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Inflated Transfer Fees Make Soccer’s Talent Supply Chain Paramount

Soccer players are now mega-valuable assets in and of themselves

19Sep

In hindsight, it seems unbelievable that Paul Pogba left Manchester United in 2012 on a free transfer. Having failed to nail down a starting position at Old Trafford, Pogba left for Juventus in a cloud of acrimony and not a penny changed hands for the 19-year-old’s signature. Four years and four Italian league titles later, Pogba re-signed for United for the then-world record fee of €105 million (£89.3 million). That figure has since been dwarfed by the fee paid by Paris Saint-Germain to Barcelona for Neymar, but the point still stands that Pogba’s rise in value is nothing short of incredible.

The return on investment for soccer talent is often huge in today’s hyper-inflated transfer market. To quote Roy Keane, ‘average’ players are now swapping clubs for ‘mind boggling’ fees, all of which are returning a tidy profit to the clubs they signed for with little fanfare just a handful of years earlier. It’s for this reason that United were willing to spend £36 million on a 19-year-old Anthony Martial, and Barcelona parted ways with €105 million to bring in 20-year-old Ousmane Dembele. Aside from their obvious footballing talent, these young players are assets, assets that are only likely to increase in value as they gain experience on the biggest stage.

The treatment of players as assets beyond what they offer on the pitch has led to a boom in talent hoarding. Within a necessarily strict legal framework, Europe’s biggest clubs are buying potential talent young, putting them into expensively assembled and well-run youth academies in the hope that they develop into marketable assets if not influential first-team players.

The hoarding of young talent is perhaps best exemplified by Premier League champions Chelsea. The London club currently has a roster of 34 players plying their trade at different clubs, while remaining under their ownership. Chelsea’s use of the loan system draws as much praise from a business perspective as it does criticism from an ethical one. Most of the players on Chelsea’s loan list have no realistic future with the club in terms of first-team plans - their function is essentially to improve, increase in value, and be sold on to bolster Chelsea’s budget for more high-profile transfers.

This is one model. It works financially, but there are complaints around the notion of wasted talent, with otherwise promising young players never given a chance to develop in the cauldron of first-team football and instead condemned to being ‘nearly great.’ The loan system, without reform, will only be more and more of a factor in club transfer plans going forward, with the likes of Chelsea and Manchester City setting the tone.

And then you have the likes of Red Bull, who are building a supply chain of promising talent by, in part, building a network of clubs around the world. The Austrian energy drink company has shown a keen interest in sport more or less since its drinks became popular, and has now well and truly established itself as a force in soccer. At present, the company owns New York Red Bulls (no points for guessing that one), Red Bull Salzburg, Liefering, RB Leipzig, and Red Bull Brasil. In fact, multi-club ownership (MCO) has grown so much that even the likes of Ajax, Atletico Madrid, Fiorentina, Monaco, Manchester City, and Leicester City are part of MCO projects.

The theory is that, by owning a club in Brazil, for example, Red Bull are cutting out the middle man with regard to buying players from that country, while limiting the risk for that player once signed. Brazil is a wildly popular market for European clubs when sourcing players, and having a foothold in the market (with the superior knowledge of that market that comes with this) could be invaluable in securing the best young talent from the region. And, for the player being brought into the MCO set up, signing doesn’t mean an immediate and risky move to Europe at a premature age.

‘My personal view is that multi-club ownership is a very interesting way of leveraging intellectual property,’ says Ben Marlow, the head of football at 21st Club, a consultancy that advises potential investors in the game. ‘Yes, it gives them a geographical advantage in recruitment by having a presence in a market. But it also helps clubs breed economies of scale, it allows clubs to share best practice.’ It will be interesting to see how the Red Bull teams perform in their various domestic leagues, with Leipzig in particular making headlines for over performance in last season’s Bundesliga. Whether the franchise can begin nurturing talent it wouldn’t have otherwise had access to will hold the key to the commercial success Red Bull so clearly wants out of the sport.

Soccer players are, more than ever, valuable assets. Talent acquisition has always been important, but it is now as much part of the commercial side of the game as it is the action on the pitch. Loaning clubs like Chelsea tend to have a network of feeder clubs that they loan talent to for development. Red Bull or the City Football Group take this idea one step further by building a network of clubs under one ownership, simplifying transfers and other dealings between the teams. We can only guess what the logical conclusion of this trend is but, for now, expect to see more and more MCO operations pop up once the flowers of the operations come into bloom.

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