Player Valuation: Putting data to work on transfer market analysis

18.09.2018

With the recent closure of the 2018 summer transfer window, familiar topics of discussion, such as the level of spending among certain clubs, and the value of signings inevitably come to the fore. While recent activity is in line with long-term transfer market trends, other interesting insights emerge from digging a little deeper.

In this article, the KPMG Football Benchmark team provides a high level analysis of the 2018 summer transfer window for the European “big five” leagues (English Premier League, French Ligue 1, German Bundesliga, Italian Serie A, Spanish La Liga) and explains how a better approach for player valuation can benefit all industry stakeholders.

Player transfers by the “big five” have – once again – increased, both in numbers of signings and in aggregate value. Indeed, according to FIFA´s latest report, transfer expenditure by clubs from these leagues reached USD 4.21 billion (+6.6% vs 2017), which provides firm evidence of player mobility as well as the constant need for clubs to strengthen their squads ahead of the new season to achieve success.

Interestingly, this slight increase was driven by the Spanish and Italian leagues while the English Premier League, French Ligue 1 and German Bundesliga experienced a decrease in spending compared to the 2017 summer window. The English league is a telling example and an indication of what some are already describing as a tipping point in the transfer market as, for the first time in years, spending on transfer fees did not increase and fell by 1.7% year-on-year.

Due to the steep rise in broadcasting and commercial revenues over the past decade, English clubs´ higher investment means have driven up transfer fees, which has also impacted the spending habits of clubs in France, Germany, Italy and Spain. With the potential plateauing of TV revenues for the next cycle, coupled with stricter implementation of financial regulation, Premier League clubs – as well as the other “big five” leagues – may be evolving towards an eco-system where spiraling transfer fees are no longer commonplace.

Beyond the specific factors that can influence this pattern (FIFA World Cup, reduced length of transfer period for Premier League and Serie A), clubs are increasingly adopting a data-driven and more professional approach when it comes to acquisition and disposal. Players are invariably the most valuable asset of a football club and often the main (intangible) assets on clubs´ balance sheets. They are key to playing success and a prominent indicator of clubs´ financial health. Furthermore, as player trading activities can play a significant role in the business model of football clubs, the acquisition or sale of talent places a significant weight on the financial sustainability of these organisations. As a result, there is an increasing need in the industry for reliable, consistent and more sophisticated valuation of players.

Using the newly-launched KPMG Player Valuation tool, the Football Benchmark team has looked into the top 40 transfers across the summer of 2018 and made a gap analysis to assess the correlation between actual transfer fees and estimated market values derived from KPMG algorithms. Despite the limited size of the sample, some interesting insights can be extracted from these few examples:

  • Goalkeepers´ crucial role in team success is increasingly being recognized as elite clubs are now willing to invest significantly to secure top players on long-term contracts at this specific and pivotal playing position. This is illustrated by the two most expensive keeper transfers of all-time – young Spaniard Kepa Arrizabalaga to Chelsea FC and Brazil´s national team keeper Alisson to Liverpool FC.
  • Clubs are also prepared to pay premium for young talents who are considered future first-class players at their respective positions. The acquisition of Thilo Kehrer (Paris Saint-Germain FC), Arthur Melo (FC Barcelona), Abdou Diallo (Borussia Dortmund) and Diogo Dalot (Manchester United FC) are all indicative of that trend. Because of the inherent risk attributed to their limited experience at top level, these players are generally undervalued by independent market valuations.
  • Players under a release clause agreement are, in most cases, acquired at a higher price than their estimated market value as recruiting clubs are ready to overspend to secure players with specific playing profiles and abilities (e.g. Kepa Arrizabalaga, Samu Castillejo).
  • Leaving aside players recruited at the release clause price tag (8 out of 40), the coefficient of determination (R2 - indicator used in statistical models to explain the predictive power) between reported actual transfer fees and estimated market values as of 1 June 2018 in the considered sample was 87%.

A more scientific, data-driven approach
Data and technology are at the heart of the modern business paradigm. Football, which has become a global, multi-faceted business, is no different and data can be harnessed to further professionalise and increase efficiency across the industry. At the same time, the football transfer market seems to be undergoing change, as confirmed by ongoing talks around a FIFA´s reform of the system. In an increasingly data-savvy environment, where business models are being constantly challenged, a clear pathway for a more realistic transfer market framework needs to be cultivated.

While many aspects would be impacted by a game-changing transformation (agent commission, Academy training compensation payments, number of loaned out players, etc), accurate valuation of players is pivotal to create a more sustainable system.

Our player valuation tool, using Microsoft’s latest technology, and in partnership with Opta, is a digital platform that uses proprietary algorithms to provide estimations of the market value of the world’s top footballers. It covers more than 4,000 players from 11 major football leagues: Argentina, Belgium, Brazil, England, France, Germany, Italy, Netherlands, Portugal, Spain and Turkey.

The benefits of a more sustainable transfer market are manifold – not least to counter some of football’s competitive imbalances and also to ensure a more robust football economy and greater financial stability of clubs worldwide.

KPMG Player Valuation

  Name (Age) Club  Nat Value
(€ million)
1 Mbappé (20) 225.0
2 Neymar (27) 185.0
3 Messi (32) 180.0
4 Hazard (28) 152.4
5 Sterling (24) 150.3
6 Salah (27) 150.0
7 Kane (26) 140.0
8 De Bruyne (28) 130.0
9 Mané (27) 130.0
10 Griezmann (28) 125.0
11 Sancho (19) 115.9
12 Pogba (26) 115.0
13 Van Dijk (28) 113.8
14 F. de Jong (22) 106.0
15 Rashford (22) 100.2
16 Alisson (27) 99.1
17 Dembélé (22) 92.9
18 Bernardo S. (25) 92.4
19 Sané (23) 90.0
20 Firmino (28) 90.0
21 De Ligt (20) 88.7
22 Alexander-Arnold (21) 88.7
23 Ter Stegen (27) 87.9
24 Ederson (26) 87.4
25 Heung-min Son (27) 86.5
26 C. Ronaldo (34) 86.4
27 R. Lukaku (26) 86.2
28 Havertz (20) 85.2
29 Agüero (31) 85.0
30 Kanté (28) 85.0
31 Dybala (26) 85.0
32 Lewandowski (31) 85.0
33 Saúl (25) 83.2
34 Coutinho (27) 81.8
35 Alli (23) 81.0
36 Kimmich (24) 80.0
37 Gabriel Jesus (22) 80.0
38 Pépé (24) 78.9
39 Varane (26) 78.3
40 Robertson (25) 77.8
41 João Félix (20) 75.0
42 Oblak (26) 74.9
43 Maguire (26) 72.7
44 Rodri (23) 71.5
45 Pulisic (21) 71.0
46 Werner (23) 70.4
47 Laporte (25) 69.8
48 Ziyech (26) 69.5
49 Jovic (21) 68.0
50 Maddison (23) 67.4