For the introduction to TPI©, please read this.
“The Benefit of New Players”
While I will cover the more important Net spend in a forthcoming article (to which TPI© will also be applied), looking at a club’s Gross outlay focuses on the value of new blood, irrespective of whether old blood was transfused in the process.
The Premier League kicked off in 1992 with 22 teams, but soon after was reduced to 20. Therefore, between 1992-93 and 1994-95, the average spend by all teams was initially 4.5%, before rising to 5% (one-twentieth).
Some clubs have registered no overall transfer outlay during a season, while in one year, a staggering 39% of the entire top division’s Gross expenditure was down to just one club. In other words, well over a third of every last pound spent on players was in strengthening just one team: Chelsea.
Of course, how much any given club chooses to spend during a season depends on a number of factors.
Has it raised money from sales, which it simply pumps back into the side? (In other words, rather than strengthen, it could simply be spending to replace like-for-like.) Is it desperate, such as when in a relegation battle?
And, of course, there’s the fact that successful clubs don’t have to spend big every year, especially if they’ve splashed out for a few years in a row to assemble a strong squad; while, at the same time acknowledging the football maxim that investing is crucial even when in a position of strength.
Let’s look briefly at Liverpool’s 2009/10 spend: 8.2% of the entire Premier League outlay. And yet Glen Johnson, Alberto Aquilani and Sotiris Kyrgiakos were ‘only’ replacements for Alvaro Arbeloa, Xabi Alonso and Sami Hyypia.
(In the winter, Maxi came in on a free transfer, while Dossena and Voronin left for a combined fee of £6.3m, while the Reds also netted £1.5million from FC Twente for the sale of reserve, reserve, reserve (reserve) goalkeeper Nikolay Mihaylov.)
Johnson was a clear upgrade on Arbeloa, but Aquilani was going to have to really fulfil his potential to improve upon Alonso. Kyrgiakos, meanwhile, was never going to get close to Hyypia at his best, although (as has been seen with recent performances) the Greek could at least, if all goes well, fill the role of 4th-choice which, by the age of 36, the Finn had inevitably become. (Yes, he’s doing brilliantly in Germany, but it’s a far less physically demanding league.)
So, despite spending 8.2% of the division’s total outlay, the Reds were merely maintaining the status quo. (The value of the squad actually decreased slightly.)
What’s most interesting is what happens to most clubs in the year or two after a particularly big Gross spend (+10% of the total Premier League outlay).
In total, this figure has been exceeded on 31 occasions over the past 18 years, with 12 different clubs managing to do so at least once, and with two (Manchester United and Chelsea) breaching it on no fewer than five occasions.
The first team to break the barrier twice in a row during the Premier League era was Blackburn, with 16.9% in 1992/93 and 10.9% in 1993/94. In 1994/95 they only spent 5.9%, but of course already had a strong squad; and much of the outlay was the addition of Chris Sutton, a new British transfer record, to add to a side that had just finished as runners-up. With Sutton and Shearer sharing the goals, they won the league that year.
Everton have breached the figure just once – 10.1% in 1994/95; incidentally, the last season in which they won a trophy (FA Cup). Fulham did so in their first season back in the top flight (2001/02, 12.7%), whereby they maintained their status with a respectable 13th place finish, setting them up for a sustained run in the elite division. Since then, they’ve been relative paupers.
Middlesbrough’s 11.1% outlay in 2002/03 was highly uncharacteristic; even in the heady days of the mid-‘90s (Juninho, Ravanelli, Barmby, Emerson, et al) they didn’t go above 7.7%. So what did the spending in the year to July 2003 get them? The League Cup, the club’s first and only major trophy, in the spring of 2004, and a couple of years later, a UEFA Cup Final. But from 2003 onwards, spending only rose above the division’s average on one occasion (and that was only fractionally so), and in the year when they were relegated their spend had fallen to just 1.4% of the Premier League total.
Leeds United spent 9.4% and 8.5% either side of 2000/01, when they registered their personal peak of 11.1%. This was a time of high-flying for the Elland Road club, with a Champions League semi-final; but this was high-flying Icarus-style. Within a couple of years they were totally broke, spending just 1.1% in 2002/03, and a year later were relegated without even registering a purchase.
Talking of relegation, Newcastle, who were promoted to the top flight just after the inception of the Premier League and went down last season, also present a fascinating example, with some striking spending in between.
Having been a whisker below 10% in 1993/94, the money really came out between 1995 and and 2000. Two of those seasons saw figures just below 10%, but three were over: 1995/96 (15.4%), 1997/98 (11.5%) and 1998/99 (11.1%).
So for six out of seven years they were spending at least twice the Premier League average, and on one occasion, three times the average. Newcastle’s best year – 1995/96 – also happened to be when their percentage was at its highest: more than twice that of the next-biggest spender.
It didn’t end there; in 2002/03 the Geordies were once again close to the 10% mark (9.3%), and in 2005/06, registered 11.9%, including the money-vacuum that was Michael Owen. Within three seasons of this they were relegated, after a campaign in which they spent 5.7% – way over the average of a team that’s doomed for demotion. But it was too late to stop the ship from sinking.
All those high spends, and all those managers – which usually means a high turnover of new players and a fire-sale of old ones. But it was often done with a sense of chaos. They had direction under Keegan, albeit on a combustible ride, and direction under Bobby Robson, but even the steady influx of exciting signings failed to spark the club once they panicked, and began sacking at will. Robson was particularly harshly treated, and never adequately replaced.
The one thing Newcastle seem to prove is that money allied to a lack of vision and stability is worthless. But the figures also show that once investment in a team drops, and there is no long-term plan, disaster looms. And even though they spent a relatively high amount the season in which they were relegated (the 5th-highest in the division), in the two seasons prior to this they failed to exceed the Premier League average.
Before getting onto the ‘Big Four’ and the nouveau riche, there’s one more club working its way into the +10% Elite – and that’s Spurs, whose percentage was steady and fairly healthy throughout the whole Premier League era, until 2006/07, when it rose to 10.1% (and led fairly quickly to their one trophy of the decade – The League Cup – in 2008).
Another big percentage followed – 9.5% – before, in 2008/09, they posted a 14.8% figure. Spurs are now widely regarded as having a strong side and a very sizeable squad.
Of the ‘big players’, Arsenal, as you would expect, have been the most frugal. Only twice have they broken the 10% barrier: 2000/01 (10.4%) and 2002/03 (12.3%). The eagle-eyed among you will recognise that the Gunners won the league in 2002 and 2004, the year after each bout of major investment. Coincidence?
(Prior to Wenger arriving, Arsenal’s biggest spending was just before the old First Division was rebranded; players like Seaman, Keown, Dixon, Winterburn and Wright, most of whom Wenger utilised heavily in his first two title successes. Although TPI wasn’t used in this particular study, to give an idea, Ian Wright, for example, has a CTPP of £15.3m, while Seaman’s works out at £7.9m. Surprisingly, Martin Keown’s fee translates to £12.2m in today’s money.)
Manchester City are the latest gatecrashers to the +10% Club, although they do have some ‘previous’.
In 2002/03 they scraped in, with an 10.4% figure. The manager? Our friend to big spending, Kevin Keegan, whose exciting Newcastle side was certainly bankrolled. City were back in the top division, and the outlay secured a 9th-place finish. Unfortunately for Keegan, the pot ran dry and by the time he left, in 2005, the club’s seasonal outlay was 0.0%.
But things are different now. City are back splashing the cash, and then some. In 2008/09 they spent a whopping 17.7%, a figure higher than any of the single-season percentages registered by Arsenal, Liverpool or Manchester United during the entire Premier League era.
Not content at stopping there, City then spent 25% during the current season (the third highest in Premier League history). In other words, a quarter of all money spent between July and the close of the January 2010 transfer window was by City. As yet, it’s not bought them any silverware, but it has made them serious challengers for a Champions League spot.
Alex Ferguson’s spending splits into three fairly distinct periods: his first few years (prior to this study) involved a lot of big spending, so that players like Pallister, Ince, Bruce, Schmeichel, Irwin, Kanchelskis and Hughes were in place by the time the Premier League was formed; the majority of these kept the Old Trafford club ticking over for the best part of the ‘90s, along with the graduation of an unusually large number of gifted youngsters.
Ferguson’s first big ‘new era’ splurge was in 1998/99: the greatest season in United’s history, and arguably the greatest of any English team. (Only Liverpool’s 1984 treble, with one cup final against fierce local rivals and the other in Roma’s home stadium, can compare.)
The 11.2% of 1999 was not matched until 2001/02, when the spending rose to a fairly hefty 16.2%; United’s biggest percentage in the study. A year later, United were champions again.
That 16.2% started off the 2nd-biggest consecutive run of spending seen in Premier League history. It was followed by 12.4%, 13.3% and 13% in the next three seasons; four +10% seasons in a row.
What’s interesting is that it didn’t lead to any further titles until 2007. Why? – because someone else (Chelsea) was spending even more, having already embarked on their own run of four consecutive +10% seasons. In fact, percentage wise, they were spending loads more.
It wasn’t until Chelsea’s spending slowed dramatically that United’s investment bore fruit. Much of Ferguson’s spending during this time was on young players yet to peak, particularly Rooney and Ronaldo. Once they came of age, and Chelsea no longer had the investment or stable management to compete at quite the same level, it was United’s time once more. Since 2005/06, the highest figure posted by the now Glazer-owned club has been 8.6%, with the lowest this season’s 4.4%.
For the time being, United are relatively safe with lower spending, having already built a large, expensive squad – the value of which can now be seen with someone like Nani (with a CTTP of £20.3m), after two and a half seasons, finally coming in from the cold. But the challenge will be a few years down the line, when the older generation of players need replacing.
But of course, Chelsea are the Daddies of this debate. Starting with a phenomenal 42% during Roman Abramovich’s first year, the Blues followed up with a further 31.8% of all Premier League spending; the two biggest outlays in the study (and almost certainly of all-time), made between 2003 and 2005.
The result? Back-to-back league titles, and several cup finals were reached. Seasons of 17.9% (2005/06) and 18.3% (2006/07) kept things ticking over to levels that in themselves were above anything the other members of the big four had posted across the 18 years under scrutiny – although by now Jose Mourinho had departed and the managerial merry-go-round was under way.
In the last three seasons, Chelsea’s Gross spending has peaked at just 5.5%, a fraction above the average; and, since 2007, below that of Sunderland.
Thankfully for the Londoners, such was the investment between 2003 and 2007 that the quality could endure, although what happens once an ageing squad (already beyond the point mentioned in reference to United) passes over the hill will be interesting to follow. Will Abramovich dig deep again?
Much of Chelsea’s success – indeed, why they paid a premium on many of the transfers – was because they were buying players already in their peak, who wouldn’t need years of nursing along. The problem now is that these once-26/27-year-olds are now in their 30s. They have little or no resale value, and cannot last forever.
Which brings me onto Liverpool. The Reds have broken the 10% barrier on four occasions, although unlike some clubs, these were all spaced apart.
It began with 11.3% in 1993/94, and rose to its highest peak in 1999/00, at 15.3%, under Gérard Houllier. In 2004/05 the club again broke the barrier, at 12.6%, although this included Djibri Cissé, bought by Houllier but paid for out of Benítez’s budget.
The 4th and final time the Reds spent +10% was in 2007/08, the first year under new ownership; a total of 11.2% was shelled out.
So how did this increased investment help Liverpool? Well, in the season after Houllier’s big cash injection, the Reds won a famous treble and finally qualified for the Champions League, while a further year later, the club registered its best Premier League campaign: 2nd place, and 80 points.
The investment in 2004/05 (Alonso and Garcia, and in fairness even Cissé contributed) led to winning the Champions League, and a year later, the FA Cup and an 82-point finish. But the gross spend over the next two years was nothing more than a little above average; hence why new investment was publicly sought, and when momentum slipped a little.
And maybe that’s the story of Liverpool’s Premier League years: investment one season, little the next; there’s been none of the consecutive seasons of +10% spending that preceded title success by Blackburn, Man United and Chelsea, and which Manchester City are now undertaking.
The arrival of Hicks and Gillett prompted their one big splurge: 11.2% in 2007/08. The season in which Torres, Mascherano, Benayoun, Lucas and Babel arrived actually saw the Reds top the spending charts, as the only +10% club between July 2007 and June 2008. Within a year, the Reds had finished as runners-up, with the best points total for the club during this era: 86.
But investment during the season itself (2008/09) was actually below average (and as mentioned earlier, the 8.2% of this current season has been purely to ‘stand still’).
So, as we can all see, there’s a pretty clear correlation between achievement and spending. It doesn’t guarantee success, but it often leads to noticeable improvement. New players seem to add a boost that cannot be underestimated.
The one time it didn’t follow for Liverpool was in the first year of the Premier League, when the Reds finished 6th for the 2nd season running, having won the title as recently as 1990. The manager, Graeme Souness, had spent 13.5% of the division’s money in the final year of the old First Division (1991/92), but the club was heading down the league rather than up.
But the biggest anomaly during the Premier League era lies with Blackburn, whose spending in the first half of the ‘90s led to the league title. So far so good.
However, in 1998/99 their outlay was 14.9% of the entire division’s; yet they got through three managers and suffered relegation. They are the only club to spend +10% in a season in which they suffered demotion; indeed, it was almost five times the average of teams that are sent down. (But continuing the League Cup connection, in 2002 Rovers, now back in the Premier League, won this competition.)
The landscape clearly changed in 2003 (the final year of Houllier’s reign at Liverpool). Even Blackburn at their peak had only spent 16.5% of the league’s outlay. But at the point when Houllier was giving way to Benítez, it went crazy in two ways.
First, there was the rise from a high of 16.5% to a mind-blowing 42% as a record percentage of the league’s outlay by one club; and how, following Chelsea’s first boom budget, the old Blackburn watermark was exceeded on a further five occasions once Benítez was in England. (Chelsea three times, City twice.)
Then there was the consecutive spending seasons: for four seasons running (2001-2005), Manchester United were either 1st or 2nd in terms of % outlay; and between 2003 and 2007, Chelsea topped the listings each and every time.
While Liverpool’s Gross spending since 2004 has been quite a bit above average on the whole, it has not come close the massive percentages of Chelsea and City, nor has the club been able to back the manager with a long consecutive run of high funding.
And when it comes to Net spend, as we will see in an upcoming article, Benítez has been even more hamstrung. But more on that next time.
The average spend of relegated teams in the year in which they were demoted is 3.3%, which indicates that they under-spent by 1.7% compared with the average. Furthermore, the average in the season before relegation of teams in the Premier League (i.e. not those promoted and then immediately relegated) is 3.2%. Hence if you spend less than 3% in consecutive seasons, you are probably going to be in trouble.
Promoted teams who successfully maintain their status spend an average of 4.6% in their first season. This shows that these clubs can’t easily stay up on the cheap; they need to invest approximately the average of the division and certainly well beyond the 3.3% outlined above.
The average spend by Champions is 8.0% in the season in which they win the league. However, perhaps more interestingly, they also spend 11.1% (i.e. more than double the Premier League average) in the season before they win the league; so that over the course of the two seasons they are spending double the average.
What Does It All Mean?
The notion that individual signings take time to settle (or may never settle) is valid. And this may well be at the heart of why significant investment works so well, and leads, within 24 months, to trophies and higher league positions.
The injection of new blood seems fairly essential to boost a team; but additional riches give more licence for a hit-and-miss strategy. It’s a bit like buying fruit without being able to touch it first; the greater the quantity, the better your odds of a good number of suitable, ripe items.
But not only this, even though you’ve paid for them, you can discard those rotten to the core without going hungry.
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