Player valuation in thin markets: the case of European Association football

Che, V

Abstract

The amount of money in football is staggering and is a concern for people of all walks of life. While these concerns are valid, the money in football is justified and consumers of football as a form of entertainment, actively participate in the set-up of this labour market. Thanks to the availability of market value, wage, and transfer fee data for the most valued production workers (players) and bolstered by the emergence of data analytics firms to crunch large amounts of performance data in real time, it is possible to analyse and better understand the monetary worth of the most talented players, and the role of each stakeholder in the buildup of this value. This 3-essay series uses Mincer’s (1985) human capital formulation and multilevel regression analyses to provide a complete study of the different money centers that underlie player valuation.
Essay 1 analyses player market values – values attributed by football fans via crowd-sourced open forums online. Market values (Transfermarkt values) that are used in actual transfer and salary negotiations are driven by both football and non-football related factors. From a sample of 500 offensive player observations in the big 5 European leagues for the 2017/18 and 2018/19 seasons, this essay analyses 12 data points per player observation, hence 6,000 data points in total, using a series of multilevel regression models to isolate the proportion of player market value based solely on talent (performance and demographic). Results show that the proportion of market value due to talent decreases as market value increases. For the players sampled, the mean impact of talent on overall market value is 77%.
Essay 2 analyses the transfer fee premia. The difference between the amount paid for the transfer of a football player and his crowd-sourced market valuation at the time of transfer (transfer premium) is dependent on several factors some of which are not measurable. This essay analyses 30 top transfers per season over the decade 2011 – 2020 and shows that buying clubs exhibit risk tolerance in that they spend a sizeable premium on young promising players compared to mature players with proven talent. The breach of a player’s current contract and player’s overall performance rating during the previous season also play significant roles in the size of the transfer premium.
Essay 3 looks at the top end of the football market valuation and shows that there are no diminishing returns on player wages as age increases. An analysis of the 90th percentile of football players in Europe’s ‘big 5’ leagues, ranked by Transfermarkt market value, shows that mature players earn 112% more than young players, while mid age players earn 64% more than young players. Transfers in this market segment come with a wage penalty, but compared to young players, mature players get an offset. Player performance and minutes played in the preceding season do not matter much in wage determination as players in this market segment already have reputation built over the years. Player popularity has a small positive effect on the basic wage of football players compared to the impact on their bonuses and image rights.
The player labour markets shows that clubs exhibit risk tolerance in player transfers by their willingness to spend huge amounts on the transfer of young players with no proven talent in the hopes that this investment will pay-off in the future. On the other hand, when it comes to wages, clubs exhibit risk aversion as they pay much higher wages to mature players with proven talent.

Citation

Che, V. Player valuation in thin markets: the case of European Association football. (Thesis). University of Salford

• Thesis Type: Thesis
• Deposit Date: Nov 2, 2022
• Publicly Available Date: Nov 2, 2022
• Award Date: Sep 3, 2022