Economic Valuation of Football Players through Media Value
Francesc Pujol
Economics Sport and Intangibles Research Group (ESI-rg)
& University of Navarra
Pedro Garcia-del-Barrio
Economics Sport and Intangibles Research Group (ESI-rg)
& Universitat Internacional de Catalunya
IASE Conference, Gijón, 9 May 2008
Economic Valuation of Football Players through Media Value
1. Accounting for sport intangible assets (player’s market value)
2. Approaches to give economic valuation of players
3. ¿What is media value?
4. Valuing players through media value. The model
5. Valuing players through media value. Empirical results
6. Checking the robustness of the media value model
Economic Valuation of Football Players through Media Value
1. Accounting footballers’ economic value
¿How do we measure the economic value of a football player?
According to accounting standards:
“Intangible assets are measure initially at cost”
(IAS 38.24)
1. Accounting
Implications of measuring intangible assets at cost
• Transfer fee paid is counted as an asset for the buying club. The value
of the player is normally amortized by the straight line method.
• Home grown players are activated up to the formation costs supported
by the club.
1. Accounting
¿Does this rule produce an accurate picture of the economic wealth
of a football team?
Let’s take an example (an extreme one)
Which is the accounting value of FC Barcelona squad?
Hired players:
Ronaldinho, Henry, Zambrotta, Deco, Eto’o, Thuram, Sylvinho,
Yaya, Gudjohnsen, …
Accounting value: 119 million euro
Home grown players:
Messi, Xavi, Iniesta, Puyol, Valdés, Bojan, Giovani do Santos,
Oleguer, Jorquera
Accounting value: 0 euro
1. Accounting
Potential equity and efficiency effects:
• Estimation of the fair economic value of a team
• Influence in the transfer market decisions
• Appraisal of the financial state of the clubs
• Club bias against home grown players
1. Accounting
It is useful to give economic valuation of players,
independently from having been trasfered or not
Economic valuation models of players is needed.
2. Valuation models
Explaining market value by relevant sport performance
variables:
•
•
•
•
•
Transfer fees. Dobson and Gerrard (1999)
Transfer fees. Castillo (2006)
Salaries. Rossi (2008)
Market value. Method (?) Transfermarkt.de
Delphi method. Nasser (2007)
Explaing market vale by media value
2. Valuation models
We propose to explain footballer market value by media value
¿What is media value?
3. Media value: popularity + notoriety
Media Value: Notoriety+Popularity
Players:
wages
Advertising
TransferFees
Sport
Success
Players
Teams
Fans
Supporters
Identification
Proudness
Admiration
Imitation
Gameday
TV Rights
Merchandising
Sponsorship
Media
Coverage
Teams: Income
Potential
Main Intangible Asset
3. Media Value
Media value at the core of sport as business
Media Value: Notoriety+Popularity
Players:
wages
Advertising
TransferFees
Sport
Success
Players
Teams
Fans
Supporters
Identification
Proudness
Admiration
Imitation
Gameday
TV Rights
Merchandising
Sponsorship
Media
Coverage
Teams: Income
Potential
Main Intangible Asset
4. Explaining market value by media value. The model
1. If media value captures sport performance and explains
players and teams income …
2. Let’s try to explain football player’s market value relying
just on media value measures …
3. Disregarding any kind of direct measure of sport
performance
4. The model
Explaining a player’s market value by:
1.
Football player’s media value
2.
Buying team media value
3.
Selling team media value
4.
Media value rank of the player in his precedent team
5.
Age
6.
Position in the pitch, nationality
5. Explaining market value by media value. Empirical
results
A set of 84 deals produced in season 2006/07 in Europe for
whom we have information about actual transfer fees
paid.
5. Empirical results
5. Empirical results
Results
•
Adjusted R2: 0.735.
•
An increase of 1% of player’s media value leads to an increase
of 0.5% of player’s market value.
•
The higher the media value of the buying team, the higher the
premium to be paid.
•
The higher the media value of the selling team, the lower the
fee received.
•
Inverted U-shape for the relationship between age and market
value.
•
A premium according to the MV rank in the previous team
•
Position in the pitch does not have extra impact (already
discounted in different media value)
5. Empirical results
Strikers Media Value in Comparison with Other Pitch
Positions
5.4
6,0
5,0
4,0
3,0
2.2
1.5
2,0
1,0
0,0
Goalkeeper
Defender
M idfielder
5. Empirical results
Differences between actual and theoretical market
value
Some examples
50
Theoretical Value
45
Actual Transfer
40
Millions of euro
35
30
25
20
15
10
5
0
A ndriy Shevchenko
M ahamado u Diarra
Jo aquín
Zlatan Ibrahimo vic
Damien Duff
Ruud Van
Nistelro o y
FC Chelsea
Real M adrid
Valencia
Inter M Ilan
Newcastle Utd
Real M adrid
A C M ilan
O Lyo n
B etis
Juventus
Chelsea
M anchester Utd
5. Empirical results
Differences between actual and theoretical market
value
Some examples
16
Theoretical Value
14
Actual Transfer
Millions of euro
12
10
8
6
4
2
0
Obafemi M artins
Ricardo Oliveira
Gianluca Zambro tta
Eidur Gudjo hnsen
Nico lás A nelka
Émerso n
Newcastle Utd
A C M Ilan
B arcelo na
B arcelo na
B o lto n W.
Real M adrid
Inter M ilan
B etis
Juventus
Chelsea
Fenerbahce
Juventus
5. Empirical results
Differences between actual and theoretical market
value
16
Some
examples
Theoretical Value
Actual Transfer
14
Millions of euro
12
10
8
6
4
2
0
Fabio Cannavaro
P atrick Vieira
Ro bert Huth
Vincent Ko mpany
Ro naldo
A sier Del Ho rno
Real M adrid
Inter M Ilan
M iddlesbro ugh
Hamburger SV
A C M Ilan
Valencia
Juventus
Juventus
Chelsea
A nderlecht
Real M adrid
Chelsea
5. Empirical results
Using the coefficients as method to estimate football
players’ fair market value
Some examples: reviewing FC Barcelona intangible assets.
Estimation of the Economic Value of FC Barcelona Home Grown
Players
180
164.9
147
Millions of euro
150
136.2
ESI-rg
Transfermarkt
130.6
120
81.7
90
78.4
60
30
0
Market Value
Accounting Standars
Accounting Value After
Amortization
5. Empirical results
Using the coefficients as method to estimate football
players’ fair market value
Some examples: reviewing FC Barcelona intangible assets.
FC Barc elona Balanc e Sheet Revision Assuming Home Grow n Players value
400
359.5
350
Accounting Standards
Millions of euro
300
277.8
ESI-rg Estimation
250
200.4
200
136.2
150
118.7
50
84.4
81.7
100
0
2.7
0
0
Value of HGP
Value of HGP
Sport Intanglibe
(Cost)
(Net)
Assets
Current Assets
Stockholder
Equity
5. Empirical results
Using the coefficients as method to estimate football
players’ fair market value
Some examples: evaluation of the transfer season Winter 2007/08
window).
Fair Transfer Value at Window Transfer Period 2008
Ag
Player
From
(1)
To
(2)
ePosition
(3)
(4)
(5)
Transfer
Fee
ESI-rg
Fair Valu
Differenc
e
Diff
in %
(6)
(7)
(8)
(9)
Nicolas Anelka
Bolton
Chelsea
29
Striker
19.9
29.7
9.8
49
Afonso Alves
SC Heerenveen
Middlesbrough
27
Striker
16.0
9.5
-6.5
-41
Sissoko
Liverpool
Juventus
23
Striker
11.0
7.9
-3.1
-28
Jonathan Woodgate
Middlesborough
Tottenham
28
Defender
10.8
4.6
-6.2
-57
Jermain Defoe
Tottenham
Portsmouth
25
Striker
9.3
8.3
-1.0
-11
Daniele Mannini
Brescia
Naples
24
Midfielde
8.0
1.9
-6.1
-76
James McFadden
Everton
Birmingham
24
Striker
7.5
4.7
-2.8
-37
Lassana Diarra
Arsenal
Portsmouth
22
Striker
7.0
6.7
-0.3
-4
6. Checks of robustness: explaining the differences
between actual and theoretical transfer fees
H1: Bargaining effects
H2: Estimations effects
6. Robustness checks
Revision of 14 FIFA Agents’s estimations when having
ESI-rg estimations.
FIFA Agents’ Upward revision of the estimations
Number of revisions
ESIrg
ESIrg
In favor
Against
Actual Fee
In favor
22 (52,4%)
5 (11,9%)
27 (64,3%)
Actual Fee
Against
7 (16,7%)
0 (0%)
7 (16,7%)
Actual Fee
Neutral
7 (16,7%)
1 (2,4%)
8 (19%)
36 (85,7%)
6 (14,3%)
6. Robustness checks
Revision of 14 FIFA Agents’s estimations when having
ESI-rg estimations.
Revision of FIFA Agents' Estimations
after having ESI-rg Information
(white, with no information; green, with information)
FIFA Agents' Estimations
40
30
20
10
0
0
10
20
ESI-rg Estimations
30
40
6. Robustness checks
Free Transfer Deals: correlations between different
approaches
Correlations Between FIFA Agent's ex post Estimations and Other ex ante
Estimations Concerning Free Transfer Movements, Season 2007-2008
1
0.8
0.6
0.4
0.2
0
ESI-rg
Other Agents
EA Sport
EA Sport Potential
Transfermarkt
3. Media Value
Media value explained by sport performance
Actual Popularity and Popularity Estimated by Sport Success
60
Actual Popularity
50
Sportive Popularity
40
30
20
10
FC
Re
a
lM
ad
ri
Ba
d
rc
el
on
In
a
te
r
M
ila
n
Ch
el
se
AC a
M
il a
n
Ar
se
na
l
O.
Ly
on
Li
M
v
an
e
ch rpo
ol
es
te
rU
td
Ju
ve
nt
u
Ba
AS s
ye
Ro
rn
m
M
ün a
ch
en
Va
le
nc
ia
0
3. Media Value
Media value explained by sport performance
3. Media Value
Media value explaining income
Relationship Between Team Market Value and Media Value
(Big Three Leagues). Logarithmic Scale
Team Market Value (Millions of Euro)
1000
100
10
y = 4,7996x + 18,711
R2 = 0,9006
1
0
1
10
Team Media Value
100
3. Media Value
Media value explaining income
Relationship Between Team Market Value and Media Value
(Eight Leagues). Logarithmic Scale
Team Market Value (Millions of Euro)
1.000
100
10
y = 5,0037x + 15,227
R2 = 0,8927
1
0
10
1
Team Media Value
100
3. Media Value
Media value explaining income
Total revenues of top players by media value
(in millions of euro)
16
14
12
10
9,1
Advertising
8
3,5
6
4
6,1
5,7
Top 10
Top 11 a 20
2
0
Salary