1. 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

2. Economic Valuation of Football Players through Media Value 1.Accounting for sport intangible assets (player’s market value)Accounting for sport intangible assets 2.Approaches to give economic valuation of playersApproaches to give economic valuation of players 3.¿What is media value?¿What is media value? 4.Valuing players through media value. The modelValuing players through media value. The model 5.Valuing players through media value. Empirical resultsValuing players through media value. Empirical results 6.Checking the robustness of the media value modelChecking the robustness of the media value model

3. 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)

4. 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

5. ¿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, … Home grown players: Messi, Xavi, Iniesta, Puyol, Valdés, Bojan, Giovani do Santos, Oleguer, Jorquera Accounting value: 0 euro Accounting value: 119 million euro 1. Accounting

6. 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

7. It is useful to give economic valuation of players, independently from having been trasfered or not Economic valuation models of players is needed. 1. Accounting l

8. 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

9. We propose to explain footballer market value by media value ¿What is media value? 2. Valuation models o

10. 3. Media value: popularity + notoriety Players Teams Sport Success Media Coverage Fans Supporters Identification Proudness Admiration Imitation Gameday TV Rights Merchandising Sponsorship Players: wages Advertising TransferFees Teams: Income Potential Main Intangible Asset Media Value: Notoriety+Popularity

11. Media value at the core of sport as business 3. Media Value Players Teams Sport Success Media Coverage Fans Supporters Identification Proudness Admiration Imitation Gameday TV Rights Merchandising Sponsorship Players: wages Advertising TransferFees Teams: Income Potential Main Intangible Asset Media Value: Notoriety+Popularity

12. 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

13. 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 4. The model o

14. 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.

15. 5. Empirical results

16. 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

18. Differences between actual and theoretical market value Some examples 5. Empirical results

19. Differences between actual and theoretical market value Some examples 5. Empirical results

20. Differences between actual and theoretical market value Some examples 5. Empirical results

21. Using the coefficients as method to estimate football players’ fair market value Some examples: reviewing FC Barcelona intangible assets. 5. Empirical results

22. Using the coefficients as method to estimate football players’ fair market value Some examples: reviewing FC Barcelona intangible assets. 5. Empirical results

23. Using the coefficients as method to estimate football players’ fair market value Some examples: evaluation of the transfer season Winter 2007/08 window). 5. Empirical results o Fair Transfer Value at Window Transfer Period 2008 PlayerFromTo Ag ePosition Transfer Fee ESI-rg Fair Valu Differenc e Diff in % (1)(2)(3)(4)(5)(6)(7)(8)(9) Nicolas AnelkaBoltonChelsea29Striker19.929.79.849 Afonso AlvesSC HeerenveenMiddlesbrough27Striker16.09.5-6.5-41 SissokoLiverpoolJuventus23Striker11.07.9-3.1-28 Jonathan WoodgateMiddlesboroughTottenham28Defender10.84.6-6.2-57 Jermain DefoeTottenhamPortsmouth25Striker9.38.3-11 Daniele ManniniBresciaNaples24Midfielde8.01.9-6.1-76 James McFaddenEvertonBirmingham24Striker7.54.7-2.8-37 Lassana DiarraArsenalPortsmouth22Striker7.06.7-0.3-4

24. 6. Checks of robustness: explaining the differences between actual and theoretical transfer fees H1: Bargaining effects H2: Estimations effects

25. Revision of 14 FIFA Agents’s estimations when having ESI-rg estimations. 6. Robustness checks FIFA Agents’ Upward revision of the estimations Number of revisions ESIrg In favorAgainst Actual FeeIn favor22 (52,4%)5 (11,9%)27 (64,3%) Actual FeeAgainst7 (16,7%)0 (0%)7 (16,7%) Actual FeeNeutral7 (16,7%)1 (2,4%)8 (19%) 36 (85,7%)6 (14,3%)

26. Revision of 14 FIFA Agents’s estimations when having ESI-rg estimations. 6. Robustness checks

27. Free Transfer Deals: correlations between different approaches 6. Robustness checks o

28. Media value explained by sport performance 3. Media Value

29. Media value explained by sport performance 3. Media Value

30. Media value explaining income 3. Media Value o

31. Media value explaining income 3. Media Value o

32. Media value explaining income 3. Media Value o