The Age of Exuberance


“I can’t believe THAT!” said Alice.
“Can’t you?” said the Queen in a pitying tone. “Try again: draw a long breath, and shut your eyes.”
Alice laughed. “There’s no use trying,” she said, “one can’t believe impossible things.”
I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why sometimes I believed as many as six impossible things before breakfast!”
- LEWIS CARROLL

With the transfer of Neymar to PSG, many were saying that it was the biggest spending in football history. Nasser Al-Khelaifi, I mean, the french club, spent €222 millions to count with the brazilian for the next season, which corresponds to R$ 817 millions. That’s money enough to pay the construction of any stadium built for the 2014 World Cup (apart from the pharaonic constructions of Mané Garrincha, Arena Corinthians and Maracanã). It doesn’t seem quite real, to the view of a regular person, that lives with, on average, R$ 25 thousand a year. It would be necessary thirty two thousand, six hundred and eighty years of labour of this fan, without spending a penny, to gather up all that sum. Along with all the cover in the media, some angry voices, murmurs and moans. Afterall, that is a lot of money to be spent on the hiring of a football player.

Gianluigi Buffon gave an interview to Gazzetta dello Sport, stating with irony: “It sounds all fake. Why is it that Neymar is worth it 220 millions and not 600?! My grandfather used to say: if you fill the balloon too much, it will explode. Everything is so random and it is all in the hands of the people who have more money: today it is 10, tomorrow another 100.” In fact, €222 millions is quite hard to believe.

Millionaire signings are not news in the world of football. In may 1983, when there were rumours about Zico going to Udinese, for US$ 4 millions (in current dollars of that time), the Italian Federation of Football uproared. It was too much money for hiring a player. No italian club had ever spent so much for a single player. Due to the iminent transfer of the 10 of Flamengo to Udinese, the Italian Federation insisted on some determinations that the club had to follow. The most “radical” one was that the clubs should expose, through their balance sheets, that they had financial conditions to effectively sign new players. It was given a deadline so Udinese could provide their financial capacity to make the sign. The northern italian club revealed that a company of property representation, based in London, would finance the deal. The operation was quite obscure and complicated - it involved the italian police and justice - and turned into a true novel about the Flamengo player. Now, with Neymar, it wasn’t much different. The president of Barcelona, Josep Maria Bartolomeu, questioned the deal due to possible restrictions of UEFA’s financial fair-play.

But Buffon’s grandfather and his balloons story left me intrigued. How much worth it, today, the US$ 4 millions of may 1983? Would Neymar really be responsible for the most expensive transfer in the history of football? In nominal terms, yes. But what about in real terms? The amount spent by PSG is much higher than the amount spent by Real Madrid to count with Zidane or Cristian Ronaldo? Spending this much of money is a “madness” never seen before?

To answer these questions, we need the deflate the nominal values by the inflation index of that period. But then, a problem come along: the inflation rates that are available bu the institutes of research, such as IPCA disclose by IBGE (IPCA stands for Índice Nacional de Preços ao Consumidor Amplo, or National Wide Consumer Price Index, used officialy as the Inflation Index, and provided by IBGE, Instituto Brasileiro de Geografia e Estatística, or Brazilian Institute of Geography and Statistics) are calculated bases only on the variance of consumption goods. Football players are a product much different of consumption goods. Besides, the suply of resources in the world of football evolves in a very particular way. Football is full of television contracts and prizes that grow tremendously year by year. The Arab Sheiks are opening their pockets at the sime time they become fans of the sport. Chinese millionaires, following the path of the Arabs, have also entered into football. Hundres of companies, of diverse segments, have invested an each time more growing amount of money into football. Football clubs have been looking for new ways to fund themselves, the simple bank borrowing is no longer the only source of leverage. Many european clubs have their shares listed on the stock exchange around the world; Manchester United, AS Roma, Juventus, Borussia Dortmund, Arsenal, among others. All these facts imply in a bigger volume of money destined to transfers, wages and sports structure. It seems cristal clear that football needs another deflator that not the price index commonly used.

Paul Tomkins, in his book “Pay As You Play: The True Price of Success in the Premier League Era”, brings the Transfer Price Index (TPI) to deflated the values of english football in a more proper way. The idea of the author is to follow the average price of transfers in english football. Under the assumption that the players hired every year, on average, have a similar technical level, Tomkins’ TPI seems a good measure of inflation in football. You may not agree with the given assumption, or have diverse critics to the index brought by Tomkins; the TPI - which is nothing more than the inflation of average prices in Premier League - has problems and is not exempt from criticism. But do not forget that the index provided by IBGE are also subject to the same problems as Tomkins TPI (have the prices of mobiles rised because there was a technological improvement or is it just that the same product is more expensive?).

Based on Tomkins TPI, I decided to calculate his index from 1992 e bring the players price to current values of 2017. As I don’t have access to his database, I used transfer data from transfermarkt.co.uk. Using the same methodology of the author, I took the same care in building the index: loans, players from the youth categories and players involved in free transfers were all removed. The result is an index price that computes the evolution of the average price of Premier League transfers from 1992 to 2017. It is not the exact same time serie that Tomkins provides in his book, but the two series present similar behavior; the correlation between both is 0.94. I started by 1992 because earlier data are scarce. Besides, the english football wasn’t so cosmopolitan before the 90s as it has been for the last two decades. Why the Premier League? First because it the number of transfers by season is really big. Besides, the amount of money involved in the Premier League, each season, is the biggest among all european leagues. It is the same as the sum of money in italian Serie A and german Bundesliga, or the sum of La Liga, Ligue 1 and Eredivise. Long story short, I chose it because it is the biggest market. The transfer window of the current season, 17/18, hasn’t closed yet and many business are yet to occur. But I calculated the inflation of this season the the 28th of july of 2017 (so far the inflation is in 10.08% compared to the previous transfer window). The accumulated inflation, from 1992 to the current season is 1.717,35%. That is a lot. Much bigger than any price index in the US or UK. If your club had hired a player for a thousand pounds in 1992, he should pay 18 thousand pounds in todays values. It is quite a respectable rate that does justice to a scenario of hiperinflation. If we want to compare to brazilian history, the accumulated inflation in the Premier League is almost the same as the accumulated inflation in 1989 under Cruzado Novo (brazilian currency at the time). In the period of stable prices in Brazil, the accumulated inflation, since the beggining of Real, from july 94 to today, july 2017. it is 463.7%. The Premier League inflation is almost 4 times the inflation of the brazilian monetary stable period. Deflate the values of transfers in football by the common index prices could distort a lot the values to be compared.

The Graphic 1 brings the evolution of average transfer prices and the respective inflation rate for each season. Although the inflation rate presents high variance - seven seasons presented deflation -, the average inflation rate of the period is 14$ a year. In the season 92/92, the average value of transfers was £541 thousand. In the current transfer window, this value ins in £9.8 millions.


Graphic 1

The blue line corresponds to the evolution of the average transfer price in the Premier League. The orange line is the variation of this average price, and is what we call “football inflation”. This inflation presents high variance, and some few years of deflation (seasons 02/02, 06/07 and 11/12). But the average inflation is quite high, 14%.

As all transfers are from Premier League, I restricted myself to compare only players who played at it (except the three last lines!). Although, if we have a bit more flexibility in accepting some assumptions, we can apply this index to players who were transfered between other leagues. I will do it only with Neymar, which is the focus of this post. The table bellow shows the biggest transfers in the Premier League by season (apart from the last three lines!)


Table 1
Season Player Club Current Value 17/18 Prices
95/96 Andrew Cole Man Utd £8,160 £64,396
96/97 Alan Shearer Newcastle £17,850 £138,333
97/98 Graeme Le Chelsea £8,930 £75,002
98/99 Dwight Yorke Saux Man Utd £16,360 £93,386
99/00 Nicolas Anelka Real Madrid £29,750 £159,892
00/01 Marc Overmars Barcelona £34,000 £127,925
01/02 Sebastian Veron Man Utd £36,210 £111,950
02/03 Rio Ferdnand Man Utd £39,100 £138,502
03/04 David Beckham Real Madrid £31,880 £114,030
04/05 Didier Drogba Chelsea £32,730 £101,778
05/06 Michael Essien Chelsea £32,300 £101,360
06/07 Andriy Shevchenko Chelsea £36,810 £124,077
07/08 Fernando Torres Liverpool £32,300 £74,457
08/09 Robinho Man City £36,550 £77,520
09/10 Cristiano Ronaldo Real Madrid £79,900 £175,292
10/11 Fernando Torres Chelsea £49,730 £105,701
11/12 Sergio Aguero Man City £30,600 £79,238
12/13 Eden Hazard Chelsea £29,750 £70,132
13/14 Gareth Bale Real Madrid £85,850 £154,787
14/15 Luis Suarez Barcelona £69,460 £103,011
15/16 Kevin De Bruyne Man City £62,900 £89,795
16/17 Paul Pogba Man Utd £89,250 £98,246
17/18 Romelu Lukako Man Utd £72,000 £72,000
00/01 Figo Real Madrid £51,000 £191,888
01/02 Zidane Real Madrid £62,480 £193,169
17/18 Neymar PSG £198,400 £198,400

Each player on the table above was the biggest spending in english football for the respective season (coming or leaving Englang). The values are in thousand pounds. The column Club is the destination of the player. The column Current Value gives us the value of the transaction at the current time, while the 17/18 Price column gives us the values at 2017 prices. All values are in thousand (for ex, the value referred to Neymar, on the last row, is £198.400,00 - 198.4 million pounds).

Table 1 brings some interesting points. In Premier League transfers history, the three most expensive signings made by english teams were Rio Ferdinand, Alan Shearer and Andriy Schevchenko, by £138.5, £138.3 e £124 millions, respectively. Table 2 (below) brings the signings made by english clubs only, in decreasing order. In real terms, the most expensive signing of the english league was a defender.

The hiring of Alan Shearer, by Newcastle in the season 96/97 is still the second biggest transfer in the Premier League. The value of £17.8 million pounds at current 1996 prices corresponds to £138.3 in 2017 season. Romelu Lukako, signed by Manchester United in this transfer window (july 2017), is just in 15th place in the list of biggest transfers in the Premier League. The biggest transfer in the history of Premier League, denfeder Rio Ferdinand, costed a bit more than £138.5 million pounds in the season 02/03, which is exactly 49.97% the value spent on Pogba last season.

Table 1 calls attention to a player that was a young promise in 99/00 season. On 5th of may 1999, Arsenal played the derby against Tottenham seeking to keep in the first place of Premier League. Man Utd was second, and on that same wednesday was facing Liverpool. At 17 minutes of game, Emmanuel Petit scored for the gunners. At 33 minutes of the first half, in a fast counter attack, Dennis Bergkamp, at the centre of the pitch, makes a low pass between two Tottenham defenders towards the goal. Both Spurs see this young and fast gunners striker passing them as a bolt behind the ball. The young striker leaves them behind and with just two touches, puts in the back of the net, all of that without the markers reaching half of the distance ran by the scorer. 0x2. The match ended 1x3 to Arsenal and with the first place garanteed, since the match between Man United and Liverpool ended 2x2. The young striker was Nicolas Anelka and that was his 17th goal at Premier League. An impressive mark for a 20 years old player. The average of 0.5 goals by match in the Premier League caught the attention of the other big european clubs. The impression Anelka left that season wasn’t so good, and the goal agains Tottenham was his last wearing Arsenal shirt. Two months later, he was announced as Real Madrid player.

The transfers involving Nicas Anelka, after 99/00 season, deserve a note. The French striker moved a lot of money on the European market in a few years. In 96/97 season, Anelka was hired by Arsenal from PSG for £5 millions at 2017 prices (£646 thousand pounds in current values). In the 99/00 season, Real Madrid took the french from London by £159.9 million at 17 prices (or £29.8 at current prices). Anelka costed to Madrid side more than David Beckham or Gareth Bale costed in the following years. In real terms, Anelka rose his transfer fee in £51.6 million while playing for Arsenal. His 26 goals in 76 matches by the gunners (average of 0.47 by match) made a profit of £154.8 million, in real terms. For the merengues side, the french scored 7 goals in 32 games (0.22 by match) and in the next seasons, was transfered to PSG for £110.4 million (£29.3 million in current value). Real Madrid bought the striker for 49.5 million euros less than what they had payed a season earlier. Given the low average goals for Madrid, compared to his time a Arsenal, the loss of £49.5 seems pretty high. Any Madrid fan would find a horrible deal, right? Well, if this same fan waited a season to give his opinion, he would probably see this loss with another eyes. (besides his modest average goals, Anelka won the 99/00 Champions League with Real Madrid). Two years after arriving at PSG (Anelka score 0.26 goals by match at the french side), Anelka was sold to Manchester City by £45.6 million; a loss of £64.8 to PSG, in real terms. If Real Madrid waited one or two seasons to sell Nicolas Anelka, supposing that his performance would be at least similar to the presented at PSG, the loss would have been much bigger. Between 1999 and 2002, Anelka moved £315.8 million, at 2017 prices, which gives us an average of £78.9 million a year. For Arsenal fans, Anelka will always be remembered for that fast sprint and the goal agains their north London rivals. PSG fans probably will have other memories of the french striker.


Table 2
Season Player Club Current Value 17/18 Prices
02/03 Rio Ferdnand Man Utd £39,100 £138,502
96/97 Alan Shearer Newcastle £17,850 £138,333
06/07 Andriy Shevchenko Chelsea £36,810 £124,077
01/02 Sebastian Veron Man Utd £36,210 £111,950
10/11 Fernando Torres Chelsea £49,730 £105,701
04/05 Didier Drogba Chelsea £32,730 £101,778
05/06 Michael Essien Chelsea £32,300 £101,360
16/17 Paul Pogba Man Utd £89,250 £98,246
98/99 Dwight Yorke Man Utd £16,360 £93,386
15/16 Kevin De Bruyne Man City £62,900 £89,795
11/12 Sergio Aguero Man City £30,600 £79,238
08/09 Robinho Man City £36,550 £77,520
97/98 Graeme Le Saux Chelsea £8,930 £75,002
07/08 Fernando Torres Liverpool £32,300 £74,457
17/18 Romelu Lukako Man Utd £72,000 £72,000
12/13 Eden Hazard Chelsea £29,750 £70,132
95/96 Andrew Cole Man Utd £8,160 £64,396

The transfers involving Anelka deserve attention, but let’s get back to Neymar’s case. How can we compare the transfers of Figo and Zidane, by Real Madrid, with the possible transfer of Neymar to PSG? Using football’s inflation rate. I used Tomkins index to correct the values of two galacticos: Luís Figo and Zinedine Zidane. The first one was hired by Madrid from Barcelona, in the 00/01 season, by £51 million. Bringing this value to 2017 prices, we have a spent of £191.8 million. Value slightly below the £193.2 million that Real Madrid itself payed to count on Zidane the next season (or £62.5 million at 2001 prices). That is, the value that PSG intends to spend to turn Neymar neighbor of the Eiffel Tower, is just 2.7% bigger, in real terms, than the value that the Madrid side spent to take Zinedine Zidane from Turin. Therefore, Neymar has become the most expensive player in football since 1992. As I don’t have previous data from 1992, it is not possible to afirm that he is the most expensive player of football history (probably yes!). But the tables above show us that the financial effort that PSG has made was already done by Real Madrid, in tow opportunities, at least. If there is someone who is astonished by the values announced by Nasser Al-Khelaifi, this person surely is Florentino Pérez.

It should also be noted that the £198.4 million are quite above the second greatest value of the table, which is £175.3, referred to the hiring of CR7 by Real Madrid in 09/10 season. Neymar costed 13.18% more than CR7 costed to Real Madrid.

The hundreds of million euros spent in the transfer of Neymar are still a lot of money, in nominal terms, real, inside and outside the world of football. The purchasing power of the clubs has increased exponencially in the last decades. However the US$ 4 million spent by Udinese in 1983 were exorbitant for Italy’s transfers until then, building up a stadium would require much more money. The Hard Rock Stadium (american football stadium with capacity of 65 thousand people, located in Florida - house of Miami Dolphins) was built in 195 costing US$ 115 million of current dollars at the time. It is undeniable that the rise of purchasing power of football institutions in the last decades. But the extravagance of Nasser Al-Khalaifi is far from being rare in european football. Real Madrid spent equivalent amount in two ocasions.

I don’t have reliable data for years before 1992. Therefore, sadly the comparsions with Zico transfer values are not possible. If the balloon will explode, as Buffon’s grandfather prophesied, I can’t tell. But “Gigi” Buffon was right about one thing: in nominal terms, tha value of transfers in the world of football, today are 10 and tomorrow can be 100.