The breaking news this Friday is that on the back of some truly incredible performances in the Premier League this season, Luis Suarez has put pen to paper on a new long-term deal at Liverpool, the club announced today.
There’s no disputing that Luis Suarez is one of the most feared and in-form players in all of world football. Having scored 17 goals and assisted four for the Anfield club in just 11 Premier League games, he has put himself firmly into the bracket of the world’s very best players.
Following the furore over Gareth Bale’s transfer to Real Madrid—which some outlets, like BBC Sport, have reported as the world record transfer fee, and others, like NESN, have claimed to still be No. 2 to Cristiano Ronaldo’s—football fans are naturally up in arms regarding player valuations.
Just a few months ago in the summer of 2013, Arsenal had a high-profile bid for Suarez rejected. Their £40 million plus £1 bid, based on a rumored clause in his contract, attracted nothing but scorn from the Liverpool hierarchy, who claimed that he wouldn’t be available even for £55 million, the going rate of Uruguayan strike partner Edinson Cavani, according to The Guardian.
So how does one go about valuating players’ transfer value? Are values arbitrarily assigned, or do they have some factual basis underlying all the public proclamations from managers and chairmen?
Without insider access to the boardroom and to the private financial accounts of most Premier League football clubs, here is a guide to working out how much Luis Suarez is actually worth in the current transfer market.
From a financial perspective, regardless of what percentage of the transfer fee was paid up front to Ajax, Suarez’s transfer fee will be amortized over the course of his contract, which was initially five and a half years. (It has since been extended in the summer of 2012.)
Simple arithmetic gives us an approximate annual cost for Suarez, excluding his wages (which we’ll get to below), of £4.13 million.
To date, he has been at Anfield for around two years and 10 months, but for the purposes of simpler calculation, let’s consider Suarez as having been at the club for three years.
By January 31, 2014, he will have completed three years of his initial contract with two and a half years left, which would mean that the as yet “unpaid” total amortization cost would come to around £4.13 million multiplied by 2.5, or £10.3 million.
With a base reference cost of around £10.3 million, let’s consider the second aspect: wages.
While Suarez’s starting wages in his first contract at Liverpool were about £40,000 a week, according to the Mirror, the new and improved contract he signed in the summer of 2012 tripled his weekly compensation to about £120,000.
Assuming the standard of 52 weeks in a year, this comes to a yearly total of around £6.24 million a year, just in wages.
Having signed his most recent contract at the beginning of August 2012, Suarez would be approximately a year and a half into his improved deal by the end of January 2014, keeping with the same benchmark time frame we suggested above.
By then, there would still be two and a half years into his contract left to run, which would come to a total of £15.6 million.
At this point in our calculations, Suarez’s base value thus far is £10.3 million plus £15.6 million, which comes to about a total of £29 million.
While Liverpool’s official announcement yet again cites ”long-term” contract, this BBC Sport article claims that Suarez will be earning £160,000 a week until the end of this season (another half year), and then £200,000 a week for the next four years, in a deal that runs until 2018 and makes him the highest-paid player in the club’s history.
Based on these numbers, his entire new contract is worth a total of £42.6 million, which brings his whole valuation into a new light and onto a new level.
Let’s return to the base reference cost of £10.3 million. If we add this new £42.6 million wage value onto the reference cost, then a new total of about £52.9 million emerges.
Notice that the underlying assumption behind Luis Suarez staying at Anfield would be that Brendan Rodgers is able to lead his team to the Champions League next season: After all, a player of Suarez’s caliber deserves to be plying his trade at the top level of club football.
With this in mind, let’s venture into the world of Premier League finances and attempt to very roughly estimate how Suarez could potentially have his value further enhanced by his club’s performances.
According to the official Premier League website, the end-of-season payout based on league performance for Liverpool in the 2012/13 season came to a total of around £54.8 million.
However, given that the Reds finished in seventh place and considering our top-four assumptions to keep Suarez, let’s take Arsenal as a reference: The Gunners, who finished fourth under Arsene Wenger last season, raked in a total of £57.1 million, which we will use as a rough guide for a minimum league payout.
With Champions League qualification and assuming that Liverpool progress into the group stages of next year’s competition, we can refer to UEFA’s minimum group stage payout according to their official website: UEFA states that “each of the 32 teams involved in the group stage will collect a base fee of €8.6m,” which translates to about £7.2 million.
As a result, a minimum total of £64.3 million will probably arrive in Liverpool’s coffers just for playing in the Champions League group stages.
The Deloitte Money League, published every year, is a fascinating insight into the finances of the top European football clubs. Its 2013 installment reveals that Liverpool’s total revenues for the 2011/12 season were £188.7 million, comprising of £45.2 million from matchday revenue, £63.3 million from broadcasting and £80.2 million from general commercial activity, including sponsorships and partnerships.
As with any corporation, Premier League clubs will have bonus schemes in place, and Liverpool will be no exception. For the purposes of this basic calculation, we will purely take into account the revenue that comes with Champions League qualification, and not Liverpool’s overall income.
A wholly generous assumption is that the 20 players registered as Premier League players for Liverpool will divide the £64.3 million that comes with a group stage venture, and Suarez will get five percent of that, netting £3.2 million in addition to the previous base.
(This estimate, when considering his contributions to Liverpool’s 2013/14 season—he has been involved in 21 goals, 54 percent of Liverpool’s total haul of 39 thus far this campaign—and a logical bell-curve bonus distribution according to performance, may in reality not be too far.)
Conclusion: £56.1 million
Take the £52.9 million we estimated based on amortization of Suarez’s transfer fee and a projection of his future bumper contract and add the estimated performance-based bonuses of £3.2 million, and we arrive at the princely sum of £56.1 million, which, coincidentally (or not), was the almost the same rate the aforementioned Cavani left Napoli for.
If we go back to the Express article, we find that Suarez’s previous deal was reported to also include image rights in his weekly wages, so all inclusive, the figure of £56.1 million may be an accurate reflection.
Turns out this benchmark might have been chosen on purpose by the Liverpool hierarchy back in the summer.
But that’s only if we were to stick with a purely financial valuation of Luis Suarez, who, if he stays on at Liverpool, will surely go down as one of the club’s greatest-ever players in time.
Taking that into consideration, and the message that Liverpool would be selling its talisman and most important player of the current period, Brendan Rodgers may well consider Luis Suarez to be worth much more than £56.1 million.
Add that to Suarez’s current form at the club and his apparent turnaround in his commitment to Liverpool, and he might just be priceless in the eyes of all Liverpool fans.
Football is an emotional game, after all.
This article first appeared on Bleacher Report, where I contribute regularly on Liverpool and the Premier League.