European clubs spent $1 billion last year buying players from other teams. Will Euro 2008 kick off a new round of player megadeals?
For the players representing their countries at Euro 2008, there's a lot more at stake than just qualifying for the tournament's knockout stages. The three-week event also allows the Continent's soccer stars to showcase their skills in an attempt to land lucrative deals with top soccer clubs.
The prospects for a big payday have never been greater. According to consultancy Deloitte, European clubs such as Spain's Real Madrid and England's Manchester United spent more than $1 billion last year buying players from other teams, a two-thirds increase over 2006. That doesn't even include the salaries paid to the players themselves. Meanwhile, agents, coaches, and players are banking on this summer's soccer championship to kick off a new round of megadeals.
"Euro 2008 represents a shop window for players to show off their talent," says Alex Byars, a senior consultant at Deloitte's sports business group. "It will definitely generate interest [from clubs], even create a few stars."
How much could a player expect to earn after playing well at Euro 2008? Well, Europe's top stars, such as England's Frank Lampard and France's Thierry Henry, already pocket more than $10 million each year. That's before they sign sponsorship deals with the likes of Adidas (ADSG.DE) and Gillette (PG), which can more than double their starting salaries.
With so much money at stake, rumors abound over which standout players from this summer's tournament are set to ink multimillion-dollar deals. Topping most lists is David Villa, a Spanish striker currently playing for domestic club Valencia but who could soon be joining the starting lineup for one of Europe's top-tier teams. Villa's transfer fee (the price paid between clubs for a player's rights) could easily exceed $30 million, and his new annual salary could match the $12.4 million pocketed by his Spanish teammate, Fernando Torres.
The soaring cost of European soccer players (BusinessWeek.com, 06/06/08) coincides with the growing financial firepower of Europe's top clubs. Lucrative international TV contracts, multimillion-dollar sponsorship deals (BusinessWeek.com, 06/06/08), and rising ticket prices have flooded the game with cash that clubs have used to buy European—and global—stars.
Leading this economic revolution is the English Premier League. Unlike their competitors around Europe, England's clubs negotiate media rights collectively. That has given them the upper hand over the likes of British Sky Broadcasting (BSY.L) in securing a $4.6 billion contract for global TV rights for the next 3 years. Such figures put the Premier League on the same footing as the U.S.'s National Football League and National Basketball Assn..
A "Financial Champion"
Deloitte's Byars says the Premier League has also maximized its revenue streams by investing in state-of-the-art stadiums with a large number of corporate hospitality suites that increase game-day sales. "It has made the [Premier League] the financial champion of European football," he says.
No wonder, then, that English clubs are expected to spend big after Euro 2008 finishes. London-based powerhouse Chelsea has already spent $32 million to grab Portuguese defender Jose Bosingwa away from FC Porto, while city rival Tottenham Hotspur has spent an estimated $30.6 million to buy Croatian sensation Luka Modric from Dynamo Zagreb.
There's so much money flowing into the sport that specialized funds are now cropping up to invest in younger and younger talent. Firms such as Britain's Hero Investments and Portugal's Football Players Funds Management let syndicates of investors buy the rights to potential future stars who are sometimes still only in high school. The funds then take a cut of future transfer fees when the players move from one team to another.
These funds say they expect to offer double-digit returns for investors, but financial advisers reckon buying shares in up-and-coming players is a risky play. Injuries could easily curtail a promising career, and the Union of European Football Associations, the sport's regulatory body, is considering outlawing third-party ownership of soccer players.
That won't stop Europe's top clubs from continuing to dish out big money for proven talent. Several multimillion-dollar transfers have already been announced in recent weeks, and further deals are sure to follow before Euro 2008 comes to an end on June 29.