Shock: Transfers Now Cost More; Plus Top 100 Signings After Inflation

Shock: Transfers Now Cost More; Plus Top 100 Signings After Inflation
July 17, 2017 Paul Tomkins

Last summer I wrote a piece about the psychological effect called anchoring – the discovery of which dates back to the 1970s experiments by Daniel Kahneman. It’s about the phenomenon where people think of a random number and then find it hard to deviate too far from that point – whether or not that number has any relation to situations that follow.

So, think of – or be primed by – a random low number, and then when you’re asked to guess the value of something totally unrelated, your estimate will be on the low side. Those primed with a random high number then guess higher in relation to the value of an unrelated object.

In the case of football transfers, the low number that primes us is past transfers, and the sense of how the transfer market was in days gone by, not how it is this summer. Hence, constant cries of “crazy prices”, as if it was all somehow utterly unforeseeable.

While the British transfer record changes occasionally – sometimes with a big bump, sometimes with a little one – the average cost of a Premier League player continues to rise fairly dramatically. On the whole, players cost more every season. Why are people so surprised, given that they already know the TV money has increased? Where do people think that money goes? It goes into wage hikes and transfer fee hikes (and agent-fee hikes).

People forget what old fees “felt” like at the time. No one gets a gut-based reaction to hearing the price of a footballer listed as “one million pounds” (said in mock-villain voice), whereas in 1979 I expect it had a real, mind-blowing frisson. (I was eight at the time and don’t remember much about it, although I was fairly obsessed with the Six Million Dollar Man, which I imagine hasn’t aged well, just like Trevor Francis, the Million Pound Man.)

Right now, £1m buys about one-tenth of an average player; or about one-thirtieth of a Marouane Fellaini (presumably the elbow, or maybe the hair). Hell, it doesn’t even get you that much, as after three rounds of inflation, Fellaini now costs £53.7m. (Remember when it felt like a crazy fee at the time?) Or basically, the same price as Man City’s new full-back. (Not that we can be too sniffy, here; just look at the cost of Andy Carroll and Stewart Downing after inflation.)

The more money comes into the game, the “crazier” the fees get, except the fees are no more crazy than when less money was coming into the game. Yes, the figures become ever-more stretched from the reality of the average man or woman, and ever more obscene in that sense – but it all connects back to the television deals. The correlation is clear.

All of which is a precursor to the figures calculated by the Transfer Price Index (which I co-created with Graeme Riley in 2010) when converting Premier League-era transfers to what is now 2017 money. When adjusted for our model of football inflation (which runs about ten-times higher than “normal” inflation*), the record fee paid is £137.8m, for Andriy Shevchenko, with Wayne Rooney’s and Rio Ferdinand’s moves to Man United at £136m apiece.

(* Since 1992, inflation in the UK has almost doubled. The average price of a footballer, however, is almost twenty times what it was back then. So, for every £1m a player cost in 1992, he’d now cost just over £18m.)

I suspect I’ll lose people on this concept now that Shevchenko’s price has risen well above the £100m mark with inflation. I get it – £137.8m seems a ludicrous, nonsensical amount for a player; but ten years ago, £90m seemed a ludicrous, nonsensical amount, at a time when the record fee paid by a Premier League club, in actual terms, was still c.£30m. (Oh, the quaintness of thinking £30m is a lot of money.) Since then the record fee has trebled (not the average fee, mind. That has doubled since 2014).

Indeed, just over three years ago £90m seemed a ludicrous, nonsensical amount – why would anyone pay £90m for a player when the record was £50m? (Of course, Cristiano Ronaldo left England in 2009 for £80m.)

So, will a Premier League player cost £137m or more soon? Well, it seems inevitable – unless the bottom suddenly falls out of football financing. Some kind of collapse in the value of the TV deals could yet happen, given the loss in viewing figures for televised games (in part due to internet streaming, and perhaps over-saturation). And remember, the average cost of a Premier League footballer dropped in the aftermath of the ITV Digital collapse just after the new millennium; and dipped again just before the introduction of FFP and the global financial collapse.

But right now, the money being invested into the game is only rising, and on top of domestic deals, the Premier League also makes money from TV deals across the world.

It’s not easy to predict when an actual fee will hit £137m, and who that money will be spent on, but going back to previous years’ inflation results, a previous transfer record (after inflation is applied) almost works a precursor to the next actual record fee.

(Note: all inflation is calculated on Premier League spending only, so does not include anyone being exported. Also, we do our best to verify fees, but some are clouded in extra layers of bullshit.)

Looking back through our old spreadsheets, starting in 2010, Rio Ferdinand’s £30m fee (from 2002) had by that point been inflated to £53.8m (as published in our book Pay As You Play), while the transfer record at the time was the £32.5m for Robinho to Man City. Six months later, however – and just three months after our book was released – Fernando Torres moved from Liverpool to Chelsea for £50m.

By 2013, Shevchenko was just ahead of Ferdinand* as the record fee, and has remained ahead ever since. The £68.2m that Shevchenko cost in “2013 money” may have looked “excessive” to people just four years ago, but within a year the £60m barrier would be all but touched with Angel Di Maria’s move to Man United. (*The slight change in their positioning occurs due to the different ups-and-downs of inflation between 2002 and 2013 for Ferdinand and 2006 and 2013 for Shevchenko, in relation to the different circumstances the seasons they were bought. But mostly they work out roughly the same.)

In 2015 money, the Shevchenko fee had risen to £82.9m. Yet the actual British transfer record was still £59.5m. As such, £82.9m – the record after inflation – seemed a bit steep. It seemed unreal; too far from reality.

Yet within a year, Paul Pogba moved to Man United for £89m. (Although with add-ons, the fee is actually £93m.)

His fee last summer put him into the top five transfers of the Premier League era in TPI terms, but of course, that fee was already in 2016/17 money (as that’s the season he arrived), yet last summer we were still using 2016 money (calculated across 2015/16).

So when we update the figures everyone else, to add the inflation from last season, Pogba’s fee remains unchanged. As such, the move now ranks 15th, and his fee will only be adjusted for inflation in 2018, based on the changes to the index in 2017/18. In other words, when the dust settles, he’ll still be outside the top 10, at best.

So, for example, if the average price of a Premier League footballer rises by 20% by the time we next calculate everything (when the January 2018 window closes), his fee in 2018 money would be up towards £110m. But anyone who is currently already more expensive than him in inflated terms will only get more expensive still.

By the same process, come next summer, Romelu Lukaku will still be £90m (£75m+£15m add-ons). Therefore, it’s likely that Pogba will always be significantly more expensive than Lukaku, even though both are c.£90m in actual terms, because Pogba cost £93m in a market (2016) where £90m was more money than it is now (2017).

Having said that, this is assuming that the average fees continue to rise this summer – it feels like they are indeed continuing to increase, but a lot of the bigger deals haven’t been finalised yet, and may not be concluded due to the numbers being quoted. (Two of which involve Liverpool’s targets.) We’ll hear a lot more about “£70m players” than we will see clubs paying £70m for players – after all, nowhere near all the touted deals take place.

If the average cost of a Premier League player were actually to drop this summer, Lukaku would then become viewed as more expensive than Pogba within TPI, because he will have been further ahead of the rest of the market of the season in which he was bought. (Lukaku would therefore be moving within a more deflated market – but as I said, that seems unlikely.)

Even so, there is no sign of anyone costing over £100m this season, in part because the best players are already tied up at elite clubs who have no one above them in the food chain, and even China’s driving up of global prices will slow now that they have to pay a tax on foreign signings. (From what I understand, Chinese clubs now have to essentially pay double for imports – the actual fee to the overseas club that owns the player, and then the same amount again, in domestic tax, to support the Chinese game. So to pay £50m for an average Premier League player would now cost them £100m.)

And please note – I’m not saying that the inflated record fee is an accurate and 100% reliable predictor of the rise of the actual record transfer just – just that the biggest fees seem unrealistic when we convert them to current-day prices, but soon make sense within a year or two. If you’re recoiling at the idea of a £137m player, revisit this article in 2019.

Anyway, below is the current top 100 most expensive deals, in 2017 money, since the formation of the Premier League. I’ve provisionally added this summer’s three entrants so far: Romelu Lukaku, Kyle Walker and Alexandre Lacazette. (As of July 17th, 2017.)

After the Top 100 table follows further thoughts, for subscribers only, on why a £100m transfer may not arrive this year.

Why Hasn’t the £100m Barrier Been Broken Yet?