21st Club Intelligence Team Roundtable: Transfer Market Trends
After a summer in which leading clubs made some clear strategic choices, the 21st Club Intelligence team sat down to discuss what we should be on the lookout for in the 2019-20 season after the summer’s activity.
Omar: Right – 2019-20 has come by quick! Where to start – how about with the transfer market?
Alex: I’ve heard people question ‘is a transfer ban good for Chelsea?’ and it made me think about whether it is possible for a club to change its core philosophy. Chelsea fans are used to short term success with managers, but I wonder if the club can create a more patient fan-base with this change (has this problem ever been solved before?), and it might even be a ‘principle’ others can follow?
Omar: I like the idea of how ‘random’ shocks can totally change a club’s perspective. Southampton, Lyon, Schalke, Feyenoord all became talent factories in part due to financial difficulties. You may get a situation here where fans accept that trading players isn’t the only solution for success, which might then influence decision-making across the club.
Sophie: It’ll be interesting to see how clubs manage these changing expectations with the fan base. Three of Europe’s top clubs are all going through a transitional period at the moment and have chosen former players as their managers: Real Madrid, Manchester United and Chelsea. The fan base is perhaps more likely to give them more time to build a new project at the club than they would an “outsider”. Whether they’re intentionally factoring this into their hiring decisions is another question.
Omar: I think a transfer ban can be good from the perspective that it creates focus on what a team needs to do. Athletic Club are the classic case – they effectively have a self-imposed transfer ban. Spurs were a great case study last season of a team not needing new signings. That said, I’ve yet to see a direct causal link in the data between lack of squad turnover and improved performance? In some cases it seems to work, in others not – there’s no neat narrative to see.
Alex: Chelsea should be a particularly interesting case study this year due to the quantity of stockpiled young talent that they have at their disposal which historically they haven’t used.
Omar: Yes, in a way it’ll be a further test as to whether a unifying philosophy across the academy and first time, plus the benefits of cohesion, are actually worth as much as spending many millions of pounds in the transfer market. Famous last words but I think they could do well, after accounting for the impact of Hazard, clearly.
Luis: I feel like one of the interesting trends in this transfer window was a relative cooldown in the transfer market. Of the big 6 clubs, City, United, and Spurs made one big signing each, Liverpool made none, and Chelsea are grappling with their regulatory situation. Arsenal have spent a lot of money to get Pépé on their books, but all around it has been a pretty quiet transfer window. Perhaps we have reached a bear market in football player valuations. I don’t know if that is a deliberate decision on the part of the big clubs, or if there are financial constraints of some sort at play squeezing all of their budgets.
Omar: And that’s coincided with English teams having their collective best season in Europe for a decade. Real Madrid, Bayern, Barca, Juventus have all been more active than in recent seasons; it’s almost a role reversal. There’s a whole challenge that clubs face of generational change – Sir Alex Ferguson was brilliant at managing this at United, and I suspect City, Liverpool, and Spurs will begin to face this challenge in two years or so. They’ve all bought young, which makes sense in light of this.
Sophie: It’s definitely true that teams elsewhere in Europe have been spending big: Barcelona’s net spend this window is currently €131m and Real’s is €188m.
Aurel: I think to add to the point above, Juventus have also spent big but not on superstars. With an ageing defence and the retirement of Barzagli they have made some signings for the future by splashing around £136m on four defenders aged between 19-21 taking their current net spend to about -£40m. Despite this, however, they’ve sold Moise Kean (19) and all their strikers bar Dybala are over 30. Do they over-value a good defence? I’m sure they don’t but a peculiar piece of business nonetheless as they continue to raid free-agent signings…
Sophie: It does feel like we aren’t seeing moves for the very top players though as we did in the 2017/18 season, which could be a sign the market has peaked. The “super clubs” might be able to afford €100-120m for Hazard or Griezmann, but feel priced out of moving for younger top talents like Mbappé who would presumably cost a lot more. If there’s less liquidity in the market, that presents a risk that clubs end up stuck with players they signed for big fees and on high wages who they then can’t move on (e.g. Neymar, Coutinho). And equally causes problems for players who are unable to leave a club they are unhappy at.
Alex: I definitely think that certain clubs are going to need to rethink their wage structure, particularly the amount they are willing to place on the top talent, for exactly that reason. When the market is so competitive you need to be able to create funds by moving on players who are no longer needed. The two big examples seen over the last couple of seasons are Sanchez and Bale; both of whom seem to be willing to accept less game time in exchange for an enormous paycheck. All the while every other player in the squad compares their effort and output with that of the highest earners and begin demanding raises.
Omar: I think this might come into conflict with a trend I see potentially happening more and more: players running down their deals. Clubs are increasingly reliant on transfer income, so players are increasingly holding the cards in contract negotiations. “You want to realise my transfer value? You should offer me a big contract”. One way clubs can counter this – and I understand that this is now happening – is clubs offering players a cut of their own transfer fees. This is a massively interesting development, and I think it might sharpen the mind of players who begin to think about maximising career transfer value, rather than earnings (they aren’t always linked!).
Sophie: That would be a fascinating shift to watch play out. And it could put even more upward pressure on transfer prices: in the same way that a club often demands a higher price when they have to honour a sell on clause (e.g. if Zaha leaves Crystal Palace), clubs that want to realise £Xm of value on a player would have to sell them at a price above that to allow for the player’s cut.
Omar: Good point; we know that transfer prices have risen proportionally with income since the introduction of FFP measures, but this could lift fees to another level. We also know that player prices are rising quicker for younger players – do you think we’ll start to see clubs take the ‘other side’ of the market and start picking up undervalued older players?
Alex: I think wherever there are undervalued assets in the market there will always be vigilant clubs that are able to take advantage. If the value starts to shift towards older players then it will be interesting to see if squad composition begins to change. Will clubs be more likely to follow Ajax’s example from last season and try to blend young prospects with more experienced undervalued players; or could we see more clubs follow a QPR 12/13 route and almost exclusively rely on older talent?
Aurel: To touch on Omar’s point regarding rising prices for younger players – I agree and it’s potentially put players like Christian Eriksen in an awkward position and out of the market. At 27 and in his prime, Eriksen has the ability to improve most teams across Europe, however with Felix going for £113m at 19 after just one full season, how much is Eriksen worth in this market and which clubs could afford him? With the fear of missing out on young talent, clubs are increasingly putting upward pressure on one side of the market that could potentially have significant effects on older players.
Luis: I think there should still be a market for players like Eriksen. The increase in transfer fees seems to be mostly about clubs paying for potential – João Félix is not better than Hazard right now, but Atlético did pay more for him because he is young. I think Eriksen would be in a similar position to Hazard – he would move for a fee of around £100m which the top clubs around Europe can afford.
Sophie: Rising transfer prices will ultimately have to be driven by revenue growth in an FFP world, as you say Omar. That links to my thing to watch for this season which is what happens in the broadcast space. The 20 PL games Amazon Prime bought will start airing this December, and they’ve just announced a partnership with BT Sport to make those games available in pubs. The value of domestic TV rights seemed to be stalling at the last sale, so for me the most crucial thing this season for clubs’ revenue prospects in the long-term will be whether the experiment with streaming services is a success. If it is, that could really change the competitive picture at the next TV rights auction.
Omar: Streaming could open up more opportunities for smaller leagues too, given the amount of clubs we speak to that say they need some disruption in their domestic markets.
We’ve discussed a lot on transfer fees and valuations, so let’s wrap up with some predictions on that theme, in the context of 2019-20. Firstly – will teams with reduced transfer activity regress, sustain or improve on last season? And secondly, who is the De Ligt or Joao Felix of this season – in other words the breakthrough player who will be discussed in €100m terms – going to be over or under the age of 23? Will it be a signing for potential, or for peak age?
Alex: I wish it was possible to have more access to information on the atmosphere and relationships within a squad of players. Being able to answer/quantify a question like ‘is it possible for Aston Villa to form a cohesive squad with 12 new signings with a variety of ages, nationalities (languages), cultures and egos?’ could provide a step to more accurately identifying a link between transfer activity and squad performance. I think clubs with minimal transfer activity should be able to sustain their performance metrics however their seasons achievements will depend on the success or failure of clubs around them.
With regards to transfers, the trend that we have seen over the last couple of seasons is that young talents have had an unexpectedly good year subsequently attracting a huge amount of attention and an enormous transfer fee. The problem with only one season’s worth of top level performances is that you have to pay a premium for a potential that may never be fulfilled. However, the excitement around young players who manage to break through at a senior level is immense and for a good reason, could this be the new Messi or Ronaldo? Even if they only reach three-quarters or two-thirds of that level, £100m now for several years of service with the possibility of retaining a large proportion of that fee (or even turning a profit) in the future seems worth it. In my opinion the opportunity of the reward of these deals will always make them the most lucrative.
Aurel: Whether teams regress or progress based on a lower level of transfer dealings heavily depends on the profile of their team. A team such as Chelsea that were affected by a transfer ban could see their performance dip in the short term but with a young team and new coach it could pay off in the long-term with some patience. Liverpool and City have very complete squads and have not been forced into the market, making only slight adjustments. Tottenham are a good example of being completely inactive in the transfer market and still having a successful campaign last season because of the age of their squad (An example of long term thinking) – this model could be replicated by more teams.
Finally, as more clubs try to recreate their identity (i.e, Manchester United, Chelsea, Bayern Munich) they will look to do so with younger players. Of the top 20 (Average age 23) transfers this summer, only 5 were over 25 – this supports the general shift in the behaviour of both fans and clubs. A club can still maximize a portion of a players peak years before moving them on for a profit – and for these reasons, I think it will be a signing for potential.
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