Third party ownership. FIFA Agents part 4
“No club should enter into a contract which enables any other part to that contract or any third party to acquire the ability to influence in employment and transfer-related matters its independence, its policies or the performance of its teams”. (FIFA)
This seems a very simple rule to adhere to, however it is just this rule that encompasses a multi-million pound industry within footballs transfer market, the rule does not outlaw third party ownership (TPO), it only states that the third party cannot influence in any way; when, how or to who their investment is transferred. So the rule above is what, 4 lines of literature, yet millions are earned via it every year, welcome to the world of FIFA.
What this rule means is that you or I can purchase a percentage of a professional football player’s transfer/economic rights (future transfer fee) from the club holding the players registration, let’s say 20% for £1 million. The player is then sold on to a bigger league/club for £12 million; my cut would be £2.4 million, not bad eh considering I never trained or paid the player. Clubs outside of England and France are indulging in selling percentages of player’s transfer/economic rights to keep the cost of purchasing the player down. UEFA have revamped FFP this year to discount monies generated from a TPO from being included in the clubs attempts to pass FFP, as this constitutes an unfair advantage for those operating outside of the Premiership or ligue 1 as TPOs are banned within both competitions.
“Any profit in respect of a player for whom the licence applicant retains the registration must not be recognised in the profit and loss account. For the avoidance of doubt, any profit arising from the disposal of economic rights or similar of a player to any other party must be deferred, and a profit can only be recognised in the profit and loss account following the permanent transfer of a player’s registration to another club”.(UEFA).
These rules have also given rise to investment funds set up primarily to invest in professional football players transfer rights, all of this happens outside of the control of footballs governing bodies and no person has to be announced to FIFA as a stake holder in a player only UEFA want to know the percentage owned by the club for FFP purposes, all FIFA asks through TMS, is who negotiated the players employment and transfer contracts, also that no outsider has influence over the club or players, they asks the clubs to confirm this via TMS (tick a box).
Players’ economic rights (or similar)
“For any player for whom the economic rights or similar are not fully owned by the licence applicant, the name of the player and the percentage of economic rights or similar held by the licence applicant at the beginning of the period (or on acquisition of the registration) and at the end of the period must be disclosed”.(UEFA)
So consequently we are seeing smaller clubs around Europe being able to afford better players due to outside investment; use the example above, but to acquire the player (artificially enhancing the performance of a team). This is a familiar trend we are seeing from agents/solicitors that not only negotiate contracts for the clubs and players but also manage/own the investment funds used to purchase the player in the first place. Add to this scenario, the exemptions of solicitors from being a registered entity and we lose all transparency from footballs transfer market. So again we see FIFA unable to regulate this market. All FIFA have done recently is to make sure that the person being transferred is real.
Not only have we seen inflated prices due to the “sugar daddy” affect I believe we’ve seen an increase in transfer fees due to investment funds and outside influence on the returns on investments, Portugal is a prime example of this (as I have shown in a previous article). We have the importation of footballers from Brazil & Africa to Portugal by Gestifute and other agencies, and then moved on in to one of the “big five” leagues for amounts that defy belief.
When the FA introduced its rules governing Third Party Ownership in July 2009 it only stated that newly registered players couldn’t be influenced by a TPO so any players within the professional pyramid that were signed before 2009 maybe still part owned by a third part. It was shown in a report by the CIES football observatory that a lot of FIFA registered agents had in the past held a percentage of a players future transfer rights, which is probably still the case within associations which allow TPOs.
This brings me to the unfair competition aspect; let’s say Arsenal want a player that Benfica also want. Benfica have a budget of £10million but Arsenal has a Budget of £25million you would think Arsenal have the player in the bag. However when you introduce TOPs which Benfica can indulge in; their budget suddenly becomes unknown as long as the investors get their money back before the players contract runs down. Add to this Benfica only need to inform UEFA of the percentage owned by a third party and declare the £10million it spent for FFP purposes then this puts Arsenal and all other English and French clubs at a distinct disadvantage unless you are Chelsea or Manchester city of course but then these clubs still need to meet FFPR. So I ask; how can this form of contractual arrangement not be in contravention of FIFAs rules governing influence over a club in matters of player transfers let alone artificially enhancing a team’s spending power and on-field performance through the acquisition of better players?
The facts of this business model are clear. A player whose transfer rights are owned or partly owned by a third party will not be allowed to see out his contract at a club , The investors will lose their money which sometimes adds up to millions of Euros or Pounds. Believe it or not but England has the highest longevity for players staying with their clubs around the 3.25 year mark on average which rises even further for top 5 premier clubs which then falls quite dramatically in other countries. The model is not conducive to building a stable club. It promotes change for financial gains that ultimately are removed from the game. Some will argue that this model gives the smaller clubs a chance to compete, yes I agree, however it will not be a sustained challenge, it will be brief with its only intention, moving players around the transfer market for profit.
To give you further food for thought on the Third Party Ownership model I will give you a comparison of Arsenal and Porto; Porto reportedly had owned 100% of the transfer/economic rights to only 5 of its 27 playing squad last season so 22 players were partly owned by outside investors, Whilst Arsenal has a professional (defined by the player status and transfer regulations) list of approximately 70 players whose transfer/economic rights have to be owned solely by Arsenal which is obviously more expensive to accumulate than Porto’s. Even if we took Arsenals 27 most expensive players we still see that Porto would be able accrue their playing squads at a fraction of the expense compared to Arsenal. The only time we would be able to get a player that Porto wanted is if the player chooses Arsenal and the selling club ignored Porto’s bid in favour of the player’s wishes. Arsenal not only has to compete with rich “sugar Daddy” clubs but also with investment funds which are not subject to FIFA /UEFA/FA regulations and have potentially unlimited resources. These investment funds target younger players whose future potential transfer fee makes investment worthwhile exactly the same market Arsenal have been operating in for the last decade. Maybe this also explains Arsenals change in acquisition policy regarding signing players without a huge sell on potential? Although this last point is personal opinion only.
So through FIFAs own rules Arsenal finds itself competing with the financial clout acquired and amassed outside of football. Maybe this is why Arsenal shops frequently in France as we can be fairly sure that we are buying a player with no PTO hanging around his neck.
Would it be possible for a club to own 0% of all its players transfer/economic rights? Outside of England and France; yes. So how can we compete with clubs that can get away with only paying players wages and rarely take the risk of acquiring full ownership of the players future transfer rights or paying a fee in the first place. UEFA it seems are interested in this model and its effects on its competitions as it has incorporated PTOs into its FFP regulations, how do we know we have not already played against teams in Europe who don’t own most of their players?
Written by Adam Brogden