Power of the Premier League dominates transfer market

THE PREMIER LEAGUE spent the equivalent of US$ 2.2 billion in transfers in 2022, according to the latest FIFA Global Transfer Report. Of the top 20 spenders, 11 came from the Premier, with Manchester United topping the list.

FIFA revealed that transfers were up 11.6% in 2022 and exceeded 20,000 transactions for the first time. Surprisingly, only 2,843 deals included a fee and 17,366 had no fee at all. There were just 276 deals of more than US$ 5 million. While 2,679 transfers were permanent, the vast majority, over 13,000 were cases of players being out of contract. In total, transfer fees were up by 33% to US$ 6.5 billion, although this was still below the expenditure of 2018 and 2019. Of this, US$ 5.8 billion was attributable to UEFA members.

Sell-on fees are gaining in popularity, rising by 35% in 2022, but these are feasible only on permanent deals and loans, the true figure is 42.1%. These clauses are more appropriate for transfers of younger players with plenty of upside in their careers, hence 72.8% of transfers of players under the age of 18 include a sell-on. In the age group 18-23, these fees are included in 45.7% of contracts.

The Premier League was involved in eight of the top 10 deals by value, including six purchases and two sales. Among the transactions were Liverpool’s acquisition of Darwin Núñez from Benfica, Manchester United’s purchase of Real Madrid’s Casemiro and the bargain € 60 million paid by Manchester City for Borussia Dortmund’s Erling Haaland.

Brazilian players, as ever, are the most popular in the market, with 2,061 deals in 2022 valued at US$ 843 million. Argentina is next in the ranking with 1,004 transfers totalling US$ 380 million. From a European perspective, French players are sought after, as evidenced by the 921 transfers valued at US$ 592 million. The busiest transfer route is Brazil to Portugal, which accounted for 338 transfers, more than double the next busiest, which was Portugal to Brazil. In terms of fees, the most valuable route was France to England, which generated US$ 355 million in transfer fees.

The Premier League’s ability to lure top talent is demonstrated in Football Benchmark’s top 50 players by value. The Premier has 46% of the 50, including seven with Manchester City and five at Liverpool. Seven of the 50 are English and 16 of the Premier’s 23 are foreign.

CIES Football Observatory calculated that in 2022-23, Chelsea have outspent everyone in Europe, their 15 transfers totalling € 555 million, more than twice the amount spent by Manchester United. One controversial aspect of Chelsea’s market activity has been the length of contracts being offered to some players, notably the seven years offered to Wesley Fofana and Benoit Badiashile. FIFA’s report stated that the average for contracts over US$ 500,000 was 32 months.

The current transfer deadline is still a few days away, but the Premier League has already spent more than £ 450 million, a record for the January window. Whatever else is going on in the world, for the Premier it is business as usual.

US appetite for English football – no sign of abating

A YEAR ago, Arsenal fans were calling for owner Stan Kroenke to ship-out of North London, Manchester United’s legions were pouring hatred on the Glazer family and Todd Boehly was a relatively unknown figure in English sport. Move the dial forward and Boehly and his consortium now owns Chelsea, the Glazers are supposedly looking for the best exit route from Old Trafford and Arsenal are standing astride the Premier League and all in the garden seems rosy. Nobody appears to be calling for Kroenke to leave the Emirates Stadium, proving that nothing lasts forever in football, not even the ire of dissatisfied customers.

US football club ownership is a growth industry: In 2022, Chelsea and Bournemouth were acquired by American investors, bringing the number of 100%-owned Premier clubs to six and another four that have minority US investment. Almost half of all Premier League revenues in 2021 were earned by US entities.

With Russia and China seemingly out of the picture, the most likely type of investors in English football are from the US or the Middle East. While the US sports team owner seeks some form of return, the likes of Saudi Arabia, Abu Dhabi and Qatar are looking for credibility and a way to improve their image. American owners are very different from the former Chelsea benefactor, Roman Abramovich, who poured money into the club and only asked that he could exercise his power by hiring and firing his managers.

The appeal of clubs from England and the other top football markets is driven by the revenue potential of the leagues, notably from commercial and broadcasting income streams that have grown enormously in the past decade. “There’s a feeling that these markets are not yet saturated, so there’s still scope for growth,” says former investment banker Craig Coben. “And the clubs have enormous fanbases that go back decades, with a degree of fan loyalty stickiness which can be leveraged.” US investors believe the longevity of the clubs, a crucial part of the heritage of English football, creates a certain type of immunity from business obsolescence.

There is a downside for US sports investors in that European leagues are open and clubs can suffer relegation from elite divisions, thereby decimating their income. This is in stark contrast to US structures. “Relegation can be an enormous blow, not just for the clubs, but also the owners,” adds Coben. “In the US, salary caps, the lack of relegation and the so-called college draft that enables less successful teams to have first choice on emerging young talent, all act as a stabilising mechanism.” It also means US team owners, because of greater certainty, can implement greater levels of cost control and future planning.

Coben describes Premier League football as a “hook and claw, somewhat carnivorous league,”, a form of “survival of the fittest”. Nevertheless, the cut and thrust of English football, indeed the European game, does not seem to have deterred partners. “Some have lost their shirts on football, but more recently, data has been informing decision-making. The US is at the forefront in the use of data and this has given investors greater confidence to enter the market,” says Coben.

There’s little doubt the value of elite football clubs has risen substantially over the past 10 years. When Boehly’s consortium purchased Chelsea, £ 4.25 billion changed hands. Abramovich, in 2003, paid Ken Bates, the Chelsea chairman, just £ 140 million for the club. When both Liverpool and Manchester United’s owners suggested they were open to offers for fresh investment, the anticipated valuation of the clubs fluctuated wildly, with United hitting the US$ 5 billion mark. “The top names haven’t just spent a lot of money on players and wages; at the same time, the strategic approach of some clubs has also dramatically increased the value of their franchises,” says Coben.

The value of club brands, a reflection of global franchise building, has also climbed substantially – in 2012, Manchester United’s brand was valued at US$ 853 million but by 2022, it had grown to US$ 1.45 billion. Manchester City, meanwhile saw their brand value rise from US$ 302 million to US$ 1.5 billion (source: Brand Finance). Contributing to this impressive growth rate has been broadcasting fees, increased sponsorship and the increasing polarisation of European football.

Will it continue or is the US penchant for European football assets a passing phase? With the global economy on the brink of a downturn and the ongoing war in Ukraine threatening to turn the lights off across parts of Europe, there will be challenges. “A lot of potential owners are very well capitalised and there is a high level of innovation that can access green-field opportunities in football, but after all is said and done, spending money on football is discretionary, so if the macroeconomic situation deteriorates, that could change investor sentiment. At the moment, however, it is difficult to see the current appetite subsiding,” says Coben.