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European Market Frenzy
by Paul Kennedy, October 1st, 2007 7:48PM

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TAGS:  england, france, germany, international, italy, spain

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Spending on the European summer transfer market reached $2 billion in 2007. What's behind the spending boom? And who spent wisely and who spent foolishly?

 

Spending on the European summer transfer market - the two-month window during which European teams stock up on players for the new season - reached $2 billion in 2007.

Two forces are behind the explosion of fees clubs are paying for players: the increase in rights fees television networks are paying leagues (or clubs directly) and the influx of wealthy owners, many of them foreigners from outside Europe.

Here's a look at the dynamics at work in across Europe and how the big clubs have reloaded for the domestic and European campaigns.

 

American owners dip into market

ENGLAND. New owners and a new TV deal are at work in the Premier League, where five clubs spent more than $70 million each on summer transfers.

The biggest factor in the increase in transfer fees - and salaries - in England is the increase in fees television broadcasters will pay English clubs over three years - a record $4.6 billion, an increase of 70 percent over the previous agreements. Each EPL club should receive about $100 million a year beginning in 2008-09.

Both Manchester United (Glazer family) and Liverpool (Tom Hicks and George Gillette) have American owners. Manchester City was recently sold to former Thailand prime minister Thaksin Shinawatra.

Net EPL spending - money spent on transfers minus money received for transfers - increased $160 million to roughly $540 million in 2007.

The bulk of the transfers involved players signed from foreign clubs.

Following up on the success of Cristiano Ronaldo, signed as a teenager from Sporting Lisbon, Manchester United signed 20-year-old Portuguese winger Nani from Sporting and 19-year-old Brazilian Anderson from Porto for a combined outlay of more than $40 million. Performance clauses in the transfer deals - fees to be paid based on the success of the two players at Old Trafford - could boost the value of these deals to more than $60 million.

Any doubts about the willingness of Hicks and Gillette to spend money on the transfer market - a foreign conception to American sports owners - were laid to rest when Liverpool bought Fernando Torres for $49.5 million.

Liverpool manager Rafael Benitez brought in seven players in deals valued at more than $1 million. Dutchman Ryan Babel (Ajax) and Brazilian Lucas (Gremio) set the Reds back more than $30 million.

The arrival of Shinawatra as owner and the continental-leaning Swede Sven-Goran Eriksson as manager was sure to trigger massive spending at Manchester City, which brought in two Brazilians, two Bulgarians, one Italian, Spaniard, Portuguese and Croat at a cost of $74 million.

City's net outlay of almost $65 million was the second most of the EPL clubs behind only Manchester United at $67 million.

Tottenham's $33 million purchase of Englishman Darren Bent - a decent but hardly spectacular striker - from Charlton was presented as evidence of the folly of the transfer market. Spurs' total spending of $80 million looked foolish when it got off to a poor start.

Backed by the Drumaville Consortium, a group of eight Irish and one English businessmen, promoted Sunderland rounded out the top five EPL spenders at $70 million.

Conspicuously absent from the top five in EPL spending was Chelsea, whose owner Roman Abramovich had spent hundreds of millions of dollars in recent years. The Blues' outlay was limited to $30 million on the summer transfer market.

 

Revenue boost for Real Madrid and Barca

SPAIN. Real Madrid was the big spender on the summer transfer market, paying more than $160 million on new players in summer 2007, including the acquisition of Dutchman Arjen Robben from Chelsea for a reported $49 million - the second-highest fee of the summer.

Dutchman Wesley Sneijder looked to be a bargain at more than $30 million, as the Ajax signing got off to a sensational start with the Merengues.

By contrast, the $40 million spent on Brazilian-Portuguese defender Pepe was surely the most questioned of the big international deals.

Barcelona spent roughly $100 million, including $30 million on Arsenal star Thierry Henry."

"Looking further afield," said Alan Switzer, director in the Sports Business Group at Deloitte, "it comes as no surprise to see Real Madrid and Barcelona spending at least as much as their English rivals on transfers, given that they have the highest revenues in world football in 2005-06."

Real Madrid and Barcelona negotiate their own TV deals, which will earn them about $200 million a year beginning in 2008-09.

Atletico Madrid also spent in the neighborhood of $100 million, but its costs were offset by the $49.5 million it will get from Liverpool for Fernando Torres and approximately $25 million it will receive for four other players.

 

Juve excesses lead to concerns

ITALY. Juventus was the top spender in Italy at almost $60 million, but an heir to the family that owns the club has warned that the Old Lady's big-spending days may be over.

John Elkann, vice president of the FIAT group and grandson of the late Gianni Agnelli, said the excesses of former general director Luciano Moggi and former chief executive Antonio Giraudo had to be avoided.

Moggi and Giraudo were at the center of last year's game-fixing scandal that rocked Italian soccer and forced Juventus to be relegated to Serie A. They were forced to quit Juventus over their involvement in the scandal.

"Moggi and Giraudo's spending was unsustainable," the 31-year-old Elkann told Italian newspaper Corriere della Sera. "They made up for it by factoring in the increase in value of players [on the balance sheet], but it couldn't go on like that."

Defending European champion AC Milan ranked only 26th the list of top spenders on the European transfer market, but it wasn't for the lack of effort.

The Rossoneri offered big money for Barcelona's Ronaldinho and Samuel Eto'o but were rebuffed in their bids.

Ditto for the defending Italian champion Inter Milan and its efforts to sign Frank Lampard from Chelsea.

No Italian club spent more than $20 million on one player, and the most costly player - Brazilian U-20 star Alexandre Pato - isn't even eligible to play for Inter until January.

 

Bayern opens up pocketbook

GERMANY. In the Bundesliga, there was Bayern Munich and everyone else. Never has Bayern spent as much as the $94 million it shelled out on the 2007 market, but then again never has Bayern had as poor a season in recent years as it did in 2006-07 when it missed out on a place in the lucrative Champions League - a mistake it won't want to make again.

The big three Bayern deals have added much-needed punch to the attack: Frenchman Franck Ribery from Marseille in a deal whose value could top $30 million, Italian forward Luca Toni from Fiorentina for $13 million and Polish-born German international Miroslav Klose from Werder Bremen for $12 million.

Only one other German club ranked in the Top 25: Wolfsburg, which spent more than $35 million. Brazilian forward Grafite was signed from French club Le Mans for a fee of $10 million.

 

Ligue 1 teams cash in on market

FRANCE. Of the clubs entered in the 2007-08 UEFA Champions League, French club Lyon was the big winner on the summer transfer market - the big winner on the bottom line.

OL spent almost $40 million on new players - signing Ivorian Kader Keita and Mathieu Bodmer from Lille and Italian Fabio Grosso from Inter Milan - but it received almost $80 million in deals. French international starters Eric Abidal (Barcelona) and Florent Malouda (Chelsea) brought in more than $45 million, while OL agreed to almost $17 million in the deal to sell Brazilian Tiago to Juventus.

Marseille, whose owner Robert Louis-Dreyfus has been unsuccessful in his bid to sell the club, hit the jackpot with its sale of Ribery. The $13 million profit it made on the 2007 market offset the $10 million it lost last year.

First Division clubs collectively finished in the black to a tune of $130 million, reflecting their concern that TV network Canal Plus will seek a reduction in its TV rights fees next season.

The success of Lorrain club Nancy - first in Ligue 1 after the first month of the season - may make other winners think twice about their market policy.

Nancy didn't spend one euro on the summer market.

 

Big spenders in Eastern Europe

ELSEWHERE. The biggest trend on the European market has been the arrival of big spenders from Eastern Europe.

Ukrainian club Chakhtar Donetsk spent more than $50 million on players, notably Mexico star Nery Castillo, who arrived from Greek champion Olympiakos for $20 million.

Donetsk has opened a pipeline to Brazil and also acquired Willian (Corinthians) and Ilsinho (Sao Paulo) in deals totaling $30 million.

Also active on the summer market was Russian club Zenit St. Petersburg and Ukrainian power Dynamo Kiev (17 foreigners on its first-team squad!). Both spent more than $25 million.

Behind the recent emergence of Russian and Ukrainian clubs as major players on the transfer market is big money being pumped into soccer.

Donetsk is owned by oligarch Rinat Akhmetov, while Zenit has the backing of Russian energy giant Gazprom.

(This article originally appeared oin the October 2007 issue of Soccer America magazine.)

 

 

 



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