Transfer market realism: Player book value

[Yuko]

The Financial Fair Play has been around for maybe 10 years now, but FM has yet to grasp its basic principles. Fixing this will pretty much set the Football Manager series transfer system to reflect real life deals and maybe this was omitted because it's not making news in the affluent Premier League where the focus lies.

It is one of the drivers for high player turnover at clubs and there's a basic concept that makes it tick.

Basic concept #1: Each player has a book value. 

Example: 

Player is signed for 10m with a 5 year contract. That means in Year 1, his book value is 10m. 

Basic concept #2: Players are assets and assets are amortized.

So this player has a 10m deal with a 5 year contract. There are several ways in accounting to amortize assets, but the easiest and most followed system in football accounting is also the simplest one. 10 million divided by 5 years gives us 2 million per annum. Since there are two transfer windows, players that leave in the winter have half the year amortized.

So what this means is that this player, at the start of the new accounting & sporting season, will have a book value of 8m, rather than 10m. On FM we see players get signed for 10m and the following year they're sold for less than 4m for some reason. We've all seen cases. Even players got bought for 40m, were hardly used by their new clubs and the following season they were sold for around 10m. 
This brings a catastrophic FFP cost, as clubs desire to show capital gains to pass regulations. Most clubs depend on transfer activity rather than television, ticketing or sponsorship revenue, so FM missing this aspect makes the transfer system very unrealistic.

 

This is also why some clubs have rather high demands. Some players have high book value and they want to avoid a capital loss in selling him lower than that, others have a home grown player that has an insignificant book value, as do free agents (less than 1m and/or very close to zero) so anything they receive is capital gains that helps them with FFP or gives them the chance to record losses in another transfer.

The game now allows for more loan + option or obligation transfers to reflect real life. But the valuations do not. Unneeded players are not given for peanuts anymore. 

To return to the  case in example; after the first season his club decides he's not good enough. His salary is quite high so many teams cannot really afford him, and no one is going to pay almost as much money as his club for a player who failed there. And his club does not wish to sell him for less than his book value as it is desperate to not record an accounting loss! This means that this player can be had for a 2 year loan deal for example. So year 2 and year 3, this player is spending it on loan, meaning his book value falls to 6m at the end of year 2 and 4m at the end of year 3. This means that the club is willing to offer him on a 2 year loan with an option or obligation to be signed at 4m. This saves the club from a player's salary, amortization may be shared between the clubs with an annual fee at times, and by the end of the loan, he can leave for a fraction of his initial cost, but in accounting terms, the club breaks even. 

Real life example: Gonzalo Higuain.

The player moved to Juventus from Napoli for 90m euros. On a 5 year deal. 90/5 = 18m annual cost for Juventus to have this player on their books.

Higuain plays the first season. Book value reduced to 72m.

Higuain plays the second season. Book value reduced to 54m.

Higuain is loaned to Milan. They are asked to pay 18m for the duration of the loan, as in, to cover the amortization cost. There is an option to buy him at the end of the season for 36m. A total of 54m, meaning that Juventus avoids a capital loss on an expensive player they do not want to keep anymore.

Higuain's loan is terminated, Milan ends up paying only 9m. Juventus seeks another club. Chelsea appears and offers Juventus 9m for the loan until the end of the season, with an option of 36m once again.

The option is not taken.

Higuain returns to Juventus and stays for the season. By the end of the season, his book value is reduced to 18m. 
Before his final season commences, Juventus and Higuain agree to terminate the contract. Juventus eventually suffers a loss of 18m euros, as announced by themselves here: https://www.juventus.com/en/news/articles/thanks-for-everything-pipita

By this time, Juventus felt it could afford the capital hit as they had sold some players to allow them flexibility. 

 

 

This is pretty much how European football works in the last 10 years and it is not reflected on the Football Manager games. I'd like to see this taken more seriously because it's the entire basis of transfer activity.

[Zachary Whyte]

We appreciate the detailed input and feedback. Some of the details are ideas that are already in our internal system. They may yet be rejected or, with further development, end up in a future FM.