“Price is what you pay; value is what you get” is a famous quote from Warren Buffet that underpins his investment philosophy. It’s also a principle that holds true in the sports landscape when it comes to making recruitment decisions. At Twenty First Group we’re able to identify both the estimated “price” of a player given current market conditions as well as their underlying intrinsic “value” based solely on factors that are indicative of future performance. Understanding the difference between the two can increase the probability of making the right recruitment decisions.
Price is dictated by the market, not player value
The astronomical transfer figures paid this summer demonstrated the financial strength at the top of the football pyramid. In the previous transfer window Premier League sides spent over £2bn, breaking their previous record from 2017/18 (£1.9bn). One of the main reasons Premier League teams are able to spend so much is a result of the league’s broadcast deal, which is driven by the value of the product itself; the league is the highest-quality in the world according to our World Super League model, has had the most jeopardy of all major leagues through variety of winners, and has excelled on coverage and scheduling to connect with fans.
The financial strength of a league is one of the important components the market considers when a player is sold, with clubs in some leagues forced to pay a premium. For instance, our models estimate that when Leeds signed Brenden Aaronson from RB Salzburg his likely price would be £33m, compared to just £22m if a Ligue 1 club were attempting to sign the American.
Conversely, there are also several “super clubs” that are treated independently from the big 5 leagues. These are sides that have spent over £1bn in transfer fees over the last 10 years, such as PSG, Real Madrid, and Juventus, among others. When these clubs are involved in a transfer we tend to see an even greater premium in the market. If a “super club” attempted to sign Aaronson this summer, we’d estimate his price would’ve been closer to £48m. In the end, Aaronson sold for £30m and our ‘value model’ (more on this below) had him at £31m, so Leeds paid a fair price.