***SSN calculates likely value of Brazilian star
***>£30m. fee is likely if a bidding war does not occur
Brazil’s latest star, Neymar, made his mark on the European soccer world with two goals and an impressive performance against Scotland.
This has thrown his future onto the back pages of newspapers with Chelsea current favourites to sign the Santos strike sensation.
Brazil’s brightest youngsters tend to go for fees well in excess of their actual value owing to third party ownership. For a club to buy a player outright a number of fees have to be paid bumping up the price significantly.
Here SSN calculates the likely transfer fee Chelsea will have to pay following the rejection of a £20m bid in the summer. Estimations are based on previous similar transactions.
SCENARIO 1: The Market for Young Brazilian* Talent
*Direct or indirect
The following estimations are based on Neymar being seen as a prospect of under 23 years and outside of the top 5 leagues (England, Spain, Italy, France, Germany).
Conclusion: While the world’s major transfers push up asking prices of even the most basic of players, in the longer term this serves to actually push up their realistic value - impacting the value of the world’s top youngsters.
The table above demonstrates that over payment for top Brazilian youngsters that ply their trade outside of the top leagues varies between 34% and 52% with an average of 44%.
Chelsea had a £20m bid for Neymar rejected in July 2010. Since then Man City have ensured the transfer market remains inflated.
On this basis, what would Chelsea pay for Neymar?
1. Chelsea’s value of Neymar is realistic
Average Inflation Rate: 44%
Neymar’s fee: £28.8m
2. Chelsea’s value of Neymar is low
High Inflation Rate: 52%
Neymar’s fee: £29m
SCENARIO 2: Young players becoming the new big signings
Soccer is an entertainment sport – it requires superstars. At present the game is bereft of this, currently there are only two world stars (none of which are playing in the English Premier League) – Lionel Messi and Cristiano Ronaldo.
While many talented players remain – Xavi, Iniesta, Sneidjer – these are not superstars, showmen that the soccer world craves.
This has resulted in a rush to sign major young talent, particularly from South America where young talent are quickly hyped to ensure that the club get the highest possible fee. Because of this many clubs young players are the new big signings.
If Chelsea or more importantly Santos deem Neymar to be in the top player in the world bracket then the below economics could well apply to his fee.
Conclusion: In comparison to the deals for foreign youngsters, the transfers that have inflated the market experience much higher hikes as clubs panic buy to secure limited talent.
The hikes vary between 24% and 78%. The most extreme example of this is the Andy Carroll transfer to Liverpool. This pushed up the average inflation rate to 49%; taking out the Carroll anomaly, this inflation rate is 44%.
There is a very good argument to say this “Carroll Factor” could well happen with Chelsea’s Neymar deal: both are young, both have a lot of media attention surrounding them.
On this basis, what will Chelsea pay for Neymar?
1.Chelsea’s value of Neymar is realistic
Average Inflation Rate: 49%
Neymar’s fee: £30.2m.
2. Chelsea’s value of Neymar is low
High Inflation Rate: 78%
Neymar’s fee: £35.6m.
3. Chelsea’s value of Neymar is low
More Realistic Inflation Rate (minus Carroll Factor): 44%
Neymar’s fee: £28.8m.
Note on estimations: Chelsea’s value for Neymar cannot be categorised as high as Santos would have accepted the deal
