Silly season is especially silly this year with big name signings flying fast and thick; Cavani, Falcao, and Neymar were just the icing on the cake with over 20 players worth €20m or more changing hands already this summer. Even Major League Soccer got in on the action bringing American superstar Clint Dempsey home to the States for a (large for the MLS) fee of £6m.
So it seems like activity in the 2013-14 window has been particularly intense compared to previous summers. Is this true? And if so who has done the most spending?
There are still a good 20 or so days to go in the window but one league is already a clear standout for ‘Spender of the Year’.
Hey Big Spender
Chairmen in the EPL have clearly gotten their new checkbooks in and are not afraid to use them. Spending activity in the EPL is also more evenly distributed, with all clubs (except for Arsenal) having a net spend so far this summer. Contrast that with Ligue 1 and you can see that the vast majority of the spending was done by PSG and Monaco (for once the headline count was actually proportional to the activity).
You can see the drastic distribution difference in spending in the different standard deviations between leagues. I have also removed the top 2 spenders from each league to show how much of an impact PSG and Monaco have on Ligue 1 statistics.
But back to our original question, has this window been more active than previous ones? To compare let’s look at a few metrics: players in/out, gross expenditure and the average buying and selling prices per player.
Quality not quantity?
Player movement is down quite a bit with the numbers of players in decreasing by 403 (-71%) and players out down by 258 (-54%). Again there are still several weeks left in the window and there is always a burst of late activity but the trend looks like a decrease from previous seasons. A metric that seems right in line with the past several years is the league net spend:
€332m has been spent so far this summer on a much smaller number of net players which would suggest a certain outcome for the average buy/sell price of players…
While the number of players moving is down the average price spent for them is higher. At the lowest €1.06m was spent per player into the league in 2011-12, so far this summer €2.58m per player has been spent. Players are also moving out of the league for less money with an EPL player costing an average of €410k to move on, down from €980k in 2009-10. In comparison to last year the increase/decrease is smaller but still as dramatic with average buying price increasing by €1.21m (+88%) and average selling price decreasing by €350k (-46%).
It is tempting to interpret this data as proof that Premier League clubs are drastically increasing squad quality by importing proven talent (higher avg prices) and selling fewer high quality players (less league exits, lower selling prices). And that maybe the case, but keep in mind stats may change after the burst of late August activity especially as more free transfers move.
I will post an update of these stats after the window closes and numbers are more comparable.
I thought I would take this blog to answer one of the questions I receive most often. How is it possible for Premier League clubs to spend exorbitant amounts on new players and still remain compliant with the Financial Fair Play rules now in effect? Don’t the millions they spend violate the rules on maintaining breakeven incomes? There are a number of reasons the clubs expect to remain FFP compliant, but the most vital one is based on a core accounting principle.
When a club incurs a cost it is treated one of two ways depending on the source. If the cost is related to a benefit that is only applicable to the current year (ex. buying medical tape for the squad) it is treated as an expense . If the cost is incurred for a benefit that is realized over multiple years (ex. improving the stadium) it is capitalized. A cost incurred for a benefit never realized is called a ‘Bebe‘. I kid because I love.
A capitalized cost is then divided over the usable lifetime of the asset. In the case of a player the usable lifetime is the length of his contract. For example, Chelsea have signed André Schürrle to a 5 year contract for £18m. The cash cost is likely to be £18m paid out immediately to Bayer Leverkusen, however the cost of the transfer for accounting/FFP purposes is £3.6m per year.
What about multiple players?
That puts big transfer price tags in the perspective of a FFP-conscious club. The annual cost does increase as you stack up more transfer in a single year but it makes it more plausible that a club that has spent millions over the past 5 years could actually be compliant. Let’s take a look at Manchester City (shockingly one of the clubs most often linked to this question in my mail).
Below is a schedule that lays out the amortized costs of ManCity’s transfer spending over the last 5 years.
At the peak in 2012-13, the annual cost of the spending spree totals €94m. The actual number is less important than seeing how the headline grabbing sums are actually spread out for FFP matters.
No one will ever accuse Luis Suarez of being boring. The Liverpool striker and Uruguayan international has a fiery temper on the pitch which has oft landed him in trouble while in service of both his club and country. Most recently Suarez has found himself on the receiving end of a 10-match ban for biting Chelsea defender Branislav Ivanovic.
Opinions differ on what impact Suarez’s suspension will have on Liverpool, with some calling it an opportunity for reinvention and others seeing big negatives for the club. The ultimate effect remains to be seen, but for now we can take a look at the costs we do know about. To get an estimate of the cost of Suarez’s antics we can look at the games he has been unavailable for and measure them in terms of lost wages; or instances where Liverpool has paid for no option to use Suarez’s talent.
That is a total of 15 bans in the 90 league matches that Liverpool have played so far; 21 (currently) bans for the 242 league games he will play over the life of his contract. From his arrival in 2010-11 till the end of 2012-13 Suarez will have been unavailable for 17% (!) of Liverpool’s league matches. Now let’s estimate a cost in lost salary for each game.
Suarez’s bans to date have (counting forward to 2013-14) cost Liverpool ~2m in lost wages. This figure does not take into account cost of fines or any other related charges. And finally, to put this in perspective with some of the investment already spent on him:
6% of the total wages Liverpool will pay Suarez over the course of his contract will be spent toward his bans. That percentage assumes that there will be no more incidents, something which seems unlikely given past history. Turns out there’s a pretty big price for mad genius.
Sir Alex Ferguson has confirmed that he will be retiring as Manchester United manager at the end of the current Premier League season. To say this is a moment in sporting history is likely an understatement. Manchester United have announced current Everton manager David Moyes as Ferguson’s successor.
Whether United are able to maintain their level of success without Ferguson is an open question. One indicator we might look at for an initial reaction is the change in the club’s publicly traded stock price. On May 8th the MANU traded down at the open and dropped to a low of $17.75 (-5.4%) before recovering to end the day at $18.45 or just a bit below the previous close.
So the market seemed to shrug off the departure on the day of, we’ll have to see what happens in the coming months and when results from Moyes’ reign start coming in.
I am going to use a new format from here on out. Instead of dropping one gigantic, catch-all post about a club’s financials I am going to break it down by category. After all the parts are done I’ll sew them together in a post summarizing . This will make the posts more digestible for you as well as easier for me to create since I won’t have to come up with 2000 words and 20 charts all at one time.
The 2007-2011 period is a tidy chapter in the Mike Ashley story. Six managers, a relegation and a promotion is just the beginning of the turmoil that has roiled St. James’ Park over the last five years. While 2011-12 was a notable year I feel that it represents a new arc in the Newcastle story and can be left for later…also the financials aren’t out yet so it has to be left for later.
Newcastle’s revenues have not grown over the past five years. Total intake has remained close to the £87m it was in 2007. While end-to-end growth has been flat there has been considerable variance within the period. Revenues reached a high of £99m in 2008, a move driven solely by the growth in media revenues, and a low of £52m in 2010 as the club suffered relegation to the Championship.
Quite surprising is the drop in commercial revenue during (and after) the relegation period, at £15.4m the category dropped almost 45% from its peak and has not recovered into the 2010-11 season. Continue reading
A monthly compilation of interesting business news related to soccer. September 2012.
Transfer spending rises in England, France and Germany - September 3rd
Spending in the summer transfer window has increased year-on-year in England’s Premier League, France’s Ligue 1 and Germany’s 1.Bundesliga, but has reduced in Italy’s Serie A and Spain’s Primera Division, according to analysis by Deloitte.
The business advisory firm said that player transfer spending by Premier League clubs was around £490 million in the 2012 summer window, marginally up from the £485 million spent in summer 2011 but just short of the £500 million record of 2008. Transfer fees to overseas clubs were around £300 million, almost 50% up on the level seen in 2011.
Full Article >> Soccerex
Manchester United chief executive David Gill will put club allegiances to one side if successful in bid to represent England on Uefa board - September 4th
Manchester United chief executive David Gill will put his club allegiances to one side in his bid to represent England on the board of UEFA.Gill will stand for election as the Football Association’s nominee to the influential 16-strong body that decides on the European football governing body’s policies.
An election will be held at the UEFA Congress in London next May when all the 53 member nations will each have a vote.
Full Article >> The Independent