Analysis: Croatian Football Clubs Cannot Survive Without Transfers That Ensure 70 Percent of Revenue

The sale of players is an extremely important source of funding for most Croatian top-tier clubs, as shown by an analysis from the Institute of Public Finance. Zoran Bubaš and Bojan Morić Milovanović from the Institute of Public Finance and Denis Alajbeg (Zagreb School of Economics and Management) in their paper ‘Financial Health and Self-Sustainability of a Small European Football League: The Realities of Top-Flight Croatian Football’ demonstrated that domestic clubs generally cannot finance themselves from ‘clean’ football revenues such as TV rights, ticket sales, sponsorships, and commercial revenues. Therefore, player transfers remain the best financial injections that domestic clubs can receive.

Analyzing domestic top-tier clubs over a period of ten competitive seasons, it was found that most players leave their clubs without a paid transfer fee. As a result, the total value of transfers is about 40 percent lower than the estimated total market value that these players had at the time of departure on the Transfermarkt website. However, when considering only transfers with a paid fee, their value almost completely matches Transfermarkt’s market value estimate, and a strong and significant statistical relationship was confirmed between these two variables. The probability of a paid transfer increases with the rise in market value, and an increased market value of players—especially above one million euros—also increases the accuracy of the transfer value estimate.

– Without transfers, the difference between total business revenues and expenses of the leading clubs in the Croatian Football League (HNL) – Dinamo, Hajduk, Rijeka, Osijek, Gorica, Lokomotiva, Slaven Belupo, and Istra – is consistently negative and aggregated from 2018 to 2022 amounts to about 37 million euros on average annually. This is a significant amount in relative terms as the operational margin of the HNL (the ratio of profit to revenue excluding transfers) during this period is deeply negative, averaging 66 percent annually. In comparison, the average operational margin of the top 20 European leagues in recent years has been around –10 percent, while other leagues have been around –30 percent – they write in the analysis.

Domestic clubs have fully covered these large losses with net transfers (the difference between the value of outgoing and incoming transfers), which averaged 37.25 million euros annually at the league level from 2018 to 2022. The importance of selling talent is also evident in the share of net transfers in total business revenues, which for the HNL amounts to 70 percent. According to UEFA data, this makes the league the most dependent on transfers in Europe, as the next leagues – Portugal, Romania, and Slovenia – have a share of net transfers in revenues of about 30 percent.

Outgoing Transfers Are Key

As outgoing transfers are crucial for the proper functioning of our top-tier football clubs, the current value estimates of their players on the Transfermarkt website are closely monitored. Foreign research often supports the thesis that the value estimates of footballers from Transfermarkt relatively well reflect their transfer value on average, and Denis Alajbeg in his paper ‘Player Value Estimates of the HNL on Transfermarkt’ (Oeconomica Jadertina, 2023) examined whether this insight holds true for the HNL.

Data on market and transfer values for a total of 1689 players who left Croatian top-tier clubs for abroad or other domestic clubs from the start of the summer transfer window of the 2013/2014 season to the end of the winter transfer window of the 2022/2023 season were collected from Transfermarkt. Transfers with a paid fee make up a smaller part of the sample, with only 261 (15.5%). The remaining 1428 players (84.5%) left the clubs without a fee. This aligns with FIFA data indicating that internationally only 13 to 14 percent of transfers are made with financial compensation.

335 Million Euros Less

According to Transfermarkt, the total market value of all 1689 players at the time of departure was 857.1 million euros, while the total amount of known paid fees was 522.4 million euros. Thus, clubs received as much as 335 million euros less (–39.05%) for the players who left than the amount that Transfermarkt indicated as their market value, which is a significant deviation from the established thesis that transfer value should be close to market value. In this sense, it is wise to have certain reservations about the nominal values of teams on Transfermarkt that domestic football officials often refer to.

However, if we look only at transfers with a paid fee (261), the conclusion is diametrically opposite: Transfermarkt has exceptionally well estimated the total market value of players as the transfer value of 522.4 million euros was almost identical to the market value of 514.6 million euros. In other words, if it is known that a fee will be paid for players, then their market value on Transfermarkt is a fairly good estimate of the total amount of their future transfers, at least in an aggregated sense.

Of course, it is not always possible to know in advance which player will be sold for financial compensation and which will leave the club without a fee. But market value can still be very useful in assessing the prospects for achieving a paid transfer. Namely, a higher market value of players on Transfermarkt increases the likelihood of a paid transfer occurring, as well as the accuracy of the estimate, especially for players who have developed a market value greater than one million euros.

Dinamo Is the Most Valuable

Along with the analysis at the league level, a breakdown of transfers by individual clubs was also made. The only club that has a total transfer value of players very close to their market value is Dinamo. Over 10 seasons of transfers, it has generated almost the same amount (251 million euros) that Transfermarkt indicated as the market value of players at the time they left the club (261 million). In practice, this means that the management of Dinamo has grounds to consider that the market value of the team on Transfermarkt relatively well reflects the potential revenue from possible player sales. Hajduk, on the other hand, should be somewhat more cautious when interpreting the value of its team on Transfermarkt; in the last ten years, the total value of realized transfers has been lower than the market value of players by almost 30 percent. Rijeka could calculate with a possible discount on the market value of the team of up to 40 percent, Osijek up to 45 percent, etc.

It has been confirmed that many players leave without a fee from less successful domestic clubs, but this also applies even to our best and most popular clubs: in the last ten years, up to 60 percent of players have left Dinamo without compensation, from Hajduk and Rijeka up to 70 percent, and from Osijek up to 80 percent.

Transfermarkt, therefore, seriously underestimates when considering all footballers who have left, but it is relatively accurate when only those players for whom a fee was paid are taken into account. However, it should be noted that this is an aggregated result based on 261 individual transfers over a relatively long period (10 seasons). In reality, some players will be sold for a higher price and some for a lower price than the market estimate, but in the long run, changes in transfer values will, on average, well reflect changes in the market values of HNL footballers.

For domestic clubs, reinvesting transfer revenues into infrastructure, technology, and expertise, as well as continuously developing new young players and promoting them to the first teams, is of existential importance. Without this, the influx of talent could seriously slow down, and thus the golden vein that keeps domestic clubs financially sustainable.