Transferring Cristiano Ronaldo Presentation

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This presentation addresses the sale of Cristiano Ronaldo from Manchester United to Real Madrid in the summer of 2009 using monopoly rents, superstar effect, and game theory.

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Transferring Cristiano Ronaldo Presentation

  1. 1. Transferring Cristiano Ronaldo<br />An analysis of the largest transfer in the history of world football<br />
  2. 2. What is a Transfer?<br />A club owns the right to have a contract with a certain player<br />Other clubs may “buy” that right from them<br />When agreement is made, the selling club transfers the right to the buying club<br />The buying club still needs to sign the player to a separate contract of their own<br />
  3. 3. World Record Transfers<br />First transfer was Alf Common in 1905 for £1,000<br />Broke £1 million in 1979<br />Current record is £80 million for Cristiano Ronaldo’s move from Manchester United to Real Madrid<br />
  4. 4. Methodology <br />Background<br />Cristiano Ronaldo<br />Real Madrid<br />Theoretical Models<br />Monopoly Rents<br />Superstar Effects<br />Game Theory<br />
  5. 5. Who is Cristiano Ronaldo<br />There are some things Ronaldo can do with a football that make me touch my head and wonder how on earth he did it.” – Luis Figo (Ex- Real Madrid Star and former world player of the year)<br />
  6. 6. Who is Cristiano Ronaldo<br />Started playing for a club in his hometown in Madeira at the age of 8<br />Quickly signed by Sporting Lisbon and on his 1st team debut at age 17 he scored 2 goals<br />Signed by Manchester United just days after playing in a friendly match<br />Set a record by scoring 42 goals in 48 appearances for Manchester United in 2007<br />
  7. 7. Real Madrid<br />Most popular club in the world<br />History of spending extreme amounts on transfers<br />Galacticos Era 2000-2005<br />Bought three former world players of the year<br />Mostly seen as a failure<br />New Galacticos – Ronaldo, Kaka, Benzema (Spent £220m in 2009)<br />
  8. 8. Theoretical Model for Transfers<br />Objective of a club : <br />maxU = U(Q,π)<br />Team Performance can be seen as: <br />Q=Q(q,Ѳ)<br />Profit: <br />π = R-C <br />Revenue: <br />R = ρG(ρ,Q) + F(Q) + N<br />Cost:<br />C = W(q) + O<br />Seller: Ts = Wqs – ωs<br />Buyer: Tb = Wqb – ωb<br />
  9. 9. Superstar Effect<br />Additional revenue generated from increased prices, and the increase in fans<br />MC is minimal since television can reach millions without any additional costs<br />Real Madrid is able to maximize its return on investment from a purchase like Cristiano Ronaldo because it already has the infrastructure to exploit all revenue streams and maximize their profit<br />Two measures are highly correlated to high wages, goals per game and assists, generate high levels of fan interest<br />Lucifora and Simmons identified 0.40 goals per game to be exceptional and a good indicator of a superstar. Cristiano Ronaldo, since 2006, has a goal rate of .615<br />
  10. 10. Game Theory<br />Real Madrid has a dominant strategy, to buy<br />This is driven by the performance, marketing, revenue, and increase in fan opinion. No matter what Manchester United chooses, Real Madrid will choose to buy because it gives them higher payouts in each case<br />Manchester United is faced with a dilemma<br />Low payout if they chose to sell and Real Madrid chose not to buy.<br />This would destabilize the team and lower the morale of Cristiano to the point that his performance may suffer and fan opinion will decrease<br />Payoff is higher not to sell if Real Madrid chooses not to buy <br />due to the performance boost of having Cristiano in the team, revenue stays up, fans opinion remains the same<br />Given that Real Madrid’s dominant strategy is to buy, their payoff is higher selling<br />Leads to a Nash Equilibrium of Manchester United selling and Real Madrid buying<br />
  11. 11. Conclusion<br />Real Madrid<br />Given the performance and marketing advantages of signing Cristiano Ronaldo, it is well worth the money to Real Madrid<br />Manchester United<br />Cristiano had been vocal previously about wanting to move to Real Madrid<br />Playing level declined in 2008 when he was working on a move<br />The fans had become neutral to him leaving and some actually celebrated when he was sold<br />Sir Alex Ferguson, the manager, had brought in replacements, obvious he had to be sold<br />Good decision for both<br />
  12. 12. Sources<br />Testing for monopoly rents in the market for playing talent by Bill Gerrard and Steve Dobson. Journal of Economic Studies, 2000; 27 (3), 142-164.<br />Superstar Effects in Sport: Evidence From Italian Soccer by Claudio Lucifora and Rob Simmons. Journal of Sports Economics 2003; 4; 35<br />‘Who’s on first’: an empirical test of the Coase Theorem in baseball by Donald Cymrot, James Dunleavy and William Even. Applied Economics, 2001; 33, 593-603.<br />http://soccernet.espn.go.com/news/story?id=654318&cc=5901<br />http://news.bbc.co.uk/sport2/hi/football/8085391.stm<br />http://cristianoronaldos.com/honorific-quotes-about-cristiano-ronaldo-what-do-other-famous-people-say-about-ronaldo/<br />http://www.cristianoronaldoworld.com/Biography.php<br />http://uk.eurosport.yahoo.com/football/cristianoronaldo.html<br />http://en.wikipedia.org/wiki/Cristiano_Ronaldo<br />http://www.insideworldsoccer.com/2009/07/cristiano-ronaldo-sir-alex-ferguson.html<br />http://www.madridgalacticos.com/the-galacticos-era/<br />http://en.wikipedia.org/wiki/FIFA_World_Player_of_the_Year#List_of_male_winners<br />http://www.guardian.co.uk/football/2009/aug/05/xabi-alonso-unveiled-real-madrid<br />http://www.europeancuphistory.com/clubs/real.html<br /> http://www.matchanalysis.com/<br />http://www.wharton.universia.net/index.cfm?fa=viewArticle&id=1739&language=english<br />http://bleacherreport.com/articles/203506-beyond-the-numbers-a-fun-look-at-ronaldos-madrid-contract<br />http://online.wsj.com/article/SB124470998673005495.html<br />http://en.wikipedia.org/wiki/History_of_Real_Madrid_C.F.<br />http://www.realmadrid.com/cs/Satellite/en/Home.htm<br />Inner Circle Sports LLC – Investment Bank that helped to formulate ideas for how to approach the topic<br />

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