David Beckham and Marginal Revenue Product

The announcement earlier this year that international soccer superstar David Beckham would be joining the LA Galaxy met with some skepticism among sports fans as well as economists. The Sports Economist’s own esteemed Stefan Szymanski had this to say about the signing:

The big question may be whether Beckham is worth the money. He has been the biggest commercial draw in soccer for the last ten years, despite not being rated the best player. He has also opened branches of his soccer academy in LA, giving him another marketing foothold. But 2006 was not a great season for him, and he is clearly on the decline.

The money being paid to Beckham is undoubtedly significant. Aside from $200 million in endorsement money he is receiving from outside the league, his five-year contract with the Galaxy pays him $10 million per year or over five times that of the official, although admittedly soft, MLS team salary cap.

According to the San Diego Times-Union, Citibank is prepared to pay the team $49 million over five years for the jersey advertising rights for the Galaxy. Anyone believe that Citibank would be forking over that kind of dough to place their corporate slogan on the chest of Peter Vagenas, last year’s starting center midfielder? (Real Salt Lake, for example, just sold their jersey rights to XanGo Juice for a paltry $4 to $5 million.) Add in the 5,000 season tickets (at $380 to $880 a pop) the Galaxy sold in just the two days following Beckham’s signing, and it looks to me like Beckham has already come pretty close to paying for all five years of his monumental salary without even stepping onto the pitch at Home Depot Center.

So, that big question appears to be answered, leaving only the equally big question as to whether Beckham’s native country will win another World Cup before his newly adopted one wins its first. Professor Szymanski and I disagree on that one as well.

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Author: Victor Matheson

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