How Much Is Liverpool Forward Luis Suarez Worth Based on Form in 2014?

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How Much Is Liverpool Forward Luis Suarez Worth Based on Form in 2014?
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 Nine matches to go in the 2013/14 Premier League campaign, and Liverpool are still on course for a top-four finish, which would see them return to the Champions League next season—and still in with a shout for the league title outright.

None of this would be possible without the contributions of Luis Suarez, who, despite all the proclamations of the Reds being a dynamic and interchanging team these days, remains one of their most important players.

After 25 goals and 10 assists—making him the leader of both charts in the Premier League—in 24 matches and a contract signed in December, Suarez has once again proven himself as indispensable and invaluable to the Anfield club.

Perhaps even more so than in previous campaign.

Back in December, we embarked on a challenging but interesting attempt to calculate Suarez’s worth in the transfer market then.

In light of Liverpool’s recently released financial results for the 2012-2013 financial year, let’s revisit this subject and try to work out how much Luis Suarez is now worth based on his current form—without any kind of insider access to the boardroom.

 

Transfer Fee and Wage Estimates

To get us started off, let’s return to our estimates in December regarding Luis Suarez’s transfer fee.

Assuming a basic financial amortization of his initial £22.7 million transfer fee (per BBC Sport) over the course of five-and-a-half years, which was the initial length of his contract signed in 2011, we arrive at an approximate annual cost of £4.13 million.

For the purposes of simpler calculation, let’s consider Suarez has been at Liverpool for 3.2 years, which means the as yet “unpaid” total amortization cost would be updated to £4.13 multiplied by 2.3, or £9.5 million.

Onto his wages, which we will only discuss in the present and future tenses, after his December extension.

Our wage calculations following his new contract in December 2013 are based on this BBC Sport article that claims Suarez is earning £160,000 a week until the end of the current season, and then £200,000 a week for the next four years. Simple arithmetic gets us to a total of £43.06 million over the rest of his new contract.

Our baseline estimated value of Luis Suarez, from just his transfer fee and wages, is thus £9.5 million plus £43.06 million, which gives us £52.56 million.

 

Possible Champions League Qualification

As it stands, Liverpool are placed second in the Premier League, and they look in ominous form as they approach the final couple of months of the season.

Our key underlying assumption is that the Reds will indeed finish in the top four, qualifying for Champions League football next term, which should also be the assumption behind Luis Suarez staying at Anfield in the first place.

Champions League qualification is known to have a wide range of commercial benefits, and this is an area where we will take the roughest of estimates of player bonuses based on club performance in both the Premier League and the Champions League.

Our best benchmark in terms of Premier League end-of-season payouts, assuming a fourth-place finish by Liverpool this May, is Arsenal’s from the 2012/13 season. According to the official Premier League website, Arsenal’s league payout for finishing fourth last season was £57.1 million.

A further assumption that Liverpool, having secured Champions League qualification, will make it into the group stages of next year’s competition, will take us to calculate possible payouts from participating in the group stages.

According to SportsBusinessDaily.com, all participants who made it into the Champions League proper were entitled to a minimum of €8.6 million, which translates to about £7.2 million.

As we noted in our December calculations, a minimum total of £64.3 million will probably arrive in Liverpool’s coffers just for making the Champions League group stages.

 

Liverpool’s Business and Commercial Performance

Our December estimates only took into account the potential sum that would come with making the Champions League group stages, and used it as a base to calculate a 5 percent performance bonus for Luis Suarez, one of Liverpool’s most important players.

This time around, however, we’re going to be a bit more ambitious, especially since the Liverpool Echo have also released the 2013 accounts Liverpool submitted to Companies House.

The increase in revenue from all sources is impressive, but for the purposes of calculations in the “current” context, we will exclude media and matchday revenues, since the 2012-13 financial year featured Europa League football, which Liverpool haven’t even been involved with this season.

The growth in commercial revenue, however, was staggering, and with the announcement of new sponsorship deals in the past few months, will only continue. Commercial revenue for the year ended May 31, 2013, was £97.7 million, more than a 50 percent increase over the previous 10 months, which landed £63.9 million. Spread the 10-month average over a period of 12 months, and the increase can be adjusted to roughly 27 percent, still a significant growth factor.

Our final assumption is if Liverpool continue in their current attacking style of football, coupled with the increased exposure of Champions League football, they will generate more interest off the field, which will lead to benefits both in terms of commercial sponsorships, as well as merchandise and image rights-related sales and advertising revenue.

Applying the same 27 percent year-on-year growth factor onto our performance bonus of 5 percent, to ensure that all staff are adequately compensated for their role in helping grow the Liverpool brand, we get a 6.35 percent bonus from the previously calculated Champions League-related payouts.

This gives Suarez 6.35 percent of £64.3 million, which amounts to £4.08 million.

 

Conclusion: £56.64 Million

Adding this performance bonus to our transfer and wages baseline, we get a total valuation of £56.64 million, which, compared with our December estimate of £56.1 million, is perhaps disappointingly close.

However, considering that it’s only been three months since our previous calculation and that our estimate has already gone up by half a million pounds, this kind of growth rate could yet translate itself into bigger margins given another year or two.

It wasn’t so long ago—last summer, in fact—that Arsenal submitted a high-profile (and now widely mocked) £40-million-plus-£1 bid for Luis Suarez, which was derided at the time by Liverpool owner John W. Henry.

Back then, £40 million plus £1 was seen as a derisory amount for a player like Suarez. Three quarters of a season onward, perhaps £56.64 million will be considered shockingly low for such an important player to the Reds cause.

But of course, this is just a purely financial valuation of Luis Suarez, based on assumptions that might not ring true in the Liverpool boardroom.

Last time John W. Henry checked, football contracts “don’t seem to hold, and [Liverpool] took the position that [they’re] just not selling” (per the Guardian).

We have a sneaking suspicion that they will be holding this position for quite some time.

 

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