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Top footballers shouldn't be so quick to sign contract extensions

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Eden Hazard recently signed a new five and a half year deal with Chelsea back in February, tying him to the club through the 2019/20 season. The deal, worth £200,000 per week, is a small raise over the £185,000 per week contract he signed after Chelsea bought him from Lille for £32m in July 2012.

What if Hazard never signed an extension, and instead played out his contract and became available on a free transfer in the summer of 2017, at the age of 26? Or, what if he signed a shorter deal back in 2012?

Even assuming he only made modest improvements to his already-stellar game, he might have been able to command £400k per week on the open market, free of the encumberance of a transfer fee. That's right, four hundred thousand sterling pounds per week, or double what he's currently earning with Chelsea.

Sound a bit ridiculous? Bear with me.

If Chelsea decided to sell Hazard this summer, he would fetch, at bare minimum, £50 million. The purchasing club would then have to pay Hazard, at a minimum, £200k per week. Assuming a five year contract, the club's total commitment to Hazard would be £20.4m per year (£10.4m in wages plus £10m in player amortisation).

Transfer fees, by their nature, depress player wages

Again, assuming very modest increases to his game and with skyrocketing revenues in football leading to increased spending, £25 million per year is a very conservative estimate of Hazard's 2017 market value.

So, if a club is willing to spend £25m per year on Hazard, they would surely jump at the chance to pay "just" £20.8m per year, right? Well, that £20.8m equals £400k per week.

Here's another example.

In order to bring Diego Costa to Chelsea, the club had to pay Atletico Madrid £32m in addition to handing him a five-year deal worth £185k per week. As such, the club's annual commitment to Costa is just over £16m (£9.62m in wages plus £6.4m in amortisation).

Had Costa been out of contract at Atletico Madrid, it stands to reason that if Chelsea was willing to commit £16m per year to Costa, the club would've jumped at the chance to sign him for "just" £13m per year.

Without a transfer fee, the entire £13m per year, or £250,000 per week, would have gone to Costa.

So, had Costa been out of contract and been allowed to move on a free transfer, Chelsea could've saved £3m per year, while Costa could have earned 35% more. This is a win-win situation.

In the summer of 2013, however, Costa signed a new five-year deal with Atletico. Had Costa simply played out his contract at Atletico, he'd be out of contract this summer. With 19 goals in his first 23 Premier League matches at Chelsea this season, just imagine the sort of numbers he'd have in the familiar (and significantly less competitive) confines of La Liga with Atletico Madrid.

With another tremendous season at Atletico and on the heels of huge new Premier League and Champions League broadcasting deals, maybe his market value would have climbed to £20m per year instead of £16m, and then a club would have naturally jumped at the chance to sign him for £17m per year, or around £325k per week, or more than 75% of what he's earning now. Again, this is a win-win situation, as the club gets the player under market value, as there's no transfer fee involved, and the player gets a massive wage.

There is a limit to what a club is willing to commit to each player, and top players and their agents should be putting themselves in the best position to take home the lion's share. Transfer fees, by their very nature, depress wages, and players should do whatever they can to ensure that the accompanying transfer fee is as low as possible, and ideally non-existent.

Risks involved

Of course, this strategy is not without risks. A severe, or even career-ending injury, while unlikely, can happen at any moment on the pitch, and there's something to be said for financial security. If Diego Costa suffers a career-ending injury against Stoke City on Saturday, then he still gets £185k per week for the next four-plus years.

Had he decided to play out his original contract with Atletico and suffered that same career-ending injury against Cordoba on Saturday, well then, he would have cost himself around £50m. In order to hedge against an injury, however, players can take out large insurance policies that they can collect in event of an injury that affects their ability to earn money as footballers.

A sharp decline in performance (and therefore the player's market value) is also not unheard of. For example, I bet Fernando Torres is very happy with his decision to lock in that long-term deal with Chelsea.

Additionally, there's the reality that the player's club isn't going to be too thrilled with the player and decide to quickly embrace the inevitably of life without that player. The player, then, could find himself banished to the reserves and without a platform to continue to showcase his talent for potential suitors. Chelsea fans will be familiar with this tactic, having seen Florent Malouda, Nicolas Anelka, and Alex removed from the first-team towards the end of their careers with the club. Of course, none of these players were stars at the time, and it would be difficult to do the same with a star player who can still help win games for the club.

After Paul Pogba and Marco Reus inexplicably signed new long term contracts, there is another player who might be well served playing out his contract or at the very least, refusing to sign a new contract so his club is forced to sell him at a cut rate rather than losing him for nothing, Daniel Sturridge-style.

Raheem Sterling

Raheem Sterling finds himself in a unique situation. Still just twenty years old, he is already one of the most talented (and most marketable) players in the world.

Currently earning £35k per week, he's turned down Liverpool's offer of a new contract at £100k per week, and rightly so.

Sterling's situation is slightly complicated by the fact that if he played out his contract and signed for another English club, Liverpool would be eligible for compensation beyond the FIFA-mandated training compensation, and a tribunal would be held to determine the amount of compensation Sterling's new club would owe Liverpool (standard operating procedure when an out of contract player under the age of 24 moves to another English club, unless that player is released). While this compensation is unlikely to be anywhere near Sterling's market value, it's still an added cost Sterling's new club would have to factor in when making a contract offer.

However, if Sterling moved abroad, Liverpool (and QPR) would only be owed the FIFA-mandated tranining compensation (negligible amount). At a minimum, Sterling would cost a purchasing club £40m and £150k per week. Assuming a five-year deal, that's £15.8m per year. If he simply plays out his contract, there's no reason why he shouldn't be able to command £250k pw (£13m per year) from a Barcelona, Real Madrid, or Bayern Munich.

Shorter contracts

In the NBA, top players are now on what are essentially two or three year deals, as their agents negotiate provisions in their long-term contracts which allows them to opt-out at certain points in their contracts. If they want, they can test the open market and sign bigger deals and/or join better teams.

Football agents should absolutely start negotiating these opt-out clauses, as it not only provides the player with financial security (the player can always choose not to opt out should market conditions dictate that he's already in the best possible sitiation), but it also provides the player with the freedom to test the market and a mechanism for which to earn his full market value, rather than having a sizable chunk of his value siphoned off by his current club in the form of a transfer fee.

It must be noted that only the most sought-after players would likely be able to successfully negotiate opt-out clauses and/or convice clubs to pass the bulk of the savings from not having to pay a transfer fee onto the player, as they are the only ones with enough leverage and demand to pull this off.

Both clubs and fans crave stability, and a "will he opt out, or will he stay" saga can be a bit distracting, to say the least, but for the best available talent, clubs will make these concessions. Having a star player for a few years with the possibility of keeping him around is a lot better than not having a star player at all.

Of course, players who simply become unwilling to negotiate a contract extension and refuse transfers in the hopes that the bulk of that fee ends up as part of his new wages instead of helping the club find a replacement, will find themselves in unpleasant situations as their deals wind down.

That said, boos from the crowd and perhaps a few harsh words from the player's former club shouldn't be a serious deterrent to exploring this path.

Professional athletes have a very limited window in which they can earn money playing sports and they owe it to themselves to do everything they can to maximise their earning potential. In football, top players should start considering taking the calculated risk to play out their contracts and sign shorter deals, which should increase wages in the absence, or reduction of transfer fees.