20th July 2017
The Truth about Transfers
1. The first ‘truth’ about football transfers is that 90% of what you read isn’t true! Mostly it is fabricated gossip for no purpose other than to sell newspapers or, in the current era, to generate clicks. But some of it is planted or leaked by intermediaries, agents, clubs, even players, to further a particular agenda. It has a purpose but it’s still lies. And the effect of modern media is to amplify the noise; ‘the Mail reports that Footy365 claims that an Italian site says …’, etc.
2. However, in amongst the haystacks are the needles; the genuine potential transfers that real journalists have actually researched or been tipped off about. But most transfers are highly complex transactions, especially the high profile ones involving big clubs, top players and large sums. Many of them fail to complete for all sorts of reasons. Unless the transfer completes, a rumour based on fact turns out to look like just another piece of straw in the haystack.
3. A transfer involves three simultaneous negotiations; (i) one between the two clubs involved (ii) another between the buying club, agent and player on the player’s personal terms (iii) a third between the buying club and the player’s agent on the agent’s fee. The only exception is where a player is out of contract and therefore no selling club is involved. Obviously where there are two buying clubs both trying to attract and bid for the same player, the negotiations can become even more complex (and the media leaks even more confusing).
4. Many fans imagine that the multiple millions involved in a transfer imply that the headline amount is then immediately transferred from the buying club’s bank account to the selling club’s bank account. In reality, that rarely happens. Most transfers involve ‘stage payments’; an initial payment on completion of the deal, one or more stage payments after a year or two, and a final top-up payment if various targets are hit (appearances, etc.). For example, Bale’s transfer to Real Madrid involved several stage payments to Spurs. However, Levy negotiated that the stage payments were underwritten by a Spanish bank (using Promissory Notes) so that Spurs, in turn, could take those future payments to a UK bank and get cash for them in advance (less an interest amount deducted for the UK bank). Kyle Walker’s transfer to Man City was unusual in that Levy extracted a lump sum (reportedly £45m) upfront from Man City to improve Spurs cashflow. Only a modest balance remains payable by Man City in future to complete the £50-53m total fee.
5. The Accounting of transfers largely reflects the above. The fee to buy a player is amortised over the life of his contract. So, the £30m Spurs reportedly paid for Sissoko is spread over 5 consecutive years in Spurs’ Accounts (at £6m per year), regardless of when the money is paid to Newcastle. Sissoko himself earns, say, £60,000 per week, plus £25,000 of potential bonuses and add-ons weekly equivalent, to give a reported ‘wage’ of £85,000 per week. Assuming Sissoko ‘only’ earns £3 million p.a. (£60k per week and no bonuses on top), then his total cost to Spurs is £9 million a year (£6m transfer fee + £3m p.a salary). Meanwhile, Harry Kane’s total cost to Spurs is ‘only’ £6 million a year (no transfer fee + £6m p.a. salary, assuming Harry’s bonus targets are hit so he earns his full reported £120,000 per week).
6. Transfers should be seen as a last resort. Not as the first thing a chairman or manager plans to do to improve the team willy-nilly every transfer window. The fact that Kane only costs two thirds of what Sissoko costs, highlights the importance of developing one’s own players. This is particularly true in today’s market. The £45m cash received for Kyle Walker could be spent buying two new £20-25m players (leaving aside their salaries). OR it could be spent giving every single one of Spurs’ top 15 players a £30k per week salary increase for 2 years! The maths is the same. Both alternatives add up to £45million. Transfers should aim to fill gaps that the squad and academy can’t.
7. In the past, transfers involved hurried negotiations in motorway service stations. Bill Nicholson and Brian Clough drove up the M6 to meet a player and somebody from the selling club at some convenient halfway point. A deal would be done on a simple contract and a handshake. Nowadays transactions are conducted via phone call (initially) and then WhatsApp (group chat). The various people involved can all see the latest comments in writing and refer back. Proposals are batted to and fro. There’s much less danger of a ‘he said this, no he said that’ dispute or misunderstanding later compared with numerous bilateral phone conversations.
8. There is a myth that clubs can recoup large proportions of transfer fees via shirt sales. This isn’t true. Kit deals are licensing deals where the manufacturer (eg. Nike, Adidas, Under Armour) uses the club’s brand to sell shirts and pays a royalty fee to the club on every shirt sold. Fans who buy shirts will buy one per season and choose the name of their favourite player on the back. Very few fans have more than one shirt with a different player’s name on each. And very few go out and buy another 2017/18 shirt just because somebody new has been signed. Of course, a few extra shirts might be sold in the country where a new player comes from. For example, Spurs sold more shirts in Korea when they signed Son. But the extra royalties Spurs earned on those Korean shirt sales wouldn’t have made much of a dent in the £22 million paid for Son.
9. Agents are leeches. Yes, at one level, agents are extracting huge amounts from ‘the game’, in the form of fees charged to clubs and players. But are they really that different to actor’s agents, for example, or estate agents? They provide a service for a fee. It is up to the administrators, clubs and players themselves to ensure agents provide value for the amounts involved.
10. And finally, the truth about Spurs’ transfer business. Levy is ‘impossible to deal with’. Yes, at one level, Levy is well known for extracting maximum value whatever side of a deal he’s on. But, that’s because he’s behaving as any chairman should with his shareholder’s money. He’s careful with it and he’s running a sound business. It’s not his fault that the Premier League is overrun with oligarchs and oil barons, crooks and incompetents, who make losses intentionally or not. Where Chelsea and Man City have both had net transfer spends of well over £1 billion each since the formation of the Premier League, Spurs have made net transfer income of over £250 million in the past decade. But that income hasn’t been taken out of the club in dividends. It’s been reinvested in the Hotspur Way training ground and academy, the groundworks for the new WHL stadium, and in fresh talent that has taken the club steadily up the PL table despite those net sales.