PARIS — Can a leather ball turn into a bubble? After the extravagant sums of money spent by French soccer team Paris Saint-German to sign Brazilian star Neymar Jr, as well as other splurges by British, Spanish and Italian teams this summer, there's no avoiding the question: Has soccer become a speculative bubble?
The figures involved can make your head spin. For the first time, top-tier teams in Europe's five biggest leagues have spent more than 5 billion euros ($6 billion) on players. The sum is colossal, and it has more than doubled in just five years. Such inflation, in the business world, is often the sign of a bubble.
When demand exceeds the offer, prices tend to go up. This is true for tulips, stocks, real estate, and soccer players. And if, on top of it, the market is being animated by buyers with deep pockets willing to spend more and more, the rise can quickly begin to look like an inflationary spiral. This is, perhaps, what is happening to soccer.
The inflation of TV rights ... might make soccer fans reject the sport.
The arrival of billionaires and countries ready to invest hundreds of millions of dollars to force their team's way into the soccer elite has led to a kind of one-upmanship that resembles an arms race. They must spend more and more to try and reduce the gap with established giants.
But beyond the hunger displayed by new investors from the Arab world, Russia and China, the price of soccer players is soaring first and foremost because the sport is attracting more money from an increasing number of broadcasters and telecom carriers looking for TV rights for the games. If billionaires continue to invest, and if the prices of broadcasting rights continue to go up, the appropriate term will be "catching up".
Like U.S. sports, which bring in huge turnovers, European soccer would thus be on the path to becoming a big show worth billions. But there could be glitches. Established big names could try and throw more wrenches in the gears of soccer's new rulers so as to slow down their rise. For instance, they could use financial fair play rules that are aimed at preserving the established order. Wealthy investors could realize that European soccer is far less profitable than American football and grow weary of splashing out.
But more importantly, in the long run, the inflation of TV rights, which are scattered over too many subscription-based broadcasters, might make soccer fans reject the sport. It would have become too expensive and therefore inaccessible to them. The skyrocketing prices for rights could therefore, one day, fall again.
Unlike other bubbles, the consequences of one bursting here wouldn't necessarily be catastrophic. It would affect billionaires, but not small savers. More importantly, soccer would still be able to captivate its audience, even if it was a few hundred million dollars short.