Six years ago, PSG signed Neymar for a €222million record-breaking fee, however he has departed for Al Hilal this season, leaving European transfer markets in his wake.
When the thin 17-year-old made his professional debut in 2008, few would have suspected the meteoric rise his career would have, and fewer would have guessed he would single-handedly inflate football’s transfer market by nearly a billion.
Still, Neymar da Silva Santos Júnior was a prodigy by all definitions of the word. Extremely quick, deceptively strong for his slight build, and overflowing with the kind of beach football trickery expected from Brazil’s best, he was bound for greatness.
At age 14, he was invited to train with Real Madrid. In his second season with Santos, he won the Brazillian Cup. At 19, he was deemed heir to Ronaldo, Pele, and Ronaldinho, and had clubs fighting for him like caviar.
Perhaps no moment signifies the brilliance of this man as the time an opponent fell to his knees and clasped his hands during a charity match. Instead of attempting to defend, Fred Desimpedidos begged Neymar not to humiliate him with fancy dribbles.
At 21 years old, Neymar moved from his boyhood club to Barcelona for 88 million euros, which was deemed a splash for the youngster back then. However, little did everyone know the biggest splash would follow four years later as PSG dropped an eye-watering 222 million euros for his services.
A simple phone call
At the peak of his powers in 2017, the idea that Neymar would leave for a club with PSG’s prestige was unthinkable. But ironically, it was a game against the budding giants that convinced him otherwise.
In a Champions League quarter-final 2016/17, Neymar single-handedly inspired the sport’s most remarkable comeback against the French club. He helped score twice and assist once, all after the 88th minute. But the headlines were about another one of Barca’s talismans: Messi.
That was the last straw for Neymar, who felt he would always be in the shadow of his teammate. Knowing PSG was interested in him, his heart moved elsewhere.
All it took was a phone call.
A plan was set in motion after a meeting between Neymar’s father and Nasser Al Kheliafi. Barcelona had no interest in letting go, but PSG was willing to pay the exuberant buyout clause.
The ‘Neymar Effect‘
The Domino that would fall due to this transfer would be catastrophic. Neymar’s transfer wouldn’t just affect PSG, but it would also irreversibly inflate the market. The previous transfer record just a year back was £105 million for Paul Pogba. Before that, the biggest fee was a 100 million euros fee for Gareth Bale in 2013 and a 94 million euros fee for Cristiano Ronaldo in 2009.
Approaching eight figures was never the norm. The first seven figure fee pre dates the euro and it was was cashed out for Papin’s 10 million pound fee to, and the first million pounds was cashed out in 1975 for Savoldi.
So when Barcelona suddenly earned 222 million euros in their banks, other clubs were willing to ask for more money for their players, causing cascading inflation.
That inflation is quantifiable, and it is 774 million euros. How?
Publicly available valuation exists for players who are being sold in the transfer market. This data can be found at Transfermarkt.com. This valuation accounts for how impactful the player may be, accounting for age, prospect, and shirt sales.
As indicated above, Neymar’s sale singlehandedly raised everyone else’s valuation in just a year.
One can follow the effects of Neymar’s money through a decision tree.
If a club offloads a player at an above-market price, everyone else knows that the club has extra money to spend, so when the offloading club comes searching for a replacement, the market would ask for more money than the actual valuation.
The inflation would be stronger in the first few levels. That is to say, it is stronger when looking at Neymar (Level 1), Neymar’s replacements (Level 2), and their replacement’s replacements (Level 3).
After calculating publicly available data, the table below indicates the number of players affected by Neymar’s transfer, the inflation amount at any level per player and the range of standard deviation.
On the first level of Neymar’s transfer to PSG. PSG overpaid 122 million euros. Neymar was only valued at 100 million euros.
On the next level, Barcelona replaced Neymar with Coutinho, Dembélé, and Semedo from Liverpool, Dortmund, and Benfica. The negotiation position for Barcelona was very weak due to their recently acquired money. On average, they overpaid for these three players by around 58 million euros (the highest overpayment was for Dembélé by 102 million euros). Meanwhile, all of their new players proved to be severe disappointments, setting back Barcelona on wages and financial fair play regulations.
But, the selling of star player Coutinho turned out to be a blessing in disguise for Jurgen Klopp’s Liverpool, who in three years would win both the Premiere League and Champions League after using the money to revamp the squad by signing Alison, Fabinho, and Van Dijk.
Dortmund would also enjoy the fallout of Barca’s panic buy. By selling Dembele, the 100 million euros would be spent in the next two seasons over the purchase of stars Manuel Akanji, Jadon Sancho, Erling Haaland, and Mats Hummel.
Still, on the third level, the negotiation position for Liverpool (Coutinho), Dortmund (Dembele), and Benefica (Semedo) were slightly weaker, as everyone in the market knew that they received a huge transfer fee from Barcelona. The same phenomenon happened, and the three clubs overpaid on average around 10 million euros for a player (the highest overpayment for van Dijk by 54.65 million euros).
Interestingly, even on Level 3, 4, and 5 clubs had to overpay for their replacements. Most of the transfers on this level were made by clubs from more minor leagues in Europe and South America, yet the overpayment persisted. At these levels, it is actually very important for clubs to invest their money intelligently to keep up with the richer competition.
While calculating the overpayment of all six levels, the market was inflated with a total of 767.74 million euros. This sum only reflects how much the clubs have overpaid for their transfers and does not illustrate the money flow into the football industry.
If we put this figure in relation to the 2012/2013 season transfer season for both winter and summer, all clubs spent a comparable amount in a year to this sum. Since then and within 5 years, the market developed to such an extent that more money is wasted by overpaying for players than was previously spent in total.
Fair play tightens
Back in France, Ligue 1 saw record TV contract deals and sponsorships. Games of the resurgent PSG team were selling out. And, the team, with the addition of Kylian Mbappe, looked like European contenders.
Despite record-breaking revenue brought in by PSG. UEFA was far from happy, especially following the extreme spending by the club.
In 2018, this transfer and others led to an investigation against the club for breach of financial fair play. Under UEFA rules, clubs can’t spend significantly more money than what they earned through matchday income, transfers, sponsorships, and other revenue streams.
Eventually, UEFA cleared PSG of any wrongdoing. But there were some consequences. Sponsorship contracts with Qatar National Bank, Ooredoo, and Qatar Tourism Authority were devalued by 37%. The club was forced to sell players worth 60 million euros to satisfy the requirement too.
And, more significantly, the sponsorship contract with Qatar Tourism, which used to be worth 800 million euros, was blocked from renewal. Without their most lucrative source of income, PSG resorted to the following deals to abide by financial fair play: Accor (€65million/ year), Nike (€80million/year), Air Jordan (€67million/ year), Visit Rwanda (€10 million/year) GOAT (€17 million/year) and Qatar Airways (€70 million/year).
For all the money spent, and hope built around the Brazilian star, he didn’t deliver the most coveted continental trophy, and leaves this club with a transfer fee loss.
But his impact on the club was more than his champions league player. He was one of the players that put PSG on the map, and more importantly, holds a record that has not yet been broken.