• Pricing Charlie Adam

    by Tyler Dellow • January 29, 2011 • Uncategorized • 9 Comments

    (I’m posting a link to this in a few different places; if you already know the background here, feel free to skip down to below the last video.)

    As I’ve mentioned a few times here, I’ve become quite the fan of Blackpool FC, an English Premier League team that bears some resemblance to the late 90′s Oilers, with some of the things I liked about the team in the later period grafted on. They’ve got the cheap owner, the quotable manager, they play a fun style, they’re hopelessly financially outgunned by the larger clubs and they’re punching well above their weight, currently sitting twelfth in the table with 28 points after 23 games.

    One of the storylines this season has been the future of their captain and (as the English press call him) their talisman, Charlie Adam. Adam’s actually not that hard to describe for people familiar with the Oilers; he’s sort of like Ales Hemsky, crossed with Georges Laraque’s showmanship and speed, with a dash of Ryan Smyth’s embodiment of the team and speaking ability thrown in. Like Hemsky, he’s a gifted passer:

    He’s got an incredible touch on free kicks as well – Blackpool achieved promotion from the Championship by winning a playoff with Cardiff at Wembley in May of 2010. Adam buried a free kick from a ways out to pull the Seasiders to 1-1 in a game that they went on to win 3-2:

    Before coming to Blackpool, Adam had a bit of a checkered career at Rangers, with some high points, like scoring in a Champions League game:

    He suffered from inconsistency though and was never really able to entrench himself in Rangers’ starting eleven. He had some issues with his diet (actual quote: “I’d never really thought of eating salads before”) and apparently got a bit of heat from Rangers’ fans. Blackpool purchased Adam from Rangers for £500K in 2009 after a successful loan to Blackpool and signed him to a contract that runs through the 2011-12 season.

    The goal to clinch promotion that is referred to above was a stunner for everyone – the Seasiders were expected to be relegated from the Championship to League One but instead got promoted to the Premier League where they have again completely defied expectations in not getting slaughtered (the manager, Ian Holloway, expressed the prevailing view at the start of the season: “I was fuming at first when people said we wouldn’t get 10 points. But when I got the fixture list I said, “My God, where are we going to get 10 points from?”).

    Blackpool has, over the course of the season, beaten some bigger clubs, most notably Liverpool (sort of the Maple Leafs of English soccer in that they won a long time ago, or Tom Petty’s character from The Postman, in that they were famous once) over whom they have “done the double”, beating them at Anfield and Blackpool. Adam wears 26 – there are some gorgeous passes from him tucked in there.

    That was the first game, in Liverpool – Blackpool beat them again in Blackpool earlier this month. Liverpool has now expressed an interest in purchasing Charlie Adam from Blackpool. Just like the Leafs would do if they could! For reasons that I don’t entirely understand (but probably have to do with the population density in Europe being much higher and there being multiple competing soccer leagues), soccer in Europe is far more capitalist than North American sport could ever dream of being. Employment status is far more of a reflection of the real world. As such, there are no trades of players. If a team is interested in a player, they come to an agreement with the team he plays for as to a price to release him from his contract and then come to an agreement with the player as to a new salary.

    There’s a transfer window in soccer – basically teams are able to purchase players during the off-season and in January. Liverpool’s interest in Adam has been one of the hot topics of this transfer window and they’ve made a series of escalating offers, all of which have been rejected by Blackpool. Adam, understandably, would like to go to Liverpool – he’d make a lot more money, they’re a huge and famous club and he might have a chance to play in the Champions League in a few years, the best league in the world. He put in a transfer request, which was rejected. Liverpool’s last offer was £6.5MM and its rejection prompted Adam’s dad to make some scathing comments about Blackpool:

    “Blackpool are such a cheap-skate club. I don’t even think this is about money. It’s because Charlie took them to a tribunal over the bonus they owed him. This is their pay-back. They are saying ‘you won’t make anything out of this, we have got you under contract’. Liverpool’s offer is 13 times what Blackpool paid for Charles. And they are turning it down? They have been more than compensated for him already.

    Mr Oyston [the club chairman] has got to realise it is somebody’s life and future that he is dealing with here. I think it is petty. This should be a time for common sense to prevail. Blackpool have been looking at other players. They could do without Charlie.”

    Adam’s dad misses the point, of course, with the reference to making 13 times what they paid – Blackpool has no obligation to sell at a certain point. They want to maximize their revenues, period.

    Following this in the English press has been interesting. This has been a somewhat interesting thing to follow – the English were historically a trading people and a large part of their economy is still based on it but their media seem to be even more clueless than the North American media when it comes to business and sports. I’ve read stuff that basically says that Blackpool will be obliged to let him go and that, basically, there’s nothing that a small team can do once a big team starts to look covetously at its players. There seems to be no idea how to value players either – the numbers for Adam seem to be all over the map.

    English soccer is not unlike the NFL, in that most teams make most of their money from television. There’s a huge incentive to be in the Premier League because that’s where the TV money is greatest. Blackpool’s game against Cardiff for promotion was referred to as a £90MM game because the team that won the game was guaranteed a year’s TV money in the Premier League as well as £48MM in what are known as parachute payments – when a team gets relegated, it receives £16MM in the first two years and £8MM in the next two in order to help teams avoid massive losses as players signed when the team was receiving Premier League money still need to be paid.

    One of the interesting things about the Premier League is that the money gets distributed based on not just membership in the league but also on the basis of how many times you play live on TV and where you finish in the standings. For the sake of this discussion though, I’m going to dumb things down a little bit and assume that staying in the Premier League is worth a flat £45MM to Blackpool. By my math, every 5% reduction in Blackpool’s chances of staying in the Premier League is worth £2.25MM in terms of expected revenue for next season.

    This is complicated stuff though. Part of the reward in staying up is the opportunity to play for future years in the league at £45MM. I’ve put together a table based on some simple assumptions to try and get a handle on how moving Adam affects Blackpool’s expected future TV revenue.

    Adam1

    This is a table of Blackpool’s expected revenues based on the probability of staying in the league in a given year. I chose the 75.6% figure for this year based on the imputed probabilities on Betfair. It’s probably low – the market has presumably factored in some probability of Adam leaving, with a corresponding impact on Blackpool’s chances of staying up. I’ve halved the impact of him leaving on the probability of staying up for next year in order to take into account that this season is halfway done. So, for example, the 4.0% column factors in a 2% reduction in the chances of staying up for 2011-12 and a 4.0% reduction in the chances of staying up for 2012-13. Adam’s contract is done after that, so no further reductions are reflected.

    I’m a reasonably new soccer fan but I have a hard time seeing a single player making much beyond a 10% impact in a team’s chances of staying up; even then, that would have to be a team that’s right in the sweet spot between staying up and going down. With that said, Blackpool kind of exists in that sweet spot at the moment.

    Ian Holloway’s been talking a lot about wanting £14MM – £16MM for letting Adam go. This is rough back of the envelope stuff but that, it seems to me, would represent a winning transaction for Blackpool. I suspect anything over £10MM would be a win for Blackpool, although there are additional levels to this – there was an an additional £800K paid for every spot that you finished up the table last year and with Blackpool in 12th right now, there’s a £4MM difference between finishing where they are now and sliding to 17th, relegation aside.

    The demand for that kind of money though, does not seem unreasonable to me. There’s certainly a level of emotion to this for Blackpool – they want to win games because that’s what the club exists to do and there are financial rewards for doing so and it’s not at all unreasonable to expect that they would demand a significant premium that can bear fruit in the long term before deciding to do something that might impact them negatively in the short term, given the fuzziness of the variables involved and the inability to come up with a precise answer one way or the other. Assuming that ownership is rational, if they sold for less than £10MM, I’d be surprised.

    About Tyler Dellow

    9 Responses to Pricing Charlie Adam

    1. January 30, 2011 at

      Liverpool won the Champions League in 2005 so they didn’t just win once upon a time.

      Great post though. It’s been interesting tracking this possible transfer. Obviously I hope that Adam moves to Liverpool but considering Torres’ transfer request I hope Liverpool shows the same determination as Blackpool to see their contract honoured.

    2. The Rage
      January 30, 2011 at

      Liverpool’s CL win was a fairy tale run rather than the mark of a successful team–they only finished fifth in the Premiership that year.

      I complete agree with MC’s characterization of the English media’s approach to the business of sport. They rarely are able to understand the costs/benefits of transfers.

    3. RiversQ
      February 1, 2011 at

      Yeah, Liverpool:TML just doesn’t work on many levels. Maybe Chelsea before Ambramovich is a better analogy? It has to be a London club.

      What about Newcastle:Oilers? If Ashley starts trying to gorge himself on public money, then it’ll seem similar. Tougher sell in the UK though.

      Did you like Fergie’s comment about Adam’s corners being worth £10MM alone? I thought that was funny for him to pump Adam for no discernible reason other than to stick it to Liverpool once again.

    4. Tyler Dellow
      February 1, 2011 at

      I did enjoy that from Fergie, as well as the subsequent breathless reporting that Fergie valued him at “at least” £10MM.

      Glad he stayed. It’ll be interesting to see what happens in the summer. If they stay up, I don’t know that someone can pay them enough money for it to make sense to sell him. Outside of an outrageous offer, I wouldn’t dream of selling him unless I had high 30′s for points in the Premier League on January 31, 2012.

    5. February 1, 2011 at

      Someone once compared Spurs to the Leafs. Spurs were once considered English soccer royalty and the last couple of decades have been less kind. Since 1990 though they have won an FA Cup and two league Cups and they’re in Champions’ league round of 16 this season – not a great comparision considering the Leafs have not even made the finals since 1967, never mind winning anything.

    6. Hambone
      February 2, 2011 at

      Tyler, isn’t this a little indulgent? I thought this was an Edmonton Oilers blog.

    7. Doogie2K
      February 2, 2011 at

      I thought this was Tyler’s blog, which mostly happened to focus on the Edmonton Oilers and the business of hockey.

    8. SumOil
      February 2, 2011 at

      @ Pat
      Spurs are coming back though.
      Not as rich as the 4 clubs above them, but have come through with some above average players and of course the potential superstar in Gareth Bale.

      So whatcha think about the 50million pounds for Torres, kinda steep eh. Then Liverpool goes back and spends much more on Carrol and Suarez!

    9. Nik
      February 3, 2011 at

      Most important is that Adam only has 18 months left on his contract, so in 12 months time, where he will be eligible to sign a pre-agreement, he will be worth zero. Blackpool are being very optimistic if they believe that having Adam play 14 extra games is worth 10M pounds.

      Transfer pricing is based on curent ability, age, and potential ability, but most important the remaining length of the contract. The player can always wait the contract out and move for free – so if a club wants to make anything from his transfer, they need to act before the second last year of the contract commences.

      Also – Adam wants to leave. It is very uncommon in football to force a player to stay at a club after they have handed in a transfer request. Especially a club captain. The last time I remember this happening was with Michael Ballack at Bayern Munich. He simply sat around for two years before he then moved onto Chelsea for free. You aren’t doing anybody any favors by forcing a player to stay.

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