This article appeared in Corporate page of The Edge Malaysia, Issue 814, July 12 - 18, 2010
Quantitative Analysis… for football managers
By Jasvin Josen
In the heat of the world cup it is worthy to reflect on how football has impacted the financial world and what it could mean for the future. The amount of money generated by the football industry grew exponentially in the late 1990s and early 2000s, and has been steadily growing since. Record-breaking financial deals have been negotiated between football clubs and players they sign. With the fast moving pace of the industry, clubs and players are bound to undergo some sort of financial advancement into the future. Shares in clubs are a reality now. Eventually, players will want to establish themselves as corporations and to issue shares in themselves. Sooner or later, it would make financial sense to hedge clubs or players’ performance with derivatives. Thus there is a real need to quantitatively evaluate a football player, to understand his value adding potential, and to put a price upon that capacity. Existing conditions already show a growing need to measure the value of a football player. Chelsea spent £24m for Didier Drogba in 2004. Real Madrid spent £80 million on Cristiano Ronaldo in June 2009. We can only guess what the price may be for Lionel Messi if he leaves Barcelona. Yet at times, this spending is claimed to have contributed to financial problems, especially when the players do not sustain their success bringing about their subsequent sale by the club at a loss. Moreover, instability came about in the football industry when the European Union (EU) legislation extended the right of free movement of labour enjoyed by other EU citizens to footballers. Formerly a player was a property of the club but now he is an employee like any other in the EU, working with a contract, and entitled to give due notice to leave that contract. Many see a strong link between this change in legislation and the...
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