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How £40m Became the New £20m in the European Transfer Market

466244 british money 4 How £40m Became the New £20m in the European Transfer Market

Last decade, a price of around £20million could buy you a footballer who had incredible skill, a deadly finish or the vision of a hawk. In 2003, Barcelona paid Paris Saint-Germain €30million for Ronaldinho, who became an eventual Ballon d’Or winner. Furthermore, Barcelona paid €15million (plus Ricardo Quaresma whose valuation stood at €6million) for Deco, who was influential in Porto’s successful Champions League campaign.

In the Premier League, Manchester United saw potential in a young Wayne Rooney and acquired his signature in a £25.6million deal with his parent club Everton. Two years prior, Manchester United signed Rio Ferdinand for a total of £30million, which, at the time, was a British transfer record.

Nowadays, in the transfer market, £20million is becoming more of a starting price than a hefty fee. Oh, how Trevor Francis (the first £1million footballer) must be turning over in his bed. As he put it, “Football has become awash with money.”

In the Premier League, the financial clout of teams such as Manchester United, Chelsea, Liverpool and the emergence of Manchester City as a major spending force have caused inflation in the global transfer market.

Clubs around the world are aware of the spending power that these teams have. However, the financial revolution of Chelsea (under Roman Abramovich) and, more recently, Manchester City (under Abu Dhabi United Group) has had a major contribution in distorting the pattern of the transfer market.

Even though Chelsea’s transfer policy has been more responsible in recent years, the club still forked out a whopping £50million for Fernando Torres in the 2011 January transfer window. Moreover, with a new manager at the helm and the need to revitalise the squad, similar spending could occur this summer.

Since the Abu Dhabi United Group takeover of 2008, Manchester City’s spending spree has surpassed £300million. The money invested has certainly helped City not to be merely “noisy neighbours” anymore, but neighbours that will want to come over and ‘borrow’ Manchester United’s title. Furthermore, with current reported interest in some of the world’s brightest talents (e.g. Javier Pastore, Neymar), it seems that the Manchester City owners are not about to tighten the purse strings just yet.

Transfer activity from such teams has undoubtedly caused a player-price hike. Clubs, which may be regarded as ‘stepping-stones’ in a player’s career, know that they can drive a hard bargain for one of their sought-after stars. Consequently, in 2010, James Milner moved from Aston Villa to Manchester City in a reported £26million deal (including Stephen Ireland). However, does James Milner really belong in the same valuation bracket as Ronaldinho and Deco? I don’t think so.

Nevertheless, it is understandable that teams, who sell their prized assets, want big money to improve the squad with significant replacements. These teams are simply protecting themselves.

Andy Carroll was Newcastle United’s main attacking threat for the first half of the 2010-11 season. So, when Liverpool came knocking on transfer deadline day, the Toon needed the money to strengthen their squad in the future (which they have obviously done so far this summer). Plus, with Liverpool needing to replace Fernando Torres, Newcastle United held the bargaining chip.

What is staggering though is that Liverpool seemed to gladly accept Newcastle United’s terms. £35million pounds, making him the most expensive British footballer of all time, seemed like a fair deal for a man who couldn’t even top the Championship goal-scoring chart of the previous season. Alan Pardew stated, “We have got an extraordinary figure for a 21-year-old, who has done six months in the Premier League.” However, if Andy Carroll turns out to be a star-striker, I suppose Liverpool fans won’t care about the cost.

Additionally, another reason for these inflated prices is the huge transfers that have been carried out before. The most obvious one being Real Madrid’s transaction of Manchester United’s Cristiano Ronaldo for an astronomical £80millon fee. These huge transfers have increased the prices, which are now deemed appropriate, for in-form players.

For instance, Napoli president Aurelio De Laurentiis recently warned both sides of Manchester that the Uruguayan forward Edinson Cavani is worth as much as £89million. That’s £9million more than the most expensive player in the world. With such a declaration, it now seems silly that Manchester United and City were reportedly preparing to table a £25million bid. Of course, this might just have been a scare tactic, but the Napoli president further stated, “He (Cavani) would have to be annoyed as he is not worth that little.” However, any sane football fan would know that £25million is far from little.

Moreover, the sale of Cristiano Ronaldo, in particular, has subsequently led to more player-valuation comparisons, which are killing the art of negotiation. Teams who claim they have the ‘next big thing’ now expect nothing less than at least half of Cristiano Ronaldo’s price for their player. Immediately, potential suitors drop by the number.

Initially, Alexis Sanchez (Udinese winger) was valued around the £30-35million mark. The teams vying for his signature were Barcelona, Manchester United, Manchester City, Juventus and Inter Milan. However, when Gino Pozzo (Udinese’s owner) caught wind of Cesc Fabregas’ valuation, he stated, “If Cesc is worth €40million (£35m), then I say Alexis Sanchez is worth €50million (£45m).” Now, only Barcelona remains with any real interest, and yet they haven’t even met Pozzo’s valuation.

Another reason for the inflation of prices is the role of the media. The case of Gareth Bale will be used to support this reason. Sport journalists around Europe went crazy after witnessing the Welshman tear Inter Milan to shreds, not once, but twice. The highest praise was lavished on the 21-year-old. Ever since, Tottenham Hotspur have demanded £40-45million if he were to be sold.

I will be surprised if any team pays that sum this summer. Yes, Gareth Bale had a good season, but it’s those two performances against Inter Milan that has pushed his price up. Question is, does two exceptional performances justify a £40million price tag?

In conclusion, it now seems that around £40million is the ‘realistic’ price for the players with huge potential and an ever-increasing reputation. Nevertheless, you still hear amongst the football fan masses the words, “He’s not worth £30, £40, £50million.” Truth is, obviously nobody is. However, when a team like Liverpool pay over the odds for Andy Carroll, what is the value of players such as Neymar and Pastore? And look at that, I’m guilty of player-valuation comparison, but I suppose it’s natural to do that. Sir Alex Ferguson stated, “There is no value in the market.” However, with football sadly becoming more of a business, maybe it’s not that there is no value in the market, but there is a new value in the market. Let’s see this summer.

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34 Responses to How £40m Became the New £20m in the European Transfer Market

  1. me says:

    NewsFlash ***** Man City signing Nasri and Clichy From Arsenal dunno the price yet

  2. Neal Thurman says:

    Curious about your thoughts on two (related) topics:
    1) Will either the “homegrown” rule or the “financial fair play” rule have any impact on transfer valuations (up or down) once they are in force.

    2) How likely is it that current valuations are extraordinarily high as teams try to get their business done before those rules come into effect?

  3. hamid says:

    liverpool sold a sulking torres in return they got andy carroll and £15m which is not bad considering torres real valuation is much less then the £50m paid for him by chelsea

  4. Suryansh Tiwari says:

    nice article man…….ya,i agree with you…andy carroll didn’t deserve even a sum of 10 million pounds and he was paid a massive 35 million!!!!!!!!!!!!!!!!
    and its really strange for the napoli president..he values cavani at 89 million!!!!!!!!!that’s simply vague……he’s nowhere near ronaldo….ronaldo scored almost twice than him and he had a good no. of assists as well…..
    its an awesome article.you should try writing for caughtoffside.com or bleacherreport.com…….they are better football sites and need writers like you….

  5. El Tri 2014 says:

    Oliver, maybe you can touch on the subject of extended contracts for young players that add a buy out clause of 89M!! Clubs start harkening for Thiago Alcantara, and Barca gives him a new contract extension with an enormous buy out clause. Personally, I think it’s decietful measure for clubs to hoard players for which the most part will spend big chunks of time on the bench on the B squad (another example is Shay Given, in terms of hoarding).

    • MUFC77 says:

      I don’t think City are necessarily hoarding players the problem seems to be getting rid of players who are on ridiculous wages. The likes of Given, Bellamy and SWP are decent players and would star for other teams but they are getting paid a fortune at City and no prospective new club can match those wages, so unless they are bought extremely cheap they are pretty much stuck until their contract expires. Given and Bellamy are perfect examples as they are both allegedly wanted by Celtic but its been reported both need to take a pay cut.

  6. David says:

    While Torres isn’t worth 50 million pounds at least one can see why Chelsea paid it as he had been a prolific goalscorer for Liverpool and even at Athletico madrid was a decent player. Compare that with the 35 million piad for Carroll who hasn’t done anything of note. All he had was a half a decent season at Newcastle. English players are way-overpriced. At the time Torres was sold there were other top European clubs interested in him as well. How many European teams, for get top-teams, would be interested in Carroll. None. Why? Because he hasn’t proven himself.

    Garth Bale is another example of a player with one decent season yet is touted as one of the best players in the world in his position. He is good but nowhere nearly as good as other top European players who have more skill and talent.

    So while the transfer market is overinflated it is even worse when it comes to British talent. Paying over the odds for unproven players is just daft. That’s what the likes of Liverpool are doing. While Manchester City pay over the odds for players at least they buy proven talent.

  7. David says:

    That should be Gareth Bale, not Garth. Should have proof-read before posting for this error and other spelling and grammatical errors. Sorry.

  8. Gary says:

    I agree with David. Paying obscene amounts for proven talent is one thing but buying mediocrity like Carroll and Henderson is outright obscene. The English have gone mad. Mad dogs and Englishman!

  9. Jason says:

    Manchester City are reportedly on the verge of signing Nasri for 20 million pounds. If true, they would have signed him right under the noses of United who were interested in him. Fergie is reportedly to have said that he felt an offer of 20 million would force Arsenal to sell. If City do sign him it would be a real coup. 20 million for Nasri is worth it as he is a very good player. So City’s first signing is a terrific player and they don’t over-pay. What is this world coming to? :-) And they beat United to it. I love the EPL!

  10. CelticsBlues says:

    From Daniel Taylor’s twitter (of Guardian.co.uk) = Sky changed strapline from ‘closing in with £20m bid’ to ‘City interested in Nasri’ within mins – ie MCFC put them straight

  11. Papa Chelsea says:

    Good article. Many agreeable points that a number of people have spoken on recently. Many disagree with the Torres fee but he has been a proven top class striker and prior Rafa running him into the ground, was honestly the best striker in the EPL, a notch better than even Drogba.

    The two overwhelming issues that you bring up, one in direct conversation, the other indirectly. First, 89 million for Cavani is insane, period. Good player, lots of potential but not a top shelf striker at this time. As it was mentioned, if Ronaldo went for 80 mil just a few years ago, can you even begin to place this kid in the same class. If these mid tier clubs want to try to push their valuations up and “cash in” off players they’ve had for a few years, good luck I say. I believe ultimately, they will place themselves out of sight entirely and the large clubs will simply say to hell with it, we can live without x, y and z.

    The indirect issue I mentioned earlier was the discussion on Carroll being worth 35 mil, Milner 26 mil, Henderson 20 mil, Young 15 mil, Jones 22 mil. These are the truly insane numbers that only have merit inside the EPL. Some teams are so desperate to land the “home grown” talent that they are paying outrageous money for these players. Out of the ones just previously mentioned, the only one that merits even close to the money he was sold for was Young and he has no real history in international play or playing for a team fighting on multiple fronts for silverware like United does. The only reason these English players are being sold for this money is simply because they are English. Honestly, most people would and could raise the argument that outside of Beckham, Rooney, Gerrard, Lampard and Cole and Owens, when all were or are in their prime that any club from La Liga, Serie A, Bundesliga or anywhere else would think twice about making an offer on them.

    Anyways, nice article to get a wide range of views on.

    • savio says:

      16.5m for jones is not a big price considering the great potential in him.Just watch this space he will be the greatest defender in his time. Man Utd do not pay these out-of-the-world prices

      • Papa Chelsea says:

        Please, will some of the United and Liverpool fans get off their high horses. Of course United has overpaid for players, i.e; Rio, Hargreaves, Bebe, Berbatov. No one really knew who Jones was prior to this window, he was nothing special in last years games for certain. Time will tell if his abilities and accomplishments match the expectations.

  12. vinnie says:

    geez, no one ever knows the word inflation? it happens in real world and it happens in football world too

  13. Thomas says:

    The issue is that this type of activity severely trickles down the ranks….

    Blackburn get 20mil for Jones..now if they go looking for players to replace him with, they will once again have to pay a premium.

    Agreed that no player is worth the kind of money being paid now a days. Real really did it by paying 80 mil and 56 or whaver for Kaka and Ronaldo.

    —–

    Funny SAF says there are no bargains, and he goes and gets Chicharito.

  14. LA says:

    This is a good article…spot on! In fairness there is ‘value’ to be had in the market a la Chicharito for £7m but these deals are very [very] few and far between. I doubt there’ll be another one like that for a while! Also, with players running down their contracts it inevitably drives prices down too. I think it’s fair play – if a club has convinced a player to sign a 3/4/5 year deal or extention why should the club then sell him for his ‘normal’ market value. There has to be a premium otherwise it makes the length of contracts completely redundant and makes it easier for players to leave as and when they choose with little to no protection for clubs. Players are investments and if you think about it like this then it quickly becomes apparant that clubs can make more than enough back in revenue from investing in a top talent who will bring success on and off the pitch (both of which generate significant revenue). As for comparisons – well if Cristiano is worth £80m then Fabregas is worth £45m. But then again… If Carroll is worth £35m then Fabregas is worth £60m. The market is what it is… old-skool managers living in the past (i.e. mid ’00s) need to realise things have chaanged and there’s no going back! Well… maybe when the Fair Play Rules come in.

  15. R2Dad says:

    Nice article. There are several relevant comments here about inflation, price elasticity vv transfer fees and Fair Play restrictions that are causing mayhem in the transfer markets. Easy money for the past decade has allowed billionaires (and irresponsible Spanish teams keeping up with their free-spending competitors) to overspend on transfers and wages, skewing the overall market. Speculators have driven all commodity prices up way beyond normal values, even in the face of declining markets. The Premier League is no different. Deals for THE top players should be seen as outliers, but since there have been more than a couple of these deals AND there has been a knock-on effect, the valuation range has expanded without regard to actual value–pure speculation, as Liverpool has admitted in the case of Carroll. Lower-table teams cannot buy top players anymore, reinforcing the bifurcation of the league. ManCity, which overbought and overpaid the past few seasons, is now suffering a glut of players that it must now sell at large losses–not to mention forcing their players to take pay cuts as well (Adebayor, anyone?). Fair Play Rules seem to be a good idea in general, but unintended consequences remain. We will see if these Rules will be enforced. Cynical CL teams may dare UEFA to do so, knowing public outcry and politics will probably water down any real impact. The teams following these Rules may not see their prudence rewarded. For Wenger, there are too many variables to rely purely on normal value metrics to get deals done. Either you play in the market for top talent, or you bide your time like all value investors. This market is like Silicon Valley in 1999, all happy craziness for growth investors like ManCity, Real and Barca. It will take a Greece debt default (impacting Spain, Portugal and Ireland as well) to stop this nonsense, but until then, buckle up for the bumpy ride. I can’t wait for next season.

  16. Zach says:

    If you’re interested in this topic I highly recommend Paul Tomkins’ “Pay As You Play” and his related blog (http://www.transferpriceindex.com). The key to valuing prior purchases vs current ones is putting them in some sort of constant denomination (say, 2011 pounds) based upon the increase in the mean or median transfer price per season. This allows you to make comparisons as to how much players cost over the years, as well as what it would cost to assemble a team of past players today. Fascinating stuff, for sure, but also critical to understanding the relative cost of assembling team’s over the years.

  17. Kyle says:

    It’s interesting to note that none of the British players who move for these insane fees go anywhere else in Europe. You don’t see the top European teams bidding huge fees for Carroll, Henderson, etc. Why? Because these are very average players at best.

  18. Frank says:

    Clubs will often break the bank to buy a player not only because of his talent on the field but also his merchandising potential. Cristiano Ronaldo sells lots of jerseys. It also takes into account bringing in a new fan base. That’s why Chelsea bought Torres for 50 million. It was not only his talent they were buying but also his marketability. That’s how things work today.

  19. jimmy says:

    written well but you seem lacking in experience

  20. Cliff merchant MD says:

    The Premier League is no different. Deals for THE top players should be seen as outliers, but since there have been more than a couple of these deals AND there has been a knock-on effect, the valuation range has expanded without regard to actual value–pure speculation, as Liverpool has admitted in the case of Carroll. Lower-table teams cannot buy top players anymore, reinforcing the bifurcation of the league.

    Regards,
    Dr. Cliff Merchant

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