Transfer Market Inflation: Why is It Happening?

By Will Shuhda
Reading Time: 6 minutes

If you paid even moderate attention to the transfer window this season, you know that something was up.  This transfer window hosted the 3 most expensive transfers ever (Neymar to PSG for £198M, Kylian Mbappe to PSG for £166M, and Ousmane Dembele to Barcelona for £97), and the all-time most expensive transfer for a defender (Benjamin Mendy to Manchester City for £52M).  Excluding undisclosed fees, the total amount spent on transfers this window by FIFA licensed teams was a record setting £1.77 billion.  As more transfer fees are released, we might see this number amount to possibly £2 billion.

Why did this happen?  Did clubs decide to significantly increase transfer budgets this year?  Was the market just more competitive than most years?  Or, was this transfer window just an anomaly all together?  In order to figure out exactly what happened this year, it is necessary to analyze the transfer markets of previous years.  This research will act as our reference point, so that we will have something to compare with this summer.

In 2010, a record setting £444M was spent in total on transfers throughout world soccer.  Notable transfers included David Villa to Barcelona (£33.4M), Zlatan Ibrahimovic to AC Milan (£26.5M), and Javier Mascherano to Barcelona (£17.5M).  To put 2010 and 2017 in comparison, David Villa, a world-class striker at the time, went for a lesser fee than that of Danny Drinkwater (£34.1M) this transfer window.  The following transfer window in 2011 included another record setting £539M spent on transfers.  And in 2012, this record was broken again at £628M.  You probably are noticing a trend here: more money is spent in each new transfer window.  Between the years 2010 and 2017, this assessment holds true for every year but one (2015).  And this rapid upward trend of growth is not because of currency inflation.

In order to understand transfer spending, perhaps we first need to analyze the business performance of soccer clubs.  It is clear from data over the past few years that there has been a rapid growth in the value of top soccer teams.  Take for example the world’s most valuable club, Manchester United.  Currently valued at £3.4 billion, the club’s worth has risen by nearly 150% in the span of just 7 years.  Man U is not an isolated case; the majority of top clubs are seeing a rapid growth in value.  According to a study “Football Clubs’ Valuation: The European Elite 2017,” the 32 “most prominent” soccer clubs in Europe have grown by 14% in 2017 alone.  The report credits this growth to “football’s broadcasting boom, the internationalization of the clubs’ commercial operations, their investment into privately-owned and modern facilities, and overall more sustainable management practices.”  The broadcasting boom and media rights are playing a special role in particular with Sky and BT recently purchasing domestic broadcasting rights for the 2016-17 and 2018-19 Premier League seasons for a whopping £5.1 million.

This increase in club worth certainly correlates with the increase in total transfer spending.  It’s simple business theory: more value leads to more spending in pursuit of greater growth.  Both the average club worth of the top 20 most expensive teams and total £’s spent on transfers have increased by greater than 150% from 2010-2017.  Refer to the graphs below.