Have football fees and wages gone out of control?

London

HARRY Gregg, the Northern Irish footballer who died last month, is best remembered as a hero and survivor of Manchester United's tragic 1958 Munich air disaster.

The brave goalkeeper not only returned to the dangerous wrecked plane to rescue Bobby Charlton and other players, but he also saved a pregnant mother and young daughter.

What is lesser known, however, is that Gregg was transferred to Manchester United just two months before the tragedy. He left Doncaster Rovers for a fee of £23,500 - a record sum for a goalkeeper at the time, and that works out to about £547,000 (S$968,722) in today's money.

If Gregg was still playing today, in his prime, the transfer fee amount would be very different.

Eye-watering deal

The current record for a goalkeeper is 80 million euros (S$125 million), which is what Chelsea from the English Premier League (EPL) paid to acquire Spanish goalkeeper Kepa Arrizabalaga's services from Athletic Bilbao.

Chelsea negotiated a seven-year contract with Arrizabalaga and agreed to pay him an annual salary of £7.8 million.

Football, of course, has become more sophisticated and powerful in the six decades or so since Gregg was an active player.

Nevertheless, the job remains largely the same; stop the ball from going over the goal line, and apply swift and shrewd tactics to kick or pass to players with openings to attack.

Arrizabalaga's eye-watering deal, however, is well below the all-time football transfer record of 222 million euros.

That was for Brazilian star forward Neymar, who made the move from Barcelona to his current club Paris Saint-Germain (PSG). Neymar is reportedly earning an obscene amount of money, believed to be in the region of 550,000 euros per week.

PSG is owned by the Qatar Sports Investments, a branch of the state-owned Qatar Investment Authority.

In comparing the massive pay-outs to clubs, players and their agents, the Bank of England (BOE) wryly observed that it was purely down to supply and demand.

"The demand for talented football players is high as they increase the team's chances of winning titles," the BOE stated.

"Clubs have to compete for the best players by offering the highest wages. If a particular club was to offer lower wages, other clubs would simply outbid them. If people lost interest in football, clubs would not be able to make such high profits. The demand for players would drop and so would their wages," the bank added.

In the EPL, the average top annual salaries range from £5 million a year for Tottenham Hotspur to £6.9 million (Liverpool), £7.7 million (Manchester United) and £8.7 million (Manchester City), according to Statista.

Mel Stein, president of the Association of Football Agents, estimates that the average wage of an EPL footballer is around £40,000 a week, or just over £2 million a year.

Average agent commissions are around 5 per cent, but this can be higher if the deal is complicated, he explained.

Fifa - football's world governing body - has threatened to peg commissions and agents have said they might pursue potential legal action against alleged restraint of trade.

Transfer fees are sky-high and top EPL and other European league players are paid mind-boggling wages because the clubs themselves are making more money than ever.

Since the EPL was formed in 1992, broadcasting rights' hyperinflation has soared from £241 million then to the current local and international £9.2 billion deal.

Over and above this revenue, clubs obtain money from sponsorship, memberships and ticket sales, among other sources. Clubs with super-rich owners - such as Manchester City and PSG - can outbid competitors with ease when it comes to signing the best players.

Deloitte's Sports Business Group estimates that on average, EPL clubs' player expenditure is as high as 60 per cent of their revenue. This places acute financial pressure on the less-profitable clubs, at the bottom of the league. Pressures worsen if they are relegated to the lower divisions.

EPL clubs' total gross expenditure in the January 2020 transfer window was about £230 million, according to Deloitte calculations. This is more than the January 2019 total of £180 million.

The clubs spent a total of £1.6 billion on transfers during the current 2019/20 season, 16 per cent lower than the record £1.9 billion in the 2017/18 season.

Predictor of performance

"Clubs have become more focused on long-term financial stability," said Tim Bridge, a Deloitte Sports Business Group director.

Transfer strategies have become "more agile", he added. For example, clubs are "utilising loan transfers often with an option to buy". They are also promoting local youth talent.

The so-called "Big Five" European leagues - the EPL, Serie A (Italy), Bundesliga (Germany), La Liga (Spain) and Ligue 1 (France) - spent in excess of 5.5 billion euros on transfers for the first time last year, during the summer transfer window.

"The wages that clubs pay their players is the best predictor of league performance," Deloitte noted. "Better skills command a higher price."