All The Money In The (Soccer) World

In recent years, there has been more and more money injected into world soccer/football. This money, of course, is not equally distributed and has only increased the gap between the top teams and everyone else. I’m a big fan of the English Premier League, so I’ll primarily be using the EPL as my reference point. Basically, if you want to win you have to have money (with the occasional, rare exception like Leicester City in 2015/16).

Here’s a comparison of the total payrolls for all 20 EPL teams last season with how many points they gained in the standings (3 for a win, 1 for a tie):
points vs payroll

The order here isn’t as important as the two distinct groups. At the top right you have the “big six:” Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham. These teams spend far more than other teams and that spending pays off. That trend has continued this season as well.

epl table

Man City are way out in front (They spent over $300 million this past summer on new players), followed by a close race for the other three Top Four spots (the top four get to play in the Champions League during next season), and then a gap to Burnley in 7th.

I would argue that, in general, the influx of money has been good for the Premier League. First, it looks as if there should be a compelling battle for the Top Four for years to come that will every year result in at least two very talented teams being left out. If you look at the first several years of the Premier League era (starting in 1992) there’s not a whole lot of parody in who won championships, with Manchester United winning 13 of the first 19.epl champions

Without question the two clubs in the EPL that have benefited the most from all of the new money that has come in are Chelsea and Manchester City. Chelsea were a very average Premier League team before Russian oil magnate and oligarch Roman Abramovich bought a majority stake in the club in 2003. Since, they have won the Premier League five times and won the Champions League once (2012). Manchester City, meanwhile, were not even a consistently top level team and spent time in the second and third tiers of English football. That was until 2008 when a group called Abu Dhabi United Group took over the club, forming the holdings company City Football Group which is owned by Mansour bin Zayed Al Nayan (Sheikh Mansour for short) who is the Deputy Prime Minister of the United Arab Emirates. City have since won two League titles and are well on their way to a third this year. A good illustration of the way money has changed these teams’ fortunes is to look at their final place in the League standings over time. I’ve included French club Paris Saint Germain as well, who along with City are notable for their enormous recent spending (they are more or less owned by the nation of Qatar).

chelsea psg man city

The Premier League has 20 teams, so I decided to crop the graph there, although Man City did once finish a season as the 47th best team in England. Also, if you’re wondering what happened to Chelsea in 2016, nobody knows and I’d rather not talk about it…

Anyway, large amounts of foreign investment have elevated the levels of teams like Chelsea and Man City and permanently shifted the balance of power in the soccer world both in England and across Europe.

The other reason I’d argue the increase of money in the Premier League has been a good thing is everyone, including the teams that aren’t contending for titles, makes more money. The current TV deal for the Premier League pays out $7.11 billion to the league’s teams. Half of that money is split 20 ways and equally distributed to each team. Another quarter of the money is linearly distributed  based on how the teams finished in the standings, and the final quarter based on how many times each team was featured on a nationally televised broadcast. Last year, this resulted in Chelsea, who earned the most from TV revenue (~ £153 million), making 60% more than Sunderland who made the least. This is a far more equitable distribution than in many other leagues, such as Spain where Real Madrid and Barcelona both earned more than 350% more from TV revenue than last-place Alaves.

This kind of money being doled out, even to teams who don’t do well, makes the Premier League an exciting opportunity for any English team, which is why the promotion and relegation system becomes so crucial. The gist is that the the three worst teams in the Premier League are sent down to the second tier (The Championship, a confusing name) for the next season. The top two teams in The Championship are promoted to the EPL, and the third promotion spot is determined by a four team playoff between the teams who finish 3rd through 6th. The final game of this playoff, the Championship Playoff Final, has become known as the “richest game in football” because of how much money is on the line. Two years ago, Deloitte estimated that winning this game was worth £170 million; for some clubs that’s a life-changing amount of money.

Soccer is generating an increasing amount of money as well, with five of the nine highest revenue sports leagues in the world being soccer leagues in Europe (of course the NFL, MLB, NBA, and NHL are the other four; the Premier League is in third, only behind the NFL and MLB). With its correlation with winning and how vital is is to the bottom line of many clubs, money can mean everything in soccer.

However, a consequence of there being so much money is that money has lost any tangible value.

This is most apparent in how ridiculous transfer fees paid for players have become recently.

A brief aside for non soccer fans, trades in soccer are rare (but not unheard of), with players usually being “bought” or and “sold” for some agreed upon amount of money. Then, the player signs a contract with his new team.

If you take the 50 highest transfer fees ever paid and split them up by the year in which they occured you get this:

top 50 transfers

It would make sense that over time fees would go up, simply due to inflation and increased team profits from TV revenue and sponsorships. What’s most striking, however, is that 2018 is only half over in terms of transfers. There are two “windows” in which transfers can occur: one in the offseason between June and August, and the other mid-season in January. This recent spike in transfer fees is a sort of chain reaction, set off last summer when Brazilian superstar Neymar moved from Barcelona to Paris Saint Germain for €222 million, which for reference is higher than the GDPs of Chile and Finland. This more than double the previous record, when Paul Pogba moved from Juventus to Manchester United in the summer of 2016. Since then, Barcelona themselves have surpassed the Pogba transfer fee with the signings of young French phenom Ousmane Dembele from Borussia Dortmund and Liverpool’s best player Philippe Coutinho (the two a reinvestment of the Neymar money).

While the big transfers are what draw the headlines, the effects have trickled down to much smaller transfers, such as Chelsea paying £34 million for Danny Drinkwater (who in my opinion has the greatest name in soccer), a player who at the time of that move had an estimated market value of only £8 million.

The way to think of soccer players is more like stocks rather than something with a fixed price/value; they’re worth whatever a team is willing to pay for them, which can be a mind-numbing amount of money when teams are being bank-rolled by oil tycoons. Is Neymar worth €222 million plus a €30 million per year contract? Maybe; if PSG wins the Champions League this year they’ll say it was money well spent.

It’s difficult to answer the question of if these huge spends are worth it. The truth is, that for the big clubs, it doesn’t matter.

Take Manchester United for example. Adidas pays them £75 million per year to be their jersey manufacturer. Chevrolet pays them $80 million a year to be their jersey sponsor. Their revenues last year topped $750 million. According to Forbes, the team is currently worth $3.7 billion. So if a big transfer turns out to be a flop? No big deal; spend a bunch of money on someone else and try again (and again).

Manchester City paid over €50 million for French defender Benjamin Mendy this past summer, but he hasn’t played at all since rupturing his ACL at the beginning of the season. In the last year Manchester City have spent over £200 million on new defenders alone. That includes the recent purchase of Aymeric Laporte for £58 million who will be more or less replacing John Stones (previously bought for £50 million) in the starting lineup. It doesn’t matter when there is no price too high.

The thing is, it seems to work. Real Madrid, PSG, Barcelona, Man City, Man United, Chelsea, Bayern Munich, Juventus, these are the richest teams in the world. They are also the best teams in the world. That isn’t a coincidence.

Money may be trivial to these clubs, but it’s the key to their success and the most motivating force in the sport.

………………………………………………………………………………………………………………………………………

This was simply a look at the legal ways in which money has completely taken over the sport of soccer. As for the less than legal aspects of soccer’s relationship with money, that’s far too much to put all in one post. There’s the original FIFA corruption case from 2015 that revealed how bribes had been paid to soccer officials to buy their votes for both the 2010 World Cup in South Africa and the 2014 World Cup in Brazil. Russia, who will host the 2018 World Cup, have also been accused of corruption in their winning of the bid for the tournament. Finally, and most notably, there is the controversy of how Qatar were selected to host the 2022 World Cup and the mistreatment of workers that has followed.

Then there’s the repeated convictions of star players on charges of tax evasion including Lionel Messi, Neymar and Alexis Sanchez. Cristiano Ronaldo has also been accused but has not been convicted of any wrongdoing. Like the super-rich clubs they play for, money doesn’t seem to really hold any value for these players either.

 

All in all, when I think of soccer and money, I just think of this:

sepp blatter money

Thanks for reading.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s