fbpx

A closer look at the growing complexity of transfer fees

The 29thof January saw two of the biggest shocks of the season on Tyneside, with Newcastle following up toppling Premier League champions Manchester City Park by breaking their transfer record for the first time since 2005, bringing Major League Soccer’s player of the year Miguel Almiron to St. James Park for £21.6 million.

By Premier League standards, the Toon have endured a big money transfer dry spell, since Michael Owen arrived for £16 million in 2005, despite the top flights ever-growing TV deals meaning transfer fees are inflating every season.

The general assumption remains that these astronomical transfer fees are linked directly to a player’s ability when, in fact, a player’s skills have become merely one of hundreds of factors when determining a transfer fee. This has become far more complex in a modern day footballing world where clubs have transformed into global corporations brokering multi-million-pound deals and as a result, introduced a wide variety of factors contributing to perplexing transfer fees.

The Neymar effect

To understand transfer value, you must first look back to 2016 when PSG more than doubled the world record transfer fee to sign Neymar’s from Barcelona for £198 million. This transfer caused a seismic shift within the already inflated market and led to an explosion of player’s valuations, with the Brazilians transfer causing a ripple effect that altered how players are valued in a more interesting and complex way.

Neymar’s departure created further fallout in Spain, with the terms of his contract meaning Barcelona had no option but to accept PSG’s bid, as the Parisian’s had matched his release clause. In response to this, many clubs began including excessive and unrealistic release clauses in their player’s contracts. Real Madrid lead the way in this field, with Los Blancos new signing from Manchester City Brahim Diaz having had a €750 million release clause inserted into his contract, despite having only scored two senior career goals.

Embed from Getty Images

Unrealistic clauses such as this, give the selling club more control in transfer negotiations, and creates a subset of the market for each individual transfer, between the buying and selling club. The isolation and individuality of these markets create near perfect economic conditions and as result the key factors in determining a player’s valuation are how badly the pursuing club wants the player (demand), how desperate the selling club are to keep them (supply).

These conditions were outlined through Virgil Van Dijk’s January transfer from Southampton to Liverpool, where the fee of £75 million was 50% more than that of the world’s second most expensive centre-back, yet was justified by the Reds dogged pursuit of their one and only centre-back target and Southampton’s determination not to sell their captain.

When you factor into this that Liverpool were on the verge of selling Phillipe Coutinho to Barcalona for £106 million, it becomes clear that Southampton knew that they could hold out for such an excessive fee due to the Reds desperation and financial capabilities. This demonstrates clearly how a player’s value is fluid and dependant on a club’s ambitions to buy or sell the player, as well as both clubs’ financial state – a factor keenly felt within England where many top division clubs are charged a ‘Premier League premium’ when bringing in players.

Embed from Getty Images

Sell on value

In response to growing transfer fees and the increasing influence of Financial Fair Play (FFP) clubs have been forced to operate more resourcefully and conduct their transfer dealings differently. Signing a modern day player has become such a lavish investment and clubs are attempting to minimise the risk attached to big money transfers, which has generated a focus on a player’s potential sell on value.

Barcelona demonstrated the importance of this by replacing Neymar with Ousmane Dembele, for a fee of £97 million. This cost perplexed many, following the youngsters solitary season at Borussia Dortmund yielding only six league goals and seemed excessive for a player yet to prove himself at the top level. However, operating within FFP rules meant that within a three-year period Barcelona’s – along with all other European clubs – expenditure must not exceed their revenue and therefore, should a failed signing need replacing, their sell on value is crucial. This allows clubs to offload players without massive losses, which would limit any future spending.

Embed from Getty Images

Signing a young player with potential, like Dembele, carries a far smaller risk than signing an established player at a similar cost as a higher potential sell on value provides a safety net for the club, should the transfer not work out. It is far more likely another sizeable club will be willing to gamble on a still young Dembele, should his transfer to Barca not work out, than it is that a club would shell out for on a more experienced player, who had failed to impress at the Camp Nou.

Of course, it is not Barcelona’s goal to see Dembele fail but the reduced risk the investment carries is certainly an attraction. Perennial selling clubs in Dortmund’s position recognise this and in turn charge a premium to elite clubs for these lower risk investments, in part contributing to Dembele’s over-inflated transfer fee.

Brand value

A final key contributing factor to modern transfer fees is a player’s brand value. This particular consideration may disgust many ‘proper football men’ and keep Graeme Souness up at night, but football clubs are now a brand and players are their ambassadors. This factor was clearly seen when Manchester United broke the then world transfer record to bring Paul Pogba back from Juventus for £89 million. Whilst the World Cup winning Frenchman is an exceptional talent, his transfer fee was inflated due to his marketability and social media presence.

Embed from Getty Images

 

These were key factors in United’s willingness to break the bank to re-sign Pogba. The Pog-back campaign launched by Old Trafford outfit demonstrated the key role his celebrity played in his transfer and this power ultimately gave him the upper hand in his feud with previous manager Jose Mourihino. United are arguably the most successful club in the modern era from a purely business perspective, regularly topping the Delloite money table, despite failing to top any other sort of table since 2013, and the reasoning behind signings such as Pogba demonstrates their shift in transfer priorities from football to business.

Changing market

Within the modern transfer market, we no longer see individual chairmen brokering deals, instead we see hundreds of lawyers determining contract conditions, sell on percentages and ultimately transfer fees. The market has become so complex and inflated that a players footballing ability has ultimately taken a back seat in determining their transfer value, pushed aside by business interests and financial due diligence. Many fans are desperate to cling to the theory that transfer fees are intrinsically linked to a player’s ability and you will often hear cries of ‘he’s not worth that’ when the simple fact remains that- he is.

One player’s valuation, what one club is willing to pay and what the other was willing to sell at, varies from club to club, country to country and basing any assumption of a players footballing ability on this is a far too simplistic approach. Players have simply become pawns in far more complex and confusing business dealings, so to stack any extra pressure or expectations on their shoulders in relation to a transfer fee – which they had little part in determining – is unjust and unwarranted. So as 25-year-old Almiron crosses the white line for the first time here’s hoping the Geordies forget his record-breaking fee and can gee him up instead of heaping the pressure on.