Increase in soccer market started with Bosman
Photo credit: Oleg Dubyna
In 1996, Alan Shearer set a record in the soccer market with his transfer from Blackburn Rovers to Newcastle United. A €21 million deal put Shearer at the top of economic soccer history.
More than a decade later, in the 2018 summer transfer market window, Cristiano Ronaldo and Kylian Mbappe became the sixth and seventh transfer deals that reached or surpassed the amount of €100 million in a single transaction in the last six years.
There is an evident economic growth in soccer that has increased exponentially over the years without any public explanation. Even the world witnessed an increase in goods and prices through the years. This increase is known as inflation.
The Bureau of Labor Statistics (BLS) defines inflation as “the overall general upward price movement of goods and services in an economy.” The BLS analyzes a specific group of products during a certain amount of years and determines the inflation rate according to the growth in the prize of that particular basket of goods and services.
Meanwhile, soccer transactions are not merely impacted by the rate of inflation. According to IUPUI economics professor Vidhura Tennekoon, the soccer market found a way to keep increasing without depending on the inflation rate of a country.
“Think about some other good, an apple,” Tennekoon said. “Last year, the price of an apple was $1, so this year it’s $2. This can be due to two reasons: The first reason is due to inflation; inflation causes almost everything to increase. On top of that, the price of an apple can increase due to an increase in production cost and demand; it is not relative to inflation.”
So, how did we get to the point where an 18-year-old player without any international experience, with less than 50 appearances with his club, collected €45 million from Real Madrid in a deal?
Every story has a beginning, and the initiation of this phenomenon was in 1995 when Belgian midfielder Jean-Marc Bosman won a legal fight against his employers.
The Bosman ruling
Bosman, a 25–year-old player, was ending his contract with Belgian football club RFC Liege. Bosman’s two-year adventure at RFC Liege wasn’t the experience he expected it to be and he was offered an improved contract by Dunkirk, a Division II French team.
Liege demanded a quantity that Dunkirk couldn’t afford to pay, and when the negotiations failed, Liege cut 75 percent of Bosman’s salary. He started a legal process against Liege, the Royal Belgian Football Association and UEFA in a European Court of Justice.
He refused to sign his new contract offer, and the Royal Belgian Football Association banned him because of his act of retaliation.
In December 1995, the European Court of Justice ruled that the actions realized by RFC Liege were violating Article 48 of the Treaty on the Functioning of the European Union, also known as the Treaty of Rome. The article stated on its first and second points that “freedom of movement for workers shall be secured within the Community.”
It also stated that “such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards employment, remuneration and other conditions of work and employment.”
After the European Court of Justice ruled on Bosma’s favor, the players were allowed to renegotiate with their current team or look for a different club without any fees or punishment, in case their contracts were about to expire.
The European of Court Justice acted on behalf of the athletes and the free market. However, there was a boomerang effect with his ruling; it benefited the soccer elites more than the smaller clubs.
“Let us pretend you are a big club trying to sign a player who is almost out of contract,” Jonathan Liew wrote for The Telegraph. “Before Bossman, you could have brought him for 2.5 million Pounds, out of the range of most clubs. After Bosman, he was available for free, and so anybody could potentially get in on the action. How to ensure you got your man? By offering him a wage packet, nobody else could match.”
In seven years, the maximum weekly wage in the Premier League escalated from the £10,000 earned by Chris Sutton to Sol Campbell’s £100,000. The industry of soccer grew exponentially, something that caught Liew’s attention.
“A tenfold increase in the space of just seven years; it is hard to imagine any profession, in any industry in the world, that got richer quicker,” Liew described.
However, the effect of this ruling also reached the people behind the player. The power of agents started to emerge even more after 1995, and transformed the negotiation game.
“The rise of super-agents like Jorge Mendes and Mino Raiola would not have been possible without Bosman,” Liew wrote in The Telegraph. “The function of the agent evolved from a contract- negotiator to a sort of middleman, a bureaucratic stratum all of its own. Now, they had to go through a fog of agents and go-betweens, all siphoning off their cut.”
After witnessing all the repercussions of his fight, Bosman went on record acknowledging that he was motivated and committed to protect the small players that didn’t have a chance; players like himself. Not into increasing the advantage of the big clubs.
“Now the 25 or so richest clubs transfer players for astronomical sums and smaller clubs cannot afford to buy at those prices,” Bosman told to The Guardian. “So the 25 pull further and further away from the rest, deepening the gap between big and small, that was not the aim of the Bosman ruling.”
The money flow/game of elites
Professor Tennekoon stated that inflation hasn’t impacted soccer in a way to be responsible enough in the rise of their assets. In the contrary, he described that the industry finds a way to grow.
The last financial reports of the Premier League, Bundesliga and La Liga showed that the most prominent soccer leagues accomplished new records with their annual turnovers.
The Premier League closed the 2016-17 season with £4.5 billion in revenue, almost a billion more than the prior season. The Bundesliga generated €4 billion, and the 2016-2017 campaign was its 13th-straight year with an expanding record. La Liga escalated from €3 billion to €3.6 billion in one year.
French LFP rose 2 percent in revenue compared to 2016, and for the second-consecutive year the LFP didn’t lose money. The Serie A sold its international TV rights for almost double the last evaluation.
Italy and France were leagues that used to lose money, but that happens because the mid-lower and Division II teams don’t make revenue. That doesn’t mean that teams like Juventus or PSG struggle to make money.
Football is becoming a more homogeneous game. Ten years before the Bosman ruling, 12 different clubs from eight diverse leagues disputed 10 UEFA Champions League finals: Steaua Bucarest, Barcelona, Porto, Bayern Munich, PSV, Benfica, AC Milan, Red Star Belgrade, Marseille, Sampdoria, Ajax and Juventus.
In the last 10 years, 10 different teams from just four leagues have disputed a final in the last UEFA Champions League editions. Three teams from Spain, three from England, two from Germany and two from Italy. But those 10 clubs have something in common; they belong to the Deloitte Football Money League, a yearly publication of the twentiest richest clubs in the world.
Manchester United, Real Madrid, Barcelona and Bayern Munich take the four first places on the list. Chelsea, Liverpool and Juventus are located in the eight, ninth and 10th. Borussia Dortmund and Atletico are 12th and 13th in the 2018 Football Money League.
Soccer is the most popular sport in the planet, and clubs are expanding their markets to every single corner of it. Football is a product that people will consume. However, evidence shows that the breaches between clubs are getting wider, but the flow of the money is increasing annually.
Television rights and marketing represent the majority of the profits for leagues and clubs. Nevertheless, the greatest money concentration stays in the hands of the elites. Due to this condition, mid-major leagues like Netherlands, Portugal, France, Russia and Turkey stopped developing. Their clubs can’t compete anymore with the elite. Acknowledging that fact, they dedicate to sell young talent to obtain revenue. And when the talent convinces the elites, you’ll have four or five clubs bidding hundreds of millions to obtain a player.
Jean-Marc Bosman started a revolution that escalated from footballers to clubs, agents, marketing and revenue. He was the pioneer of an industry that is booming and will continue to grow until people around the world stop watching and consuming soccer, or until the elites consume the game forever.
Follow Luis on Twitter: @LFulloa.
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