For professional soccer teams August often is the costliest month, the month when they make vast bids for each other’s players. This year has been particularly lavish. Early this month, Paris Saint-Germain, a French team, signed Neymar da Silva Santos Jr., a Brazilian forward, from Barcelona for $264 million, more than double the previous record price for a soccer star.
With three weeks of the transfer “window” left, teams in Europe’s “big five” leagues—the top divisions in England, Spain, Germany, Italy and France—have paid $3.75 billion, barely shy short of the record of $4 billion set last year. The $210 million splurged by Manchester City, an English team, on defenders alone outstrips 47 countries’ defense budgets.
Arsène Wenger, a veteran manager of Arsenal, a London team, who holds a degree in economics, described the modern transfer market as “beyond calculation and beyond rationality.”
Counting the $233 million PSG had to pay to Barcelona as a “release fee,” Neymar, as he is known, will cost the team’s owners, a branch of Qatar’s sovereign-wealth fund, about $587 million over five years. In the betting markets his arrival has boosted PSG’s implied chances of winning the Champions League, Europe’s most coveted club competition—but only from around 5.5% to about 9%. Prize money and ticket sales alone will struggle to generate enough revenue to recoup such an outlay.
That does not make Neymar a bad investment. The goals he scores may matter less than the gloss he lends to the club’s brand and the sponsors he will lure. He earns more from endorsements than any soccer star except Cristiano Ronaldo and Lionel Messi. Some 59% of PSG’s 2016 revenue of $610 million was commercial, meaning other than ticket sales and broadcasting fees, more than any other club in the big-five leagues. Neymar has more followers on Instagram, a social network, than does Nike, his main sponsor and the provider of PSG’s equipment, for which privilege it pays $28 million a year. Neymar’s popularity will help PSG when this deal is renegotiated: Nike already has agreed to pay Barcelona, his former team, $182 million a season as of 2018.
As long as teams’ revenues keep growing, the transfer boom is likely to persist. Broadcasting revenue, the game’s first big injection of cash in the 1990s, has become, in the internet era, the weakest link. British television audiences for live games have dipped, as some fans opt for illegal streaming sites or free highlights. Zach Fuller, a media analyst, reckons that signing a sponsorship magnet such as Neymar is a hedge against volatility in that market.
Audiences are more robust elsewhere: Around 100 million Chinese viewers tune into the biggest games. Manchester United is the most popular team on Chinese social media, despite having qualified for the Champions League only twice in the past four seasons. It has overtaken Real Madrid, which has won the trophy three times in the same period, as the world’s most prosperous team.
If Neymar unlocks new markets as well as he does defenses, then PSG may have backed a winner.
© 2017 Economist Newspaper Ltd., London (August 12). All rights reserved. Reprinted with permission.
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