Contract Negotiation Soccer

Beckham On The Move?

David BeckhamIt all started out so simple – David Beckham, arguably the most popular soccer player on the planet strikes a loan deal with Italian Serie A side AC Milan. The move was done so Beckham could get some match fitness to be selected to play for the England squad. Upon first arriving, Beckham stated that he was not seeking a permanent move from the LA Galaxy. Rumors began to swirl when David was included on Milan’s updated UEFA Cup playing list, meaning he can compete in European competitions. However, as he soon realized he could still compete at such a level, he asked LA to work out a deal that would allow him to move across to AC.

His original move to LA Galaxy from Real Madrid was seen as a revelation for the MLS. Before his arrival, 250,000 ‘Beckham’ jerseys were sold, prompting fanfare and worldwide interest in the Galaxy and the MLS. Attendances jumped, and US soccer benefited from his signature. The $250 million, 5 year deal, which included a mountain of sponsorship signed 2 years ago would have seen him signed through to the age of 37. Last season, despite David being a fantastic player, the LA Galaxy struggled, even with other ex-premier league star, Able Xavier, on their team they failed to make the playoffs.

So, being a world class player and one of the most marketable sportspeople in the world, why would LA want to sell him? Firstly, no team wants a player who doesn’t want to play for them. While I’m sure if the transfer falls through David will still give his best, there is no point LA stopping this deal. Galaxy has already made back the money they invested in David, so there would be no loss in him moving on. In terms of a team point of view, by releasing him the team could bring in another star under what was ironically known as ‘The Beckham Rule’, where only a portion of a marquee signing’s salary falls under the cap. A team is allowed 2 marquee players, so even without Beckham, $400,000 is freed for additional players.

So why wouldn’t they want to sell him? With David at the Galaxy the team is valued at about $100 million. This would fall by almost half, jeopardizing sponsorship for the club. Gate attendances would drop, merchandise sales lost. The impact would take some shine off the glamor club. Not to mention it may be difficult attracting a player of Beckham’s talent to replace him.

Taking a deeper look into his lucrative contract, Beckham may see some of those big bucks lost. Breaking it down at $50M a season, $10M is in his performance contract, $10M in merchandise sales, $20M in sponsorship and the last $10M in profit sharing from Galaxy. As you can probably tell $30M of that will be wiped instantly, however a move to Milan may see a similar performance contract and merchandise sales should still be in the same vicinity, as the Beckham brand is global. In terms of sponsorship, Beckham’s deals should stay relatively unaffected as they are worldwide companies. Any shortfalls of US specific marketing bonuses may be made up by new sponsors in Italy.  Italy, the home of fashion, presents a lot of opportunities. Despite David’s long list of sponsors, he still has some room for more. Fine living and luxury items such as fashion and cars are industries in which David may sign up with in Italy.

Obviously the move isn’t about money.  It’s about fulfilling his dream of trying to win a World Cup, and 2010 will most likely be his last chance. Galaxy have already dismissed AC’s first bid of between $10 and $20m, telling them to increase it. I guess time will tell whether they will.

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