Why Celtic's transfer model must continue to develop - Alan Morrison

It had been reported Ange Postecoglou was promised a £30million transfer kitty to make a dent in European football. That had apparently then been part of Brendan Rodgers' toolkit when the Australian moved to Tottenham Hotspur.

Then the unexpected sale of Jota to Al-Ittihad for upwards of £25 million further raised expectations Celtic would spend big in this window. Instead, so far - and there is plenty of time left - there have been two young prospects for modest fees (Odin Thiago Holm and Marco Tilio), with seemingly further frugal investment in two youngsters from South Korea in Hyun-Jun Yang and Hyeok-Kyu Kwon. Adding in the permanent registration of Tomoki Iwata, five players have been purchased for just shy of £8million.

There is tension between the perceived transfer outlay and the perceived impact that will have on the quality of the squad. But of course, big does not always mean better as the data shows below.

There is much to debate about this, and it is intended to poke a response, but you’d be hard-pushed to argue that paying out huge transfer fees does not guarantee success on the pitch.

Transfer fees are emotional for fans. You want your players to be the most valuable. You simultaneously want your club to be the savviest shopper whilst being seen to splash the bling. You want to taunt your rivals with the paucity of their biscuit tin whilst also deriding their latest waste of money.

The key to football success is usually through money but in the form of wages – i.e. the best-paid squads tend to win the trophies. Do transfers matter? For a club like Celtic, absolutely. The Scottish champions are locked into a cash-starved environment. The TV deals on offer treat the Scottish game as filler around Sky’s enormous investment in English football. The Scottish league winners received a tiny fraction of the distribution compared to finishing bottom of the EPL.

Commercial deals are over many years and are commensurate with the exposure through the TV deals. Thus, they can grow but there are limits and change comes slowly. Changing your revenue through commercials is a long game.

European performance payments are game-changing but fraught with danger. A penalty kick can be the difference between Champions League group stage riches or total elimination. It is not a revenue stream that can be budgeted for year over year with confidence or certainty.

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That leaves player trading as the lever a club like Celtic can use to grow the football operations. If they can sell players for more than they buy them for over a long period, then revenues can grow, and more money can be committed to wages, therefore, raising the overall quality of the squad. This should create a virtuous circle of better performance, more exposure, higher fees paid for their players and therefore more money to invest in the squad.

Celtic’s Player Trading Model

It sounds very grand but what is a player trading model? Like all models, it is a simplification of reality but has many facets. There cannot be one size fits all for such a complex operation relying on the performance of individuals.

And it is not something that you flick a switch and say, “now we are operating our player trading model”. Celtic are where they are through evolution and in the context of their own environment and organisation history. A brief history.

The start of the 20th Century saw Celtic’s football operations goal as simple – put the best team on the park as is possible. In those days Celtic could offer wages in competition with those in the EPL. Henrik Larsson’s wage in 2001 would be equivalent to around £70k a week now.

The tipping point for this model came in 2002-03. Celtic reached the UEFA Cup final and were winning trophies at home. It was a highly effective team and achieved the kind of results in Europe that fans crave today – a UEFA Cup quarter-final would follow from Sevilla. 

The problem was it was unsustainably expensive – despite a European final the club lost money. The “slow lane”, as Martin O’Neill quipped, followed and was mapped out by new CEO Peter Lawwell. Gordon Strachan operated under a strict policy of anything we make from dealings we can spend but that is it.

Player recruitment relied upon Strachan’s notebook of players identified during his sabbatical from the game.. Player trading as we might begin to know it today only really started in 2010-11. Under Neil Lennon, Celtic began to pick up players from more exotic markets – Israel, South Korea and Mexico.

The Bosman market was exploited to bring in the likes of Charlie Mulgrew, Joe Ledley, Daniel Majstorovic, Cha Du-Ri, Adam Matthews, Kelvin Wilson and Mikael Lustig. But it wasn’t really aimed at growth – the above-mentioned did generate a transfer fee trading profit of nearly £5million but this isn’t game-changing. The aim was value. Here Celtic were acquiring useful and productive (largely) players for minimal outlay meaning slightly more money could be set aside for wages.

Bosmans are not free of course, usually coming with large signing-on fees and wages. Over the next three years player trading as we might know it today operated in a limited way by exception. Victor Wanyama, Fraser Forster and Virgil van Dijk were all purchased for modest fees and would go onto be sold for vast (by Celtic standards) sums. In those cases, £5.4million outlay brought in £43.2million in fees.

There were further good examples of this model over the next few years with Stuart Armstrong, Ryan Christie, Kristoffer Ajer, Moussa Dembele, Odsonne Edouard, Jeremie Frimpong and now Jota, all generating healthy transfer profits.

This is player trading, but not at scale. Doing this once or twice a season plugs a gap caused by poor European performance but does not sustainably turn the dial leading to squad quality uplift. Scale is e.g. Benfica in 2022-23 selling 260 million Euros of talent and buying 90 million.

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This is an extreme example and Portugal is a very different environment and set of contexts. However, Benfica are demonstrably a peer of Celtic in European football. Therefore, they are a fair benchmark to use to evaluate player trading performance. Celtic may never get to that scale of trading, but they need to get closer to generate sufficient excess revenue to grow the club sustainably.

The other lever here is growing your own. Celtic has been largely unsuccessful on this regard except for the sale of Kieran Tierney in 2019-20 and Aidan McGeady in 2010-11. Here is the summary of each year, the amount spent each season and the amount those players subsequently brought back in when sold:

We can see that the scale of purchasing has grown enormously over the last four seasons with over £20million committed to transfers in per season. A long way short of £90million - but a start. And you can see the level of fees generated from those players is increasing as well. Obviously, many of the players bought in the last four years are still here so no fee has yet been realised.

But the 2022-23 cadre is already in “profit” thanks to the single sale of Jota. Only in 2016-17 did the player trading model truly pay off for the long term when £9million was laid out and eventually over £38million was recouped mainly due to Ajer and Edouard.

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Coincidentally that was Rodgers' first season. He has stated he is a development coach. He wants a fully functioning recruitment team so that he can concentrate his time on the training pitch.

Which brings us back to this season. What we are seeing so far is a steady hand continuing the course of buying up young, relatively cheap but well-scouted talent with a view to selling on at significant profit. This is aided by an elite-level development coach to bring them along.

Does this mean Celtic will not spend big on a player? No. But it must be the right player at the right price point. Edouard would be a good example. If Celtic are going to dabble in the tricky £5million - £15million range market, it needs to be as sure a sure thing as sure things can be. I refer you back to the EPL chart of high-cost duds.

And then we must consider not every player is an asset to be flipped. Some stability is needed to maintain a core of trusted players. Selling others at high prices allows the club to reward the loyalty of the backbone. Callum McGregor and Kyogo Furuhashi are recent notable examples of this. Their new contracts make sense if you consider the replacement cost of those talents.

So, in summary, not one size fits all. And Celtic need to make huge strides to improve the despite the Scottish game failing to provide an adequate competitive pathway for young players.