The real cost of a modern-day footballer - everything you need to know
Apart from just transfer fee and wages, there is a lot more that goes on behind the scenes to ensure clubs adhere to Financial Fair Play regulations
Most European leagues are winding towards the close of the 2014-15 season. While the off-season can generally be a time of great boredom for most footballs fans, the one saving grace of this time period is the reopening of the transfer window.
Clubs will be looking to strengthen, upgrade and clear out their squads to maximize the possibilities of achieving the targets that would have been set for them in the upcoming season. Every summer has one or two major transfer sagas that play out, and this season promises to be no different.
While last year was relatively quiet, this transfer window will almost certainly see a bidding war between most European superclubs for Juventus’ talented midfielder Paul Pogba, as well as the continuing uncertainty regarding Gareth Bale’s future at Real Madrid. Some of Europe’s hottest talents such as Koke, Antoine Griezmann, Raheem Sterling and Mario Götze will also be the subjects of transfer speculation.
The biggest transfers in European football often involve huge amounts, often well over the €50 million mark. But while such amounts are eye-catching and are usually the only numbers that are reported, the real cost to clubs is calculated differently.
Transfer fees are convenient and make for easy comparisons of value, but are not necessarily indicative of the actual costs of footballers. There are many other factors that are involved and are often not considered while assessing the real-world costs that a club incurs while making these transfers.
Let’s start with the first and most obvious factor: wages. Naturally, clubs have to pay the players once they acquire their services from the selling club. Usually, when players in their prime transfer from one club to another, it is accompanied by a hike in wages as well. It’s the wages themselves that are often the stumbling block in clearing transfers.
For example, Fernando Torres’ £50 million transfer from Liverpool to Chelsea was accompanied by a 5-and-a-half year contract at an estimated £180,000 per week; this is why Chelsea found it particularly difficult to move the misfiring striker off their books, as no club was willing to fork out that kind of money for a striker who only scored 20 league goals in 110 games.
Players are obviously entitled to the money they are owed under contract and few, if any, young players would be willing to take a wage cut.
Transfer fee and method of payment
It would probably be helpful to explain exactly how clubs record player transfers in their accounts. For Financial Fair Play (FFP) purposes, UEFA has allowed clubs to report their income in two different ways. (If you’re inclined, you can find UEFA’s 85-page document on the workings and rules of FFP here).
The first method is to show all incoming transfer fees as expenses, which is the most convenient way of doing things. Player purchases would be a one-time expense while player sales would be a one-time income. Calculating profit or loss would simply be a matter of subtracting expenses from incomes.
However, most clubs would not use this method for a variety of reasons. While it would allow for quick fixes to large losses by selling players, it would also make it very difficult to consistently break even.
Clubs using this method would likely show seasons of large profit and large loss at varying points of their accounting, and that would affect the calculations for the extent of losses clubs are allowed to make under FFP Rules. It would prevent sustained spending by European clubs (even the ones that would seem to have the finances to do so).
Thus, most clubs would take Option 2: amortization of transfer costs. This means that the cost of the purchase can be evenly spread over the length of the contract. For example, a player purchased for £10 million on a 5-year contract would have his transfer fee spread out over the 5 years he was under contract, working out to an even £2 million per year.
This, of course, doesn’t mean that the club is actually paying £2 million per year to the selling club (for convenience, most transfer fees are paid in full or in instalments over the next year).