Neymar PSG: World’s Best Footballers Usually Cheaper Than They Appear To Be

Neymar PSG: World’s Best Footballers Usually Cheaper Than They Appear To Be

As a part of clubs’ revenues, the highest transfer fees have been considerably constant for years
Concerning football clubs, August is usually the costliest month, when they bring about vast bids for each other’s players. This very year has been particularly sumptuous. On August 3rd Paris Saint-Germain (PSG), one French team, officially signed Neymar da Silva Santos Júnior, a Brazilian striker, from Barcelona for €222m ($264m), more than twice the previous record price for a footballer.

With three (3) weeks of the transfer “window” left, the teams in Europe’s “big five” leagues—the top divisions in France, England, Spain, Italy and Germany – have paid €3.2bn, just short of the record of €3.4bn set last year (2016). The €179m splurged by Manchester City, popular English club, on defenders exceeded 47 countries’ defence budgets. Arsène Wenger, the veteran manager of Arsenal, a London team, and a graduate of economics, describes the current transfer market as “beyond calculation and beyond rationality”.

Neymar, as he is well-known, will cost PSG’s owners, a arm of Qatar’s sovereign-wealth fund, about €500m over five (5) years. In this betting markets, his arrival has raised PSG’s implied probability of winning the Champions League, Europe’s most coveted club competition—but only about 5.5% to 9%. Also the prize money and ticket sales alone manage to generate enough proceeds to recoup such investment.

It does not make Neymar a poor investment. The goals he scores may count less than the gloss he lends to the club’s brand and the sponsors he will attract. He earns more from endorsements than other footballers apart from Cristiano Ronaldo and Lionel Messi. Up to 59% of PSG’s revenue of €520m last year (2016) was commercial (ie, other than ticket sales and broadcasting fees), beyond any other club in the big five (5) leagues. Neymar has more followers on his Instagram profile, a social network, than what Nike has, his main sponsor and the source of PSG’s kit, for which entitlement it pays €24m a year. Neymar’s popularity will assist PSG when this deal is renegotiated. Nike has already concurred to pay Barcelona €155m a season from next year (2018).

The owners of PSG are confident of breaking even, though they could bear a loss. Qatar has been disbursing €420m a week getting ready for the 2022 World Cup, and the signing of Neymar is a news that the otherwise embattled nation remains strong and wealthy. The risk is to PSG, since under “financial fair play” rules, teams are penalized if they fail to curb their losses. In 2014 the club was disciplined for violating these rules. Another failure to balance the books could mean a bar from the Champions League.

This kind of spending caps irk billionaire owners, but they have assisted in preventing the inflation of a transfer-fee bubble. The rapid growth is a result of European football’s increasing fan base. In the English Premier League, football’s richest, average net expending on players per club has remained roughly constant, lingering at around 15% of revenue since around 1990s, according to the 21st Club outfit, a football consultancy.

As long as clubs’ revenues continue growing, the transfer boom is probably to persist. Broadcasting revenue, the game’s earliest big injection of cash in the 1990s, has turned to, in the internet age, the weakest link. British television viewers for live games have dipped as some fans opt for illegal streaming websites or free highlights. Zach Fuller, a professional media analyst, reckons that signing a sponsorship magnet like Neymar is a protection against volatility in that market.

Viewers are more robust elsewhere: about 100m Chinese spectators tune into the biggest games. Manchester United (Man U) is the most popular team on Chinese social media platform, despite qualifying for the Champions League just twice in the past four (4) seasons. Man U has overtaken Real Madrid, who have won the medal three (3) times in the same period, as the world’s richest club. If Neymar unseals new markets as well as defences, then PSG may have sponsored a winner.