Brazil’s greatest footballer, Neymar, is getting it in the neck this week.
He’s decided to move from Barcelona (a great club in a tough league) to Paris Saint-Germain (a so-so club in a bad league).
At Barcelona he plays with and against the best in the world. At PSG he’ll be gliding past clumsy defenders for most of the season, until the Champions League gets going in March or so.
So why’s he doing it? Well, PSG are now owned by the Qatari Government. And Qatar have a few quid to throw around. They’re going to make Neymar the best-paid player in the world.
The football world is aghast. How could one of the world’s greatest players turn his back on top-level football? Ken Early, a football journalist, said of Neymar leaving Messi,
“Like Lucifer… he wasn’t prepared to serve in heaven, he’d rather reign in hell.”
But the deal makes more sense for financial writers. In Bloomberg Leila Abboud writes that Neymar is less greedy than he looks.
Abboud points out that even though footballers’ wages are exploding, they’re actually pretty constant as a percentage of football clubs’ revenue. In 2005 Premier League clubs spent 62% of their revenue on players salaries: last year it was 63%.
In other words, when extra money comes into football clubs from a bigger TV deal, higher-priced tickets or extra jersey sales, the clubs use that money to increase players’ wages.*
It’s the same story in the other leagues. In Germany, France, Italy and Spain, wages has stayed steady as a percentage of total revenue.
Viewed in those terms, Neymar’s new deal makes a bit more sense. His salary may have exploded in percentage terms, but he’s just claiming his fair slice of PSG’s giant revenues.
And it makes a bit more sense of this year’s crazy summer transfer spending. Wages and transfer fees have gone through the roof. This summer a distinctly average Premier League player will cost anywhere from £20-40m, a good one will cost £50m plus, and a star will cost £70-200m.
This is a direct consequence of clubs making more revenue from TV deals. Players are just claiming what’s rightfully theirs.
The reason Premier League transfers in particular have gone bananas is because in the last few years, a new force has entered the market.
For more than 20 years, Sky TV exclusively held the Premier League TV rights. But starting in 2015, BT decided it wanted to get involved.
BT is a much bigger company than even Sky. It wanted the rights to sports events in order to tempt customers onto its broadband and TV packages. And the competition between BT and Sky has pumped even more money into the Premier League.
Can you think of another company with deep pockets… huge ambition… which delivers video online… whose business model can monetise subscribers indirectly?
Of course, I’m talking about Amazon. Talk about any topic long enough and it comes around to Amazon…
Amazon has more than 100m Prime subscribers worldwide. It’s pouring money into original TV shows and movies, more than $4.5bn last year. Why? Because Amazon Prime subscribers tend to spend a lot of money on Amazon – more than twice the amount non-prime subscribers pay.
That’s why it makes sense for Amazon to plough money into original programming. And it’s why Amazon’s next move might be to bid for the rights to sports events.
As Rich Greenfield, a media analyst for BTIG told Axios,
“Think about 2021 when the NFL’s Monday Night Football contract expires. I don’t think there’s anyone who doesn’t believe anymore that Amazon Prime in the U.S. won’t have more subscribers than ESPN. So if Amazon wants Monday Night Football, it’s theirs for the taking.”
Basically, Amazon’s money-harvesting machine is so efficient that it’s worth their spending billions on TV shows and sports, in order to draw in more customers. Once the customers are locked into Prime, Amazon owns them.
It’s a diabolical plan. And you could probably make a few quid by investing in Amazon today.
But there’s a better way to do it. I’ve found a “back door” way to invest in Amazon.