Tag Archives: player valuation

How Much Is Liverpool Forward Luis Suarez Worth Based on Form in 2014?

Nine matches to go in the 2013/14 Premier League campaign, and Liverpool are still on course for a top-four finish, which would see them return to the Champions League next season—and still in with a shout for the league title outright.

None of this would be possible without the contributions of Luis Suarez, who, despite all the proclamations of the Reds being a dynamic and interchanging team these days, remains one of their most important players.

After 25 goals and 10 assists—making him the leader of both charts in the Premier League—in 24 matches and a contract signed in December, Suarez has once again proven himself as indispensable and invaluable to the Anfield club.

Perhaps even more so than in previous campaign.

Back in December, we embarked on a challenging but interesting attempt to calculate Suarez’s worth in the transfer market then.

In light of Liverpool’s recently released financial results for the 2012-2013 financial year, let’s revisit this subject and try to work out how much Luis Suarez is now worth based on his current form—without any kind of insider access to the boardroom.

 

Transfer Fee and Wage Estimates

To get us started off, let’s return to our estimates in December regarding Luis Suarez’s transfer fee.

Assuming a basic financial amortization of his initial £22.7 million transfer fee (per BBC Sport) over the course of five-and-a-half years, which was the initial length of his contract signed in 2011, we arrive at an approximate annual cost of £4.13 million.

For the purposes of simpler calculation, let’s consider Suarez has been at Liverpool for 3.2 years, which means the as yet “unpaid” total amortization cost would be updated to £4.13 multiplied by 2.3, or £9.5 million.

Onto his wages, which we will only discuss in the present and future tenses, after his December extension.

Our wage calculations following his new contract in December 2013 are based on this BBC Sport article that claims Suarez is earning £160,000 a week until the end of the current season, and then £200,000 a week for the next four years. Simple arithmetic gets us to a total of £43.06 million over the rest of his new contract.

Our baseline estimated value of Luis Suarez, from just his transfer fee and wages, is thus £9.5 million plus £43.06 million, which gives us £52.56 million.

 

Possible Champions League Qualification

As it stands, Liverpool are placed second in the Premier League, and they look in ominous form as they approach the final couple of months of the season.

Our key underlying assumption is that the Reds will indeed finish in the top four, qualifying for Champions League football next term, which should also be the assumption behind Luis Suarez staying at Anfield in the first place.

Champions League qualification is known to have a wide range of commercial benefits, and this is an area where we will take the roughest of estimates of player bonuses based on club performance in both the Premier League and the Champions League.

Our best benchmark in terms of Premier League end-of-season payouts, assuming a fourth-place finish by Liverpool this May, is Arsenal’s from the 2012/13 season. According to the official Premier League website, Arsenal’s league payout for finishing fourth last season was £57.1 million.

A further assumption that Liverpool, having secured Champions League qualification, will make it into the group stages of next year’s competition, will take us to calculate possible payouts from participating in the group stages.

According to SportsBusinessDaily.com, all participants who made it into the Champions League proper were entitled to a minimum of €8.6 million, which translates to about £7.2 million.

As we noted in our December calculations, a minimum total of £64.3 million will probably arrive in Liverpool’s coffers just for making the Champions League group stages.

 

Liverpool’s Business and Commercial Performance

Our December estimates only took into account the potential sum that would come with making the Champions League group stages, and used it as a base to calculate a 5 percent performance bonus for Luis Suarez, one of Liverpool’s most important players.

This time around, however, we’re going to be a bit more ambitious, especially since the Liverpool Echo have also released the 2013 accounts Liverpool submitted to Companies House.

The increase in revenue from all sources is impressive, but for the purposes of calculations in the “current” context, we will exclude media and matchday revenues, since the 2012-13 financial year featured Europa League football, which Liverpool haven’t even been involved with this season.

The growth in commercial revenue, however, was staggering, and with the announcement of new sponsorship deals in the past few months, will only continue. Commercial revenue for the year ended May 31, 2013, was £97.7 million, more than a 50 percent increase over the previous 10 months, which landed £63.9 million. Spread the 10-month average over a period of 12 months, and the increase can be adjusted to roughly 27 percent, still a significant growth factor.

Our final assumption is if Liverpool continue in their current attacking style of football, coupled with the increased exposure of Champions League football, they will generate more interest off the field, which will lead to benefits both in terms of commercial sponsorships, as well as merchandise and image rights-related sales and advertising revenue.

Applying the same 27 percent year-on-year growth factor onto our performance bonus of 5 percent, to ensure that all staff are adequately compensated for their role in helping grow the Liverpool brand, we get a 6.35 percent bonus from the previously calculated Champions League-related payouts.

This gives Suarez 6.35 percent of £64.3 million, which amounts to £4.08 million.

 

Conclusion: £56.64 Million

Adding this performance bonus to our transfer and wages baseline, we get a total valuation of £56.64 million, which, compared with our December estimate of £56.1 million, is perhaps disappointingly close.

However, considering that it’s only been three months since our previous calculation and that our estimate has already gone up by half a million pounds, this kind of growth rate could yet translate itself into bigger margins given another year or two.

It wasn’t so long ago—last summer, in fact—that Arsenal submitted a high-profile (and now widely mocked) £40-million-plus-£1 bid for Luis Suarez, which was derided at the time by Liverpool owner John W. Henry.

Back then, £40 million plus £1 was seen as a derisory amount for a player like Suarez. Three quarters of a season onward, perhaps £56.64 million will be considered shockingly low for such an important player to the Reds cause.

But of course, this is just a purely financial valuation of Luis Suarez, based on assumptions that might not ring true in the Liverpool boardroom.

Last time John W. Henry checked, football contracts “don’t seem to hold, and [Liverpool] took the position that [they’re] just not selling” (per the Guardian).

We have a sneaking suspicion that they will be holding this position for quite some time.

 

This article first appeared on Bleacher Report, where I contribute regularly on Liverpool and the Premier League.

Advertisements

How Much Is Liverpool’s Luis Suarez Worth in the Current Transfer Market?

Hi-res-456857877-luis-suarez-of-liverpool-celebrates-scoring-their_crop_north
Paul Gilham/Getty Images

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.

Paul Gilham/Getty Images

Transfer Fee

Let’s start first with the most visible element: the transfer fee.
In what will surely be known as one of the landmark bargains of this decade, Luis Suarez signed for Liverpool from Ajax Amsterdam on January 31, 2011, the last day of the 2011 winter transfer window. His transfer fee, according to BBC Sport, was around £22.7 million.

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.

Previous Wages

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.

Alex Livesey/Getty Images

New Wages

Now it’s time to consider the rumored new package that Liverpool have supposedly offered him. And this is where the less concrete part of our analysis starts.

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.

Alex Livesey/Getty Images

Club Performance 

Of course, we also have to take into account Liverpool’s performances and financial rewards as a result of their on-pitch displays.

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.)

Paul Gilham/Getty Images

Conclusion: £56.1 million

So what do we end up with?

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.