Seven things to remember in January

The transfer window reopens on Jan. 1 and to judge by what we’re hearing from clubs and agents, the twin forces of COVID-19 and bad contracts will dominate. The former because the global pandemic has left clubs short of immediate cash (zero or few spectators in the stands, rebates on TV money) and mid-term revenue (less money in the pockets of sponsors and fans, which translates into less cash from broadcasters). The latter because the impact of paying somebody far more than they’re actually contributing weighs heavier when there’s less money coming in. (In fact, they were less of an issue pre-pandemic where, at some clubs, revenue were growing by 10 percent or more every year.)

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Gareth Bale became the epitome of this at Real Madrid. Last season, his contract paid him more than $40 million, easily making him one of the 10 highest paid players in the world. He started a total of 14 games in all competitions, scoring three goals and playing 1,258 minutes. His salary was so high that the club couldn’t find a buyer last summer and so he ended up going to Tottenham on loan, with the proviso that Real Madrid are still paying a considerable chunk — some reports suggests more than half — of his salary.

Bale’s struggles may or may not be his fault. He’s had injuries, he’s had managers who perhaps didn’t rate him, he’s been unlucky… but nobody would dispute the fact that, from Madrid’s perspective, they’re not getting what they paid for. So here are seven principles to remember when assessing contracts and transfers, some of which are too often ignored by media and commentators.


1. If you’re acquiring a player, you need to look at cost + wages together

Club accountants already do this; we in the media too often forget. When Juventus signed Cristiano Ronaldo from Real Madrid in the summer of 2018, they paid €100m ($120m) in transfer fee and €12m ($14.6m) in commissions to agents, solidarity payments to his previous clubs (in accordance with FIFA regulations), and a commitment to pay him €54.25m ($66.3m) in annual wages through June 2022. The total cost (we’ll leave bonuses out of it for the sake of convenience) over four years: €329m ($402m). That works out to €82.25m ($100.5m) a season.

The most basic criteria in judging whether that was a good deal is this: Is he offering Juventus $100m worth of value?

2. Value comes in different forms

At the most basic level, players earn money for a club by generating box office revenue (which can mean selling out stadiums, allowing you to increase ticket prices or, ideally, both), by improving your performance in the league and cups (which generate more prize money) and by driving sponsorship and commercial revenue. Some will have more of an impact than others — Ronaldo may help sell x amount of club merchandise at Juventus, Alex Telles less so at Manchester United — but everybody will have some. (And by the way, that commercial value isn’t absolute: Telles will generate more at United because they’re a bigger club, than he would at, say, Brighton.)

There are also intangibles in this. Some players may be good leaders, some may appeal to supporters and some may simply help a team play better. Some might make your coach happy, and a happy coach tends to coach better. In the case of some signings, your club can make a quantum leap forward as a brand: again, Ronaldo at Juventus is often cited as such an example.

It’s difficult to put a numerical value on this, but it’s something a good club considers.

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3. Opportunity cost matters… but not always in the way it is presented

Last September, Arsenal signed Pierre-Emerick Aubameyang to a contract extension through 2023 and gave him a big raise, up to a reported £18m ($24m) a season. It made him one of the highest-paid players in the Premier League. Two of the justifications were that if they hadn’t extended it, they would have lost him for nothing as a free agent in July 2021, and that bringing in a player of comparable quality would have cost at least £60m ($80m).

If you assume that a £60m forward will expect to earn at least £10m a season, then even if that player signs a five-year deal, it’s cheaper to keep Aubameyang, who is already settled and productive.

The argument holds merit if certain conditions are met.

One, you want to win straight away, and you’re less worried about what happens in a few years’ time when you’ll still need to replace Aubameyang. Maybe you think Eddie Nketiah or somebody else in-house can replace him, or maybe you think conditions are ripe to challenge straight away.

Two, you don’t think you can get a cheaper, younger alternative to Aubameyang, whether this past summer or in the summer of 2021 (when his previous contract expired). Not necessarily somebody who will be as good as Aubameyang straight away, mind you, but who you think will become as good eventually.

Three, you’re not worried that his presence (and his minutes on the pitch) will stunt the growth of the young players you already have at the club: Bukayo Saka, Gabriel Martinelli, Nketiah, Emile Smith Rowe, and so on.

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Four, you’re not overly concerned that giving him a big contract will hurt your leverage in other contract negotiations with forwards at the club, like, say Alexandre Lacazette. (Or you don’t want to keep him anyway.)

All of the above are things Arsenal would have thought about when extending Aubameyang’s deal. They would have weighed up the factors and come to their own conclusion. Whether right or wrong, time will tell.

4. You’re not paying for what a footballer has achieved, you’re paying for what folks believe they WILL achieve

It’s like the disclaimer when buying mutual funds: “Past performance is not an indicator of future results.” Obviously, somebody signing Harry Kane will expect him to continue scoring a ton of goals since he’s 27 years old and has scored them continuously throughout his career. But it’s not guaranteed. In fact, it’s much harder to predict what will happen the further you get from a player’s peak years (usually 23 to 30).

Young players have a limited track record and can be affected by events like, say, becoming adults (or not: see Balotelli, Mario for more information). Older players often become less productive and more injury-prone as they age. This is something many observers seem to forget when they say stuff like, “but X is a former Footballer of the Year and top scorer in 2017!” Discussing what happened in 2017 is only marginally relevant when you’re guessing what will happen in 2022.

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5. Resale matters, which means age matters and wages matter

At some point, clubs will need to sell players, either because they haven’t been good enough, because they’ve done extremely well and somebody bigger and better wants to sign them, or because they can no longer afford to keep them. When that happens, buyers look at two things: age and contract. If the player is still on the younger side, he’s more attractive. If the player doesn’t have a long-term contract with massive wages, he’s more attractive.

Think back to the opportunity cost argument above and the Aubameyang case. What if Arsenal had elected not to extend his deal and, instead, acquired, say, Marcus Thuram instead? I’m not suggesting they’re like-for-like players, though they’re both the sons of professionals of similar status, both are right-footed forwards who cut in from the left, and Thuram isn’t far off what Aubameyang was at age 23. This is just an example to illustrate the economics, so for a moment put the counterarguments (including the fact that Thuram’s agent is Mino Raiola) to one side.

Thuram, who is 23 and has been capped by France, might cost you, say, €50m ($60m) and you may need to offer a five-year deal at €4m ($4.85m) per season. That means that on Arsenal’s books, Thuram would cost around $16.85m a season, which is considerably less than the $24m given to Aubameyang. But the upshot is that if Thuram flops, you can still let him join another club in a couple of years and get a big chunk of that €50m fee back, because he’ll still be 25 and won’t be making monster wages.

Equally, if he does phenomenally well, you either build around him for the next decade or you let him leave at a handsome profit. Either way, you have options (including the nearly $8m extra you’re saving on Aubameyang, which you can use to strengthen elsewhere). With Aubameyang, for better or worse, you are likely stuck with him until the end of his contract.

Again, maybe Arsenal felt they couldn’t get Thuram or an alternative to him at a price they liked, or maybe they were wedded to Aubameyang all along. But the point is you can’t just look at a contract in a vacuum; you have to project down the road. And when you do that, wages and age are critical.

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6. At the top end, there’s no such thing as a “free transfer”

There may be no transfer fee to pay for player who is out of contract, but many times you end up paying heftier commissions to the agents involved as well as giving the players themselves a bigger contract. Juventus spent a whopping €15.86m ($19.3m) in commissions to sign Emre Can when he left Liverpool, as well as lesser fees on Adrien Rabiot (€1.4m/$1.7m ), Sami Khedira (€1.3m/ $1.6m) and Aaron Ramsey (€3.6m/$4.4m).

The argument is that since you’re not paying a transfer fee, you can pay more in wages and more to the agent for “delivering the player.” Sometimes it’s worth it. Other times, less so.

7. No such thing as a “going rate”

The Transfermarkt website has a nifty tool that tells you how much a player is “worth.” They’ve been around for 20 years and have a ton of credibility to the point that some clubs have cited them in their fiscal reports. But ultimately, they’re just assessments made by individuals, often volunteers who do this for fun. The fact of the matter is that so much goes into determining a player’s price that any notion of treating them like commodities, and putting a “valuation” on them, is going to be both an inexact science and a moving target.

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A player with 18 months or less on his contract will have his valuation depressed. So too, relative to one of equal ability, will a player who is on big wages with many years left on his contract. (All things being equal, a player with a long-term contract and more manageable wages should see his valuation rise.)

Beyond that, much depends on the clubs involved. How badly does the club want or need to sell? How badly does the player want to leave? How badly does a club want or need to buy? And — people often ignore this — where is the player going?

If Manchester City come calling for a player, they will be quoted a far higher price than if, say, West Ham ask for the same guy. The seller will assume that City wants the player and because they can afford to pay more, they will charge more. This happens all the time.

It’s basic psychology. If a guy with a $100,000 watch rocks up in his Bentley and wants to buy your house you will probably try to charge him more than the guy in ripped jeans and dirty baseball cap who hops off a city bus.

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