The football trade

My apologies in advance to those whose eyes glaze over when I write about soccer. But if you bear with me here, I am actually looking at the business of football, rather than the game.

Nevertheless, first a bit about the game. Yesterday, as some readers may know, was the last day of the ‘transfer window’ (more correctly called the ‘registration period’). What this means is that for four weeks in January ending on the 31st (and later for 12 weeks in the summer) players can transfer between football clubs. But this isn’t about players making career moves at their own initiative; it is more about clubs buying and selling players as tradable assets. This is so because whenever a player who is under contract to his club transfers, the ‘buying’ club has to pay a fee to the ‘selling’ club representing the asset value of the player. So if this a player who is in good form and has time left on his contract, any club wanting to acquire him will need to pay a large fee. And I really do mean large. Yesterday Newcastle United FC (the club I support) sold its star player, Andy Carroll, for a reputed £35m to Liverpool.

If you’re still with me, let me briefly look at the football logic of this. I say briefly, because there isn’t any logic. Carroll has so far scored 11 goals this season, and he is one of the Premier League’s top scorers. Newcastle were promoted from the (lower) Championship last summer, and Carroll’s productivity has been important in keeping them up in the premiership. While most observers would consider Newcastle to be a fairly safe bet for staying up, it’s not yet in the bag, and anyone looking at the football prospects rationally would say that Carroll should have been a vital contributor to a successful outcome. Nor is the £35m income helping the club in any way, because it has come too late to spend it on a replacement player. Just to reinforce all this, Newcastle manager Alan Pardew said repeatedly that Carroll would not be ‘for sale’ in the transfer window. And yet, he was sold.

So if there is no football sense in what was done, what was the point of it? And here’s an intriguing thought. What if Newcastle United owner Mike Ashley isn’t dealing in football strategy at all, but instead is pursuing objectives relating to his club’s balance sheet? What, in fact, if he doesn’t actually have any football strategy – I mean at all? Here’s how it might look. Andy Carroll has come through the ranks at Newcastle, where he has been for his entire playing career to date. He came to prominence last year when Newcastle successfully returned to the Premier League from the Championship, aided significantly by his success as a striker. His run of good form has continued in the current season. So now he has become a valuable player. If your strategy as a club owner was to get the team into the top places in the premiership, you would hold on to him, regardless of what other clubs were offering. But what if you didn’t care about that, and if what you wanted was to make money by trading? Then of course you’d sell him, if you were offered that kind of money.

So Ashley’s business model for Newcastle may be that it will make money from developing and then selling top players. This strategy would work best if the club is not in the top premiership places. Why? Because to get there and stay there you have to invest big money and hold on to key players. For this strategy the club does need to be in the premiership, but a place somewhere in the middle of the rankings would be perfect. So you make good but not overwhelmingly excellent players the backbone of the club, and you put into such a group a small number of hugely promising players. You build them up until they have a real asset value. And then you sell them. The club keeps its place somewhere between 9 and 14 in the league; your outlay is manageable, and your sales make big money.

Can this strategy work? On paper, yes – but I suspect not in practice, thankfully. The reason why it will ultimately fail is because the overall mix of the business model must include fan loyalty: supporters buy tickets and products and provide morale boosts for the team. But the enthusiasm of the supporters depends heavily on what I might call ‘the dream’. This is the belief that, perhaps, this club will one day be right at the top. It keeps the wheels of the club’s business turning. If it became clear that the dream is just that and that the owner has no intention of pursuing ultimate glory, that would change all the atmospherics and, I suspect, the business would no longer work. So the strategy works only as long as no-one knows that it is the strategy.

Apart from anything else, what this tells me is that having rich businesspeople owning football clubs is not good for the game. Indeed, all this excessive money that has been fueling the game has distorted it. I hope that all come to see reason before football as a genuine sport dies, the victim of inappropriate business strategies.

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6 Comments on “The football trade”

  1. NiallM Says:

    So Ashley wants to keep NCFC away from the top of the Premier League? Well, it would explain the sacking of Chris Houghton!

  2. anna notaro Says:

    “If you’re still with me, let me briefly look at the football logic of this. I say briefly, because there isn’t any logic.” Wellcome to the football version of Orwellian *doublethink* Ferdinand.
    “But the enthusiasm of the supporters depends heavily on what I might call ‘the dream’.”
    The parallesisms one could draw with academia! Hmmm… tempting but better not go there 🙂

  3. katja Says:

    comparing this to teams in other professional leagues and countries but in similar situations, ‘elevator clubs’ are (Football Club of Cologne) driven by managers trying to make money for stakeholders or even shareholders. If any, a bit of investment goes into the development of young talent. However, they can do this because they have enough fan-mass backing the club. Look at the NHL club Toronto Maple Leafs: never getting to the play-offs and yet they play in front of a sold-out crowd everytime.
    one interesting detail about the German team: the membership has not confirmed the voting of the manager to renew his post. with the new management, the strategy has changed, for now.
    Perhaps there is (some) hope…

  4. Kevin O'Brien Says:

    with the Irish team in mind, I am hopeful that Leon Best emerges as a top class striker, and is able to fill the gap Carroll leaves behind.
    (I also hope Conor Sammon starts knocking a few in for Wigan)

  5. John Smith Says:

    In attempting to guess whether there is any other business strategy in place at NUFC other than take the maximum out and put the minimum investment in whilst preserving PL status, it would be wise to look at the relative wealth of Mr Ashley compared to the owners of the big clubs. Amramovic, JWH and Sheik Mansour all have a worth far in excess of the NUFC owner. As for Manchester United, their financial capabilities are based more around on-field success and the ability to acquire great players due to the desire to join a team with a (recent) history of success. Out of the top teams, only Arsenal who operate a buy to (eventually) sell policy could be copied by NUFC. In order to do this they would require a manager with the reputation of Wenger to obtain the best young talent. I do not think Mr Pardew currently holds such status. Even if he did, Arsenal now have the greatest match-day turnover (and due to implementing a strict wage structure, the greatest profit margin also) and so will only grow financially stronger each year providing relative (top 4) success is maintained. Only today they have offered one of their brightest and best, Nasri, a five year deal at £75k a week, only £5k short of what Liverpool are now paying Carroll.

    With regards to Carroll, I think they were right to sell. They require 3 wins from 15 games to virtually guarantee PL status and the league is not of a high standard this year. The game is littered with players who have had a good season and not reached their potential over the long haul. Carroll is equally likely to be in a Broadmoor XI as he is in the England XI.

    Where NUFC will fall down will be in re-investment. To a large extent, if you are not a top 6 team, finding one good player such as Carroll is nothing more than a guaranteed future sale. I would rather see the £36M invested in the way of scouting to find the next generation of potentials before the big clubs wade in. Spending the £36M on two players at £8M each with £40k a week salaries over 5 years (which accounts for the full £36M) may well have little impact in driving the business forward.

    The business model should be based around early identification of potential, strong youth recruitment, and partial asset turnover to maintain the financial viability of the model. Scour the planet, recruit 10 potentials, hope 4 make it, sell on the best player at an exhorbitant fee, keep the remaining 3 in the squad. Do this well for 5 years and you will have 15 players in the age group 17-22 in your squad with a healthy set of accounts to boot. The whole system only works if you have a solid infrastructure with a persistent manager (no new manager every 6 months a la NUFC) and some of the worlds best scouts. Mt Carr, NUFC’s current head scout, is such a scout, finding international class players such as Ben Arfa and Tiote for relatively modest fees. With sufficient resources spent on assistants and networking infrastructure, could he find 5 a year? That is the real question if you are looking for a financially inferior business to compete in the big leagues.

    FYI I was born in Newcastle, lived there for 20 years and have spent the last 20 in Scotland and currently reside in Aberdeen, who are also faced with a history of success which amounts to little more than a burden that they cannot compete any more for the same reasons as NUFC mentioned above.

    Regardless, I will still be hoping NUFC can do the ‘business’ out on the pitch tonight at Craven Cottage.

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