DI$UNOMICS

Everything in life is a transaction

007: TRANSFER VALUE - HOW DO WE DETERMINE WHAT A FOOTBALLER IS WORTH?

Transfer Value

 

Firstly I would like to give myself a pat on the back for resisting against all urges to implement corny James Bond jokes as this is post number 007. Yay me!

To those of you who have little to no interest in football, I would like to apologise. I would understand if you wanted to skip this edition of DISUNOMICS, but as you are already here...

 

I have a pet peeve with football fans; I always blame them for not using their brains, behaving in a tribalistic manner, insane levels of bias and a complete disinterest in objectivity. Every transfer window, my eyes and ears literally bleed at the comments I read on social media or what I hear on the radio: “Dat bloddy Rahim Stir lin. He ain’t bladdy worth fifty million quid. Imagine how much Sir Bobby would have been worth today aye!” I think that, instead of me finding new ways of insulting people, it is best to share my ideology and maybe bounce ideas about the place.

 

 

The most irritating thing is that NOBODY seems to have a criteria for judging a footballer's worth, but everybody is so passionate about what they think Player X should be valued at. It comes across to me that people judge a player's transfer value mainly by how good they think the player in question is, and scale it to transfer fees around that time frame. Unfortunately, we football fans are still operating as if football is not a business. As much as we want to romanticise about the game, it is imperative to remember that football is actually a multi billion-dollar business, and for the players on the field is a career choice. If I approached someone who works at Barclays, earning £50,000 a year, and offered them a job at HSBC for £85,000, would they turn it down? In fact, how many people out of 10 are going to turn that down? I would guess at hardly any, and I am sure you would agree. Furthermore, you would not consider those people to be “snakes” and “money grabbers”. You would consider them to be smart, heck, you would probably call them lucky! Yet, somehow, we expect a completely different process of reasoning from footballers. A player who makes moves based on the cash money is often demonised, for something most human beings do on a daily basis: do what is in their best interest.

 

“He is already on 50k a week, why does he need an extra 10k? Greedy!”

 

Wise words from @Dave_AFC from Scunthorpe. I’m pretty sure if somebody offered the same lad a fiver every time he starts his Monday morning commute he isn’t turning it down. Muppets! Now I have established that money motivation in football is normal, let us tackle the conundrum that is transfer value.

 

How do you determine a player's transfer value?

 

 

What is the industry we are discussing? Football. What is the product? Football players on the field of play along with managers, etc. So, what is the biggest asset to a football club? It is the players. An asset is described as a “useful or valuable thing or person”. If you obtain something useful, do you want to let it go? Probably not. When do you want to let it go? When it is no longer useful, or the offer you receive for the asset is at least matching YOUR valuation or exceeding it. A club will most likely want to be adequately compensated for losing any player against their will. By this simple fact alone, the player in question will command a price that the average spectator may not agree with, the difference being that the club is the one paying the player every week, not us! In my opinion, there are several key components that constitute a footballer's transfer value:

 

 

1.     Contract length - If a player has 5 years left on his contract, the selling club does not have to sell if they do not really want to. You will have to wait 5 years to get the player for free. For the club to break this agreement with the player and sell you his rights, you will probably have to pay exceedingly above his perceived market value. If the player has 1 year left on his contract, like Mkhitaryan, formerly of Borrusia Dortmund, his transfer value will significantly decrease. Mkhitaryan, who is in his prime, German Player of the Year who contributed to 50 odd goals, was sold to Manchester United (hehe) for £26m. Usually, somebody of that profile would command a fee of almost double that. The reason he was sold for an amount considerably below his potential value is because Dortmund knew that, if they didn’t sell him this summer, in 12 months' time he will leave for FREE *cough Lewandowski cough*.

 

2.     Age - This is the one that really gets on my nerves. We have seen very high transfer fees for the likes of Leroy Sane, Raheem Sterling, Anthony Martial, Paul Pogba, John Stones and many more. What is the automatic football fan's bonehead response? “HE'S NOT WORLD CLASS, HE ISN'T AS GOOD AS RONALDO, HE DON’T SCORE 700 GOALS PER SEASON, SHOCKING PRICE”. I want to shake these people!!! If those players signed a 1 year contract, maybe I would understand their stance. But these players sign on 5-year deals often. The business is purchasing the asset with the mindset that the player purchased will grow into someone who will be value for that price tag. If Manchester City go on to pay £50m for Stones, like they did for Raheem Sterling, it is not City saying this guy is world class NOW. It is them believing in the talent and their coaching staff to harness that talent. If a player is in their prime, they are also likely to command upper end of fees. For example, Gonzalo Higuain has just hit 36 goals in 35 league games. He is at the height of his career, and Juventus brought out the black card and dropped €90m on him! Usually players in their mid-30s tend to have an extremely low transfer value. Remember when David Villa went from Barcelona to A. Madrid for €5m, and he was in his early 30s!

 

3.     Squad status - In every business - in every team, in fact - different people bring different values to the group. Some will be indispensable, some will be surplus to requirements. When you are trying to sign a player who is KEY to his current club, his transfer value will be considerably higher than if he was a back-up. Why? How that business operates is likely to be based around that player and maybe a few others. If you purchase this player it will weaken the selling team, hence weakening their product. Remember when Arsenal tried (pathetically) to sign Luis Suarez?! He even had a clause in his contract that was meant to realise him to a club that met the criteria and stipulated fee. Arsenal seemingly activated his clause, and Liverpool said no before Wenger even typed “Kind regards”. Suarez was Liverpool’s best player and they were desperate not to lose him, especially to a league rival! When a player is surplus to requirements sometimes you witness a transfer value that seems considerably below what you would expect. Manchester United sold Luis Nani, Robin Van Persie and Javier Hernandez for less than £20m COMBINED! All of those players are still talented and can be very useful for the right club, and United recouped £20m for a group of players that cost them approximately £48m!

 

4.     Club finances - It is no secret who has money and who doesn’t. It is easy to find out players' wages, how much TV money clubs get, how much prize money, their sponsorships and the year end results. Just think of when you go on holiday destination and how the locals boost the price. They know you aren’t coming to their country to azonto for pesos; you have money to spend and enjoy your vacation. So the local businesses use this opportunity to increase their profit margin. This is why Premier League clubs never seem to get the bargains those on the continent do. We assume English players are overpriced solely because they have red passports - that is not the case! In 2015, 17 out of 20 Premier League clubs made the top 30 in terms of revenue generation. The TV deal in England is distributed fairly equally, whereas in places like La Liga, Barcelona and Real Madrid eat a large slice of the pie. Premier League clubs have money, and lots of it; because of this, it will take a lot more money than on the continent to entice their players away. The vast majority of English players play in England so, by this fact alone, they will have a higher transfer value.

 

5.     Status and Ability - The better you are at football, the more likely you are to have a higher transfer value. The reason I combined status and ability is because exposure matters. A player can have all the ability in the world but if he is in a league and/or team with little exposure, not many will be aware of this. This reduces the selling club's ability to bargain. Let us take Kante and Mahrez for example. Both played in the French Ligue 1 and were signed for peanuts as low profile signings. They happened to have fantastic seasons in the most high profile leagaue in football, what did that do to their value? Leicester signed Kante for £5.6 and sold him 11 months later for £30m! Riyad Mahrez was purchased for under £400,000 and he is now linked with moves for £40m! That is the power of having a bigger platform, it magnifies your talent, which boosts your value.

 

Some footballers reach the level of superstardom. They have a particular aura and charisma that transcends beyond the white lines. They tend to be the guys who sell the most shirts, who are on the most adverts, those with great talent who the fans love. Being a superstar does not necessarily mean being the best player. Sergio Busquets is widely regarded as the best defensive midfielder in world football. Is he a superstar? Heck, no! It goes for the likes of Luka Modric, Bonnucci, Kroos, Lahm. These are some of the very elite in world football, but they do not have superstar status. Players like Ronaldo, Neymar, Messi, Bale, Pogba, Rooney, Sanchez have that status. You will see them on the back of everybody's shirts, on Hugo Boss adverts, in L.A with entertainment stars, etc. If you look at recent history, the transfers for the highest amount tend to be this calibre of footballer. Neymar, Bale, Higuain and Ronaldo for example are 4 of the top 5 most expensive signings of all time. Why? Not only are they some of the best footballers in the world, the club (business) can also benefit from the commercial value that they bring. Suarez should be a superstar but he has been too busy racially abuse people and treating other players like doner kebab. If Paul Pogba does move to Manchester United for €110m then all 5 of the worlds most expensive players would in my view qualify as superstars. These types of players will almost always be the most EXPENSIVE signings.  If you look at the top 10 most expensive signings the vast majority of those players I would class as superstars.

 

 

Now I have set detailed criteria, I believe if you look at points 1 through to 6 you can make an estimation of how much a transfer should be approximately. If you look at the criteria I have designed, you will understand my frustration at some of the wayward moans at player transfer values. Paul Scholes is one of my favourite players EVER, but he would never be ‘worth’ more than Paul Pogba in his prime. How many times have you seen Scholesy on TV ads or hanging about with mega stars?...… Oh, never? I see!

 

I really hope this breakdown was easy to follow. If you have any questions, or would like to have a debate on what you have just read, leave a comment or tweet me abuse! Thanks for reading!