Update: Kaka and AC Milan rejected the proposed transfer record smashing move to Manchester City. (20 January 2009).
Whether the 26 year old Brazilian soccer miracle Kaka is sold to Manchester City now or over the summer the transfer fee reportedly around £100 million (paid to AC Milan), and salary (£500k p/w) has already sparked controversy, and raised legitimate questions about the future of the game. None of which, this time, is hyperbole.
There are two arguments to the controversy: one, that the record transfer breaks new ground. Two: that the high price will be dangerous for the game. While neither are normally not true, in this case both are true.
A huge transfer fee
That a record has occurred is not special or rare. Whether Kaka is sold now, or over the summer, Kaka’s would be the 38th English record transfer since 1947, the 5th of this decade. In contrast, in the 1970s the English transfer record was broken 9 times.
But the huge Kaka transfer from AC Milan to Manchester City is interesting because. It represents a really big increase – or ‘step change’ leap – in transfer fee that is historically rare. If we consider English soccer’s modern era began in 1961 with Denis Law’s landmark £100,000 move, a transfer record twice as much as the previous one has occurred just once.
The only time the existing English transfer record doubled in the modern era was when Trevor Francis went from Birmingham City to Brian Clough’s Nottingham Forest in 1979 for £1.18 million. In the three decades since February of that year, the closest to another statistical ‘step change’ was Newcastle United’s Kevin Keegan’s 1996 purchase of Alan Shearer from Blackburn Rovers for £15 million, a £6.5 million or 75% increase on £8.5 million.
By contrast, Kaka’s £100 million transfer would not just double but triple the existing highest transfer, Robinho’s 2008 move to Manchester City for £32.5 million. The last time the world transfer record doubled was 1968.
Kaka’s £100 million move is therefore an unprecedented sum of money both in absolute value and value relative to the previous highest value. Even though huge leaps have happened before, the leap in value of Kaka’s transfer fee over all the others is unprecedented. We have entered new territory.
Is Kaka’s transfer dangerous?
Not to Manchester City.
Steve Bruce, manager of the small Premiership side Wigan Athletic (currently a respectable 7th in the table after half a season), has told the media Kaka’s salary is dangerous for the game. He intimates it could result in clubs putting up ticket prices to pay for higher wages. Is he right?
Yes, of course. Is it dangerous? Yes. But not to Manchester City, and not for immediately obvious reasons.
When David Beckham went to Real Madrid for £24.5 million in 2003 people said that was too much money. Yet it is now thought through merchandising and shirt sales Beckham helped Real Madrid overtake Manchester United as Europe’s richest club. In fact, academics recently calculated that when the Beckham brand move to LA Galaxy the club lost £30 million.
So could Manchester City’s Abu Dahbi investors be banking on a similar Kaka effect to pay for Kaka’s wages? Unlikely.
It is likely impossible Kaka’s £100 million and £500,000 a week wage will be paid back in shirt sales and merchandising even if Kaka remains their for 10 years. It’s too much money and Manchester City start out from a much a smaller fan base and smaller scale business arm than Real Madrid did.
Also, Kaka’s arrival is contingent on the club spending another reported £400 million on star players, and their salaries, to play with him in order that the club win trophies and play in elite European competitions.
If the ticket prices are not to rise to pay for this expenditure then the City chairman Khaldoon Al Mubarak will, like Roman Abramovich at Chelsea, have to run the club at a loss. As long as the Arabian investors are willing to do this the transfer will not be dangerous for the home club.
How can a Manchester City fan be sure they have the interests of the club at heart? They can’t, but that does not mean they want the club to disappear. If you are an Arab oil Sheyhk like Mansour bin Zayed Al Nahyan with £15 billions in petrodollars you too would gladly trade an long line of paper digits for something of tangible value, like a soccer club.
While a significant chunk of the value of Abu Dhabi’s consortium’s money in petrodollars could evaporate overnight with exchange rate fluctuations, Manchester City FC, which is substance, people and beliefs, located in time and space, won’t, and may actually increase in value.
A wise investor with so much money does not just keep it under the bed but spreads the risk and puts assets on his portfolio even at perceived loss.
But while Manchester City fans should consider themselves lucky, the rest of the soccer world should not (unless, that is, something changes).
So, where’s the danger? Other clubs.
One aspect to the problem is wage inflation: no other club can compete with the ability of Manchester City’s owners to pay stupendously high wages and will have to put up ticket prices.
But the real problem is that City’s trillion dollar men have turned the football business into a game of ‘chicken’: who is prepared to risk the biggest loss? The oil Sheyks now represent the ceiling of the richest investors that exist in the world. Nobody else can play theirgame.
There are few left in the world in the game able to outspend them and willing to run a club at a loss. Perhaps not even Chelsea’s credit crunch hit Roman Abramovitch or Queen’s Park Ranger’s steel magnet Lakshmi Mittal.
Thus, the money Manchester City has to throw at football is unfair competition that is dangerous to the game. It could result in falling match attendence and the big clubs – rival clubs – being driven out of business in an effort to match Manchester City’s hyperwages and largesse.
Not only smaller clubs could go out of business but the largest ones too.
Would one want one’s club leveraged on hundreds of millions, such as Liverpool, Manchester United, to have to pay in excess of £200,000 a week for star players? Not even Manchester United’s (£700 million debt) or Liverpool’s worst enemy would want them both to have to work their way up from the Ryman’s League again.
Okay, perhaps Manchester United’s would. But it’s not going to happen. Why?
The coming European Premier League
How will this happen is not yet clear but there are pressures building within and outwith the English game, footballing, media and business, for the much talked about European League to happen.
English clubs, Chelsea, Manchester United, Liverpool, Everton, Arsenal, Aston Villa, who do not want to pay their star players ridiculously high wages and run the club at a business loss and risk bankrupcy may force the issue before the Europeans do, by creating a lucrative breakaway European Soccer League.
Mancheater’s City would not be allowed to compete in this league unless they agreed to an official wage-cap structure – making the European Soccer League similar to the big American sports leagues, such as the NHL, which rules on the total amount it is legal to spend on wages in a year.
In fact, the new ESL could work exactly like the multi-time zone blockbuster marketing US sports leagues with divisions, conferences and playoffs.
How long will this take? English club over-representation in the final rounds of the European Champions League is now making the competition a laughing stock, so pressure will come from Europe as well as inside the English game to make European football more unpredictable and entertaining.
Indeed, UEFA President and Kaka like soccer star of his age Michel Platini has made noises, but nothing yet as radical as a proposed breakaway European League.
My prediction is we could get a new European Soccer League surprisingly soon given the high wages Manchester City are likely to pay their incoming galacticos this summer. Sky’s TV deal with the Premier League ends in 2010.
Watch this space.