This is an article originally written in summer of 2009, indulging my interest in sports law. It was originally written against a backdrop of vast sums being mentioned in the media in connection with a potential salary offer to rumoured transfer target John Terry, but I suspect that the point still remains relevant.
So far this summer, Real Madrid’s astonishing spending has been the major news story emerging from the global transfer market. The Spanish giants have signed a string of superstars, and, if reports are to be believed, seem set to make further spectacular additions to their squad. In English football, meanwhile, Manchester City are leading the way in spending terms as the club tries to make the most of the first summer transfer window throughout which it has the backing of its Arab owners’ amazing wealth.
At the time of writing, the club has made two major signings from other Premiership clubs in the form of Gareth Barry and Roque Santa Cruz, but may well, according to the media, add Carlos Tevez to its ranks soon. However, the club is also being linked with deals for other high-profile players such as Samuel Eto’o and John Terry, and is rumoured to be willing to pay them big to tempt them to Eastlands. Combining the biggest weekly salaries for each player mentioned in the press gives an astonishing total in excess of £500,000, and, though City later issued a denial, the Barcelona President Joan Laporta suggested that the Blues had put a “stratospheric” offer to the Cameroon striker.
This is not the first pursuit of a star player which has seen City contemplating a deal which would entail the payment of a vast transfer fee and wages. In January, the club was prepared to spend a world record £91M to AC Milan for the services of Brazilian star Kaka and would presumably have made a salary offer commensurate with the status of the world’s most expensive player. The player ended up rejecting the offer but has this summer moved to Real Madrid, but the perception, surfacing again as City chase Tevez, Eto’o and Terry, is that the Blues are simply throwing around their petrodollars with abandon as they seek to lure players who would not otherwise consider playing for a club which has just finished tenth in the Premier League. Much media criticism has resulted.
In fact, it is unlikely to be true that City regard the fees and wages they may end up spending on any star players they manage to acquire as being purely dead money. Madrid President Florentino Perez has spoken of his club’s colossal spending as representing an investment, which he is confident of more than recouping through commercial deals. The suspicion is that City may well have similar thoughts, and the biggest clue to their strategy came in an article in The Independent newspaper published on 21 January of this year, in the immediate wake of the collapse of the club’s bid for Kaka.
Many football fans will remember the furore caused by the comments of Garry Cook, the City Executive Chairman, when the Kaka deal fell through. He was widely ridiculed for accusing Milan of having “bottled it” when the Italians’ enthusiasm for the proposed transfer waned. To put his side of the story, Cook granted an interview which formed the basis for the said article Independent journalists Ian Herbert and Frank Dunne. That story called City’s plans for the Kaka deal “a ground-breaking proposition, ahead of its time”, and it seems fair to suppose that the club is using the same template when now hoping to land other top players.
The key is image rights. Herbert and Dunne wrote in January that City had been entertaining “big ideas of selling Kaka's image rights across the globe to recoup the £91M they were planning to pay Milan.” Kaka, the article explained, had at that point an overall image rights income believed to be in the region of €8M (£6.85M). City’s intention, through “lucrative digital TV and internet image rights deals” among other things, was to take control of the rights to Kaka’s image, exploit them with considerably more efficiency and ensure that the player’s share of the resulting bonanza left him very handsomely rewarded.
There is nothing new in what City were intending to do with regard to Kaka, and it is now commonplace in the Premier League. Fans may recall the recent reports of the image rights payments due to the relegated Newcastle United squad, including the annual £675,000 paid to Joey Barton, a player of whom it might be said with some understatement that his public image is not quite the best in English football. The practice seems first to have been used in England in the mid-1990s when they acquired Dennis Bergkamp and David Platt from top Italian clubs when Serie A retained its place as the world's richest league. Otherwise, the Gunners may well not have been in a position to offer sufficiently attractive financial terms to attract the players.
What City seem to believe is that they have it in them to exploit image rights much more effectively. Despite its great global appeal, football still lags behind the major American sports in terms of its exploitation of commercial opportunities. In betting that they can, the Blues are effectively banking on Cook’s expertise in making things work.
Having spent ten years as the head of the Michael Jordan brand at Nike, Cook is probably entitled to be regarded as one of the world’s foremost authorities when it comes to knowledge of how commercially to exploit the image of an elite sportsman for top dollar. The plan is that his knowledge will enable the club to make image rights offers to turn the heads of star players and then to recoup as much as possible for the club in marketing those rights. If he is as successful as at Nike, this seems a realistic goal: the Independent, presumably using information from Cook, revealed that Jordan has arrangements in place that “earn him $12m (£8.6m) a year for his signature alone.”
So City have a strategy that looks like enabling them to put together big-money offers on which the club will see a return. It remains to be seen whether that will be enough to attract star players who would ordinarily expect to be playing Champions League football. The next few days and weeks will make that clear.
FOOTNOTE - Many footballers set up private companies to handle payments for sponsorship deals and other earnings with a view to minimising their exposure to tax. Admittedly, with HM Revenue and Customs now seeking desperately to close the loophole, such arrangements will no doubt become less common – the Revenue thinks that, in some cases in the past, players’ image rights may have been over-valued with the result that tax has not been paid on money that would otherwise have gone to the player as a salary payment. That is unlikely to matter for City’s scheme. Cook will be confident that he can justify any image rights payments City make as reflecting the commercial reality of the global appeal of elite footballers.
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