Archive for the 'Soccer Business' Category

Dec 06 2013

Profile Image of Lindsey Barrett

Soccer Satire

 

Satire can be a fantastic way to stimulate discussion about real issues; often, it can be more revelatory than straight discourse.   Laughing at a joke compels understanding and examining why the joke was funny– and in satire, the humor is derived from revealing precisely how ridiculous certain serious subjects truly are.  Satirists are frequently an important part of cultural criticism, from Mark Twain to Bassem Youssef;  humor is an excellent way to make an unreceptive public care about what you want them to care about.  While frequently more ridiculous than incisive, the Onion is one such source; and when I stumbled upon this piece written about the 2010 World Cup, I discovered that many of the premises of the humor of the piece are still distinctly applicable to soccer in the US.

http://www.theonion.com/articles/nations-soccer-fan-becoming-insufferable,17553/

The running joke is that the single soccer fan in American has become insufferable over the World Cup, the humor (and truth) lying in the fact that, of course, while there is more than one, there are far fewer soccer fans in the US than practically anywhere else, despite a deeply entrenched culture of sports spectatorship and participation (particularly, and paradoxically, participation in soccer youth leagues.)  The lone fan, Brad Janovich, is “the only American citizen currently aware that the World Cup begins June 11″; the sources quoted in the article are “only peripherally aware of the World Cup,” and are confused and irritated when he strikes up “several extended but one-sided conversations concerning figures such as “Kaka” and “Ronaldinho,” generally mystifying and alienating everyone he has come into contact with.” I won’t  ruin the genuinely funny piece by quoting further, but you get the gist.  The humor of the piece is predicated on the isolation of the US in its apathy towards the global game, and that the grip soccer has on American audiences is tenuous at best.  These are realities that have seen some movement in the last 4 years, but not much; hopefully this World Cup will do a better job of capturing the American imagination (apart from Brad Janovich’s) better than the last one.

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Nov 25 2013

Profile Image of Vinay Kumar

L’importance de la Coupe de monde pour Adidas

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Le grand détaillant de sport, Adidas, se prépare pour la Coupe du monde 2014. Dans sa compétition avec Nike, Adidas a eu beaucoup de difficulté récemment. Nike a dominé les marchés avec 54% de la part de marché aux Etats-Unis (Adidas a 11% de la marché). La Coupe du monde est essentiale pour Adidas parce qu’elle est le leader sur le marché de football (et l’un des sponsors officiels pour la Coupe du monde 2014). Néanmoins, Nike a obtenu beaucoup du marché de football ; en particulier le marché au Brésil.  Les investisseurs s’attendent des ventes fortes et ils regarderont attentivement la performance d’Adidas.

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De plus, Adidas est le sponsor officiel pour la création du ballon de football pour la Coupe du monde. Il commencera à vendre le ballon, qui s’appelle « Brazuca », dans huit jours et il coute $160. Le prix est incroyable mais Adidas anticipe de vendre plus de 13 millions. Cet exemple montre l’importance du business de la Coupe du monde. En fait, Adidas vient d’étendre son contrat avec le FIFA à 2030. Avec cette extension, le partenariat entre Adidas et FIFA et l’un des plus anciens dans l’histoire (60 ans).

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Nov 10 2013

Profile Image of Christopher Nam

United States Businessmen Taking Over the Premier League

This past week, David Goldblatt visited our class to explain his accounts of world football.  One interesting comment he made was describing the English Premier league as a business to be completely hopeless.  This past summer, Shahid Khan, a US billionaire car parts baron, bought Fulham football club for an estimated $300 million.  

Shahid Khan with a personalized Fulham jersey after purchasing the London club this past summer

This purchase made him one of six American businessmen to be owning a Premier League team, including the Glazer family at Manchester United, John Henry at Liverpool, Randy Lerner at Aston Villa, Ellis Short at Sunderland, and Stan Kroenke at Arsenal.  These six make up almost a third of the entire Premier League, a number much higher than the American representation in any other aspect of the league.

So what exactly is bringing these American investors to the Premier League?  Most of the owners claim that they are avid fans of the club and want to be a part of the rich history that the club entails.  However, more practical reasons underlie why they fork over several hundred million dollars for these clubs.  Shahid Khan said that, “the Premier League obviously has a huge global audience… It’s got a great media deal, it’s got great leadership at the top and most importantly a very, very passionate fan base and it’s an excellent business platform.”

TV deals are a large factor when it comes to earning profits.  According to the Tribune, the 20 clubs will split around $2.6 billion in new broadcast deals this season.  John Henry, the Liverpool and Boston Red Sox majority owner, interestingly told The Guardian that he bought the famous soccer club without ever really knowing anything about the game.  They understood the business behind it, recognizing the enticing profits made through these television deals.  In addition, these clubs come at a fraction of the price to other American sports franchises.  Because the Premier League is run in a way of possible relegations, large swings in income can occur if ones team does poorly and is relegated.  Therefore, these teams offer a higher risk and are sold at cheaper prices than in closed leagues.

Furthermore, the globalization of soccer, more specifically the Premier League, has offered these businessmen a way to globalize their brand.  Shahid Khan is the current owner of the NFL franchise the Jacksonville Jaguars and has vowed to bring his team to London for a game in each of the next four seasons.  Additionally, most of the owners also own American sports franchises like the Jaguars or the Boston Red Sox.  These offer them a platform to gain more fans in America for their English teams.  The purchase of an English Premier League teams offers these Americans another outlet to spread their brand all over the world.

This influx in American owners also underlies the growing popularity of soccer in the United States.  An estimated over 24 million Americans are currently playing soccer with another millions and millions watching it every year.  NBC is continuing the trend by paying an estimated $250 million for the rights to air Premier League games in the US.  With the growth of the MLS as a competitively recognized league by the world, soccer interest in the US is becoming more common, and the influx of American owners in the Premier League is another big step.

These owners also seem to be helping the Premier League teams financially by running tighter budgets.  By owning American sports teams, they are often accustomed to limits imposed by the league to limit their spending including salary caps and luxury taxes.  The European governing body of soccer, UEFA, is encouraging teams to have more sustainable budgets, after years of Russian and Arab owners spending millions and millions of dollars for their respective clubs, most notably Roman Abromavich at Chelsea.  American businessman, Stan Kroenke, however, has invested in a business model that brings in over a $20 million operating budget annually, by being frugal with his spending.

With the popularity of soccer growing in the US and the popularity of owning soccer teams growing among rich investors, Americans could become a larger majority of not only the Premier League, but other popular leagues around the world, like the Bundesliga or La Liga.

References:

1) http://www.theguardian.com/football/blog/2013/jul/12/fulham-us-takeover-english-football

2) http://www.mirror.co.uk/sport/football/premier-leagues-american-owners-not-2312593

3) http://tribune.com.pk/story/590590/us-owners-buy-in-to-new-era-for-premier-league-finances/

4) http://www.thedailybeast.com/articles/2013/07/11/english-premier-league-is-now-an-american-billionaires-paradise.html

5) http://bleacherreport.com/articles/1729357-clint-dempsey-may-have-left-the-premier-league-but-the-us-invasion-continues

 

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Oct 28 2013

Profile Image of Vinay Kumar

La situation continue : l’impôt qui peut “tuer” des équipes françaises

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Comme une suite à ma poste précédente, je voudrais revoir la situation en France avec l’impôt de François Hollande. Jeudi dernier, les meilleures ligues de foot en France ont annoncé qu’ils ne participeront pas aux matchs de 29 Novembre à 1 Décembre en réponse à l’impôt de 75%. Jean-Pierre Louvel a dit que cette grève essaie de « sauver le foot français » et peut continuer si le président n’aide pas les clubs de foot français. Les ligues et François Hollande rencontreront cette semaine. Selon Jacques Vendroux, un commentateur sportif célèbre, les moyens clubs peuvent faire faillite avec les nouveaux impôts.

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Les deux meilleures ligues en France, Ligue 1 et Ligue 2, ont perdu 149 million de dollars et elles perdraient un autre 60.7 million de dollars avec cet impôt. En France, il y a une croissance du sentiment contre des impôts. Étonnamment, le public ne soutient pas les joueurs du foot avec leur grève. Selon un sondage par LCI,  85% des personnes interrogées sont en faveur de taxer les joueurs et 83% des sondés ne croient pas qu’une grève est justifiée. Ces résultats me surprennent parce que j’ai pensé que l’amour du foot vaincrait François Hollande et son gouvernement. Cependant, j’ai oublié la histoire riche des joueurs français et des grèves. L’équipe nationale a perdu beaucoup de respect national et international quand il a fait la grève au Coup du Monde 2010. Le média compare cette situation plus récente à l’incident de 2010. Je trouve la réponse des français très intéressant mais si les équipes souffrent et ne jouent pas bien, je pense que les spectateurs et les citoyens changeront leurs avis.

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Oct 20 2013

Profile Image of Ale Barel Di Sant'Albano

The ignorance and naiveté surrounding the valuation of Football Players

As we the fans have seen over the past decade or so, the valuation of football stars has sky rocketed to new heights, heights that too many fans, can never be reached. Nonetheless there seems to be a large correlation to big money spending and the outcome of that given player at a club. How much can we actually value a player? Clubs seem to be always spending money on the wrong transfers. For instance, Liverpool’s 60 million pound splurge on Jordan Henderson, Andy Carroll and Stewart Downing or Chelsea’s 50 million spent on Fernando Torres or my personal favorite Ricardo Quaresma astounding 30 million pound move to Inter, however in the past three years economists such as Simon Kuper have been trying to argue that the net amount spent on transfers bears little relations to where they finish in the league. While, on the other hand, spending significant sums of money on wages generally helps the clubs success rate.

 

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Using the average league position in the Premier league compared to the relative wage spending there have been accurate results to Simon Kuper’s hypothesis over the past 15 years.

 

Club Average League Position Wage spending relative to the average spending of all clubs.
Man Utd                   2                 3.16
Arsenal                   2

2.63

Chelsea

3

3.50

Liverpool

4

2.68

Newcastle

9

1.93

Aston Villa

9

1.60

Tottenham

10

1.34

Everton

10

1.41

Middlesborough

12

1.32

Leeds

13

1.70

West Ham

14

1.31

Blackburn

14

1.41

Fulham

16

0.92

Southampton

16

1.24

Sunderland

18

0.92

Man City

18

1.24

Wigan

19

                      0.59
Wimbledon

19

0.94

Birmingham

20

                      0.74
Leicester

20

0.88

 

 

Let’s use a manager I despise as an example. Rafel Bentiez during his time at Liverpool encountered a “host of poor overpaid players” as Carragher wrote in his biography. He was charged with the blame of buying Ryan Babel for 15 million euros, Jermaine Pennant for 9 million,  Andrea Dossena for 10 million and my personal favorites Alberto Aquilani and Robbie keane for 25 million a piece. In 2008 Benitez signed Robbie Keane, at 28 years old (debatably his peak) for an astounding 25 million euros. Keane had never had a season where he scored over 20 goals. Six months after bringing him to Anfield, Benitez sold him back to Tottenham for 15 million euros. For all the spending Benitez did, many of his true stars were homegrown talents like Sami Hyypia, Steven Gerrard and Jamie Carragher.

In the six years Benitez spent at Anfield he spent a total of 164 million euros more than he received from transfers compared to Sir Alex Ferguson’s 40 million, yet in those years United won 3 titles compared to Benitez’s best 3rd place finish. The largest problem is that managers often pay for the name, not for the play, especially those that are new to a club and are desperate to make an impression.

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Over the past decade football has taken to stats through the evolution of stats in US sports, in particular Baseball. Billy Beane, the Oakland As general manager commemorated in Michael Lewis’s Moneyball, who subjugated the failings of baseball’s player-trading market to turn the Oakland As into a consistent powerhouse in the American League, has managed to do so by spending the least money on salary in the Major League.

 

Beane has been so successful that the world has adapted his methods to suit there sport. From this Kuper has created golden rules how to approach the transfer market.

  1. A new manager wastes money on transfers: don’t let him
    2. Stars of recent World Cups or European Championships are overvalued: ignore them
    3. Certain nationalities are overvalued (Brazilians and Dutch, for example)
    4. Older players are overvalued
    5. Centre-forwards are overvalued; goalkeepers are undervalued
    6. The best time to buy a player is when he is in his early twenties
    7. Sell any player when another club offers more than he is currently worth
    8. Replace your best players even before you sell them

 

From these 8 points there is one team that immediately come to mind, teams that make profits, win a lot of matches and produce great players right before they become superstars: Udinese

 

The line between playing a successful brand of football and running a profitable business is often a daunting task when anchoring a club, but in the case of Udinese, it has always been “bianconero”. Ever since taking over the reins of the Friulani over 25 years ago, Giampaolo Pozzo has maintained a clear vision on how the outfit would operate.

Their scouting system is vast and spreads over countless countries, but their focus has always been in both Africa and South America, continents with a vast number of unknown players such as the Kwadwo Asamoah, Mehdi Benatia, and Alexis Sanchez’s of the world. Pozzo has developed this connection buy hiring locals in foreign markets in order to tap into local talents. In addition, he has realized that a small market club like Udinese is never going to be able to bring the revenue of a European supergiant so he recently purchased Spanish club Granada in 2009 and more recently English side Watford to expand the system further. Players can now gain experience in vastly different footballing landscapes before moving back to Udinese a more matured prospect.  He can take the most well rounded players who have gained experience across the world and therefore will be more appealing to potential suitors.

ITALY SOCCER SERIE A

Over the past decade Udinese have netted close to €350m from players. In the last year alone the sales of stars such as Gokhan Inler (15mill) to Napoli, Alexis Sanchez (40 mill) to Barcelona, Cristian Zapata (13mill)  to Villarreal, Sulley Muntari (13 mill) to Portsmouth and other amounting to over 150 million. Despite the sale of all there key players, the Friulani still consistently qualify for the Champions League preliminary round again last season, leapfrogging the likes of Inter, Napoli, Lazio and Roma.

 

Udine is a city of 100,000 in the misty mountains near the border of Albania and Italy. With crowds at the Stadio Friuli typically no more than 17,000, and the majority of ticket sales going to the local commune, Udinese’s game day money making is non-existent. As the Swiss Ramble, a soccernomics blog clearly states Udinese’s 2009-10 wage bill of €31m cannot compare with €230m and €172m at Internazionale and Milan. Only the club’s savior, Di Natale, has an annual salary over €1m; Sanchez himself was only earning €700,000 (he now earns 4 million with Barcellona.) Internazionale, Milan and Juventus, all finish the year with revenues of over €200m. At €41m, Udinese did not match a single Premier League club. Income from television accounted for €26m; Internazionale’s  in there treble season was €138m.

 Transfer Success

Name Bought Sold
Pablo Armero From Palmeiras 2010
Fee: €1m

 

To Napoli  2013

Fee: 13 m

Gokhan Inler From FC Zurich 2007
Fee:c. €600,000

 

To Napoli 2012

Fee: 13 m

Kwadwo Asamoah From Bellinzona 2008
Fee: c. €400,000

 

To Juventus 2012

Fee: 15 m

Mehdi Benatia Free To Roma 2013

Fee: 13.5m

Samir Handanovic From AC Rimini 2008

Fee: 800,000k

To Inter 2011

Fee: 16m

Mauricio Isla From Universidad 2007

Fee: 550,000k

To Juventus 2012

Fee: 17mill

Fabio Quagliarella From Sampdoria 2007

Fee: 7.5 m

To Napoli 2009

Fee: 18m

Udinese has created the foundations for every club to follow. Never to they overspend on transfers. They always buy youth, build players and then sell them when they are worth more than there value. Although this is an incredible model teams such as Chelsea, Juventus and Barcelona have to adopt this model in order to create a winning model. Udinese will never be able to win with this team, but they sure are an entertaining team to watch when the Serie A season starts up each August.

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Oct 08 2013

Profile Image of Natasha Catrakilis

An Uneven Playing Field

I’ve lived in the United States for over ten years now, and yet somehow I still struggle to remember the name of my hometown’s American football team (give me a sec… oh that’s right, Atlanta Falcons – Rise up!). Being a Greek South African (born in SA, but 100% of Greek descent), my sports upbringing was dominated primarily by soccer (with rugby and basketball coming in close second). However, the stop-and-go pace of American football as compared to the rhythmic flow of “the beautiful game” has always deterred me from ever watching more than one full quarter of a game.

I’d be lying if I told you I knew which NFL team won the most recent Super Bowl or who the best quarterback in the league is right now. In fact I’d be lying if I told you I even cared. But there is one thing that I do envy about American football (the NFL in particular), and that’s the fact that, unlike most European soccer leagues, it embraces an even playing field.

I’m a huge fan of the underdog. Ask me which team I want to win in a match and (unless it involves my beloved Olympiakos) I’m almost always rooting for the non-favored team. Perhaps it stems from being both the only daughter and youngest child in a loud, obnoxious Greek family, but there’s something about an unforeseen victory by an underrated opponent that gives me the utmost satisfaction. With all this being said, those of us who are avid European soccer fans know that the chances of an underdog team ever winning a domestic league championship are slim to none.

If we take a look at the champions of both La Liga and the English Premier League since the start of the 21st century, we see both leagues are dominated by less than a handful of teams. Since 2000, Real Madrid and Barcelona have been the two most undoubtedly successful teams in La Liga (with the rare occurrence of Valencia breaking through El Clasico barrier). Real and Barça have won 32 and 22 titles, respectively, since the establishment of La Liga in 19291. In fact, no other club has won the title on more than nine occasions1.

In the EPL, a similar trend can be seen, although it is not quite as strong or as historically rooted.

spanish english

However, if we take a look at the winners of the Super Bowl over the same time frame, we see a trend that falls on the total opposite end of the spectrum. In the last decade, 9 different teams have won the Super Bowl.

super bowl

What constitutes for this stark difference in playing fields? In essence, it is the drastically different economies of the NFL and European soccer.

Firstly, the NFL’s revenue-sharing model is what makes it possible for the sport to survive in any size market across the US. The majority of the league’s revenue comes from TV broadcast deals, and that income, in addition to any revenue made from licensing deals, is shared equally among all teams in the league5.

Secondly, the NFL consistently rewards mediocre franchises with the most talented young prospects through a reverse-order draft2. Any team from any city has the same opportunity to compete, and in order to ensure this, the NFL has created a variety of mechanisms to prevent a free market for talent2.  Player movement and salaries are severely restricted: a rookie draft denies young players the opportunity to have teams bid for their services, a salary cap prohibits teams from spending over a certain amount of money on players, and a franchise tag forces teams to give up two first-round picks to sign each other’s most coveted free agents2.

On the other hand, European soccer leagues are financially fractured. It’s every team for itself, a strikingly capitalistic nature when compared to the NFL.  In La Liga each team has different sponsorship and TV deals, creating a dichotomy between the value of the big-market teams and small-market teams, and there is also no cap when it comes to how much a player is worth6.

This nonrestrictive structure of La Liga allows clubs like Barça and Real to operate on a financially higher level and thus make deals that other clubs could only dream of acquiring. Who could forget this year’s transfer of Gareth Bale to Real Madrid for £85.3million, making him the most expensive transfer to date3. The fee eclipsed the £80million that Real paid in 2009 for Cristiano Ronaldo, the second most expensive transfer in the league, but still the highest paid player, making approximately $20.5 million a year, while Barça’s star Lionel Messi comes in close behind with an annual salary of around $20 million4.

Basically, there are no limits to how Barcelona and Real Madrid can acquire talent. However, since they have the best players, they also have the most fans. With more fans comes more money, and with more money, they can afford to buy the best players. It’s a never-ending cycle that gives way to an uneven playing field, but we can’t deny that it generates some incredible soccer.

1. http://en.wikipedia.org/wiki/List_of_Spanish_football_champions

2. http://www.policymic.com/articles/2087/the-drastically-different-economics-of-the-nfl-and-european-soccer

3. http://www.mirror.co.uk/all-about/gareth%20bale%20transfer

4. http://www.forbes.com/pictures/mli45igdi/11-lionel-messi/

5. http://basketball.about.com/od/nba-vs-nbapa/ss/Revenue-Sharing-And-North-Americas-Major-Pro-Sports-Leagues_2.htm

6. http://www.sportsgrid.com/soccer/european-soccer-teams-dominate-top-of-forbes-most-valuable-sports-teams-list/

4 responses so far

Oct 08 2013

Profile Image of Ale Barel Di Sant'Albano

The Europa League a complete waste of time?

europa-league1

What exactly is the Europa League? It’s a second tier competition meant for those “losers” that miss out of competing in the Champions league. It means less T.V revenues, it means playing on a Thursday night (less recovery for league fixtures) and it means that you have to have two full squads in order to keep up with the competition. The Europa League has two extra legs in comparison to the Champions league and the overall prize money for the winner is only 5 million euros compared to 35 million for just qualifying into the Champions league.

The key issue to me seems to be the lay over time between European matches and league matches. Ultimately, if you do not win league matches you do not get into the champions league, however, the way the system works, coefficients for champions league victories are practically the same for Europa league victories, meaning teams of leagues that focus on their domestic league such as Italy, get slaughtered to leagues such as Germany.

Italy has lost its additional champions league spot over the past two years for this exact reason. While Italian clubs have done better in the Champions League than the Germans, the Germans nonetheless, consistently have three teams in the late stage of the Europa league, so the question remains is it more important to have the strongest teams in Europe (e.g In 2009-10, German clubs outscored Italian clubs by 2.6 coefficient points even though Internazionale won the competition, a huge margin[1])? Or do we want to see well-rounded leagues?

Personally, I see a well rounded league as fiscally impossible, while we can have a stronger competition towards the top in leagues like the Portuguese Superliga, La Liga and Ligue 1, it seems pretty much impossible that six or seven teams could be challenging for a league title, except in a fiscally uneven playing field like England.

 

The main issue here is that many leagues feel very differently about the Europa league, as it offers no economic incentive. The Dutch, the Russians and the Italians are key example of this. Italians feel there is a sense of injustice, and it stems from the methodology of the coefficient. Germany, the argument goes, has only overtaken Italy by its strong performance in the Europa League, a competition that has traditionally been taken less seriously in Italy due to economic benefit. It is argued that teams such as Udinese, cannot afford to give it there all in the Europa league as ultimately there league performance outweighs the importance of Europa. It might be time for Michel Platini to sit down and reform the competition as a whole.



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Oct 07 2013

Profile Image of Vinay Kumar

François Hollande, des impôts et leurs conséquences pour le foot français

Filed under France,Soccer Business

Dans sa campagne pour le président, François Hollande a introduit un impôt qui taxe des millionnaires à un tarif de soixante-quinze pourcent. Cette loi controversée a encouragé beaucoup de français riches à déménager aux autres pays européens, comme l’acteur Gérard Depardieu.

Francois Hollande campaign meeting in Toulouse

En ce qui concerne le football, ces impôts sont très importants. En avril 2013, le gouvernement a dit que des équipes du football françaises deviendraient soumis aux impôts. Ces nouveaux impôts inhibent des équipes françaises parce qu’elles doivent payer des impôts plus hauts que des autres équipes européennes. Par conséquent, des équipes françaises ne peuvent pas attirer le talent parce qu’elles ne peuvent pas payer leurs joueurs comme les autres équipes.

Logo_de_la_Ligue_1_(2008).svg

Cette situation est très intéressante pour la France parce qu’elle juxtapose deux choses que les Français adorent : l’égalité et le football. Le socialisme de François Hollande ont obtenu le soutien de la majorité comme l’écart socio-économique entre les riches et les pauvres continuent à élargir. Cependant, l’exode des riches de la France est un grand problème pour l’économie et la croissance.  Le football, le sport le plus populaire dans la France, est aussi important aux Français. Les supporters n’aiment pas que leurs équipes soient défavorisées parce que des équipes françaises représentent leurs villes et leur pays. L’impôt coûtera 82 millions au foot français et mille salariés seraient concernés en France. Le président du Ligue de Football Professionel (LFP), Frederic Thiriez a dit que l’impôt serait “la mort du football en France.”

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Nous verrons si le football gagne dans cette situation!

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Sep 24 2013

Profile Image of Ale Barel Di Sant'Albano

“Spend some F****ing money Arsene!!” Guru or bust? Is he the only sane manager left?

Arsene Wenger, now 63, began his tenure at Arsenal in 1996 and he led the club to almost a decade of non stop success. He has since, however, suffered eight seasons without a trophy including two abysmal loses in the Capital One Cup final. Arsenal have won no trophies since 2005, and have now been forced to qualify for the champions league for the past 7 seasons. He is the strangest character in football today, some say he is one of the bests, some think he is simply an arrogant Frenchmen that had a few great years.

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The main problem that people address is his refusal to spend money. Wenger refuses to buy those players depicted as game changers, “world-class” or “fuoriclasse,” but instead focus on taking the maximum value out of each player. However, is this the right decision when you have a club as distinguished as Arsenal, competing in a league and competitions with clubs like Chelsea, Manchester City, or Real Madrid, even though Arsenal made roughly 155 million pounds last year after deductables.[1] (Management firm Deloitte estimated last year thatPremier League clubs had cumulative debts of £2.4bn.)

http://www.youtube.com/watch?v=7gSFEaI4HdA

But isn’t the fact that he consistently makes the Champions league ( a 30 million pound pay off) while being the only club in the top 10, of the premier league to earn a profit, simply astounding?

Wenger, who graduated in economics at Strasbourg University in 1971, has a mathematician’s brain. The subject taught him how to see the true potential in each player, Valuing a player for what they are or what they could be. Despite having players like Samir Nasri, Thierry Henry, Dennis Bergkamp, Patrick Vieira, Cesc Fabregas and Robin Van Persie, Wenger has never spent more than 20 million pounds on a player until this year with Mesut Ozil. The total he paid for Henry, Vieira and Pires was less than the £23m he received from Real Madrid for a troubled young French teenager, Nicolas Anelka.

Wenger’s Genius transfer deals

  • Kolo Toure (Bought: £150k ; Sold: £16m ; Profit % = 10667 %)
  • Cesc Fabregas (Bought: £500k ; Sold: £35m ; Profit % = 7000 %)
  • Nicolas Anelka (Bought: £500k ; Sold: £23m ; Profit % = 4600 %)
  • Alexandre Song (Bought: £1m ; Sold: £15m ; Profit % = 1500 %)
  • Robin van Persie (Bought: £2.75m ; Sold: £24m ; Profit % = 873 %)
  • Marc Overmars (Bought: £7m ; Sold: £25m ; Profit % = 357 %)
  • Emmanuel Adebayor (Bought: £7m ; Sold: £25m ; Profit % = 357 %)[2]

 

In addition, Billy Beane, general manager of the Oakland A’s baseball team and a innovative economist in his sport, says: “When I think of Wenger, I think of Warren Buffett. Wenger runs his football club like he is going to own the club for 100 years.” Wenger has most recently moved Arsenal to the Emirates Stadium. Not only has this increased there revenues, but they sellout practically every match while having the most expensive tickets in the league. Never previously a giant club, Arsenal now rank fifth in global football for revenues. In the short term, though, heavy debts on the stadium has curtailed their spending[3]

 

Wenger in his first seven seasons at Arsenal achieved an average league position of 1.6 while only spending 7.5% of the Premier league’s total wages. In the past six years his record has been less striking but he has still managed to average a league position of 3.3 while spending 8.8% of the total wages in the Premier league. [4]

 

The problem seems to be that Wenger is no longer open to any form of change. He is set to his system and is sticking with it despite the outcome, however as players values skyrocket, there must begin to be more and more leniency to tactics. Is Wenger recent purchase of Ozil a one time thing to please the fans or will he adapt a model more suitable for the premier league.  Clearly the investment is paying dividends as Arsenal  has now collected 9 points from 9 and currently leads the Premier League.

 

 

 

 

 

 

 

 



[1] http://www.ft.com/intl/cms/s/2/d363b054-6548-11e2-8b03-00144feab49a.html

[2] http://networkofsports.com/arsenal/2012/09/the-genius-of-monsieur-arsene/

[3] http://www.ft.com/intl/cms/s/0/42992d86-d48c-11e0-a42b-00144feab49a.html#axzz2fGzNXXmw

[4] Soccernomics, Simon Kuper and Stefan Szymanski, Nation Books; Second Edition edition (May 1, 2012)

 

One response so far

Sep 12 2013

Profile Image of Ale Barel Di Sant'Albano

“We must not abandon our youth, and we’re not going to abandon them”

In the build up to the World Cup, Cesare Prandelli, head coach of the Italian National Team has raised concerns regarding the sales of key Italian players to foreign markets. “We must not abandon our youth, and we’re not going to abandon them. They are struggling and we need to work out why,” he said. Cesare Prandelli. But how influential is foreign player migration on domestic leagues and national teams?

With the most recent group of Italian internationals moving abroad, such as  Emanuele Giaccherini, Marco Verratti, Thiago Motta and Daniel Pablo Osvaldo, Prandelli worries the invasion of foreign names is hindering the development of younger Italian players, which could have serious problems on the future of the Italian national team.

In Italy, there is a long history of playing older, experienced players instead of giving the youth a chance. A clear example of this is the fact that in the recent U-21 European championship, 17 of the 24 players Italy selected played on Serie B (second division) squads.

Prandelli noted in his most recent press conference “It was thought that the presence of many foreigners would stimulate our young lads, but we’ve seen that things have not gone that way,” Prandelli said at a press conference. “We need to reflect on this.

“We need to study and plan. If I were a club president, I would think about working with youngsters and bringing them through into the first team, rounding things off with foreign players, but only good foreign players.

“We must not abandon our youth, and we’re not going to abandon them, but we’ve also got to see the reality. They are struggling and we need to work out why. They’re not getting regular games in the league and they are not finding any continuity.”

This led me to think about how key player migration is to club competition. Is it make or break for a teams season? Does it impact the national teams? Surely leagues with more money can afford the foreign talent? Can Italy continue “stimulating the younger lads” even though the foreign talent they are bringing in is not top class?

 

Over the last twenty years the number of foreign players in the European leagues were increased in part due to changes in the regulations allowing more foreign players in the teams but most notably, as a result of the increased purchasing power of certain leagues. Increased foreign player migration has led to: First, increased disparity of teams playing in European competitions, as the richer clubs are able to send scouts all across the globe to discover some of the world’s best unknown players. Second, because gifted footballers across all continents of the world are able to play against the world’s best teams on a week to week basis, the standard of play by national teams outside of Europe is increasing as a result. It is a matter of time that either an Asian or African team wins the World Cup.

Foreigners made up 38.9 percent of the 2,744 players in the five biggest European leagues in the 2006/07 seasons.  The figures were compiled by researchers studying the 98 teams in the five main European leagues (Bundesliga, the Spanish league, the French league, the Serie A and the Premier League).[1] (Raffaele Poli, a researcher at the University of Neuchatel in Switzerland). The five leagues averaged just under a quarter – or 24.3 percent – of homegrown players on rosters. The Premier League has the highest number of foreign players – 55.5 percent. Brazilians make up the largest group of foreign players in the five leagues. [2]

To some the presence of foreign players has brought about excitement for the prospect of teams being able to market their clubs all over the world and most importantly excitement for their fan base. The national pride of the past has vanished due to the fact that football has become more entertaining and more competitive to watch. On the other hand, many argue that have too many foreign talents limits the growth of home-grown, and furthermore creates a complete divide in the competitiveness of the league and weakens the national team. 
The arguments for and against foreign players have been protested in the media for decades, without much action ever taken. In another perspective, the increasing wealth of the top European leagues, boosted by television revenues and corporate sponsorships, has attracted in the best players from all over the world.[3]

Other factors that have contributed to the movement of players, is players are simply influenced by colonial, cultural and linguistic linkages. Thus, many players from Senegal, Togo, Cameroon and Tunisia play in France; while many South Americans especially Argentinians play in Spain.

The majority of foreigners emanate from other European countries, followed some way behind by South America. In part this reflects the legal issues such as work permit restrictions and the popularity of soccer in certain parts of the world. In Italy, there has been an attempt through regulations imposed by the FIGC (the governing body) to limit the number of foreign players that can be signed each season by a team. There are sanctions allowing only two non-EU players to join a club each year but clubs are constantly devising strategies to overcome these[4]

% of Italian Players in Serie A Team: 2012

TEAM Foreign Italian % Italian Position
Atalanta

6

26

77

Promoted

Bologna

13

31

61

 16th

Cagliari

8

23

65

14th

Catania

15

29

48

13th

Cesena

14

26

46

15th

Cheviot

15

30

50

11th

Fiorentina

13

27

52

9th

Genoa

16

26

38

10th

Inter

19

32

41

2nd

Juventus

9

30

70

7th

Lazio

19

33

58

5th

Lecce

11

30

63

17th

Milan

11

27

59

1st

Napoli

15

27

45

3rd

Novara

10

29

66

Promoted

Palermo

17

26

35

8th

Parma

10

28

64

12th

Roma

13

27

52

6th

Siena

5

30

83

Promoted

Udinese

20

31

30

4th

 

 

Globalisation is indeed a chief influence in the football industry with the best of the best of all African and South American talent trying their luck in Europe. With the demise of the 6+5 rule (each club having to field 6 players eligible to play for the national team of the country of the club[5]) that UEFA were hoping to instigate in 2012, it is nearly impossible to not see a further expansion in globalization. Furthermore is it possible to see in the future a team winning the champions league with ten home grown players on their side?  It is literally impossible to answer as there are so many variables to cover.

In an ever-expanding globalised world, surely there will always be some parallel amongst ‘success’ and the number of recruited foreign players on your team[6]? Clearly, if there was not teams would not rely on foreign players today? Therefore this promotes the subject: which countries export the most players[7]?

Indisputably, between clubs, the Champions League embodies the acme of soccer glory. Thus, if the number of foreign footballers recorded from a champions league winning side each year one would finally see the true difference between achievement and globalization, if there is one?[8]  Post 1997, the globalisation of football became much easier to notice thanks to clubs like “Real Madrid and Manchester United of ’98 and ’99 respectively, with both 7 imported players starting in their winning teams”[9]. The data reveals  a 194.4 percent rise in the number of foreign competitors in Champion League winning sides in the nineties for the past 30 years . This is a strong indication that globalisation has had, and is continuing to have, an extremely significant influence on professional soccer squads. Inter (Italy) had no Italian players starting in the Champions league final against Bayern Munich in 2010. Nevertheless, the development of globalisation is very apparent. “Even in one decade (80s-90s), there was a 76.67% increase in the number of foreign players in winning team.”[10]

 

An uneven fiscal landscape has also played its part in making certain leagues more competitive as the costs to acquire and hire a player are dramatically different. In Italy were the all-in tax rate stands at over 55% and soccer teams also have to pay an employment tax on the cost of labor. Since agents and players focus on the net after tax income to the player the consequences have a significant impact on a club’s income statement:

 

  England Spain Italy
Net after tax salary

2 mln

2 mln

2 mln

Tax rate

35%

40%

55%

Gross Salary

3.1 mln

3.3 mln

3.6 mln

 

 

 

 

 

If the fiscal impact is applied to club rosters of 30 players at an average of 2 million the ability of a club to compete on salary is not financially viable.  Inevitably certain leagues face another hurdle to become or stay competitive.

 

The advent of globalization and increased communication technology has created important opportunity for the leading soccer clubs to broaden their fan base and as a result capture higher revenues. The Club’s success is predicated on the support of the national league and the Premier League has demonstrated to be the most forward thinking with the development of youth academies and marketing worldwide. Youth will ultimately result in better cost efficiency for teams and larger local fanbases.  The Italian league has failed to capitalize on this opportunity and is at risk of not being able to catch up because the ability of Italian teams to pursue the best talent will be limited in large past due to the lower economic benefit they capture in the globalization process.  Italian teams remain increasingly dependent on the significant capital contribution of their wealthy benefactors.  International player migration is driven in part by certain linguistic and cultural affinity, but mostly because of economics.  The significant talent that is being developed in Africa, Asia or Latin America will be increasingly attracted by those leagues that can compensate the top players and most importantly also provide them the opportunity to create a personal brand.  Serie A will need to address its less attractive financial and economic business environment in order to attract top players and close the gap with the other leagues.    Serie A will need to address its less attractive financial and economic business environment in order to attract top players and close the gap with the other leagues.  So as Italy is no longer attracting the likes of Ronaldo, Kaka, Edgar Davids, Maradonna and Platini, shouldn’t they be focusing on the future of their own talent?

 

Europe’s top 10 earners
Italy’s top 10 earners
Zlatan Ibrahimovic (PSG)
€14m Daniele De Rossi (Roma) €6.5m
Radamel Falcao (Monaco) €14m Gonzalo Higuain (Napoli) €5.5m
Lionel Messi (Barcelona) €13m Diego Milito (Inter) €5m
Thiago Silva (PSG) €12m Esteban Cambiasso (Inter) €4.5m
Eden Hazard (Chelsea) €11.4m Carlos Tevez (Juventus) €4.5m
Wayne Rooney (Man Utd) €11.2m Francesco Totti (Roma) €4.5m
Robin van Persie (Man Utd) €11.2m Mario Gomez (Fiorentina) €4.25m
Yaya Toure (Man City) €11.2m Marco Borriello (Roma)
€4m
Gareth Bale (Real Madrid) €11m Gianluigi Buffon (Juventus) €4m
Fernando Torres (Chelsea)
€10.8m Mario Balotelli (Milan) €4m
Ricardo Kaka (Milan) €4m
Philippe Mexes (Milan) €4m

 


[1]  Raffaele Poli “Africans’ Status in the European Football Players’ Labour Market”  Soccer and Scoiety, 2006

 

[2] Raffaele Poli “Africans’ Status in the European Football Players’ Labour Market”  Soccer and Scoiety, 2006

 

[3] Alistair Endesbury. (2008). Football restrictions on overseas players. Available: http://www.idebate.org/discussion/view_topic.php?id=1937&forum_id=1. Last accessed 22nd February 2012.

[4] David Storey “Football, place and migration: foreign footballers in the FA Premier League”, Geography International Journal, Summer 2011

[5] http://www.fifa.com/mm/document/affederation/federation/01/03/27/09/inea_media_release_e.pdf

[6] Deloitte, A. (2011). Deloitte Football Money League. Available: http://www.deloitte.com/view/en_GB/uk/industries/sportsbusinessgroup/sports/football/deloitte-football-money-league-2011/1cf28c129dffd210VgnVCM2000001b56f00aRCRD.htm. Last accessed 26th September 2011

[7] Hitchings, A . (2010). The Globalisation of Soccer. Available: http://soccereconomics.com/categories/3390. Last accessed 17th August 2011

 

[8] Hitchings, A . (2010). The Globalisation of Soccer. Available: http://soccereconomics.com/categories/3390. Last accessed 17th August 2011

[9] Deloitte, A. (2011). Deloitte Football Money League. Available: http://www.deloitte.com/view/en_GB/uk/industries/sportsbusinessgroup/sports/football/deloitte-football-money-league-2011/1cf28c129dffd210VgnVCM2000001b56f00aRCRD.htm. Last accessed 26th September 2011

 

[10] Hitchings, A . (2010). The Globalisation of Soccer. Available: http://soccereconomics.com/categories/3390. Last accessed 17th August 2011

 

 

[11] Hitchings, A . (2010). The Globalisation of Soccer. Available: http://soccereconomics.com/categories/3390. Last accessed 17th August 2011

[12]Hitchings, A . (2010). The Globalisation of Soccer. Available: http://soccereconomics.com/categories/3390. Last accessed 17th August 2011

 

 

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