of recent World Cups or European Championships are overvalued; ignore them.4 Both superstars and weakest links are overvalued: your top three players matter most.
5 Certain nationalities are overvalued.
6 Older players are overvalued.
7 Centre-forwards are overvalued; goalkeepers are undervalued.
8 Gentlemen prefer blonds: identify and abandon ‘sight-based prejudices’.
9 The best time to buy a player is when he is in his early twenties.
10 Sell any player when another club offers more than he is worth.
11 Replace your best players even before you sell them.
12 Buy players with personal problems, and then help them deal with their problems.
13 Help your players relocate.
Alternatively, clubs could just stick with the conventional wisdom.
NOTE
1. Our view of transfers has been challenged in the book Pay as You Play: The True Price of Success in the Premier League Era, written by three Liverpool fans, Paul Tomkins, Graeme Riley and Gary Fulcher. The book is a treasure trove of interesting financial facts, with the added benefit that the authors are donating all their royalties to the children’s charity Post Pals.
Pay as You Play uses data on transfer fees put together by Riley, by day a senior accountant at Adecco, by night an accomplished football statto. He collected figures for transfer fees paid by Premier League clubs since 1992–1993 from newspapers and any other sources he could find. It’s a true labour of love.
The authors’ approach to transfers is very reasonable. As they point out, adding up the total transfer fees paid for all the players in a squad over many years is misleading because of inflation in transfer fees – the average spend per player has roughly doubled in a decade. The authors therefore convert past transfer fees into the ‘current transfer fee purchase price’ (CTPP), using average transfer fees as an index. For example, Thierry Henry cost Arsenal an estimated £10.5 million in 1999, which converts to a CTPP of £24.6 million. By giving every transferred player a value, they can compare a team’s spending on transfers to performance in the league.
When Tomkins then published a blog by Zach Slaton headlined ‘Soccernomics Was Wrong: Transfer Expenditures Matter’, naturally we sat up and took notice.
Slaton argued that transfer fees were just as good a predictor of league position as is wage spending. One of us (Stefan) contacted Slaton and the authors to find out a bit more about what was going on. Riley kindly showed us the data he had used to calculate his index.
It then became clear where the differences lay. The Pay as You Play index refers only to transfer fees paid. But when we said that spending on transfers bears little relation to where a club finishes, we were referring to net transfer spending – transfer fees paid minus transfer fees received. (We have clarified that point in this edition.) The net figure is the crucial one, because hardly any clubs can just keep buying players without occasionally selling some to stop their spending from going too far out of whack. Once you look at net spending, it’s clear that very few clubs run successful transfer policies: their net spending barely predicts where they finish in the league. If managers and clubs were valuing players accurately, you’d expect to see a significant correlation between net spending and performance, at least over time.
The reliability of the Pay as You Play data is also doubtful. Data on wages is pretty accurate: it’s drawn from each club’s audited financial accounts, which are publicly available in England. But transfer fees quoted in the media are less trustworthy. Take the following comparison of transfer fees paid for members of Arsenal’s 2008–2009 squad from Pay as You Play data and from another reputable source, transfermarkt.co.uk:
| Player | Pay as You Play (£) | transfermarkt.co.uk (£) |
| Mannone | 350,000 | 440,000 |
| Almunia | 500,000 | 0 |
| Silvestre | 750,000 | 836,000 |
| Song | 1,000,000 | 3,520,000 |
| Eboue | 1,540,000 | 1,936,000 |
| Fabiański | 2,000,000 | 3,828,000 |
| Vela | 2,000,000 | 2,640,000 |
| Fàbregas | 2,250,000 | 2,816,000 |
| Van Persie | 3,000,000 | 3,960,000 |
| Denilson | 3,400,000 | 4,400,000 |
| Diaby | 3,500,000 | 2,640,000 |
| Gallas | 5,000,000 | 0 |
| Ramsey | 5,000,000 | 5,632,000 |
| Sagna | 6,000,000 | 7,920,000 |
| Adebayor | 7,000,000 | 8,800,000 |
| Walcott | 12,000,000 | 9,240,000 |
| Nasri | 12,800,000 | 14,080,000 |
| Arshavin | 15,000,000 | 14,520,000 |
There are clearly some big differences here. No wonder, as transfer fees are almost never officially disclosed, only leaked to the media by the club or the player’s agent, generally with a spin. Nonetheless, and given these caveats, the Pay as You Play index does quite well at explaining the variation in team performance in the Premier League for the years covered.
That’s hardly surprising. A club that spends a big transfer fee buying a player will almost always also spend a big sum on his wages. So in this sense, in the very short term, transfer fees can be almost as good an explanation of success as wages. However, real success in the transfer market means buying cheap and selling dear. For that you need to know a club’s net spending, which shows very little correlation with team performance. The transfer market remains far from efficient.
THE WORST BUSINESS IN THE WORLD: WHY FOOTBALL CLUBS HAVEN’T MADE MONEY
A
