Valuing Ronaldo

The deal has finally been completed. Ronaldo's dream of playing for Real Madrid will finally come true, albeit at a great cost. Real Madrid did not flinch to shell out £80m. The press went crazy, experts gave their two bits, fact sheets were reprinted and the whole circus played out. Obviously Ronaldo made a few wiseacre, 'Im the best' comments to add to the hysteria.

I have often wondered how these clubs assign a value to a player. It is obvious that some players perform better than others, but how much are they really worth. Basic finance has taught me, that the value of an asset is equal to the amount of cash it can generate in the future discounted to its present value.

Lets list the cash flows Ronaldo will generate for Real Madrid.

1. T-shirt sales: At the moment he is arguably the most popular player on the planet (almost in the league of Beckham).
2. T.V. rights: Clubs in Spain negotiate T.V. rights individually. Ronaldo's popularity will give Real more bargaining power.
3. Endorsements: Ronaldo will definitely attract big brands to Madrid.
4. Stadium Receipts: The best players attract larger viewers to the game.
5. Buzz: This is not exactly tangible. But Ronaldo has a habit of shocking. check this (stupid but catches media attention)

I was wondering if you could use some multiples to arrive at a value. Here are some i could think of:

1. Player Value / T-shirts sold
2. Player Value / Goals scored
3. Player Value / Assists
4. Player Value / (Wins/Games started)

I still think its more art than science. Not really sure if the managers actually care about valuations but the finance guys at the clubs surely would.