Udinese: Producing Added Value

Moneyball, Spring 2019

Author:
Juan Martín Hernández Velázquez 17-746-405

June 28, 2019

Contents
Introduction ............................................................................................................................................. 3
Udinese- Brief History ............................................................................................................................ 4
The Strategy ............................................................................................................................................ 4
Age ...................................................................................................................................................... 4
Long Term Project .............................................................................................................................. 5
Managing the Loans and Expansion ................................................................................................... 6
Granada ............................................................................................................................................... 6
Watford ............................................................................................................................................... 7
Conclusions ............................................................................................................................................. 7
Bibliography ........................................................................................................................................... 8
Introduction

The competition in football is not only in the field, but also in the transfer market. Teams
with large economic resources obtain a wide competitive advantage to hire the best players, thus
teams with more limited resources could reduce this advantage, not with money but with innovative
methods in their recruitment process and formation of players.
When teams proceed to recruit and hire new players, they face asymmetric information and
consequently adverse selection. To mitigate adverse selection, teams and scouts must develop
screening methods that not only discover skilful players but also successfully predict the performance
of the player in the new team. With a reliable screening process, poorer teams can reduce the
competitive advantage by finding the future stars of the game and hiring them at a price below their
future market value. Even if the big teams eventually come to buy the players, small teams still have
incentives to find talent since they could buy low and sell high.
If we observe the data from the highest 250 transfers fees for each of the seasons from 2001-
2002 to the 2017-2018 there is one team that stands out among other European giants: the Italian team
Udinese. In comparison with the other teams in the Top 10, Udinese is a team that does not compete
for the title of its league and has a considerably lower budget that the others, however they have made
several sales (51) within the highest 250 transfer fees for 17 seasons, as Table 1 shows.

Top Selling teams in the Top 250 transfers from the 2001-2002 to the 2017-2018 season

Rank Team Number of Sales Average of Transfer Fee

1 Inter 68 11.548.235 €
2 Spurs 63 11.095.238 €
3 Juventus 59 13.525.085 €
4 Chelsea 57 14.728.596 €
5 FC Porto 56 16.384.821 €
6 Liverpool 56 14.257.321 €
7 Real Madrid 53 16.818.868 €
8 Benfica 52 15.110.577 €
9 Atletico Madrid 52 14.123.077 €
10 Udinese 51 9.264.706 €

Table 1
Source: Top 250 Football transfers from 2000 to 2018

Moreover, Table 2 shows the differential between the sales and acquisitions made by the
teams in the Top 250 transfers in the last 17 seasons, we can observe that the only team that remains
from Table 1 is Udinese, the reason: big teams sell top players but also buy top players, in contrast
Udinese sells high quality players in the Top 250 transfers but they usually do not acquire players in
this market. In Table 2 only three European teams appear Udinese, Braga and Dinamo Zagreb. The
rest of the teams are from South America, in specific Argentina and Brazil.
 Trasnfer Differential in the Top
Rank Team
250 (Sales- Acquisitions)
1 River Plate 35
2 Udinese 24
3 Cruzeiro 24
4 Dinamo Zagreb 24
5 Sao Paulo 23
6 Corinthians 21
7 Boca Juniors 21
8 Internacional 21
9 Braga 18
10 Velez Sarsfield 18

Table 2
Source: Top 250 Football transfers from 2000 to 2018

Overall, the data from Table 1 and Table 2 show, that in the last years Udinese has been using
a scout system that has enable them to identify players with talent that have a future high market
value. So, what is the observable process that Udinese follows to buy players that eventually reach
the football elite?

Udinese- Brief History

Udinese is an Italian football team that is in the northeast part of the country. The team was
bought by Giampaolo Pozzo in 1986. Then in 1993 Gino Pozzo, Giampaolo son, a master graduate
from Harvard, entered the board of the Udinese and stablished a different approach to manage the
team (Gazette Day, 2019). The new approach brought results and after years of shifting between Serie
A and Serie B, the team has finally remained in the Serie A since the 1995-1996 season , although
they have not won a Scudetto or a Copa Italia , Udinese is a team that can compete in the upper half
of the table (Gazette Day, 2019).
The success of Udinese is that they have built a competitive team in the Serie A with a limited
budget, budget that has been used in a recruitment system that has enabled the team to identify and
develop young talents (Pozzo, 2014).

The Strategy

The strategy that has been settle by Gino Pozzo and Andre Carnevale, consists in a strong and
large network of scouts all around the world that recruit several promising players. The underlying
idea of buying several players, probably more than needed, is that some of them will not reach the
expected football level. After acquiring the players, the players remain in the team or are loaned to
other teams so they can get experience and develop their skills (Pozzo, 2014).

Age
As Table 3 shows, must of the players that Udinese eventually sold in the Top 250 transfers,
were originally acquired by Udinese at a very young age, with limited experience and below their
peak age, period in which the player reaches his best level. The average peak age for a football player
is between 25 and 27 years (Dendir, 2016), thus Udinese strategy is defined by buying young players
before their peak age, giving them time to develop their skills to eventually sell them just before or
after entering their peak age.

Table 3
Source: Top 250 Football transfers from 2000 to 2018

What Table 3 also shows is that , on average, the team keeps the players for three and a half
years, this exposes the long term project that is required to develop the players by giving them time in
the first team or by loaning them to another team so they have playing time , these years enable
players to obtain experience so they can reach their potential.
The best example of this process would be the Chilean left winger Alexis Sanchez. Udinese
bought the player when he was 17 years old, instead of bringing the player immediately to play for the
first team in Europe, they loaned him for two years: one year with Colo Colo and another with River
Plate (Wikipedia, Alexis Sanchez, 2019). It was until the third year than Alexis finally played for
Udinese, after probing himself in South American professional leagues.

Long Term Project

This scouting , development and selling strategy is a long term project, as Gino Pozzo, the
mind behind this method describes it “With longer term vision , eventually, be able to get better
players for our club... with this vision we were able to clearly move up the club to a different level ,
being able to compete in Italy with the top clubs and become profitable” (Pozzo, 2014). He is also
aware that not all the promising young players will reach a high level of performance “During this
process you have to sign a lot of young players in order to be successful and not all of them can come
directly into the first team” (Pozzo, 2014).
The added value of this long-term strategy can be observed in Figure 1, which ranks from the
highest transfer fee to the lowest transfer fee Udinese received (blue bars), and the amount that
Udinese originally paid for those players (orange bars). Figure 1 shows that for most of the players
that Udinese sold and were in the Top 250 transfers, the team made a considerable profit. This profit
was achieved by the team’s recruitment strategy of getting young promising players with an expected
high market value and help them develop their skills, as their market value increased. Still it is
relevant to point that this are the transfers in which Udinese strategy worked, but to quantify the
overall efficiency of Udinese’s strategy, the signings that did not work as expected, or worked but did
not entered the top 250 transfers, should also be taken into account, this data only contains the cases
where the transfer fee was high enough to enter the Top 250.
 Figure 1
Source: Top 250 Football transfers from 2000 to 2018 and Transfer Market
* Note: not all the 51-sales Udinese made appear in the Figure 1 because there was no data of
the fee Udinese payed for those players

Moreover, with a long term vision project the selection of players is not given to the sport
director or manager , as it usually works, because both positions will not stay in the club for long ,
thus their incentives are contrary to the long term vision that the Udinese recruitment and
development strategy requires (Pozzo, 2014). To mitigate the moral hazard between the long-term
vision of the club and the short-term objectives of the coach, Udinese settled a system in which the
recruitments and transfers are defined by the board and not by the managers or sport directors, who
might lack the long term vision of the recruitment strategy and prefer to buy players at their peak age
instead of young players that have not reached their top level .

Managing the Loans and Expansion

Loaning the players to other teams is a vital part for the well-functioning of Udinese
development strategy. The aim is that young players get experience and improve their skills, before
playing for the first team. However, when a team has too many players it can become a problem to
find place for everybody.
The development process of Udinese was functioning well, however, the acquisition of
several players started to become a problem and a conflict of interest. Agents and their players wanted
to have more minutes with the first team, in contrast, Udinese could not always obtain minutes for all
its players in Udinese or other teams. Eventually Udinese found the solution and bought Granada a
Spanish team in the third division in 2009 and in 2012 they also bought the English team Watford
(Ahmed, 2018). These acquisitions strengthened the scouting network of Udinese and facilitated the
loan of players between the 3 teams, however today only the Watford is still owned by the Pozzo
family.

Granada

Udinese sent some of its players to Granada at the beginning of the 2009-2010 season and
eventually won the promotion to the Spanish Second Division and in the 2010-2011 season they won
the promotion to the Spanish first division (Gazette Day, 2019). The loaned players that Udinese sent
to Granada were key to accomplish the promotions and simultaneously allowed Udinese to provide
more minutes for the young players. This collaboration between Granada and Udinese lasted until
summer 2016 when Gino Pozzo sold the team to a Chinese firm (EFE, 2016).

Watford

The Pozzo family still owns Watford, the profits and global exposure that the Premier League
offer are highly attractive to develop a team. Gino Pozzo has directed most of his energy in the last
years to Watford , he even moved with his family to London and his office is inside Watford´s
facilities (Burnton, 2019).
The efforts have brought results, Watford was promoted from the Championship to the
Premier League in the 2015-2016 season. The cooperation with Udinese continues, not only Udinese
loaned players to Watford but also sold Watford players that even entered the Top 250 transfers of 3
seasons.
Name Position Age Sale Team_from Team_to Transfer_fee Sale Season
Adalberto Peñaranda Centre-Forward 18 Udinese Calcio Watford € 10.600.000,00 2015-2016
Matej Vydra Centre-Forward 23 Udinese Calcio Watford € 8.400.000,00 2015-2016
Odion Ighalo Centre-Forward 25 Udinese Calcio Watford € 8.000.000,00 2014-2015

Table 4
Source: Top 250 Football transfers from 2000 to 2018

The most successful player of these 3 transfers was Odion Igahlo who in total scored 39 goals
in 99 appearances with Watford (Wikipedia, Odion Ighalo, 2019). About the loans, Udinese loaned 9
players to Watford after the Pozzo´s bought the team, this move forced the FA to limit the number of
loans a team can have (Ahmed, 2018) . Moreover, Watford uses Udinese so that young players from
non-European countries that do not fulfil the Visa requirements to play in Premier League, play in
Udinese to fulfil the requirements such as games in major European leagues (Ahmed, 2018).
Overall, Watford has benefited from the synergies that arose between the teams of the Pozzo
family and was able to stablish in the middle of the Premier League table in the last years and were
runners-up of the 2018-2019 FA Cup. In contrast Udinese fans are not happy with the decreasing
effort the Pozzo family exerts in managing Udinese: in May 2019 while Watford was playing the FA
Cup final , Udinese was playing to avoid relegation to Serie B (Burnton, 2019). The sports group has
higher incentives to allocate the best players in Watford given the increasing global exposure and
revenues of the Premier League.

Conclusions
The management methods that Gino Pozzo and his collaborators have used in Udinese,
Watford and Granada have been successful: the three teams accomplish to move to the top division of
their countries under Pozzo´s administration. The recruitment method executed by their global
scouting network has allowed them to find young talents, below the peak age, who can be acquired at
a low price. The development method, that relies on loans and buying other teams, has allowed them
to give playing time to their young players so they can improve their skills and thus increase their
market value. Finally, the sports group sell the players as they enter their peak age. Overall, the
method has generated added value for their players and teams.
 Pozzo has exploited the synergies of owning more than one team. However, the cooperation
between the two teams might also create moral hazard among the administration and fans: while fans
look for the success of their team, the sport group looks for the success of the group, thus objectives
might not always be the same.

Bibliography

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Burnton, S. (2019, May 17). ‘A demanding perfectionist’: how Gino Pozzo did the unthinkable at
Watford. Retrieved from The Guardian:
https://www.theguardian.com/football/2019/may/17/gino-pozzo-watford-owner-fa-cup-
final

Dendir, S. (2016). When do soccer players peak? A note. Journal of Sports Analytics , 89-105.

EFE. (2016, May 22). Pozzo cierra la venta del Granada a Desport por 37 millones. Retrieved from
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https://www.kaggle.com/vardan95ghazaryan/top-250-football-transfers-from-2000-to-2018

Wikipedia. (2019, June 25). Alexis Sanchez. Retrieved from Wikipedia:

https://en.wikipedia.org/wiki/Alexis_S%C3%A1nchez

Wikipedia. (2019, June 26). Odion Ighalo. Retrieved from Wikipedia:

https://en.wikipedia.org/wiki/Odion_Ighalo