How a Player’s Market Value is Determined

In the dynamic realm of football transfers, a multitude of activities unfold. Players’ prices sometimes reach astonishing heights, disproportionate to their perceived abilities, while others are significantly undervalued despite the underlying addition they bring – all relative and subject to a few considerable factors.

From Guiseppe Savoldi’s historic £1.2 million transfer from Bologna to Napoli in 1975 to Neymar Jr.’s record-breaking £190 million move in 2017, the trajectory of transfer fees has been climbing rapidly. Presently, accurately assessing player values has grown arduous, leading to football clubs often paying prices that don’t align with true worth.

Liverpool’s acquisition of Philippe Coutinho in 2013 for a mere £8 million, contrasted with their earlier £20 million expenditure on Stewart Downing in 2011, vividly underscores the complexities of player valuation. This challenge has persisted since the inception of football transfers.

Amidst this everlasting conundrum, if anything showcases how berserk the world of football has become over the last 20 or so years, its players’ transfer fees. But how, though, is a player’s market value calculated? What factors contribute to the seemingly outrageous prices affixed on football players? What underwrites outstanding players being offloaded by clubs for nominal sums?

A football player’s valuation depends on a few factors, which we will dissect in this piece.
It’s important to recognise that players can be evaluated based on three foundations and assumptions:

Historic Cost

This approach involves valuing a player according to the transfer fee initially paid for them. However, this method lacks accuracy due to the highly volatile nature of the transfer market. Using historical costs can lead to underestimating a player’s actual value. Moreover, player values can rapidly appreciate or depreciate, rendering this method unreliable and unsuitable. Prime examples of this flawed model being put to work are Chelsea’s signing of Romelu Lukaku from Inter Milan as well as Atletico Madrid’s signing of Alvaro Morata.

Replacement Cost

This method entails valuing a player by estimating the cost of finding a suitable replacement in the current transfer market. While more dependable than historical cost, it poses challenges since every player possesses unique qualities and characteristics. Consequently, implementing this method universally becomes intricate and less feasible.

A more recent illustration of the replacement model being put to the test occurred with West Ham’s valuation of their former captain, Declan Rice. Despite having just a year left on his contract, the Hammers knew it would be never impossible to replace someone of his ilk. A quality player who can play comfortably in multiple positions and a leader on and off the pitch. This was the catalyst for demanding the gigantic fees for the 24 year-old midfielder.

Market-Based Costs

Valuing a player can also be determined by assessing the offers made by other clubs in the transfer market. This approach often disadvantages larger clubs seeking to acquire players. The case of Moise Caicedo is a prime example, wherein Chelsea and Liverpool engaged in a competitive bidding war. Their actions seemingly prompted Brighton to inflate the midfielder’s price, ultimately resulting in Chelsea securing him for a British record fee of £115 million.

However, the inherent volatility of the transfer market renders these methods complex to employ, and the presence of wealthy owners of football clubs have led to many binning these factors. Nonetheless, in present-day football, a few elements remain constant in measuring the worth of a football player.

Now we detail factors that affect a player’s valuation as of the present day.

Age

A player’s age serves as a pivotal metric. Younger players command higher market values, a common trend in the transfer market. Clubs seeking to sign players prioritise younger talents displaying substantial potential, resulting in a higher market value than older players approaching their careers’ twilight. The extended time for development and improvement makes younger players more valuable. This trend is evident when we examine the list of football’s most expensive transfers, where players under the age of 25 hold greater value than those who are 25 years or older, with 70% of the world’s most expensive transfers being for players who (at the time) were under the aforementioned age threshold.

Nevertheless, there are a few instances where this valuation metric is with an exception.

Experience

Experience is closely linked to market value and can be defined differently depending on who is doing the valuation. Jamie Vardy, for example, didn’t play in the football league until he was 25. Marcus Rashford, meanwhile, is 26 but has over 350 senior games under his belt. Rashford’s experience on and off the pitch would be valued supremely higher than that of the then 25-year-old Vardy.

Contract Length

Many seem to undervalue the importance of a player’s contract length. Fans are mainly consumed by the qualities a player possesses that they forget how vital a lengthy contract can be and the significance of a short term contract.

A suitable example is Real Madrid’s Eduardo Camavinga. In 2020 Real Madrid were tracking the then-Rennes teenager; his value at that time was reported as high as £90 million. A move never materialised at that time but fast forward a year, and Real would get their man; the only difference was that they paid just £35 million. Due to the fact, Camavinga had just a year left on his deal Rennes would be risking their talented youngster penning a deal with another club for free in just 6 months.

Player’s demand

Market value is also substantially influenced by the supply and demand dynamics. Just as a house attracts higher bids with multiple buyers, a player’s value escalates when several clubs express interest. This collective interest amplifies a player’s market value. However, the stature of the clubs involved also becomes a factor. The high demand surrounding both Caicedo and Romeo Lavia resulted in their clubs – Brighton and Southampton inflating the respective prices for these players.

Injury Record

Injuries exert a significant impact on a player’s market value. Players are valuable assets to clubs, and injuries can drastically diminish their worth. An extensive injury history, such as multiple ACL injuries or severe incidents like Christian Eriksen’s collapse, leads to value depreciation. Conversely, players with excellent injury records hold a higher value.

League Factor

The league that the player features in does impact value. Typically players plying their trade outside the Europe’s top 5 leagues (English Premier League, Bundesliga, La Liga, Serie A and Ligue 1) are valued much less.

The league a player participates in plays a defining role in market valuation. Generally, a player excelling in a more competitive league holds greater value compared to someone in a less prominent league.

An example highlighting this factor is Slovenia’s Benjamin Sesko. Despite his achievements in the Austrian Bundesliga, the forward’s cost would be lower than his current valuation at RB Leipzig. This situation mirrors that of Manchester City’s Erling Haaland. Initially signed by Borussia Dortmund from Salzburg for around £17 million, the Norwegian forward only needed to replicate his outstanding form in the German Bundesliga for his market value to skyrocket to over £100 million. However, Manchester City secured his signature for a fee exceeding £60 million in the summer of 2022. Primarily, it’s about having proved yourself at a better level.

Marketability

Modern football integrates business aspects. Beyond ball-playing skills, marketability factors into the valuation. Questions arise: Is the player renowned? Are they a brand themselves? Can they attract new fans and drive merchandise sales? The ability to generate substantial fan interest, exemplified by figures like Lionel Messi and Cristiano Ronaldo, can inflate a player’s market value, regardless of age.

These factors collectively shape the intricate landscape of player valuation in today’s football transfer market.