but when Morgan Rodgers moves from Aston Villa to Chelsea, how are we viewing that transfer fee within squad cost rules? Yeah, so it's now effectively you're getting a third of the benefit. So what it means is that if you're a club that underperforms in a given year and all of a sudden towards the end of the season you find that you're way short, whereas under PSR you were able, it wasn't ideal but you were able to in that final month usually most teams have that June period that they can sell they were able to take a profit bolster their profit under PSR, take the whole of the benefit of that in that final year of PSR so it sort of corrected it, it's different now they're now only going to get the benefit of effectively a third of it in the equation for SCR because it's over three years Yeah.

19:56Right. However, under the UEFA rule, whilst that's going to be the same with the part of the UEFA rule that's the SCR part, there is still a football earnings PSR style test in the UEFA rules. So they still have to comply, if they're in Europe, with a PSR style test where they will still get the benefit of sales, for example, in that June if they're short.

20:27But there's still going to be a lot of benefits from trading players effectively where you're making profit. The issue that a lot of the teams are going to have, and this is something that we talk about a lot with Chelsea, of course, is it's all very well making a profit on a player. But if you're then replacing that player with two or three players that are coming in on sizable fees that you then have to amortize over the next five years, if you're only getting a third of the benefit within the equation, but you're adding the total amortization over five years, the delta between those two is not as great as it used to be.

21:10So it doesn't play that well for trading teams, especially because in the traders, you've also got very large agent fees. So we talked about that being in the equation because there's a lot of frictional costs with buying and selling footballers. It's not, you know, in many ways, it's like buying property. You've got stamp duty and you've got legal fees and you've got all these additional fees that actually take a big chunk out of the profit. So, you know, I think the Chelsea model, they're using that as their excuse for how they get around this constant spending. I think it's going to be strained even with the change of regime to SCR so that amortisation which is, I don't know you sign a player for£30 million and they sign a five year contract that is£6 million per year under the old rules and the new rules and the new rules but you get only a third of that but for the player that you've sold to bring in that new player you're only recognising a third of it effectively so when Aston Villa again, I go back to them as an example because there's this interesting transfer period that they had in selling Morgan Rodgers, but then from the club they sold it to Chelsea, they brought Alejandro Garnaccio in, but they brought him in on loan with, I think, various conditions to buy him.

22:37Again, there's an accounting reason. Well, this is... There could be an accounting reason. Yeah, so I think what we've got there is, first of all, the optics, people go, ooh, we've seen this before. This is all about the rules, isn't it? I think in fairness to Aston Villa, first of all, they've done a lot of loans for players on conditions that they haven't ultimately signed. So I think we have to assume that Aston Villa do rate Garnaccio, that the condition is a genuine condition, i.e. that he needs to play a certain number of games. They've shown with Harvey Elliott that they may not play that player the requisite number of games, and therefore may not ultimately crystallise the option.

23:21They couldn't just buy Garnaccio unless they wanted to risk some of the profit from Morgan Rodgers under the UEFA rules because the UEFA rules have just brought in on the 1st of June a new rule where if you swap a player effectively or you do a deal with the same club for a player within 45 days, UEFA deem it to be a player exchange and the rules of accounting that they expect on a player exchange are different. And they will likely be different to the rules in the Premier League rules. So whereas the Premier League rules will probably not have this restriction around player exchanges, the UEFA rules do.

24:06And you might say, well, hang on a minute, Chelsea aren't even in Europe. Except Chelsea are now under a settlement agreement with UEFA, which means they are, for all intents and purposes, still captured by UEFA's rules. And obviously Aston Villa are in UEFA competitions. They are also in a settlement agreement. And a big part of what they needed this summer was a profit and a sizable profit because that sizable profit can be used both for SCR, which they've breached now twice, and they don't want to breach it a third time because what happens in SCR is the penalties keep ramping up. Plus they've also got€15m suspended on SCR.

24:48But also they really don't want to breach their settlement agreement with UEFA. Because if they do breach it by more than the limit that they're set, they will be banned from European competition for a season. So they can't risk, Aston Villa can't risk disrupting the profit on Morgan Rodgers by doing a deal with Chelsea. which is why it's extremely unlikely that the talk around Nicholas Jackson, for example, is real talk because they can't loan another player from Chelsea because you're only allowed one between Premier League clubs. And they can't buy him because if they do, they're going to have to adjust the profit on Morgan Rodgers for UEFA purposes.

25:35So just in this one scenario, you've got a snapshot of all of these different mechanisms and regulatory issues that particularly Chelsea, Aston Villa, Newcastle now, given that they've signed the settlement agreement, are all working to. And the complexity really, even from the finance team. If you were to go round and ask one of the Premier League's finance directors to explain what's happening, how come Chelsea can keep spending? I can tell you a lot of people go to be honest I've looked at it I've got no idea

26:20the squad cost ratio as well when this was being brought in there were several Premier League clubs who voted against it and through your explanations people might understand why certain clubs were against it because if you are basing everything on your turnover then that understandably is going to favour in inverted commas the bigger clubs. Yeah and so the teams it's no it's no massive surprise who most of the clubs that voted against SCR were. So it's Bournemouth well you know small stadium very difficult for them to generate revenue beyond broadcast. Brighton who have done exceptionally well of course we know that but still have limitations in terms of what they can do from the size of club the stadium commercial side of things Brentford similar sort of story again very very well run clubs but limited just by the physical size of those clubs and their catchment areas and their fan base Fulham another example pretty similar Crystal Palace, and the last one was Leeds.

27:32And I guess Leeds, in some ways, was a more surprising club to vote against. The other thing about all of those clubs are that they are all more likely to be looking at the second tier of UEFA competition. And that means that under the Premier League SCR rules, they will be capped at 70%, but won't have the benefit of the Champions League. So it's fine if you've got 70 % cap and you're getting£80-200 million of revenue. But not if you're in the Conference League. But if you're in the Conference League, even if you win it, you're probably doing€20 million before bonuses, right? So before costs.

28:10You can well understand why those clubs were less in favour of SCR, but there needs to be some scheme, ultimately. You know, there's no one size that fits all clubs here. So they had to come up with something. and ultimately they chose SCR largely because UEFA have already put it in place. And I think what's happened over time is the Premier League has kind of lost its will to go to war with its clubs. And on the back of what happened with Everton and Nottingham Forest, which were clearly almost brutal punishments for those clubs, particularly for Everton in their scenario, and now with a knock-on of then a whole lot of litigation that's following, I think the Premier League said, look, we just can't do this.

28:58You can't have a situation where we're spending£50 to£100 million a year taking action against our clubs. And put City to one side for now, we may want to touch on it, but the City case is different from the ones that we're talking about here. they were they were starting to run a kind of constant very expensive legal process every season and I think they were like this this just can't work especially then when it was contrasted with Chelsea using effectively intra-group and accounting favorable transactions with themselves that effectively got around the Premier League rules so I think the Premier League said look we can't go on like this.

29:39And definitely when Chelsea were permitted to sell the hotels and sell the women's team for total profit of about£275 million which in the way that those rules worked effectively went from£105 million over three years to£275 million plus£105 million. So they just immediately had a much higher cap than everybody else who hadn't sold the women's team. And not everybody is based in Chelsea and has a hotel on the forecourt that they can sell. So obviously what happened was Aston Villa, Newcastle and lots of other teams then said, well, we'll sell our women's team as well. And so that's how they got out of more breaches.

30:19And you go back five years ago and teams were selling their training grounds as well, weren't they? Or some clubs actually sold their grounds to their owners. Correct. If memory serves me right. Right. So where we are at now, are there still loopholes to be exploited? Well, the first thing to say is arguably they're not loopholes because I think there is a good argument to say that had the Premier League had the appetite, they could have challenged some of this stuff. So they could have said, well, it's all very well as allowing you to take£200 million for the sale of the women's team. But we believe that you've done that effectively not for genuine commercial rationale, but because you're trying to effectively satisfy the PSR rules.

31:12And there is a rule within the Premier League rules that effectively says everything has to be with genuine commercial rationale. They chose not to do that. so let's be fair to Chelsea everything was approved by the Premier League under the various rules that were required Associated Party and all this stuff it was all approved after a process and therefore I would say they didn't it wasn't a loophole they didn't do anything wrong they're closed those mechanisms now just because the rules have changed because it's not the same tests I don't want to go too far down what's happened in the past or anything like that but if you were to break squad cost rules now are we looking at fines are we looking is there are there set punishments because the other thing with Everton and Forrest was it was if somebody just stuck their finger in the air and came up with a points deduction yeah yeah so I mean I don't I don't actually have a particular problem with the fact that they gave the discretion to an independent panel to take everything into account and come up with a decision as to what the penalty should be but but that that is what they ended up doing um now we are in a different world and in the first year you can only have um financial penalties okay um in scl so uh there won't be anybody losing points whenever you do this subject we get constant community well you haven't mentioned manchester city what about manchester city and and all the charges that are hanging over them that that is different though as you said Yeah, I mean, so it's different in the extent that we're not talking about conventional breaches of PSR.