Where will we finish?: Page 6 - The Arsenal discussion forum and community: One More in the Tolly

Where will we finish?

Mirth

General wrote:
Sterling went for £50m, this is a significant proportion of the money Bale went for. I wouldn't call that a fraction at all and I don't really rate Sterling.

Not really, Sterling's transfer fee is barely 60% of Bale's transfer fee. Furthermore, there are several other players that have gone for a larger sum of money. And Sterling is probably outlier because you're dealing with Man City who desperately needed English players to meet their quota at the time. The likes of Martial and other young players are in the 30-40m range these days.

For me his transfer was bad business compared to Pogba's as it was purely based on potential and had little commercial value. Clearly United haven't paid the record fee based on Pogba's talent alone and they've factored in the commercial gains from their partnership with adidas. If based on the former, then most would agree they've paid way over the odds. They will re-coup the fee and the economics make sense for them. If you want to put value on it, then talent is in the region of £60-65million under current market conditions and commercial value is about £30-35million. So the total sum sounds about right.

I don't think Sterling's worth the money either but City overpaid for him by around 15m. Meanwhile United overpaid by about 50m.

Also the concept of transfer fees being recouped or offset by commercial deals and potential value is a myth. See this article (https://www.theguardian.com/football/the-set-pieces-blog/2016/aug/24/transfer-window-market-myths).

Claudius

Qwiss! wrote:
Claudius wrote:
Cannon, people need to be realistic and consider three very important elements.

Inflation is very high in football, so comparing fees paid 3 and 7 years ago respectively is not very informative if you don't adjust accordingly

United were desperate to land a superstar and be relevant. Who were they competing with for that transfer fee? Nobody was interested.

I think Adidas must have intimated that they can get better synergies by having Pogba at United rather than Juve. He's in every window of any Adidas store I've gone past. United fans will devour Pogba shirts, bringing a return on that 750m pound deal.

The Adidas angle doesn't matter a shit when you're spending 100m. There are no mitigating factors for this transfer it was just stupid. Pogba is a quality player but even in this market he's worth half what United paid for him.

And a team with Pogba, Martial, Rushford, Shaw, etc should never have been given to Jose Mourinho. Everything at United right now seems to be about reputation and not ability or being the right fit.

I agree with your second statement, but disagree with the first.

The Adidas angle probably matters. People on this forum always complain that United and the Spanish clubs are leaving us behind commercially. What they don't realise is that every kit manufacturer needs anchor clients, in much the same way that malls have anchor tenants. These are the guys who give you the business case. And you're willing to pay over the odds for them so they are on your books.

As you invest so much in the anchor teams, you need to ensure that the sponsorship repays, which means that as a kit manufacturer, you will try to influence transfer dealings to get the biggest players on board, assist in negotiations to bring in players that belong to you (because a Nike player clouds the messaging for Adidas), etc. It's a high-risk sponsorship for Adidas, so they need to make it work, as they're basically giving out 75m pounds/year for the right to take pretty much all merchandising revenue.

On the first statement - absolutely right. Mourinho cannot name a single player he's developed. He's a short-termist who will dump all these kids as soon as they fail him. You can see how he's trying to milk the experience of Rooney and the thug Fellaini

Tam

Mirth wrote:
Also the concept of transfer fees being recouped or offset by commercial deals and potential value is a myth. See this article (https://www.theguardian.com/football/the-set-pieces-blog/2016/aug/24/transfer-window-market-myths).

To go off on a tangent, I believe that article explains very well what a lot of fans seem to misunderstand about our transfer dealings – more specifically Wenger’s oft used statement about having to account for wages etc in addition to the transfer fee when we’re considering signing a player. Not every club will operate the same way but this is a good explanation of how finances and deals are structured.

The following gives a better understanding of how clubs budget for signings to include all costs as opposed to starting the season with a ‘warchest’ for transfer fees.

[size=medium]Net spend is not as important as fans might think[/size]

[size=small]Despite what you may have heard, “net spend” is completely irrelevant to how big clubs do business and is not something they consider when calculating player costs. Consider the following: Manchester United signed Henrikh Mkhitaryan from Borussia Dortmund for £35m. Mkhitaryan will likely be earning the equivalent of at least £180,000 per week over the length of his four-year deal.
[/size]
[size=small]In practice, clubs such as United, for whom cash flow is never an issue, often pay the entire transfer fee up front or in a few instalments over a short period of time (less than 12 months). This helps reduce the overall cost of the transfer, and most selling clubs will much prefer to see the entire fee paid quickly, as opposed to several instalments over two or three years.
[/size]
[size=small]However, on the books – and this is how clubs actually calculate player costs – United, like every single other football club in Europe’s top eight leagues, will record the transfer fee as £8.75m in each of the next four years, not £35m now.
[/size]
[size=small]This is a universal accounting practice called player amortisation, and it is fundamental to how clubs calculate player costs. Rather than recording the entire purchase when it was made, the club will spread the transfer fee over the length of the player’s contract.
[/size]
[size=small]Naturally, wages must also be included in the calculation of player costs. Ideally, agent fees and image rights payments will be included as well, but to keep things simple, we’ll focus on the two big expenditures: amortisation and wages.[/size]
[size=small]With Mkhitaryan costing Manchester United £8.75m per year in amortisation and £9.36m in wages (£180,000 per week multiplied by 52 weeks), his overall cost to the club is just over £18.1m per year. That £18.1m per year is what clubs look at with regards to player costs, not just the transfer fees coming in and out.
[/size]
[size=small]Let’s compare the Mkhitaryan deal to that of another recent Premier League signing from the Bundesliga: Arsenal’s £30m purchase of Granit Xhaka from Borussia Mönchengladbach. Xhaka signed a five-year deal and will reportedly earn around £125,000 per week at Arsenal. The transfer fee will be spread out over Xhaka’s contract at £6m per year (£30m divided evenly over five years). So including Xhaka’s wages, the overall cost to Arsenal is £12m per year.
[/size]
[size=small]While the transfer fees for Mkhitaryan and Xhaka are similar, Mkhitaryan is costing Manchester United 50% more than Xhaka is costing Arsenal on an annual basis.
[/size]
[size=small]To further illustrate why net spend doesn’t tell you anything about how clubs do business, consider United’s signing of Zlatan Ibrahimovic on a free transfer. While the “net spend” on that deal is zero, he adds well over £10m to Manchester United’s player costs this year.[/size]

[size=small]If those were the only transactions United and Arsenal made this summer, their “net spend” figures would be similar (£35m and £30m, respectively). However, after applying the business and accounting principles that the clubs themselves use, we see that Arsenal added £12m to its total player costs for the coming season, while United added over £28m. Rather than a difference of less than 20% in actual spending (which is what net spend would show), the actual difference is over 200%.[/size]

Qwiss

General wrote:
Sterling went for £50m, this is a significant proportion of the money Bale went for. I wouldn't call that a fraction at all and I don't really rate Sterling. For me his transfer was bad business compared to Pogba's as it was purely based on potential and had little commercial value. Clearly United haven't paid the record fee based on Pogba's talent alone and they've factored in the commercial gains from their partnership with adidas. If based on the former, then most would agree they've paid way over the odds. They will re-coup the fee and the economics make sense for them. If you want to put value on it, then talent is in the region of £60-65million under current market conditions and commercial value is about £30-35million. So the total sum sounds about right.

The "commercial gains" of signing Pogba are completely insignificant compared to the price of Pogba. United are already commercially massive, Pogba doesn't change that much. And Pogba isn't even that big a star. In terms of star power United already had Rooney and Ibra. They are household names more than Pogba.

Qwiss

Claudius wrote:
you will try to influence transfer dealings to get the biggest players on board, assist in negotiations to bring in players that belong to you (because a Nike player clouds the messaging for Adidas), etc.

I think thats massively overstated TBH. Adidas want United to sign big players and be successful and in an ideal world they'll have big adidas players but that is not pushing the biggest transfer fee in the history of football for a player who's nowhere near worth it and not well known at all outside the game.

General

Mirth wrote:
General wrote:
Sterling went for £50m, this is a significant proportion of the money Bale went for. I wouldn't call that a fraction at all and I don't really rate Sterling.

Not really, Sterling's transfer fee is barely 60% of Bale's transfer fee. Furthermore, there are several other players that have gone for a larger sum of money. And Sterling is probably outlier because you're dealing with Man City who desperately needed English players to meet their quota at the time. The likes of Martial and other young players are in the 30-40m range these days.

For me his transfer was bad business compared to Pogba's as it was purely based on potential and had little commercial value. Clearly United haven't paid the record fee based on Pogba's talent alone and they've factored in the commercial gains from their partnership with adidas. If based on the former, then most would agree they've paid way over the odds. They will re-coup the fee and the economics make sense for them. If you want to put value on it, then talent is in the region of £60-65million under current market conditions and commercial value is about £30-35million. So the total sum sounds about right.

I don't think Sterling's worth the money either but City overpaid for him by around 15m. Meanwhile United overpaid by about 50m.

Also the concept of transfer fees being recouped or offset by commercial deals and potential value is a myth. See this article (https://www.theguardian.com/football/the-set-pieces-blog/2016/aug/24/transfer-window-market-myths).

60% isn't a fraction though, that was my point. Also don't forget Sterling's transfer was a pure cash deal which even made it the more significant considering the rate of inflation in football.

At best United have paid around £20-30million more for Pogba depending on what transfer figure you're quoting and this would easily be recouped through commercial income.

The article you posted is interesting but it rather relies heavily on some over optimistic assumptions and is far from the myth busting eye opener it purports to be.

For example it assumes United only start receiving royalty on shirt sales once a threshold of 3m shirts are sold. I would suggest this figure is a lot lower as United sold slightly fewer than this in total in the 15/16 season. If Adidas were banking everything from the 2.9m shirt sales United made last season, they'd be making a return around treble the £75m they pay United every season. I think even Bernie Ecclestone would struggle to pull this off. Remember also that clubs make money from branded licensed products on players not just shirts and this can also help offset transfer fees. They are already guaranteed £75m a year from Adidas anyway and additional income from royalties and club merchandise could easily take them past the £100m mark.

I think the real question is whether Pogba is £60-65m player which in reality is the net spend on him once commercial income is factored in. If Sterling is going for £50m, then it's difficult to disagree. The whole world record fee thing has an air of soap opera about it and it's difficult to take it seriously.

General

Qwiss! wrote:
General wrote:
Sterling went for £50m, this is a significant proportion of the money Bale went for. I wouldn't call that a fraction at all and I don't really rate Sterling. For me his transfer was bad business compared to Pogba's as it was purely based on potential and had little commercial value. Clearly United haven't paid the record fee based on Pogba's talent alone and they've factored in the commercial gains from their partnership with adidas. If based on the former, then most would agree they've paid way over the odds. They will re-coup the fee and the economics make sense for them. If you want to put value on it, then talent is in the region of £60-65million under current market conditions and commercial value is about £30-35million. So the total sum sounds about right.

The "commercial gains" of signing Pogba are completely insignificant compared to the price of Pogba. United are already commercially massive, Pogba doesn't change that much. And Pogba isn't even that big a star. In terms of star power United already had Rooney and Ibra. They are household names more than Pogba.

The question was whether the gap in the fee between Pogba's actual worth (I'd say around £65m) and the transfer fee United paid could be recouped through commercial income. As you say, they are big commercially and were always in a position to spend £60-70m on a single player.

Mirth

The fact that you keep using Sterling as a benchmark is bizarre.

Tam

I like the irony in Sterling only performing well for City after Brexit.

Claudius

Tam wrote:

[size=medium]Net spend is not as important as fans might think[/size]

[size=small]Despite what you may have heard, “net spend” is completely irrelevant to how big clubs do business and is not something they consider when calculating player costs. Consider the following: Manchester United signed Henrikh Mkhitaryan from Borussia Dortmund for £35m. Mkhitaryan will likely be earning the equivalent of at least £180,000 per week over the length of his four-year deal.
[/size]
[size=small]In practice, clubs such as United, for whom cash flow is never an issue, often pay the entire transfer fee up front or in a few instalments over a short period of time (less than 12 months). This helps reduce the overall cost of the transfer, and most selling clubs will much prefer to see the entire fee paid quickly, as opposed to several instalments over two or three years.
[/size]
[size=small]However, on the books – and this is how clubs actually calculate player costs – United, like every single other football club in Europe’s top eight leagues, will record the transfer fee as £8.75m in each of the next four years, not £35m now.
[/size]
[size=small]This is a universal accounting practice called player amortisation, and it is fundamental to how clubs calculate player costs. Rather than recording the entire purchase when it was made, the club will spread the transfer fee over the length of the player’s contract.
[/size]
[size=small]Naturally, wages must also be included in the calculation of player costs. Ideally, agent fees and image rights payments will be included as well, but to keep things simple, we’ll focus on the two big expenditures: amortisation and wages.[/size]
[size=small]With Mkhitaryan costing Manchester United £8.75m per year in amortisation and £9.36m in wages (£180,000 per week multiplied by 52 weeks), his overall cost to the club is just over £18.1m per year. That £18.1m per year is what clubs look at with regards to player costs, not just the transfer fees coming in and out.
[/size]
[size=small]Let’s compare the Mkhitaryan deal to that of another recent Premier League signing from the Bundesliga: Arsenal’s £30m purchase of Granit Xhaka from Borussia Mönchengladbach. Xhaka signed a five-year deal and will reportedly earn around £125,000 per week at Arsenal. The transfer fee will be spread out over Xhaka’s contract at £6m per year (£30m divided evenly over five years). So including Xhaka’s wages, the overall cost to Arsenal is £12m per year.
[/size]
[size=small]While the transfer fees for Mkhitaryan and Xhaka are similar, Mkhitaryan is costing Manchester United 50% more than Xhaka is costing Arsenal on an annual basis.
[/size]
[size=small]To further illustrate why net spend doesn’t tell you anything about how clubs do business, consider United’s signing of Zlatan Ibrahimovic on a free transfer. While the “net spend” on that deal is zero, he adds well over £10m to Manchester United’s player costs this year.[/size]

[size=small]If those were the only transactions United and Arsenal made this summer, their “net spend” figures would be similar (£35m and £30m, respectively). However, after applying the business and accounting principles that the clubs themselves use, we see that Arsenal added £12m to its total player costs for the coming season, while United added over £28m. Rather than a difference of less than 20% in actual spending (which is what net spend would show), the actual difference is over 200%.[/size]

I don't think that people are under the net spend illusion around here. OMIT readers are quite sophisticated and spend a lot of time talking about transfer fee structuring player investment cost amortisation. This is something for the guys who sit in front of the TV all day long listening to lies from Sky Sports.

General

Mirth wrote:
The fact that you keep using Sterling as a benchmark is bizarre.

Nothing bizarre about it at all. It is a prime current example, rather than benchmark, of clubs paying huge fees for 'potential' as you appear to have taken umbrage at the Pogba transfer because of this.

Claudius

Perspective is also important. You are talking to the fans of the one big club in the world that just doesn't pay big fees. So a large fee will feel ridiculous to most.

Tam

Claudius wrote:
I don't think that people are under the net spend illusion around here. OMIT readers are quite sophisticated and spend a lot of time talking about transfer fee structuring player investment cost amortisation. This is something for the guys who sit in front of the TV all day long listening to lies from Sky Sports.

I'm sure there's a better understanding of it here than in general, however I still read plenty about warchests, transfer budgets, cash balances and so on. There certainly is a lack of knowledge about how clubs approach the budgeting and structuring of transfers.

Cannon

The poll should have been

1-2

2-3

3-4

Outside top 4

Qwiss

Cannon wrote:
The poll should have been

1-2

2-3

3-4

Outside top 4

No it shouldn't. 1 and 2 are not the same thing.

Cannon

Qwiss! wrote:
Cannon wrote:
The poll should have been

1-2

2-3

3-4

Outside top 4

No it shouldn't. 1 and 2 are not the same thing.

But why not? Who said that?

Claudius

Might as well make it 1-3, 2-4, 3-5 while you're at it, no?

Cannon

Claudius wrote:
Might as well make it 1-3, 2-4, 3-5 while you're at it, no?

You are not making this fun Claude...

mohan

You guys have too much free time

Mirth

😆

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