Updating the TTV Model with 2011 Wage Data

They're now the £796M team.

No sooner had the digital ink dried on my last post regarding the TTV model, I stumbled across a trustworthy source for 2011 wage data: the Swiss Ramble.  A table of 2011 Premier League wages  can be found in his latest post on Liverpool’s finances.  A quick check versus seasons’ past shows minor differences between Swiss Ramble’s data and Szymanki’s Companies House, likely due to the slight accounting differences in the two sources.  Nonetheless, the data are reasonably similar enough to use for comparisons until I can acquire all twenty club’s data via purchase at the Companies House.  This post will serve as a quick update to the TTV model, with a few observations provided below based upon graphs updated with the 2010-11 data.

Wages continued to rise in 2011 (+11%), and as did the median Sq£ (33%).  The graph below demonstrates how each of those rises fits into the historical context of the previous 18 seasons of data.  With last year’s change the median club wage is now up a whopping 1503% in 19 seasons, while the median Sq£ is up 1023%!

The median TTV value also rebounded in 2010-11 with the rise in both of its inputs.  While not quite back to its all time high of £156M in 2009, it did climb to £143M in 2011.  This represented a 21.7% rise from 2010.

With the smaller jump in median wage compared to Sq£, the ratio between the two continued on a downward trend after a brief rise last season.  This suggests that continued player mobility and the desire to succeed sooner rather than later is placing an ever-increasing emphasis on transfer fees rather than wages.

The addition of Blackpool as a discrete data point to the position vs. mTTV model, combined with the increased number of data points going into each club’s average value, led to a slight improvement in the regression model’s fit (R-squared of 0.7338 vs. previous R-squared of 0.7143).  This indicates that 74% of the variation in average finish position for a club can be explained by their average mTTV.  The slope value has also lowered just a bit (2011 = -6.837 vs. 2010 = 6.947), suggesting that clubs must spend even more than the median club to secure the same desired table position.

What this ultimately translates to is the odds shown in the table below for the spending required to achieve a top five finish.  Clubs must have a player valuation at least 2.19 times the median TTV (£334M 2011 CTTV) to have a 50/50 shot at making it into the Champions League.  An mTTV of 3.00 (£429M 2011 CTTV) is required to be virtually assured of  making the tournament.  Such a team valuation will also give the club a slightly-better-than 75% chance of winning the Premier League title.

As I said in my last post, the Premier League has certainly turned into a rich man’s game that shows no signs of slowing down.  It will be interesting to see how this year’s financial data impacts the TTV models, as I am certain median club wage and Sq£ have continued their upward rise.

Zach Slaton is the author of A Beautiful Numbers Game blog, and a contributor at The Tomkins Times, the Transfer Price Index, and Forbes Online. You can follow him on Twitter and Facebook.

Definitions of terms/models from prior posts:

  • TTV = Total Team Valuation. A combination of the team wages and Sq£ that provides the total cost of assembling a team and paying it for the year if someone were starting from scratch.
  • CTTV = Current Total Team Valuation.  Similar to CTTP, but the annual inflation/deflation rate is calculated based upon the increase/decrease in median TTV.  The inflation/deflation rates from each season are then applied to each club’s data to get a present day (2010-11 season) value.
  • mTTV = Multiple of the Median TTV.  This metric measures the ratio of a club’s TTV to the median TTV of the specific season being studied, which provides an understanding of the relative advantage or disadvantage a club faces within the league.
  • CTPP = Current Transfer Purchase Price.  The player’s original transfer value adjusted for football inflation using the same method – but not the same figures – as the Retail Price Index. (Andriy Shevchenko holds the highest CTPP, his £30.8m transfer in July 2006 now worth £68.2m; the increase down to the difference in the average cost of a Premier League transfer that season – around £2m – and how the average in 2011 is c.£5m)
  • Sq£ = The cost of a club’s squad for a season
  • £XI = The average cost of the starting XIs in Premier League matches that season
  • MSq£ = Multiple of average Sq£. Not how much a squad costs, but how much more (or less) it costs versus the average squad that season.
  • M£XI = Multiple of average Sq£. Not how much a starting XI costs, but how much more (or less) it costs versus the average starting XI that season.
  • m£XIR = estimate of win, draw or loss (and thus expected resultant points) in relation to venue (home/away) and match starting XI cost ratios (the greater the advantage in the CTPP cost of the XI over an opponent the higher the chances of winning; but also taking the big advantage of being at home into account.)

One Response to “Updating the TTV Model with 2011 Wage Data”

  1. Notoverthehill July 12, 2012 at 8:45 pm #

    Zach, oh Zach!

    You should not take Kieron, too seriously. He supports The Arsenal and that is enough for me.

    Now, please play attention: The figures that have been used include ALL the Wages and salaries for all the players, coaching staff, administrative, catering, etc. Manchester United employ far more people than The Arsenal. Manchester United have in-house catering and The Arsenal out-source the catering. Manchester United have a bigger stadium that The Arsenal and The Arsenal have a bigger stadium that Spurs. Bigger the stadium, the more employees.

    The Wages figure include the Employers’ National Insurance Contributions and perhaps Pension costs. Ferguson will be included in the Payroll, but due to his commitments, I do bot believe it is tax effective for Mr Wenger! He will be a consultant, I suspect, and his fee will appear in the Other Operating Expenses.

    Zach, I could go on and on! Please feel free to ask, I like your theory and the raw wages data should be as accurate as possible. Not this way.

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