Wayne Rooney Transfer
What It Says About UK Soccer, the Economy and the Social Mood
Big news of the week in the world of UK soccer was the long-expected transfer of teenage sensation Wayne Rooney from Everton to Manchester United. For those who don't follow soccer, the 18 year old Rooney is currently one of the hottest properties in soccer after some attention grabbing performances at the Euro 2004 tournament. What's most interesting to me is the economics of the deal and what it says about soccer finances.
The transfer fee is apparently GBP 20 million, with another GBP 7 million payable if certain conditions are met. Of the GBP 20 million, however, only half is payable now, with the balance payable in a years time. The following points stand out for me.
My read of all this is that the bubble has burst for soccer and things are tough financially (and going to get tougher). The fee paid for Rooney is much lower than originally suggested (originally, Everton were talking of GBP 40-50 million!) and is just the latest in a number of transfers going through at much lower levels than expected (for example, the transfer of Michael Owen to Real Madrid). This trend has been evident for a while but was disguised by the big spending of Chelsea after the arrival last season of new owner Roman Abravonich (the fabulously wealthy Russian businessman). Now, even Chelsea appear to be adopting a more cautious approach.
Soccer has long been a terrible business from a pure investment point of view. The economics of the game changed dramatically in the 90's with the injection of huge amounts of money from broadcasting rights and the "Bosman Ruling" (which changed the balance of power in the game towards the players and away from the clubs). During the boom times of the 90s, fans lived with higher ticket prices, paying to watch games on the new pay-TV channels and getting ripped off by the clubs with their "commercial activities" (club shirts etc). So, for a long time, things have, on the surface, been rosy.
Socionomics students will be familiar with the connection between the bull market and various sports in the USA. Soccer itself ("The Beautiful Game") would appear to be a bull market sport and the latest cracks in it's finances would appear to be another indication of the gathering bear market and a changing social mood.
Interestingly, Euro 2004 was won by the complete outsiders Greece. Their playing style was negative to say the least. This too is an indication of a bear market. Negative, defensive teams tend to dominate in such times.
Expect further financial distress among soccer clubs, lower transfer fees and (horror!) probably lower wages for players. The game is likely to become less attractive to watch as defensive minded teams dominate (think of Leeds United in the 1970s!) and the 2006 World Cup is likely to be controversial and antagonistic, with crowd troubles likely to be a big issue again.
Big news of the week in the world of UK soccer was the long-expected transfer of teenage sensation Wayne Rooney from Everton to Manchester United. For those who don't follow soccer, the 18 year old Rooney is currently one of the hottest properties in soccer after some attention grabbing performances at the Euro 2004 tournament. What's most interesting to me is the economics of the deal and what it says about soccer finances.
The transfer fee is apparently GBP 20 million, with another GBP 7 million payable if certain conditions are met. Of the GBP 20 million, however, only half is payable now, with the balance payable in a years time. The following points stand out for me.
- If Manchester United (one of the richest and most successful clubs in the world) have struggled to raise the funds, what does that tell you?
- Only 2 clubs were actually in the running to sign Rooney, Manchester United and Newcastle United. Where were the other big clubs (Arsenal and Chelsea) and what about overseas clubs?
My read of all this is that the bubble has burst for soccer and things are tough financially (and going to get tougher). The fee paid for Rooney is much lower than originally suggested (originally, Everton were talking of GBP 40-50 million!) and is just the latest in a number of transfers going through at much lower levels than expected (for example, the transfer of Michael Owen to Real Madrid). This trend has been evident for a while but was disguised by the big spending of Chelsea after the arrival last season of new owner Roman Abravonich (the fabulously wealthy Russian businessman). Now, even Chelsea appear to be adopting a more cautious approach.
Soccer has long been a terrible business from a pure investment point of view. The economics of the game changed dramatically in the 90's with the injection of huge amounts of money from broadcasting rights and the "Bosman Ruling" (which changed the balance of power in the game towards the players and away from the clubs). During the boom times of the 90s, fans lived with higher ticket prices, paying to watch games on the new pay-TV channels and getting ripped off by the clubs with their "commercial activities" (club shirts etc). So, for a long time, things have, on the surface, been rosy.
Socionomics students will be familiar with the connection between the bull market and various sports in the USA. Soccer itself ("The Beautiful Game") would appear to be a bull market sport and the latest cracks in it's finances would appear to be another indication of the gathering bear market and a changing social mood.
Interestingly, Euro 2004 was won by the complete outsiders Greece. Their playing style was negative to say the least. This too is an indication of a bear market. Negative, defensive teams tend to dominate in such times.
Expect further financial distress among soccer clubs, lower transfer fees and (horror!) probably lower wages for players. The game is likely to become less attractive to watch as defensive minded teams dominate (think of Leeds United in the 1970s!) and the 2006 World Cup is likely to be controversial and antagonistic, with crowd troubles likely to be a big issue again.
posted by Kevin Francis at
1:16 pm
