David Beckham

Comm 423 The Value of David Beckham Dik Yi Tse (230052113) Ryan Darmasubrata (230055322) The purpose of this paper is to survey angiotensin-converting enzyme of the most phenomenal channels in the football world. The sendred of David Beckham from Manchester get together to received capital of Spain has be advance the remonst respect of non just football fans but the financial expert for the grow 2 old age. Unlike most transfers, the David Beckham transfer has revolutionized impostor transfer in the football world. It became the standing point on how football player is not cherishd according to their skills on the field but rather on their skills appearside the field.The paper leave alone evaluate the cause, the flat coats and the effect of the transfer base on some(prenominal) technical and financial aspects. In order to evaluate the transfer based on its financial aspect, we will use analytic theory of production and competition between firms. pic pic Variable c ost satisfies the some cadence(prenominal)ime formula pic pic Return function pic C variable cost S unit price of the product K improve cost ? rate of diffusion r throw out rate T duration of the instalment With the formulas above, we try to justify the returns of the football clubs under different environment.From the calculations, we screwing call for the change of revenue for the football clubs between heady costs at different levels of trade size. David Beckham David Beckham is an English footballer, widely regarded as the broadgest icon in the recreation. He currently plays for current capital of Spain and he is the maitre d of England national team. David Beckham is especially noted for the quality of his crossing and the ability to hit free-kicks specially from long-range and swinging corners. He is alike famed for his celebrity life style trappings, media attention and trade potential.Early on in his c beer Beckham secured a figure of speech of mer go offtile patroniseship deals including Brylcreem, Adidas, Vodaf unscathedness (which ended in July 2005) and Diesel. Despite the USAs uneven acceptance of soccer, Beckhams recognition in the USA is strong enough to enable him to come to the fore in print and television advertising for various sponsors, including Gillette razors. He has live on more well known in northbound America since the supremacy of the British film Bend It Like Beckham, virtually a British Sikh girl who idolizes David Beckham and harbours ambitions of being a football player.David was born on May 2, 1975 in Leytonstone, London to Ted and Sandra Beckham. Davids parents were Manchester United supporters and he accompanied hence to m either of the games. He hallowed for Manchester United as a trainee in July 1991 and he was instrumental in helping the club win the FA youth Cup in May 1992, scoring in the second fork of the final a get intost Crystal Palace. His Premier League debut eventually came at h ome to Leeds United on April 2, 1995. Partially as a sequel of injuries to key starters, David established himself in the first team during the 1995/96 season.Davids match-winning performances during 1996/97 helped United to win another Premiership title and reach the semi-final of the UEFA Champions League. On a personal level, he was voted Young Player of the Year and second in the overall Player of the Year poll. Manchester Uniteds 1997/98 season was one to bequeath as they finished second to Arsenal in the League, lost to Barnsley in the FA Cup and were knocked out of the Champions League quarter-finals by Monaco. David enjoyed a memorable moment, when he was selected for Englands World Cup Finals squad. Hes been a team ingredient ever since. Beckham captained England for the first ime in a friendly match in Italy and retained the armband for the friendly with Spain and the World Cup qualifiers against Albania and Finland, against whom he scored an important end at Anfield. Beckham made his 85th appearance for England in 2005 and is expected to captain the team at the 2006 World Cup in Germany. If so, he would become only the sixth England player to represent his country at tierce World Cup competitions (although Sol Campbell and Michael Owen are expected to achieve this travail at the same time), and the fourth (after Billy Wright, Bobby Moore and Bryan Robson) to captain the team at more than one World Cup.Beckham is also a reasonable panorama to record 100 appearances for his country. He captained his country for a landmark fiftieth time in the friendly international against Argentina in November 2005. Beckham is one of only four players to perplex appeared 100 times in the Champions League. The reasons for transfer Manchester United First reason David Beckham only had 2 more socio-economic classs contract with Manchester United and under the Bosman rule, e real player jakes sign another contract with another team in the term of 6 months befo re his contract expired.Because of the clause of the Bosman transfer rule, any club tidy sum get David Beckham signature without paying any hire to Manchester United, if David Beckham decide not to sign any new contract within the next one and a half years, Manchester United would lose their biggest asset without getting any returns. Second reason David Beckham relationship with his manager was in the midst of trouble. David Beckham popularity has dual-lane his con centimeration between his job on the field and on the runaway.With having traditionalist method of running a football club, Sir Alex Ferguson, Manager of Manchester United had guardianship that David Beckham was not performing as best as he should. because arguments had arisen in numbers of occasion. Third reason Pepsi and Adidas played a big role in forcing David Beckham to move to true(a) capital of Spain. For Pepsi, it would be more economic for them to require David Beckham to play in Real capital of Spain bec ause Real Madrid has three other players that have sponsorship deals with Pepsi. But the biggest influence came from Adidas, which is the main sponsor to David Beckham.Manchester Untied is sponsored by Nike, Adidas biggest competition in the industry and Real Madrid is sponsored by Adidas, so it would be so ofttimes breach for Adidas to have David Beckham to play in Real Madrid instead of Manchester United. Fourth reason Manchester United needs more young players in their squad, while the clean age of their rosters has reach 30 years old, Manchester United needs to invent another potential young player to maintain their reputation, the sale of David Beckham would wreak the necessary capital for the inve short-term memoryent.Real Madrid Real Madrid is a very successful club with champions reputation at their back, their starting lineup is filled with star players, hence their advantage was also their biggest weakness. With many star players in their team, Real Madrid has a exal ted fixed cost in their operation, but most of their star players are not very commercial. Majority of the players are just big label within the industry or in the European market. Real didnt have any ne cardinalrk in the Asian and North American market at the time.With football to be the number one divert in Asia, Real Madrid was missing study(ip)ity of the action. As a result in 2002/03 season, Real Madrid only spotted themselves the eighth on the list of the richest club in the world. Real Madrid needful to find a player who would pioneer their marketing strategy to the whole world. They are not only looking for someone who can stick sponsors to their stadium, and not just a poster boy for the campaign, but also has the skills to show in the field. This is the ultimate reason why Real Madrid was very determined to get Beckham.The effects of David Beckham to Real Madrid Real Madrids revenue from club merchandise, much(prenominal) as shirts, jumped 67 per cent in Beckhams fi rst season alone, and climbed another 6. 5 per cent in the year to June. Overall commercial income, which includes money from deals with the likes of Siemens, Adidas and Pepsi, which have all grown in value with the Beckham effect, now stands at around ? 80m a year. Real Madrid also earned ? 48m (26 per cent of turnover) from match-day income (primarily ticket sales), ? 44m (24 per cent) from television, and ? 6m (8 per cent) from promotional activities such as lucrative overseas tours and friendliness, which have also become better earners because of David Beckham. And whereas Real Madrids annual wage bill (? 98m) now equates to 52 per cent of turnover, and is falling towards an expected ratio of 47 per cent next year. With the financial improvement, Real Madrid is now the richest club in the world, beating Manchester United who won the title 8th consecutive years. 2005 Football clubs revenue ranks1 1 Real Madrid (Spain) $330 one million million millionManchester United was No. 1 when it had David Beckham. right off Real Madrid has him and became No. 1. 2 Manchester United (England) $295 million Slips out of the top spot for the first time in the nine-year history of the rankings. 3 AC Milan (Italy) $280 million Nearly 60 percent, or $165 million, of its revenue is from broadcasting more than anyone else. 4 Juventus (Italy) $274 million Averages only 26,600 fans but moves up from No. 5 last year thanks to a lucrative TV contract. 5 Chelsea (England) $264 million Its otherworldly payroll makes it No. in annual net losses, which reportedly were $244 million. Evaluating the transfer pic In determining the vindication for the transfer, we use the analytical theory to prove that even though Real Madrid paid a large sum of transfer fee and obligated to pay a mellowed salary to David Beckham, the acquisition would kale Real Madrid more because the larger market size that David Beckham can open for Real Madrid. To make the calculation to be accurate as possible , we had made some assertions for the numbers used in the calculation.Reader should slip by in mind that because Real Madrid is a private organization, it is very hard to find the material data about their current and past financial statements. Nevertheless, we did our best to present the numbers as it would present the existing case scenario. Fixed cost (K), because we do not have the actual numbers for the fixed operation cost from Real Madrid, we use the confidence that fixed cost would be equal to the salary of the players. We know that thither are other things that contribute to the clubs fixed cost but for the intimacy of the formulation we are ignoring that.The fixed cost increased from $98 million to approximately $117 million because of David Beckham. Discount rate (R), according to our research, the closest number that we found for the discount rate during that time in Spain, was the checking account interest rate, provided by the banks in Spain. Hence we use this n umber as our discount rate. Term of project (T), David Beckham was 28 years old when Real Madrid bought him from Manchester United, using the assumptions that most football players can play until the age of 34 years old, we use the length of project to be 6 years. incredulity rate (sigma), if Real Madrid did not buy David Beckham, they would have an distrust rate of 50%, that is they either succeed or not. With David Beckham on their squad, they have bigger uncertainty because they have to add the possibility that will David Beckham can work together with his teammates and produce something positive for the team or will he have some problems in adjusting to the new Spanish strategy. From the marketing strategy, they would also be concern that if David Beckhams fans would still like him in Real Madrid jersey.The value of product (S), we used the assumption that major football clubs would require to have a success in both the domestic and international competition but as an organiza tion major football clubs also want to bring profit for their tune. Because of these factors we concluded that the value of S should be 2 instead of 1. Market size, we use the assumption that Real Madrid previous market size which is the European market to be 100 and the new potential market involving the Asian and North American market would be 145.The 45% increase due to that in North America, football is not that popular, North American people would like to watch and buy basketball, American football, baseball or hockey. For the Asian market, the increase of market size would come from people that buy the merchandise, there is a little chance that they would come to the actual game. Analysis & Conclusion From the calculation, it prove that bringing David Beckham to Real Madrid squad was a positive move. The transfer has solved Real Madrids problem of having high fixed cost and low returns.David Beckham has managed to open the Asian and North American market for Real Madrid to expand, hence now Real Madrid with high fixed cost on their organization can work and do business more efficiently in larger market size environment. With the emerging of internet and globalization, major sports clubs have tried to improve their business strategy by purchasing international players that can open more potentials market for their business. Another example besides David Beckham is the Chinese International basketball Player, Yao Ming. Yao Ming was purchased by the Houston Rockets Basketball companionship in US.With the help of Yao Ming, NBA (National Basketball connection of America) and Houston Rockets have managed to gain substantial market in the Asia. NBA opened merchandise stores all over Asia and has extradition match between American Basketball Club and the Chinese Basketball Clubs. Their website subscriber, www. NBA. com, has increase significantly during the past 2 years. With major website subscriber approach from the Asian market, it is only for certain that the expansion broadcast will continue with other Asian basketball players coming to the NBA.In baseball, The Seattle Mariners imitated the strategy by purchasing a Japanese National baseball game player, Ichiro. Ichiro is now a market symbol for the major league of baseball, tourer flow from Japan has increased significantly to Seattle. American baseball has gain more popularity because of Ichiro. Ichiro merchandise is one of the top selling merchandise in the league. The main reason for this trend among major sport clubs is the revenue coming from the selling of merchandise and television broadcast license.With the improve technology and internet, fans in other parts of the world can watch their favorite player and club match through website and live television broadcast. The distance and time factors have been eliminated by the technology, hence potential customer is closer in today time. Another factor for the trend is the sponsorship revenue coming from companies that wan t to put their smear on the teams jersey. With sponsoring a sport club, major companies can make brand recognition by associating their brand to a specific sport clubs or players.The better the clubs perform, the better progeny that the sponsor company will achieve. The last reason is the revenue coming from exhibition games. An exhibition game is when a sport clubs have a friendly match with other sport club from different country. high fee has to be paid to attract famous clubs to come to do exhibition match. Today sport industry is not just about winning a game but also about how much money the games will generate for the clubs, the revenue and reputation are the two main factors that influence the livelihood of a sport club.The higher the fixed cost, the more necessary for club to find a player that can open bigger potential market. REFERENCES Chen, J. 2005. 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Z ? ? oeo? O? EAEA ? ? ? ? ? wog? jDeloitte Football Money League 2006.