Home > Sport > Why Neymar’s transfer fee could make economic sense.

Why Neymar’s transfer fee could make economic sense.

September 10, 2017 Leave a comment Go to comments

Late August is often a very busy time for football clubs as the transfer window closes and this year was no exception with Neymar da Silva Santos Junior being signed by French club Paris Saint-Germain (PSG) from Barcelona for a staggering €222m. How can a club afford a record signing – more than double the previous record price for a footballer? To put this is perspective Paris Saint-Germain is owned by Oryx Qatar Sports Investment, a privately held company based in Doha, which is in fact an investment vehicle for the Qatar government. Neymar will cost PSG’s owners about €500m over five years but he is an investment which the club hope to take advantage of.

From PSG’s perspective, the price tag requires close scrutiny. Although transfer fees have generally increased with the sport’s revenues over time, their share of clubs’ overall spending has remained more or less steady: big clubs are reluctant to surrender more than a quarter of their annual revenue on a single player. Just four of the 19 European transfers so far to have cost €60m or more have exceeded this threshold. Neymar’s deal blows through it: he is likely to cost PSG around 40% of next year’s turnover (see chart below). No top team has spent such a large chunk of its income on a player since the signings of Mr Figo and Zinedine Zidane at the turn of the century. The only other player to command more than 25% of a club’s revenues was Radamel Falcao, who was bought shortly after AS Monaco won promotion from France’s second division, where broadcasting and sponsorship revenue are much lower.

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So how will PSG recoup the cost of Neymar?

  • Match day tickets and corporate hospitality sales.
  • Broadcasting rights – domestic leagues, cups and Champions League.
  • Commercial sources – playing kit merchandise – on the day the signing was announced fans queued up at the PSG merchandise shop and bought over 10,000 shirts at $118 each. Additional sponsorships and image rights given Neymar’s marketability. 59% of PSG’s revenue of €520m last year was commercial i.e. other than ticket sales and broadcasting fees.
  • Instagram – Neymar has more followers on Instagram than Nike and this following will help PSG negotiate a deal greater than the current €24m it receives from Nike each year. Barcelona are to receive €155m from 2018 for wearing a Nike playing strip.
  • Overseas supporters – Manchester Utd are the most popular team on Chinese social media although they haven’t qualified for the Champions League for the last couple of seasons. If Neymar can bring success to PSG maybe this will open the door to new and much bigger markets.

A good performance in the Champions League will no doubt lessen the burden on PSG – only time will tell. Their campaign starts on Tuesday with an away game at Celtic.

Source: The Economist – August 12th 2017

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