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Transfer Market Effect on Team Success

By Trent Bellinger and Derek Nakagawa




Source: Boss Hunting

Introduction


Often referred to as the most competitive league in world soccer, the English Premier League is home to many of soccer’s best teams. Many of these teams have experienced great successes over the years and are now massively successful businesses, earning hundreds of millions of dollars every year. Success for these teams, however, is often extremely expensive. Along with the many costs associated with running the teams successfully, these teams often spend massive amounts of money on the players that compete for their team. The transfer market is a market in world soccer where teams can pay each other in exchange for players. This market has become increasingly expensive, and many Premier League teams have become extremely involved, often spending millions of dollars every year on players. But is this spending worth it?


Top Spending Teams Over Past 10 Years


To help establish a clear correlation between spending in the transfer market and club success, we will take a close look at the 25 clubs in the Premier League who have spent the most money over the past ten years. The two main factors that we will look at to measure these teams’ success are their finishes in the Premier League and their Champions League success.


First, we will look at the impact that spending money in the transfer market has on success in the Premier League. The below visualization depicts the correlation between average league finish in the Premier League and amount of money spent on transfers in the last ten years. Each club is depicted by its team crest. For any year in which the team was not in the Premier League, we count that as a 20th place finish in the Premier League.




There is clearly a strong correlation between spending money in the transfer market and success in the premier league, as shown by the r-squared value of 0.8656 in the above graph. There is a large disparity in spending between the top three clubs (Manchester City, Chelsea, and Manchester United), and the rest of the teams displayed. This disparity in spending sets these clubs apart from the bottom 19 clubs shown in terms of league position, but Liverpool, Arsenal, and Tottenham have achieved nearly the same league success while spending significantly less. Tottenham and Aston Villa are the only two teams that have clearly overperformed or underperformed according to this model. It is shown that a team must spend an average of about $80 million over a ten year period to improve their average league position by one place.


This poses a question: is this extreme expenditure worth it? It is predicted that a Premier League club will earn about $3 million more per year for an increase in one place of league position. Over ten years, this increase in prize money will add up to be about $30 million, which is only three-eighths of the expenditure needed to facilitate this improvement. However, there are other factors that could make this expenditure worth-while, one of which is qualification to the Champions League.


The teams that finish in the top four of the Premier League every year compete in the Champions League, which is a competition among the best teams in Europe. Only the top teams in every league in Europe are allowed to compete in this competition, making it extremely competitive, popular, and profitable for Premier League clubs. The below visualization shows the Premier League clubs that have competed in the Champions league in the last ten years, in order of least money spent (Leicester) to most money spent (Manchester City)





In terms of the number of appearances in the Champions League, it is clear that spending in the transfer market has a direct correlation as the number of champions league appearances increases consistently as transfer market spending increases. However, the amount of money spent does not necessarily directly correlate to champions league success. Chelsea has had the greatest Champions league success, winning the tournament two times over the last ten years. This is closely followed by Liverpool, who have won the tournament once and finished as runner-up twice in the last ten years. Seeing as Chelsea and Liverpool are the second and fourth-highest spending clubs respectively, the amount of money spent does not directly correlate to success in the Champions league.


The Champions League is one of the most profitable tournaments for Premier League clubs. The prize money for each finish is outlined in the table below.


Group StageRound of 16Quarter-FinalSemi-FinalsRunner-UpChampion$15.5 mil$25.5 mil$36 mil$48.5 mil$64 mil$84 mil



According to the values above, the amount of money made by each of the seven Premier League clubs over the past ten years from the Champions League in comparison to their total expenditure in the transfer market is given below.



The above graph shows a clear correlation between money spent in the transfer market and prize money acquired from the Champions League (r-squared of 0.7379). Liverpool is the only team who has overperformed, and Man United is the only team who has underperformed. The correlation shows that the amount of prize money made from the Champions League pays back about 25% of the money spent by these teams. This, combined with the total money made from premier league finishes shown above, is almost enough compensation to completely cover the amount of money spent by these teams. Hence, it is very clear that the spending of these top teams is completely justified and is easily paid back by their successes.


Correlation Between Spending & Immediate Success


Although we know that money spent over the course of a long time period directly contributes to the success of a team, we also want to take a look at the direct impact of money spent from the season prior and see how much it correlates to success. In order to find when the money spent on the transfer market makes its biggest impact, we analyzed the season of and the previous two seasons impact on the points earned.




For the correlation matrix above, it is evident that the spending of the year prior on the transfer market makes the biggest impact on the current season. This is likely due to the fact that players need time to adjust to the play-style of a specific team and it takes a season, maybe two, to make the transition. Another thing to note is that the correlation is only about 0.60 which means that 60% of the data is represented by the linear model. This shows that even if a team spends a lot of money on the transfer window, it doesn’t necessarily mean success because the player might not be the ideal fit for a specific position on the team.


Predictive Model


As seen on the correlation matrix, the correlation for expenditure in the previous season and points last season were decently high, so we want to make a predictive model based on those two variables. Here were out results:






Limitations of Model


The biggest limitations of our model is that we don’t take into account injuries, can’t predict the newly promoted teams, and don’t factor in new players coming from the club team’s academy. Throughout the past 10 seasons there were many instances of teams that were expected to do exceptionally well but were hindered due to injuries to star or key players on the team. For example Liverpool and Chelsea are under-performing this season due to multiple injuries for many of their key players such as Kante, Kepa, and Reece James for Chelsea and Diaz, Jota, Matip and Keita for Liverpool. In addition, each season there are 3 new teams that get added to the Premier League and it is often hard to predict how well they do since we don’t have much data on them. Last, each club team has an academy where they develop their own players and sometimes select them to play for the team, which our model doesn’t take into account.



Conclusion


Although it is evident that money spent on the transfer market has a direct correlation to the success of a team, the short term impact is less clear. Teams that had spent a total of over $100 billion over the course of 10 seasons were on average the most successful which allowed them to play in the Champions League. From there, many of these teams received prize money which then allowed them to spend on the transfer market again and get even better players. In terms of immediate impact on the team’s success, it is evident that newly acquired players need time to adjust to the team and it takes at least a season for a team to reap the benefits of the transfer season. However, due to the uncertainties and unpredictability of soccer, it is harder to find the immediate impact of money on the team’s success due to things like injuries and developing talent from a club’s academy.



References:

https://www.transfermarkt.us/statistik/einnahmenausgaben

https://www.bosshunting.com.au/sport/newcastle-united-fc-saudi-arabia-takeover/


GitHub:

https://github.com/derek-naka/BSA_F2022_Transfer_Market



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