Money talks, Neymar walks: The Crazy World of Football Transfers

By Pete Dawson

The Brazilian football Neymar has been transferred from Barcelona to Paris Saint-Germain (PSG) for a world record fee of £200m (€222m).  It has also been reported that he will earn £782,000 (€865,000) a week.  The five year deal will mean PSG will have shelled out close to £400m.  These are extraordinary sums of money – even for football.

Image result for neymar

First, consider the transfer fee.  The previous record – a mere £89m – occurred when Paul Pogba transferred from Juventus to Manchester United last August.  Prior to that changes to world record prices had been fairly gradual.  Does Neymar’s deal represent a permanent step change?  It is difficult to say.  The fee paid represents the buyout or release clause that the buying club effectively have to pay in order for the selling club to release the player from their contract.  Since the Bosman ruling, which meant players out of contract could transfer freely – that is without a transfer fee being payable, players have benefitted from long term contracts and higher salaries.  A likely consequence of the Neymar deal is that star players will benefit from even longer contracts and command even higher salaries.  In the short-term, we are likely to see a flurry of activity in the transfer market: Barcelona will be desperate to use the money received from Neymar to purchase high profile players before the transfer window closes.  The club(s) which these players are purchased from will, in turn, also be desperate to replace the services of any lost talent.

Next consider Neymar’s expected wages.  Is he worth £782,000 per week?  We have been here before: three years ago I contributed to an article for the BBC as to whether Gareth Bale, who transferred from Tottenham to Real Madrid, was worth £256,000 per week.  Below I restate some of the arguments made in that article.

When considering the earnings of individuals we should take account of supply-side and demand-side factors.  In the case of supply-side factors, superstars (whether this be in sport, music, movies etc) typically command higher salaries because these individuals are in scarce supply and not because they are more deserving than, say, teachers or nurses.  In general, the more unique the skill set the individual possesses the higher the potential salary.  Demand-side factors are also important.  Why would a firm, or in this case a football club, be prepared to part with this kind of money?  The obvious answer is that they will expect to receive some kind of return on their investment, essentially PSG believe they will be more successful and their brand more lucrative (through merchandising sales, advertising and sponsorship deals) with Neymar in their team.  It is no secret that since PSG was taken over by Qatar Sports Investment the main objective was to compete with likes of Barcelona, Real Madrid and Bayern Munich and ultimately win European football’s premier club competition, the UEFA Champions League.  Quite simply, PSG and their owners believe purchasing Neymar will deliver this objective.

UEFA introduced a set of rules, known as Financial Fair Play, in an attempt to stop the excessive spending of football clubs.  La Liga officials attempted to scupper the deal by stating that they believed PSG were violating these rules but the deal has gone through nonetheless.  Time will tell whether the extraordinary amount of money paid for one player will be worth it.

 

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