Warning - this is a long post all about the busienss aspects of football. If that's not your thing, please skip it!
Let's just look at the financial aspect again. I'm not sure most people appreciate quite how this deal is going to work in money terms, though some are obviously on the right track, mentioning the Umbro connection. I admit I'm guessing a little here, but I do think this speculation is informed and therefore has a good chance of proving correct.
Now, football is by far the world's most popular sport, but footballers' earnings lag behind those of the stars of the big American sports. Look at the earnings of the top-earning player in each of gridiron, baseball and basketball and you'll find that it's somewhere between USD 25 million and 30 million. That, in football terms, equates to roughly GBP 300K to 400K per week. If you think about it in these terms, top footballers are underpaid (and I know how crazy that phrase sounds!) and sooner or later the gap will probably close.
The reason top American sportsmen can command these huge salaries is that their employers pay them for the right to exploit their image rights, and then exploit those rights to get as much of the money back as possible. This practice in the US is very widespread and sophisticated, meaning that image rights for star players are worth a lot of money - a major component in the big earnings.
It's also now very common with footballers in the UK for their earnings to include an image rights component. It seems first to have been used in English football by Arsenal in the mid-1990s when they signed David Platt and Dennis Bergkamp and couldn't match the salaries those players had been earning in Serie A, using image rights deals to supplement the players' earnings while allowing the club to try to recoup a decent chunk of what they were paying out.
The structure is popular with footballers because it allows them to use offshore company structures to minimise tax liabilities (though HMRC is now watching like a hawk for any inflated image rights payments that effectively are attempts at tax evasion). However, those familiar with sports in the US think that footballers' image rights generally are woefully under-exploited.
This, it would seem, is the view of our very own Garry Cook. Now, Cook has an unfortunate tendency to come out with American corporate speak, which doesn't resonate well with an English ear. He therefore gets derided by the press and other fans as a kind of footballing David Brent. But if there's one thing he does know about, as the man responsible for the Michael Jordan brand at Nike for a decade or so, it's how to turn the image of an elite sportsman into hard cash.
Back in January, when the Kaka deal fell through. He was widely ridiculed for accusing Milan of having “bottled it†when the Italians’ enthusiasm for the proposed transfer waned. To put his side of the story, Cook granted an interview which formed the basis for the an article Independent journalists Ian Herbert and Frank Dunne. You can find that article here:
http://www.independent.co.uk/sport/...to-convince-shooting-star-to-fly-1452158.html.
That story called City’s plans for the Kaka deal “a ground-breaking proposition, ahead of its timeâ€, and went on to describe in some detail, presumably using information supplied by Cook, how the deal would have worked. It seems fair to suppose that the club is using the same template when now hoping to land other top players, including Terry.
The key is image rights. Herbert and Dunne wrote in January that City had been entertaining “big ideas of selling Kaka's image rights across the globe to recoup the £91M they were planning to pay Milan.†Kaka, the article explained, had at that point an overall image rights income believed to be in the region of €8M (£6.85M). (To put this in perspective, The Independent noted that the rights to reproduce Jordan's signature alone fetch more than this!).
City’s intention, through “lucrative digital TV and internet image rights deals†among other things, was to take control of the rights to Kaka’s image, exploit them with considerably more efficiency and ensure that the player’s share of the resulting bonanza left him very handsomely rewarded. There is nothing new in what City were intending to do with regard to Kaka. What City seem to believe is that they have it in them to exploit image rights much more effectively. In betting that they can, the club is effectively banking on Cook’s expertise in making things work - but his previous track record tends to suggest this is true.
So what does this mean for Terry? Well, let's assume he's on the oft-quoted GBP 135K per week at Chelsea and let's assume the image rights component is included in that figure (conventionally, it is). We'll round it up to GBP 7 million per annum. Let's say that, as the England skipper, he's able to justify an uncommonly high level of image rights payments - a quarter would normally be towards the top end, but we'll round that up to GBP 2 million too. He has three years of his deal left at Chelsea. These figures are not going to be exactly right, but they're intended to be illustrative, and they won't be a million miles out.
That gives him earnings over the life of the contract of GBP 15 million subject to income tax and GBP 6 million per year in image rights. The new 50% tax rate for high earners comes in next year and will affect nearly all his salary. Thus, the wages part of the equation will see him receive GBP 8 million gives a total of GBP 14 million over the rest of his contract (less whatever tax he'll pay on his image rights payments - pretty minimal, I think, but I'm no longer living in the UK and I've forgotten the exact UK rules).
Let's now look at City. For the sake of argument, let's say we'll pay Terry, over a 5-year deal (the reported term of our offer), the same GBP 160K per week that Robinho gets - it's just under GBP 8.5 million per year, but we'll round up again for mathematical convenience. Now let's say also that Cook is prepared to offer Terry GBP 5 million per year for his image rights. (I actually think he may well be prepared to offer more than that - Terry is with Umbro, City's kit sponsor as well as England's, so deals will now be possible which Chelsea can't make happen given they're with Adidas. And, of course, Umbro is now owned by Nike - where Cook was a fairly senior employee for a long time).
This comes out over five years at net salary payments of GBP 20 million and a total of gives a total of GBP 45 million over the rest of his contract (less whatever tax he'll pay on his image rights payments). In other words, what I suspect City are offering absolutely dwarfs what he'd get from Chelsea.
Why can't Chelsea exploit image rights in the same way, you may ask? Well, in time they will. But for now, it's a completely different way of doing things and they simply don't have enough time to get up to speed right now. And if they gave Terry a bumper deal on image rights now to keep him, they'll have problems with all the rest of the squad, who'll want the same. Not a situation they want to be in until they've had time to develop a coherent strategy on this topic.
It's possible that they'll agree to talks with him over a new deal, and if they do, I'd expect him to listen before committing. I personally doubt that they'll offer him enough even nearly to make up for the sum into the tens of millions he'll forego by turning his back on the City offer.
The outlook of the Chelsea fans on here who think that this is just JT agitating for an extra GBP 20K per week and another year on his deal is commendable: we all like to see things in the best light for our own club. However, I suspect that their optimism may prove misplaced. It will take a lot more than that kind of offer even vaguely to approach what City are offering. "Money doesn't talk, it swears," to quote a man I admire greatly. It seems to me, given the sums involved, likely to be hurling an obscenity or two towards Stamford Bridge in the near future.
Of course, the player may stay: in football, as in any otehr walk of life, the deal isn't done until the contract's signed. Maybe he's not money motivated at all and Chelsea will allay any other concerns he may have. Then there's the fact that Chelsea are making it as difficult as possible for him to leave, and he may not quite find himself able to take the final step to force his departure given the status he enjoys at that club. Maybe Chelsea are currently feverihsly working on a revised approach to image rights and will match our offer. But if they don't, most people, I think, would find the heart to insist on a move given the sums we'll pay.
One thing's for sure. If he turns this offer down, then it proves he really is Mr Chelsea, and I'll respect him immensely for it. I love City but in his position would quit the club in a heartbeat!
