economic valuation of football players through media value francesc pujol economics sport and...
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Economic Valuation of Football Players through Media Value
Francesc PujolEconomics Sport and Intangibles Research Group (ESI-rg) & University of Navarra
Pedro Garcia-del-BarrioEconomics 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)
Implications of measuring intangible assets at cost
• Transfer fee paid is counted as an asset for the buying club. The valueof the player is normally amortized by the straight line method.
• Home grown players are activated up to the formation costs supportedby the club.
1. Accounting
¿Does this rule produce an accurate picture of the economic wealthof 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
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.
1. Accounting
l
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
We propose to explain footballer market value by media value
¿What is media value?
2. Valuation models
o
3. Media value: popularity + notoriety
Players
Teams
SportSuccess
Media Coverage
FansSupporters
IdentificationProudnessAdmirationImitation
GamedayTV RightsMerchandisingSponsorship
Players: wagesAdvertisingTransferFees
Teams: Income Potential
Main Intangible Asset
Media Value: Notoriety+Popularity
Media value at the core of sport as business
3. Media Value
Players
Teams
SportSuccess
Media Coverage
FansSupporters
IdentificationProudnessAdmirationImitation
GamedayTV RightsMerchandisingSponsorship
Players: wagesAdvertisingTransferFees
Teams: Income Potential
Main Intangible Asset
Media Value: Notoriety+Popularity
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
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
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
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
5. Empirical results
2.2
5.4
1.5
0,0
1,0
2,0
3,0
4,0
5,0
6,0
Goalkeeper Defender Midfielder
Strikers Media Value in Comparison with Other Pitch
Positions
Differences between actual and theoretical market value
Some examples
5. Empirical results
0
5
10
15
20
25
30
35
40
45
50
Andriy Shevchenko Mahamadou Diarra J oaquín Zlatan Ibrahimovic Damien Duff Ruud VanNistelrooy
FC Chelsea Real Madrid Valencia Inter M Ilan Newcastle Utd Real Madrid
AC M ilan O Lyon Betis J uventus Chelsea Manchester Utd
Mill
ion
s o
f eu
ro
Theoretical Value
Actual Transfer
Differences between actual and theoretical market value
Some examples
5. Empirical results
0
2
4
6
8
10
12
14
16
Obafemi Martins Ricardo Oliveira Gianluca Zambrotta Eidur Gudjohnsen Nicolás Anelka Émerson
Newcastle Utd AC MIlan Barcelona Barcelona Bolton W. Real Madrid
Inter M ilan Betis J uventus Chelsea Fenerbahce J uventus
Mill
ion
s o
f eu
ro
Theoretical Value
Actual Transfer
Differences between actual and theoretical market value
Some examples
5. Empirical results
0
2
4
6
8
10
12
14
16
Fabio Cannavaro P atrick Vieira Robert Huth Vincent Kompany Ronaldo Asier Del Horno
Real Madrid Inter MIlan Middlesbrough Hamburger SV AC MIlan Valencia
J uventus J uventus Chelsea Anderlecht Real Madrid Chelsea
Mill
ion
s o
f eu
ro
Theoretical Value
Actual Transfer
Using the coefficients as method to estimate football players’ fair market value
Some examples: reviewing FC Barcelona intangible assets.
5. Empirical results
Estimation of the Economic Value of FC Barcelona Home Grown
Players
136.2
81.7
147
78.4
164.9
130.6
0
30
60
90
120
150
180
Market Value Accounting Standars Accounting Value After
Amortization
Mill
ions
of
euro
ESI-rgTransfermarkt
Using the coefficients as method to estimate football players’ fair market value
Some examples: reviewing FC Barcelona intangible assets.
5. Empirical results
FC Barcelona Balance Sheet Revision Assuming Home Grown Players value
0 0
118.7
277.8
2.7
136.2
81.7
200.4
359.5
84.4
0
50
100
150
200
250
300
350
400
Value of HGP
(Cost)
Value of HGP
(Net)
Sport Intanglibe
Assets
Current Assets Stockholder
Equity
Mill
ions
of e
uro
Accounting Standards
ESI-rg Estimation
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
Player From To
AgePositio
n
Transfer
Fee
ESI-rgFair
Valu
Difference
Diff in
%
(1) (2) (3)(4
) (5) (6) (7) (8) (9)
Nicolas Anelka Bolton Chelsea 29 Striker 19.9 29.7 9.8 49
Afonso Alves SC HeerenveenMiddlesbroug
h 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 24Midfield
e 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
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 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%)
Revision of 14 FIFA Agents’s estimations when having ESI-rg estimations.
6. Robustness checks
Revision of FIFA Agents' Estimations
after having ESI-rg Information
(white, with no information; green, with information)
0
10
20
30
40
0 10 20 30 40ESI-rg Estimations
FIF
A A
gents
' Est
imati
ons
Free Transfer Deals: correlations between different approaches
6. Robustness checks
o
Correlations Between FIFA Agent's ex post Estimations and Other ex ante
Estimations Concerning Free Transfer Movements, Season 2007-2008
0
0.2
0.4
0.6
0.8
1
ESI-rg Other Agents EA Sport EA Sport Potential Transfermarkt
Media value explained by sport performance
3. Media Value
Actual Popularity and Popularity Estimated by Sport Success
0
10
20
30
40
50
60
Real
Madrid
FC B
arce
lona
Inter
Mila
n
Chels
ea
AC M
ilan
Arse
nal
O. Ly
on
Liver
pool
Manch
este
r Utd
Juve
ntus
AS R
oma
Baye
rn M
ünch
en
Valen
cia
Actual Popularity
Sportive Popularity
Media value explained by sport performance
3. Media Value
Media value explaining income
3. Media Value
o
Relationship Between Team Market Value and Media Value
(Big Three Leagues). Logarithmic Scale
y = 4,7996x + 18,711
R2 = 0,90061
10
100
1000
0 1 10 100
Team Media Value
Team
Mar
ket
Valu
e (M
illio
ns o
f Eu
ro)
Media value explaining income
3. Media Value
o
Relationship Between Team Market Value and Media Value
(Eight Leagues). Logarithmic Scale
y = 5,0037x + 15,227
R2 = 0,89271
10
100
1.000
0 1 10 100
Team Media Value
Team
Mar
ket
Valu
e (M
illio
ns o
f Eu
ro)
Media value explaining income
3. Media Value
o
Total revenues of top players by media value(in millions of euro)
6,1 5,7
9,1
3,5
0
2
4
6
8
10
12
14
16
Top 10 Top 11 a 20
Advertising
Salary