Have you ever heard the news that your favorite player at your club is moving to another club? How did you feel? Sad? Depressed? Ashamed? Angry at the player? Angry at your club for selling? Angry at the other club for buying? All of the above?
If you are a football fan, then there is a 100% chance you have experienced what I just described.
There are a lot of factors that go into player movement and player sales, and it helps if you understand how it works so you do not get too disturbed when it happens.
Also, do you wonder why a player costs so much? Or why a player costs so little? Is he overrated in terms of his financial worth? Is he underrated?
Has the buying club been fooled? Has the selling club made the wrong decision? If you understand these how these things are determined, your reactions to them will be a little different, so let’s break it all down.
Section 1: Why Players Leave
The first thing ( the golden rule ) you have to know when trying to analyze player movement is that PLAYERS ARE CONTRACT EMPLOYEES.
This simple fact is the foundation of everything, and you must never forget it. The primary concern of a player is his career and family, before any employer, before any customer/fan.
Think about a worker at McDonald’s, he works there, gets paid, and seeks to advance his career. Gets a better offer ( money, career advancement, benefits, etc ) from Burger King, is there a serious reason he shouldn’t leave?
No customer has formed an emotional bond with him ( they don’t even know he’s the one that made the burger ), and more often than not he hasn’t formed an emotional bond with his employer, so why can’t he go?
I introduced the emotional bond angle because this is what actually makes football different. There are fans of teams who are emotionally attached ( unlike a customer buying a burger ), and there are players emotionally attached to clubs and the fans ( it may happen at McDonald’s too with the employee )…But the most important question is, are these emotional attachments higher on the scale of importance to the employee than career and family?
Remember PLAYERS ARE CONTRACT EMPLOYEES who can be tossed out as soon as their present contract is over, or as soon as they lose some ability or some shiny new younger person comes into the organization.
So what are the broad reasons why a player moves? I’m going to try and list them, IN NO ORDER…
- Money: Ah yes, good old money. Believe it or not, it is a huge factor in people making career moves. It is what you earn, and it gives you the ability to take care of yourself and family, do the things you want to do, and own the things you want to own. More often than not, more money is better than less money. So yes, players move because they stand to earn more elsewhere. It’s best you come to terms with this.
- Chance To Win: A player will move to another club if he feels there is a better chance of winning trophies there. The aim of the game is to win. I don’t think there is any one player who wants to end his career without winning a trophy ( League, CL, EL, Domestic Cups, Club World Cup, etc ).
- History/Prestige of Club: All things being equal, would you like to work for Chevron or that unknown gas company in your small town? Play for Real Madrid or Granada? Manchester United or Swansea? The history and prestige of a club is a big factor in determining whether a player wants to move there in comparison to where he presently is, or to other leaving options.
- Present Coach of Team: The pull of the manager cannot be overemphasized. Believe it or not, there is a difference of pull/attractiveness from one coach to another, and it plays a part too. Players want to play for the best coaches, coaches that can improve them individually, and give them the best chance of winning ( individual accolades and team accolades ). Or coaches they just simply have a better rapport or connection with, or coaches that will play them in their ( the player’s) preferred position and system.
- Other Intangibles: Other factors like city of location ( some people want to live where there is sunshine as opposed to torrential rain ), cultural pull ( for most South Americans, their club utopia is Real Madrid or Barcelona, Germans have Bayern Munich, etc ), home pull ( players sometimes want to play for their home team. Where they were born, where they grew up, where they have family ties, etc).
Players move for these broad reasons listed above. It could be all, it could be 1, it could be a mixture of some, and the importance level of these reasons vary from player to player ( some may value club prestige over money, others may value present coach over prestige, etc ).
I know we love the romantic idea of a player we love staying at our club forever, and it happens ( Totti, Buffon, Giggs, Zanetti, Puyol, etc ), but those are rare gems, and all the conditions perfect for them to continue to stay were present.
As for mainstream reality, PLAYERS ARE CONTRACT EMPLOYEES who value their personal happiness, career and family over emotional attachment to club and fans, and emotional attachment from club and fans.
Section 2: What Determines the Price of a Player
As with the previous section, I’ll start with the golden rule that you must always remember; FOOTBALL CLUBS ARE ORGANIZATIONS THAT SEEK TO MAKE PROFIT WHEREVER POSSIBLE. Now I understand there are emotions involved ( of fans, players, etc ), but when it boils down to it, that golden rule holds.
One of the ways an organization can make a profit is to sell a good/service. Simple definition of profit is;
Profit = Revenue – Cost
So you must ensure your Revenue is > Cost, or * reduce cost if Revenue is constant. I will touch on these two ways as regards football clubs and selling/pricing.
What determines the price of a good/service set by its owner? Firstly, the owner must consider all it costs to make/manufacture and own that good. The CAPEX ( Capital Expenditure: The total Initial cost of investment. e.g. maybe a sewing machine for a starting tailor ), and the OPEX ( Operating Expenditure: The total cost to actually create the product. e.g. cloth material, transportation costs, storage costs, labor costs, etc ).
The owner must then take these costs and divide it by the total output, to get the UTC ( Unit Technical Cost).
UTC = (CAPEX + OPEX )/ TOTAL PRODUCT OUTPUT
UTC gives you the cost to produce 1 unit of your product. So how do you then set a price?
UTC + Profit = Price
The profit is what you add on top of your unit cost, to set your price. This price must be set in consideration of market competition ( you don’t want to have a price too high in relation to your competitors ), and any government price regulation.
So how does this all relate to football you ask? Well, FOOTBALL CLUBS ARE ORGANIZATIONS THAT SEEK TO MAKE PROFIT WHEREVER POSSIBLE. One of the possible ways is through the sale of players. So how do they set their price?
I know we like to think the club President sits down and just throws out his favorite number as the player price ( maybe some do. Haha ), but in reality, there is an economic analysis by experts of any potential sale. What are the factors in this analysis that determine the price of a player?
Attractiveness to Buyer: How attractive is the player to a buyer? The things that determine this are first and foremost the player’s ability ( or potential ) and fit to team.
How good is he? Is he a huge talent?, Average?, Poor?, etc. Will he fit into the buyer’s team? Another thing is the player’s age.
Is he 22? Does he have time to grow and give the buyer solid years of service? Is he 34 and old and slow? Resale potential also ties into this; If it came to it, in the future will we be able to sell this player we are buying?
Will he be attractive to others? Health is another factor that contributes to player attractiveness. Is he mostly injured? Fit? History of injuries? Then there are other intangibles like player mentality, behavior, attitude, etc.
All these things contribute to how attractive a player is to a potential buyer, which in turn affects the willingness to buy. If there is a high willingness to buy, the seller can make use of this to his advantage.
CAPEX AND/OR OPEX of the seller on a player: What did it cost initially to buy/develop this player? What have we paid to date to this player in terms of salary, health benefits, travel costs, bonuses, etc?
Purchasing Power of Buyer: What is the present financial ability of the buyer? What can they afford? Did they get an influx of money ( from government/FA, TV revenue, sponsorships/endorsements, etc )?
The higher the purchasing power of buyers, the higher the prices of goods/services ( that increase in purchasing power is actually a major cause of inflation, and this explains why we see player prices reaching higher levels these days ).
The existence of More than 1 Interested Buyer: Is it only 1 interested buyer? Are there more? More buyers usually mean a bidding competition, which in turn can drive up the price.
The willingness of Player to Leave: Is the player tired of playing for us? Does he want to leave? If he does, this kind of plays into the hands of the potential buyer. But this also depends on how strong the hold of the seller on player is ( how many years left on contract? How stringent is the contract? etc )
In all, the selling club looks at the CAPEX and OPEX for the player ( use this to get the absolute minimum price which would mean break-even of Revenue=Cost), assign number weights of importance to the other in numerical factors depending on the situation, and then place an additional amount to the minimum figure form their CAPEX/OPEX analysis of player. This would then represent their profit.
I have come up with my own system to determine a player price based on all I have written here ( I’ll call it the Otoiks Formula ), but the exact way may vary from club to club. The overriding principle remains though, FOOTBALL CLUBS ARE ORGANIZATIONS THAT SEEK TO MAKE PROFIT WHEREVER POSSIBLE.
Let’s say I own a club, and we have a young player with huge talent ( e.g. Mbappe ).
1- He ticks all the boxes talent-wise, he will fit into the interested buyer’s team perfectly, he’s young, he’s healthy, has resale potential, and he has the perfect attitude/mentality. This makes him very attractive and will generate a high Willingness to Buy from the Buyer. So I assign a weighted value to this, 10.
N.B: My scale in all my weights is from 0 to 10.
Willingness to Buy WB = 10
2- I sit down and do my CAPEX and OPEX analysis. What has this player cost me to date ( initial purchase, training, salary, benefits, bonuses, etc )? I write this down. Let’s say I have;
CAPEX= 30 million pounds ( how much I initially bought him for )
OPEX = 10 million pounds
3- Purchasing power of buyer PP. Let’s assume the buyer just got a new TV deal and has some liquid cash to burn. I can assign him an 8 out of 10 weight. So;
Purchasing Power PP = 8
4- Competition C. How many clubs are genuinely trying to buy my player? I can assign a weight based on this number. Let’s assume 4 clubs, so 4 it is.
Competition C = 4
5- Willingness of Player to Leave WP. Let’s assume he wants to leave, but he is in just the 2nd year of his 5 year contract, so I hold some power. This will result in maybe a half and half situation. So I’ll assign a 5 to this.
Willingness of Player to Leave WP = 5
What I then do is to put it all together into the Otoiks Formula;
Player Price= ( CAPEX + OPEX + WB + PP + C + WL)/K
Where k is a constant for “HEALTH” and can either be 1 or 0. 1 implies the player is healthy and a transfer can happen, 0 implies the player isn’t healthy, will fail a medical, and the transfer cannot happen ( you cannot divide a number by 0 ).
So for my hypothetical situation, I will assign 1 million per weight so as to get my answer in millions. (e.g. a weight of 5 means 5 million ), and I assume my player is healthy, so K=1.
Player Price = ( 30,000,000 + 10,000,000 + 10,000,000 + 8,000,000 + 4,000,000 + 5,000,000 )/ 1
Player Price = 67,000,000
Sixty Seven Million Pounds ( or dollars or whatever ). With this, we have recovered our initial investment of 40 million ( CAPEX + OPEX ) and made a profit of 27 million based on the unique parameters of this particular purchase.
There are other angles to look at; agent fees, straight trade by barter player for player ( both teams have to sit down and properly analyze if it’s good for them ), player plus cash, buy out clauses ( where if a buying club meets the clause and the player wants to leave then nothing can be done to stop the move ) etc.
Sometimes, the club may want to sell off a player at a cheaper price than they got him because he is old, not good anymore, unattractive to buyers, and is just taking up more OPEX cost ( salary, bonuses, etc ), so sell him off to take away those costs ( * reduce cost if revenue is constant ) and write off the CAPEX.
So when next you hear a player costs X million pounds, most times it really has nothing to do with the player himself in terms of who set the price, and it may or may not reflect the player’s ability in your eyes, so do not take out your annoyance on the player. Also, remember his primary loyalty is to himself, his career, and his family, before you or the club.