Friday, January 23, 2009

Knowing Me Knowing You, KAKA

“Knowing me, knowing you Kaka
There is nothing we can do
Knowing me, knowing you Kaka
We just have to face it, this time were through” – Abba

Manchester City Football Club, failed in its astounding 100 million pound ($147 million) bid to buy Brazilian Kaka from AC Milan. On top of the signing fee, he could easily have earned well over 1 million pounds a month. Wow! This move could have damaged the sport image at a time when many clubs and fans are in debt.

The bid was made possible after a consortium from Abu Dhabi bought the club from Thaksin in August. Yes, that 'assets frozen' Thaksin, who was associated with the mayhem in Bangkok, that showed little sign of ending!

In investment point of view, how do we justify this amount? Assuming he stays injury free and is to play 5 years for the club, are there enough time to recoup such a high single investment? Wouldn't it be a better bet to diversify and spend on 5 different high quality players?

Agreed, the calculation of return of investment in football business is very different as there are many spillovers. In addition to increase in gates collection, his glamour boy appeal could translate into millions of pounds in replica jersey and other merchandises sales. Then there are the television and image rights, branding and other intangible like new supporters’ base all over the world.

This formula had been proven but at a very much lower cost. The first few Asian imports (Korean, Chinese and Japanese footballers) to English league were signed primarily for commercial reason instead of footballing reason. They get their wages warming their rears but the revenues generated were multifold. The Asians especially the proud countrymen started supporting these clubs. Some flew over to watch the games; all dressed up in the team colours. Summer tours to these countries were arranged as more money was milked from Asians. Not forgetting increased in cable TV subscription! It was a commercial masterstroke.

In purely football point of view, there could untold damages. Spending such a huge amount on one player could trigger angry reactions from players and supporters. The gap between the haves and have-nots is widening. As unemployment is growing across Europe, spending so lavishly would have been nothing short of outrageous; enough to make some followers of the game simply turn off.

Personally, this model does not work. Are these rich investors prepared to stay for the long haul? They might have unlimited funds but do they have unlimited passion and patience? If they were tired of these toys, they could just go on another spending spree and dump the oldies. Look at Chelsea. Just like US government, the club is in spending deficit and heavily in debt! The moment the Russian walks out, there is a real danger all the pounds and ruble will turn to rubble!

To put into perspective, Kaka’s fee could be used for the following :

It could buy almost three F16 fighters which were priced at $US55 million dollars each in 2008.

It could cover the GDP of a host of nations. For example, in 2005, the Marshall Islands estimated GDP was $US115,000,000 and Anguilla $US108 million.

It would fund 20 million family-sized mosquito nets for sub-Saharan Africans, who lose 800,000 children under age five to malaria each year.

It could buy roughly 588 million meals for the World Food Programme. More than 10 million deaths were related to malnutrition each year.

It could buy himself Malaysia's Premiership. Not the football premiership as it had long gone to the dogs but the other almost going to the dogs premiership.

In the end, the four Liverpool lads were right to sing Money Can’t Buy Me Love. To add salt to injury, Mancunians could only shed Holding Back The Tears.

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