Are transfer fees really exploding?

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With Neymar’s transfer to PSG, the football media has moved from just excitable to the swooning and fainting associated with young Victorian debutantes laying eyes on returning officers of the Household Cavalry. The “world record” (we will get to this in a moment) has seen the football experts go into overdrive in trying to explain how it is that so much has been paid, and how it can be justified.

Among the more interesting commentators were the crew on last week’s Guardian Football podcast, specifically award-winning Jonathan Wilson who made a couple of insightful points. The first was the likening of the football transfer market not to the clichéd and overused Dutch tulipmania of the 17th century, but to a more subtle historical event that I had not heard of before, the Indian horse market of the same period. Although Wilson does not spell it out, the point here is not that best-in-class assets become expensive (Neymar for €222m is comprehensible); it is rather what Mourinho has been warning about, that mediocre asset prices get dragged up too and that is where things become unsustainable. In other words, the Man Utd’s of this world will always spend top dollar; the real danger is when Middlesbrough are doing the same.

The second intriguing point surrounds the role of Qatar in the Neymar move. Barcelona have for many years irritated a majority of neutral fans with their holier-than-thou attitude about all matters football. It does not take a hard-core royalist like myself to be sickened by the constant nonsense about being “mes que un club”, or the self-indulgent refusal to have a shirt sponsor for so many years. But recently, the club have taken to criticizing Qatar over the forthcoming World Cup – the very people they finally took their blood money from when the caved into for money. Was this criticism a result of failing to agree a new sponsorship deal? Was PSG’s bid for Neymar driven by a Qatari government keen to demonstrate they still had retaliatory power? Both, it seems, may be a firm “yes”. Well, it couldn’t have happened to nicer people …

But really, how big a transfer fee is Neymar, anyway? Clearly a direct comparison of nominal fees is useless; so is a basic use of inflation to recalculate them. Only one analysis I have seen attempts to bring fees into historical perspective, the excellent Paul Tomkins’ blog. For the purposes of analyzing which transfers have had what impact, Tomkins and his team have used a form of “football inflation” based on average transfer prices from year to year, and inflating the nominal figures this way. Since football inflation has far outstripped CPI, this produces a top ten looking something like this:

Tomkins table

Source: https://tomkinstimes.com/2017/07/shock-transfers-now-cost-more-plus-top-100-signings-after-inflation/

Now, I like this approach. It has much to recommend it. However I believe it understates the impact of TV money on the psyche of football clubs – Tomkins’ analysis looks at correlation between the two but does not integrate them. I believe that – for the Premier League at least – another interesting way of looking at transfer prices is rebasing nominal transfer fees against the growth in TV deals. In my model, “inflation” is based entirely on the growth of TV deals struck over time (which have grown at an impressive 17.2% CAGR since 1992). In particular, I think this better reflects the thinking behind those headline-grabbing, record transfer deals as opposed to the median ones. The thesis being, that record transfers experience inflation different to normal transfers.

When this principle is applied – the Pang Index – the following numbers are generated:

Transfer records re-based to Premier League TV deal sizes

Football transfers

The blue bars represent record transfer fees paid by English clubs since the Premier League came into effect in today’s money. The grey bars were record transfers out of England (as it happens, all to Real Madrid). In this context, I have thrown in the Neymar transfer for fun. Of course this is not a perfect comparison – European clubs have very different TV deal structures and have not earned as much as English clubs have anyway; moreover the likes of PSG are barely “commercial” clubs at all these days, throwing the numbers out. Nonetheless, it makes some sense: Neymar’s fee is probably the same as a proportion of the kinds of TV money sloshing around as Veron’s transfer to Man Utd was all those years ago. No-one old enough to remember, can really be in doubt that Shearer’s £15m fee shocked us rather more than Neymar’s (let’s perhaps forget Stan Collymore for a moment).

The basic lesson is: money is here to stay; it is growing at a pace; but it makes surprises more and more difficult. Already this summer, there have been several moves rumoured to be in the same ballpark (£131m for a 31-year old Ronaldo, for instance). Actually, for the bigger clubs, it seems superstars are getting cheaper, not more expensive.

A squad of two halves – the drag from Tottenham’s wage structure

Tottenham NY Post

Frustrations are beginning to appear around my beloved Tottenham Hotspur. Obviously, we have yet to make any new signings, even as all around us in the top six have done so – including from us with Kyle Walker’s move to Man City. It is well known that we have a shortage of money compared with our rivals – the subject of a neat video produced by Joe Devine last year. But, there has also been much commentary about how Tottenham are struggling to find the right kind of players to fit into the squad – especially as “understudies” to key players like Harry Kane and Dele.

The reality is that Tottenham faces structural problems of its own making. First, the wage cap in place is enforcing a concept of a First XI vs secondary players. Most clubs have some sort of wage structure in place, of course, but rarely at the top level is such a fuss made about it or is it so well known. A look at the figures as last season commenced (below) demonstrate this clearly: Lloris and Kane were the top earners but the whole first team plateau out before a sudden drop off as one reaches Trippier and Davies (both now ironically effectively first team players).

Tottenham wages

Source: sillyseason.com (http://sillyseason.com/salary/tottenham-hotspur-players-salaries-69471/)

Compare this with the three biggest paying clubs in the Premier League and the contrast is stark. It is not just the absolute amounts that are different; it is the distribution, and with it an entire philosophy of creating star players with a large pool of players below them. A new arrival at Spurs would question how inelastic the first team appears to be; a new arrival at Man Utd may know he won’t oust Paul Pogba, but the rest is up for grabs. Tottenham have allowed themselves to create too rigid a playing structure.

This leads onto the second structural point: no other team has quite such a disparity between the quality of our First XI and the bench. Title winning teams do not have a set first team; asking “who is willing to sit on the bench?” is to ask the wrong question altogether. The real measure is the quality of the first team squad – the 18 or so players who should be interchangeable in quality terms. This is more difficult for the striker position, since there is only one match day position available. But for the attacking midfield positions, where we play at least two (in the 3-4-2-1 formation) or three (in the 4-2-3-1), we should have at least n + 2 players of comparable quality competing.

So what is the answer? Well, one or two rumours have emerged which are of real interest: Iheanacho from Man City for instance, or Kovacic from Real Madrid (incidentally Ross Barkley is not the answer). But it seems like under the financial constraints we have, and under the wage structure we enforce, Pochettino is going to have to further rely on coaching youth players. It’s not a bad way to do it – Josh Onomah has had an excellent summer with the England U-20s, as has Kyle Walker-Peters; Harry Winks and Cameron Carter-Vickers already made their appearances last season too. I also believe that some players can be reinvented – Moussa Sissoko into a deep-lying central midfielder for instance.

Ultimately though, Spurs are going to have to rejig the way they pay their team even if they do not raise the total amounts being spent, and even to keep existing squad members happy. The current system reflects something static, sacrificing flexibility on the altar of stability. It might serve for another season, but what happens when our ambitions expand?