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Third party ownership: the way European football is manipulated

Adam Brogden

An acquaintance of mine asked me a question some time ago, and this question has had me thinking for quite a while now, not only because of its possible ramifications on the footballing industry, but also because this person earns a living out of the game and has done for the last twenty years.

A little background about this individual and his career: after leaving the military he became involved in football via friendly connections, he has a degree in law and he is a FIFA registered football agent who in the past specialised in bringing in footballers from the Caribbean in to European football.

This has been achieved mainly in the premiership and championship via his relationship with another FIFA registered agent based in Jamaica, whilst also acquiring talent in England. He has represented quite a few Arsenal players in the past but has none now, and this is where it gets interesting, because he has admitted to me that he no longer wishes to import players in to England or represent them because of certain rules we have had in place for a while now.

In fact he wants out of the industry all together, but still has a small client list that is based all over Europe’s big leagues.

The rules I’m referring to are Third Party Ownerships, which can take a couple of forms.  Mainly it involves a player being employed by an agent (who guarantees the players income).  The player is rented to a club for a small fee and short duration of time in which the club registers the player but has no rights on his future. All the club has to do is find the agreed percentage of the player’s wages and the agent pays the rest or profits from the higher salary.

The agent also profits if the player is sold on.  If not he finds him another club. Also a club can buy a player out of his contract with an agent and enter in to a playing contract for a longer duration up to a maximum of five years, which may also include the player’s future transfer rights or a percentage thereof. Again this will cost the club. For clubs that already own all of the above they can, to find funds, sell a percentage of a player’s future transfer rights to an investor, but again this brings into question contractual stability.

In England, France and Poland this form of ownership is against competition rules. A club can only own 100% of a player’s employment contract and 100% of the player’s future transfer rights. So straight away we see two sources of income taken away from football agents and to some degree the clubs.  This may go a long way to explaining why an agent no longer wishes to import their footballers into these countries unless the original buy-out is worth it. It may also explain why agents are now advising their clients to remain on the continent until a profitable solution is found.

This form of ownership has its roots in South American football where most clubs do not own their playing staff, the agencies do, and they only lease the players to the clubs. The clubs can purchase a percentage of the players future transfer rights but this goes against contractual stability as the only time a profit will be made from their investment is when the player moves for a fee.  This will never allow the manager of the side a chance of creating a settled side, and it also encourages this transfer merry-go-round.

FIFA and UEFA have been looking in to this form of ownership with the view that it goes against the integrity and stability of the game and have even commissioned studies in to this form of ownership.  The reasons behind this are that when an agent has a controlling number of players at a club they can then dictate the direction or stability of that club which again infringes on the integrity of the sport.

FIFA & UEFA are also aware of the artificial inflation of transfer fees that comes with this model of ownership and that agents will work together to maximise profits to the detriment of competitive integrity and the stability of clubs. The European Union are also looking into this form of ownership and may force legislation on the industry if it can prove the integrity of the sport is at risk.

This is also why we have the implementation of TMS (transfer matching system) which is an information gathering programme designed to gather data on the different areas of transfers and contracts that happen across international borders.

Within the TMS system a club has to disclose what percentage of the player is owned by a third party and all other intricacies within the employment contract, including future transfer rights including naming of those parties.   FIFA & UEFA have access to this data and will use this data to decide on an appropriate way forward. At present this seems to have kept the EU at bay.

An example of this risk to competitive integrity would be the Portuguese league, where two teams remain unbeaten this this season. What happens in Portugal is that two sides collect (or rather are given) the best talent via agents and investors that wish to get maximum profit from their client list.

Thus they place them at either Benfica or Porto with the view of moving them on into one of the big five leagues consisting of England, Spain, France, Germany or Italy and to some extent Russia where the biggest wages and transfer fees can be found.

This is viewed as a form of fixing as only Benfica or Porto will win this league and both gain entry in the champion’s league and higher funding. This is a deliberate act as other teams within the Portuguese league could indulge in the same model but it would not yield the same benefits for the investors.

This goes directly against the integrity of the sport, as the agents know all too well that the talent at both clubs will be wanted elsewhere in Europe as interest has already been shown in most players from multiple big five league clubs.  That is why they are transferred to Portugal to gain further exposure and maximise profits for the controlling agents and investors.

Is this league fixed?  Well, to a certain degree of course it is. Would Benfica & Porto be as competitive in their domestic leagues without this form of ownership? I would say yes they would be. Maybe they would not be unbeaten but certainly be very competitive.

Would they be as competitive in European competition? The answer would definitely be no; both clubs have vastly artificially inflated playing squads, which if you removed this form of ownership neither club could keep hold of.  Nor would they be able to supplement their squads with new foreign players.  In fact they would struggle to keep hold of their better domestic talent something that still happens but at huge profit.

If this form of ownership was ruled out across Europe then we would see the talent moved directly in to the big five leagues (work permits permitting), or agency owners or investors purchasing clubs within Europe’s importing nations.  They would thus give up their right to represent players so they can still maximise profits from future sales of players registrations.

In other words the mega-rich agents would become club owners who would not be allowed to represent players as an agent, but will be allowed to deal in the purchase and sale of player’s registrations and this limited to the one club they owned.

This is instead of the situation we have at the moment in which singular or multiple cross international agents/agencies and investors can work together to bring the most promising talent together at a select couple of clubs, winning their respective leagues more than comfortably, whilst allowing exposure to European competition, which in turn artificially increases future profits.

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20 comments to Third party ownership: the way European football is manipulated

  • GoingGoingGooner

    A good read. Thank you.

  • WalterBroeckx

    OH so it isn’t just all about spend till you drop dead? 😉

    Very interesting article Adam.
    This really is a part of the football world that is rather unknown to most of us.

  • greencardusa

    Great article Adam; gives me much insight into complexities that have thus far been mere suspicions.Thank you.

  • Mark

    Was this what was going on with Tevez? Football needs some clear reforms!

  • Steve

    I heard a story about the Mata deal that Arsenal refused to buy out his third party ownership and that is why he did not come to Arsenal. Chelsea on the other hand were quite happy to pay extra on top of the transfer fee & wages to get the player.

  • A.Stewart

    1) “Would Benfica & Porto be as competitive in their domestic leagues without this form of ownership?”

    Maybe, maybe not. But as you explicitly detailed that this ownership model is not against the rules in Portugal then what’s the problem? Is having two of the historical top clubs of a league monopolizing revenues via an ownership model vastly different from having two of the historical top clubs of a league monopolizing revenues via TV deal and favourable bank relationships that other clubs don’t get, such as with Madrid and Barcelona? (Meh all leagues favour the status-quo of the more historical successful and followed clubs in one way or another) Further, in both cases the benefits that these clubs reaps are not as “articial” as you present, since in historical context these clubs were amongst the strongest in their countries long before the advent of such ownership models pertaining to transfers across Europe or the advent of Satellite TV, and thus were organically pre-positioned to already receive the better players in those leagues from way back.

    2) “Would they be as competitive in European competition? ”

    What does this really mean though? Again in a historical context (and where you let yourself down imo with this article) both Benfica and Porto have been very successful in Europe long before the advent of these creative ownership agent registrations etc, and thus that historic success has allowed them to be positioned to be a powerhouse in the league, always attract the best LOCAL players especially regardless of how ownership models changed in the subsequent decades (I emphasize local players because much of Porto’s recent success in Europe was based around local up and coming promising players and regardless of their ownership/subsequent transfers they weren’t European elite players at the time, nor vastly experienced etc, and we’re outgunned in terms of quality and resources by Europe’s big boys, and thus overachieved, we know much of this post is really about Mourinho). It’s not as though these are clubs like say City who never/rarely tasted success and were essentially “artificially” inflated out of nowhere. Benfica was showing dominance in Europe from as early as the 1950s/1960s. With Porto tasting European success as far back as the early 80s. Without the providing some historical context, you’re article loses much credibility imo.

    Now back to more modern times, and being competitive in Europe, regardless of their ownership models of some of their better players, I think any rational person can still agree that these clubs are VASTLY outgunned by Europe’s elite in terms of player resources and money. So exactly why is it “unfair” that a traditional European top club that cannot compete with the revenues generated by the bigger countries/leagues in Europe not take advantage of their domestic situation to give them self at least a chance? Regardless as your article alludes to with statements such as: “What happens in Portugal is that two sides collect (or rather are given) the best talent via agents and investors that wish to get maximum profit from their client list. Thus they place them at either Benfica or Porto with the view of moving them on into one of the big five leagues consisting of England, Spain, France, Germany or Italy”..the players in question are NOT amongst Europe’s elite players that the big clubs have, but rather much more so, up and coming unproven/inexperienced talents, so in other words they are still vastly outgunned by the top clubs, and achieving anything in Europe especially the Champions League in this modern climate is still an over-achievement of epic proportions!

    3) “In fact they would struggle to keep hold of their better domestic talent something that still happens but at huge profit.”

    Exactly, and this is further justification that any success these clubs taste or will taste in modern European football is an over-achievement. All this shows is exactly what I’ve been saying, they generally will always lose their better (especially domestic) talent to the MUCH RICHER CLUBS AND LEAGUES regardless of the ownership structure, which you pretty much admit will STILL HAPPEN regardless. And it happens…Well… because these clubs and leagues are much richer and far more attractive, hence any success Porto or Benfica have in Europe in modern times is still a David against Golliath task, as their better players are generally always going to want to eventually leave for Europe’s top clubs and leagues. And with their profits generated (and I say good for them) it’s not as though they can even still compete with the big clubs for top elite established talent, because a) their monetary resources still pale in comparisons and b) they simply cannot attract already established top stars. So therefore Porto and Benfica (who haven’t done as well in Europe in recent years) are always generally where they should be, in that second tier of European clubs, putting in a good showing here and there, but generally falling way short of the ultimate top prize(s), that is until someone like Mourinho comes along who overachieved and gained success of unprecedented proportions in the modern game WITH ALL the inherent player and monetary resources disadvantages Porto has in relation to it’s European top competitors (note not domestic).

    4) “In other words the mega-rich agents would become club owners who would not be allowed to represent players as an agent, but will be allowed to deal in the purchase and sale of player’s registrations and this limited to the one club they owned.”

    This is nothing but speculation and hyperbole.

    5) “This is instead of the situation we have at the moment in which singular or multiple cross international agents/agencies and investors can work together to bring the most promising talent together at a select couple of clubs, winning their respective leagues more than comfortably, whilst allowing exposure to European competition, which in turn artificially increases future profits.”

    You’re conclusion is anything but objective, (well clearly this article isn’t intended to be). Many would argue against the “artificial” nature of historical top clubs in a domestic league (successful domestically and in Europe before the advent of super agents etc) taking advantage of something currently within the rules to maintain some semblance of financial/sporting competitiveness and viability in comparison with the heavy hitters across the Continent who can otherwise just even more easily pick off their top talent, and whose resources in the modern commercial explosion of football are exponentially more than clubs in second tier league such as Portugal. They do what they need to do to remain viable, and as long as it is within the rules so be it.

    Please don’t give me the moral high-horse from a domestic point of view, because every league is set up in one way or another to maintain the status quo to the benefit of the elite who like Benfica are generally the clubs who tasted success and grew big following from way back. Quite frankly are far more interesting expose on the effect its having on the game as opposed to examining the advantages of clubs in small leagues like Portugal who still have no resources near the big boys, would be to examine the effect of the monopolies traditional Spanish heavyweights like Madrid & Barcelona have in Spain with TV/Banks/local govts (still within the rules like ownership in Porto) and the effects on the “integrity” ( a word you used often throughout) of the game in Spain, and the real effects on their competitiveness AT THE TOP of the European game.

    I think all you achieved with this article is demonstrating that you have vast knowledge of the intricasies of third party ownership, and that’s impressive. However, this article lacks a tremendous amount of context, research beyond a narrow topic, and objectivity.

  • Stuart

    So third party owners are maybe the source of most of the transfer rumours out there, owners looking to cash in by generating false demand.

  • Steve

    ” However, this article lacks a tremendous amount of context, research beyond a narrow topic, and objectivity”

    So should every blog post be researched beyond its topic, have a lot of context and be objective? Having read a lot of blogs etc hardly any would exist if you applied those rules also a lot of written media articles would also fall flat on their faces. A point has been made to discuss not to critisize why try to make it personal?

  • Adam

    Thankyou for the responses.

    Stuart, to a degree, yes, the agencies actually have media departments that deal with the publicity. Some agencies are known for keeping a tad quiet, whilst others use the media as an advertising tool.

    Steve, A.Stewart has a history of trying to discredit writers on untold, it seems to be a favourable pass-time. Also, I’m not sure on the Mata deal, but I do have my suspicions that Arsenal have indulged in third party ownerships in the past or at least bought players out of their TPPO contracts, but nothing concrete.

    A.Stewart. There is an ongoing (across football) debate regarding this form of ownership as it has pro’s & con’s for the industry, as you rightly pointed out it keeps some clubs competitive on the European stage, but by doing this it keeps leagues uncompetitive, and this is not restricted to just Portugal. The histrionics of this have their foundations buried alot further back in European history than any of us would like to admit.

    However I do admire your attempts at challenging me. I put a small bit of misinformation in the article.

    A person, with the background knowledge and research that I have put into the various articles on this site, would have picked up on this, you have not.

    You do have some valid points. Especially with regards to the clubs ownership model, but you missed the point of the article which was to enlighten people on what the agents and investors are upto. The club has gone about its business trying to compete but has also attracted some attention from the governing bodies regarding “Benfica star fund” the investment arm of Benfica (an area I didn’t want to wander off into within this article). “First Portuguese football fund” is the investment arm of Porto, again an area I didn’t want to wander into (just yet). You mentioned the Mourinho years most players he managed during his time at Porto were owned by this fund and not the club. It was a totally complicit act, yes he did superb with the players at his disposal, however he should not have had the players in the first place.

    Lastly. I spotted you chastising someone on this site for expanding on the thread subject and accused them of such, and asked them to stick to the subject, yet you are guilty of exactly that. Bit hypocritical don’t you think. It has become clear to me that you wish to be right at any cost, which goes against why I do this, I want to get the information out to you guys. Its not a competition.

    So please stop with this useless debate. When you spot the small piece of misinformation I will take you seriously.

    @Walter, for me it is still spend, spend, spend, but with someone else’s money, and they want more back. The point some people miss is this, if you own ten great horses you don’t race them against each other. You maximise your winnings by racing each one in ten different competitions.

  • Danny F.

    I agree with A. Stewart – the alternatives presented in the article don’t sound like a long-term win-win between the clubs and the players.

    You would do well to study north American sports and their system of trading and player agency if you want long term club stability that benefits both the players and owners and agents.

    And seriously don’t get all defensive because someone is posting an intelligent and non-emotional post debating your article. That was a very well-measured response and it only makes you look like you have something to hide!

    We can all get along here and that’s what I appreciate about untold is the level of user civility is like nowhere else.

  • Adam

    Danny F, they are not alternatives, it is the only way a person can earn money out of players under the current rules, if you removed TPPO’s.
    North American sports would be a good model to follow, however I don’t think most Europeans would want to do away with the pyramid system of achievement.

    I think most would agree that football needs an overhaul, but going about that is the hard part. I include English football in that as well. There are too many differing rules across the nations associations that compete at European level for the sport to be deemed fair and competitive.

    Also Danny, we don’t all get along on here. some people are very disruptive and I can only put up with so much.

  • Full disclosure: I’m the co-founder of Starbox, a crowdfunding platform to buy and sell players’ economic rights.

    Being from Portugal I can clearly agree with A.Stewart saying Porto and Benfica are the 2 top teams historically playing for the title, with TPO or not. In fact, a third team, Sporting CP, who used to fight for championship, who regularly uses TPO is going through a massive crisis with concerns about their capability to overcome insolvency and struggling in mid-table. Today we see underdogs like Rio Ave and Paços de Ferreira in Europa League positions and wonder why is this possible. They both have excellent managers who you’ll hear about in a few years but they do have different approaches towards TPO. Rio Ave’s coach is very close to Jorge Mendes/Gestifute and even got Bébé on loan from Man U. On the other hand Paços de Ferreira scouts lower league divisions to find talent and they have been doing that for years. In the professional leagues, Premier and 2nd division is hard to find a club that hasn’t got any arrangements with an agent (whether he owns transfer rights or loans the player to the club). These clubs are struggling to keep their head over the water and to pay their bills at the end of the month they engage with agents or investors. The main reason for doing this is financial and the other reason is passion. It would be heart-braking if my hometown club, a mid-table second league club, would shut the doors because they owned 100% of the players in the squad.

    I’m not saying everyone who’s in favour of TPO are right and the others are not. By all means don’t get me wrong. What I’m trying to do here is to launch a debate about TPO, there are several things that are good and others wrong.

    I don’t advise a full ban but I do think we need more restricting rules about it.

    1- full transparency, football and other industries have served money laundring and tax evasion schemes for a long time, prior to TPO came to light. Investors should be forced to share any conflicting rights that might occur. full names and percentage owned as well and could be created the “role” of an accredited investor.

    2 – integrity of the sport, more damaging to the industry are betting schemes as we know but I do reckon fair play could be in peril if we persist in shady TPO schemes like an agent owning a player in full paying for his salary or even a full squad. Agents exist to represent a player like a lawyer represents a client and we’re seeing agents setting up investment funds in offshores to bend the rules as they please.

    3 – restrictions, percentage of the TPO owned by others than the club, eliminating all the “farm” clubs that only exist to own sporting rights and not competing at all. If you’re a club you have to compete, period (fight club adaptation). Code of conduct for investors could be another good thing.

    Consensus, instead of battling over each side of the trenches it would be better to get both sides talking about it.

    At Starbox we wan’t to be an active part of this change (mentality included). We are limiting our percentage ownage to a specific figure and we’ll be developing a more social concern and try to get talents out of situations of extreme poverty and giving them the chance and the tools to become a better human being and when the time comes go back home help others doing the same path that they did.

    I would like to invite anyone to write a guest post about anything football related for our upcoming blog. My email is hugomcastro@gmail.com, get in touch to arrange it.

    Looking forward to hear from you

  • nihirealist

    Great article Adam. I don’t see how anyone can argue against the risks of the current investor model.

    As for Porto or Benfica being the traditional big teams, I think the article made it clear that they would still be among the most competitive teams in the league without the investor model. So, people criticising that should read the article more carefully.

    I am certain some players are bigged up by the media because of this.

    Also, another question with this investor model. What if, as an example, Abramovich owned 30% of the rights of Piazon, Ramires, Luiz, Oscar etc? Isn’t he then channeling funds through Chelsea to essentially pay himself? Would this count as illegal? Money laundering?

  • Adam

    @Hugo, Thankyou, and you are exactly the type of person I would like to exchange some ideas with. As you state this is an ongoing debate with both pro’s and con’s for the industry.

    However it is clear (in my mind at least) that some parties are using these clubs as an advertising tool, earning millions from promoting their clients to the detriment of sporting integrity which you allude to, which is again an area I didn’t want to wander off into within the article.

    There are many ares of the game/industry that need looking at, and if there are clubs at risk of folding if we removed TPPO’s then this would have to be taken into consideration.

    As I have stated before TPPO’s have positive and negative influences on the sport, what I don’t agree with is person’s of wealth using these rules to maximise profits to the detriment of the sport. It’s a bit like banking interest rates, a perpetual mathematical equation with no end as any profits go to acquiring more talent.

    Shard, Thankyou. Chelsea have had close links with Jorge Mendez AKA Gestifute and were even looking into a similar fund along the lines of Benfica star fund.

  • Adam

    Hugo, Fan ownership has been looked into in England as well.
    I have no problem with that as long as the league they play in remains competitive and is not financially doped by wealthy fans.

    Yes there needs to be complete transparency as at the moment a club doesn’t have to divulge who owns the other percentage of the players future transfer rights.

  • Adam, it’s great to have healthy discussions where we’re treated fairly and in a civilized way.
    What you guys think about club owned investment funds? Does it stands also as a “wrong usage” of the TPPO?

  • bjtgooner

    Adam, this is really an excellent article, well researched and well written. Third party ownership should really be universally banned and the fact that it isn’t suggests corruption in some places. Further, agents must come under tight control and regulation.

    I share your concerns about the comments of A.Stewart – he often comes across like a long winded version of Rupert – glad you caught him out.

  • Adam

    Hugo, Its not something I have researched only read Government reports on.

    In England we have recently had an inquiry into the governance of the sport and one of the subjects raised was more fans owning their clubs in part or in full.

    If the fan base owned a percentage of a club then I see no problem with allowing an investment fund as long as those fans investing are registered fans of the club and not just some investor wishing to pump money in, to artificially inflate the playing squad. Also there must be limits to the investment in line with direct competitors.

    Whereas if a club opened an investment fund to anyone, then this should be against the rules of competition unless it was a European wide decision and all clubs could indulge.

    For me its about fair competition, and at the moment some countries are willingly carrying a handicap.

    Do you think many sides would be able to compete with Arsenal if we were allowed an investment fund where anyone could put money into the club?

    We have Usmanov who is worth £18 billion, Kroenke worth £3.5 Billion, yet we only spend what the club earns.

    If Arsenal opened an investment fund for the fans (not the fanshare) to invest in recruiting players, I think that would be met with mixed emotions, as we already work within our means.

    It also raises further questions about who is solely responsible for solidarity payments, is it the club or fund or both?

  • Adam

    BJT, nice one, the biggest problem I have with people such as A.Stewart is that they are intelligent enough to hinder but they refuse to use their intelligence to help.

  • Adam

    nihirealist

    The Ramires transfer was interesting as two months before he was transferred, a portion of his right were acquired. Some insider trading going on there. A third party earned about £4 million out of that deal and the person is reported as being Kia Joorabchian the same person involved in the Tevez & Masc deals. Still to this day we don’t know who is behind this agent /investor.

    Third parties are ruled out in the UK, but that’s not stopping someone from investing in these players or arranging their transfer’s into Portugal, then on into the UK or Spain at huge profit.

    Only on entering the UK, Poland or France must a player be bought out of his third party contract.