9 Factors To Determine a Football Players Transfer Value – Comparison To US Sports

In recent weeks we have seen the football market go crazy with the world record transfer fee shattered not once, but twice! In a global recession where most sports teams in North America are nervously watching their turnover and revenue streams, sacrificing the chance to sign real quality college/high school players in favour of saving money, an American football (soccer) fan could be forgiven for thinking life on the Eastern side of the Atlantic is a bed of roses.

The current transfer trend in football is continuing to spiral out of control with the price of English players in particular looking even more ridiculous! With emphasis on English players, due to UEFA’s current, and an even tighter proposed policy on the number of home-grown players a CL side must field, the price for talented English players figure to ratchet up another level. An example being the £17mil paid by Liverpool for right full back Glen Johnson.

The likes of Steven Fletcher, Kyle Naughton and Kyle Walker are talented young players but these cases nly further illustrate the problem. With Fletcher largely unproven outside the SPL and the pair of Kyles both young players with Championship experience, how can they suddenly be valued at £4-6m? This begs the questions; how do football managers value a football player?

Do they glance at a multitude of Opta statistics to determine a value? Do they have any measure of cost certainty? Do they have any measure of procedures in place when valuing players? For the most part, it’s all about perceptions and precedents. We hear about over-inflation of a transfer market driven by Real Madrid and Manchester City who are this summer’s big spenders. Michael Owen was loudly ridiculed by fans for publishing a brochure in an attempt to sell his talent but that kind of marketing is nothing new in American sports where statistics rule. Obviously it must be noted that American sports such as basketball, baseball and american football are a lot more easy to quanitify in comparison to football (soccer) where a players value can not always be explained by statistics.

Whilst Alex Ferguson will surely have been swayed by Owen’s goals record, the perception of continental coaches is; Owen simply does not offer mobility and movement in a general sense that the likes of Torres and Villa could But the bottom line, Owen is essentially a classic risk free signing. He didn’t cost them anything by way of a fee or exorbitant wages but perhaps just the opportunity cost of playing another player in his place who is hindered because of Owen’s presence.

In American sports, to establish current market value (salaries, rather then transfer fees), they rely on precedents, much similar to the legal system. The sport systems in the USA are unionised and players are always driven to drive the market. Witness the MLB strikes in the 90s and recent grievances filed by the union citing ownership collusion. Unfortunately for football, the likes of Real Madrid and Manchester City have both driven the market in startling fashion. Alex Ferguson and Arsene Wenger have already made a conscious decision not to get involved with the current transfer market with both agreeing on “unrealistic” valuations of players.

What would iconic American uber-agent, Scott Boras make of negotiations on this side of the pond? Knowing Boras, he’d be the worse thing for football with his aggressive stance and “one dumb owner” theory which applies to the Italian and Spanish sides where presidents regularly make decisions regarding transfer without consulting their managers and Chelsea with Abramovich looking increasing likely to adopt his own transfer policy regardless of Ancelotti’s wishes. The signings of Ballack and Shevchenko proved he disregarded Mourinho’s preferences for unheralded and hungry stars.

With agents striving for more transfers to line their pockets, what would happen if clubs collectively followed the American system in that, the players have to pay the agent? Less transfers would occur theoretically as players seek security and less expenses and upheaval. Why should a club pay the agent to broker a deal with a player paying nothing?

Consider two players this summer: Carlos Tevez and Emanuel Adebayor are both valued at ballpark £25m. Why? Both are international players with Argentina and Togo respectively and both are 25 yrs of age. Both have big club experience and play a premium position. So what exactly does the £25m fee comprise of?

Consider Ronaldo and Kaka, the two most expensive players in the world. One cost £80m and the other £56m. Why? Let’s glance at a few basic statistics:

There’s not much of a difference apart from the price and age though Ronaldo has a better goals ratio then Kaka. Put simply do we conclude that the £24m difference can be put down to age? Surely not and there must be other factors that surely caused Real Madrid to value two similar player £24m apart with a 3 years age difference.

Whilst politicians continue to voice concerns over spiralling transfer fees (though UEFA remains remarkably silent on Real Madrid’s spending in comparison to his previous position regarding English football), why not offer guide price in valuing players? So we take a look at the possible factors that managers, ownership and future regulators could use to gauge a player’s value.

1) Squad Status

This player is an indispensable member of the team

This player is an important first team player

This player is a valued member of the squad

This player is a backup to the first team

2) Age

16-20

21-25

26-30

31-35

36+

By bracketing a fixed valuation on the age brackets we can surely regulate transfer fees? The younger the higher value we can affix to a fee from the 21-25 range. The same for squad status: the higher the status, the higher value the fee.

3) Talent

All players to have a minimum of 20 Premier League appearances

Type A- Opta Statistics to determine whether a player is in the top 10% performers in their positions

Type B- Opta Statistics to determine whether a player is in the top 25% performers in their positions

Type C- Opta Statistics to determine whether a player is in the top 40% performers in their positions

Type D- Opta Statistics to determine whether a player is in the top 60% performers in their positions

This is tougher to regulate as football statistics can be subjective. How do we determine top performing goalkeeper? Buffon could play for West Brom and still concede a similar amount to Scott Carson. How do we determine top wingers? Assists? Not necessarily as there’s so much more a player contributes to a game. This is one area regulators can research and comply with Opta. In baseball there are so many formulas to work out a true ability and contributions a player makes and surely Opta can manage something similar to saber-metrics.

4) League Factor

Like the European Golden Boot we can adjust the above talent for league factor and affix value of those factors. Middlesbrough may not have been so keen to pay £12m for a Brazilian forward plying his trade for a small team in the Dutch league!

5) Premium Position

Attacking Midfielders, central and wide areas in the final third of the field and forwards are considered premium. The problem with marginalizing the full back position or defence is that football is essentially a team sport and all players should be considered as equal. But that is not the case as a glance at the top transfer fees by position would suggest the goalkeeping position and full back positions are not essentially considered an area of the team where a team should spend plenty. Whilst there have been some anomalies with a handful of significant transfers of central defenders with Nesta, Ferdinand and Carvalho the more prominent names in the upper echelons of transfer fees and Dani Alves by far the most expensive full-back, on average, these positions command a smaller transfer fee than strikers for instance.

6) Adaptability

Certain nationalities notoriously had problems with adapting to the rigours of English football. South Americans are widely thought to have trouble adapting to the British game but it is more a case of the managers doing their in-depth homework on a player’s lifestyle, intelligence, attitude and personality as a person rather the footballer alone to provide a measure of cost certainty that their import can succeed. There have been plenty of Brazilians who play in oil rich Russia and have adapted well, but apart from Jo and Elano, there hasn’t been any transfers of note to England though Vagner Love continues to be mooted as targets for Premier League sides.

7) Depreciation

This is one area I feel only a handful of managers pay attention to. Though it has to be said only Mark Hughes and Rafa Benitez look to have overpaid for players who will likely be worth less than half of the fee they paid when their contracts expire (Roque Santa Cruz, Gareth Barry, Robbie Keane). This is also an area Chelsea failed miserably in signing Shevchenko at 30yrs for £32m and Makelele for £16m at a similar age.

But “depreciation” basically amounts to a rental deal. Alex Ferguson paid a widely reported £10m for two years service of Carlos Tevez at £5m per season, while also paying his contract, How much would a club accept in depreciation? Arsene Wenger is probably the shrewdest manager around who is prepared to sell a player in his late 20s even at the top of his game for a significant return. Put this way, if Steven Gerrard was under his management, he’d likely be sold this summer whilst extracting maximum value for a player at the peak of his career but likely worth much less in 2-3 years as he settles into his 30s. Would he be right to do so? As a fan, NO! But in the real world, he is doing what the best managers do. Look to the future and the bigger picture.

The “salvage” value is the theoretical sell-on fee when his contract expires (4-5 years) and this should prove an invaluable guide to the player’s actual price. How much “depreciation” would they be prepared to write off? 50%? 10%? (if you’re Real Madrid and Chelsea!) What’s reasonable? Because a player can walk away from the club at the expiration of his contract, a club has the player for only a couple of years before they either make the decision to extend his contract and completely write off the transfer fee or make the decision to sell. For a two years rental, a player at the right age would prove no risk or profitable provided that player shows improvement or sustained performances.

Take Robbie Keane – Rafa Benitez for whatever reason decided to recoup some measure of money back urgently and Tottenham obliged, thus writing off a reported £7-8m from the £19-20m. That’s a massive ballpark 33% hit in less then a year! Chelsea look to have taken a 100% hit on Shevchenko for little service whilst absorbing the cost of Makelele of £16m for 5 years service. Compared to Tevez’s reported £5m per year, Makelele actually ranks a bargain given his importance and contributions to the club.

8 ) Image Rights

What a player projects to bring in merchandising sales. This is a tricky subject as merchandising sales are variable rather then fixed. Clubs would have to release figures relating to the exact amount each player are thought to have earned for their clubs in their commercial activities. By underpinning a certain percentage, regulators could also affix a value in terms of high and low.

9) Iconic Status

This term was derived from American agent, Scott Boras who believed a player can impact on a “franchise” that transcend sthe club itself. The club would benefit from all aspects of commercial activities, experiencing increased ticket sales, larger  TV contracts, pre-season tours etc. Only Beckham in recent times has earned “iconic” status for sure. The likes of Zidane, Henry, Ronaldinho were also thought to be not behind Beckham in terms of commercial activities but that has to be verifed and they could be labelled “iconic” as well depending on how much they actually helped a team turnover. Has Ronaldo earned the right to be labelled “iconic”? That is only a question Manchester United’s money men can answer. Did he impact on ticket sales, merchandising, tours or was the brand name of Manchester United bigger then Ronaldo and wouldn’t have made a difference? Perhaps its a bit of both.

It is up to the clubs themselves to do their due diligence and detailed scouting reports on the players’ intangibles. Whether they have the personality and mentality to succeed in the league, whether they have real leadership, the hunger to drive a team, whether they are possibly a disruptive influence and look for hidden depth. Or end up like Middlesbrough paying over the odds for Afonso Alves. Whatever reasons persuaded Southgate to pay that amount of money for an unproven Brazilian plying his trade for Heerenven and in the inferior Dutch league needs re-examining.

Like any business they must recruit players the same way businesses do. We interview prospective employees to gauge whether they are a correct fit. We also ensure they can bring something different depending on what roles they are asked to undertake. Big businesses have a set of procedures in place for recruitment and football should not differ. At the end of the day for example, no matter how talented and dynamic a chef or manager is, his attitude, application, personality must be spot on for the business. A case can be made that football is a “special exception” but footballers are human, fallible to the same flaws and demons that haunt people from all walks of life.

As in the real world, football clubs must also start to ensure they manage their budget and the transfer side of football is critical to ensuring a healthy balance sheet. Like it or not, that’s the harsh reality. Spending like Real Madrid in borrowing to fund a new era of “Galacticos” is simply reckless unless they can produce a turnover reminiscent of their Beckham years when they shattered turnover records which they appear to banking on. But that is not a given as Beckham is English and that always helps in the lucrative far Eastern markets where Caucasian English speaking stars are much more marketable.

By consistently valuing players, the clubs and managers can better manage their budgets and ensure they do not overpay. However the pressure from media and fans must be withstood. They must simply walk away from overpriced talent and look for alternatives. Owners must realise that whilst football is a sport, it is their money managers are gambling with. Fans may feel this is a cynical view but as with everything they own, everything has to be paid for! When we purchase goods, cars or houses, we shop around and consider the facts and we pay for our choices. We don’t pay more then we have to with plenty of viable alternatives unless we have plenty of money or the product itself is too good to pass up.

As they say, nothing in life is free.

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  • Shawn

    Great article. This is exactly what I’ve been looking for since the Blockbuster transfers were made. The part about the “Iconic” status is exactly what I believe to the reason for the Rediculous Price paid for Ronaldo. Although his star shines very bright right now, I do not believe he is more recognizable than say Ronaldihno, Zidane, or Beckham and quite possibly Wayne Rooney. It would be really interesting to know exactly how Club Managers come up with these Values because they will also have an impact on Video Games…lol
    Great Article