Banish transfer fees – and see what happens

IN THIS time of global upheaval, football soldiers on, playing to empty stadiums in deserted towns. The tumbleweed continues to roll in the streets surrounding football grounds, but the grandstands echo to the sound of the dugout. The longer this prevails, the financial structure of the game will surely be seriously compromised.

The 2019-20 season only touched on the problems that lay ahead, 2020-21 is in danger of having a long-term and somewhat existential threat to many clubs.

However, the transfer market continues to boil away, albeit at a lower temperature than in the past. There’s a moral question or two to be answered about the persistence of the market, although in 2020, activity was lower than in the previous year. 

Laws

A recent article in The Athletic suggested transfer fees are actually illegal and the way forward may be to abolish them. Football finance expert Stefan Szymanski, the co-author of the excellent Soccernomics, said everyone has the right to move jobs except footballers, adding no law has ever been passed to exempt clubs from labour laws. 

Szymanski, whose paper in July 2015 (The economic arguments supporting a competition law challenge to the transfer system) questioned the post-Bosman transfer market, said clubs need to treat players less like horsemeat. “It’s not difficult, every other employer has to do it.”

While Szymanski believes very few small clubs are ever able to generate substantial revenues from player trading, it cannot be denied player trading has become an essential part of many business models. The question is whether there is an alternative and if there is, how do you wean clubs off a system they feel reliant upon? Removing transfer fees would require a huge recalibration of the industry, which actually might take years to achieve.

When he issued his paper, Szymanski felt at worst there would be no change to a world where big clubs dominate and the rest are constantly on the brink of financial collapse. At best, he added, smaller clubs might attempt to match the big clubs by hiring top players on short-term contracts. “After Bosman, the football authorities sat down to create a new system, which is what we have today. If this system were now to be abolished, no doubt there would be negotiations and a new system created. It is not necessary to pre-judge that new system in order to accept that the current system is unjust and illegal.”

As far as FIFA are concerned, the current level of transfer activity reflects the game’s resilience and strength of football’s employment market. In the governing body’s Global Transfer Market Report, FIFA confirmed transfer market activity fell by 5.4% in 2020 to 17,077 transfers. It was the first time in 10 years the volume declined.

Food chain

Transfer fees totalled US$ 5.63 billion in 2020, the lowest since 2016 and a decrease of 15% on 2019. Surprisingly, only 13.3% of all transfers have fees attached to them. Furthermore, of those transfers with a fee, 51.4% include a sell-on clause in the agreement. In deals with no transfer fee, only 2.8% have a sell-on clause, a figure which probably affects clubs lower down the football food chain. Over 60% of transfers involve players that are out of contract.

The pandemic has not stopped clubs from spending and there has been a number of sizeable transactions, although only 130 over US$ 10 million. Naturally, the biggest deals have included Chelsea (Kai Havertz), Juventus (Arthur), Napoli (Osimhen), Manchester United (Fernandes), Manchester City (Dias), Paris Saint-Germain (Icardi), Barcelona (Pjanic), Bayern Munich (Sané) and other members of the elite.

Premier League clubs dominated the top 10 spenders in 2020, Chelsea, Manchester United and Manchester City in the top three. In fact, English clubs spent more than any other country – US$ 1.6 billion – in 2020. The highest amounts went to Spanish clubs (US$ 340 million), and Portuguese clubs (US$ 261 million). The Premier League has accounted for a third of all European top division spending over the past few years.

The absence of transfer fees would not just affect individual clubs, but would also impact domestic football in countries that rely on a flow of international transactions. Brazil, which accounted for over 2,000 deals and over US$ 300 million in fees in 2020, is responsible for the most frequented transfer route. In 2020, 274 deals featured movement of players between Brazil and Portugal, the busiest trade path. Spain received the highest amount of transfer income, almost US$ 800 million.

As we have seen, some clubs have become very proficient at player trading, providing a steady flow of players to the market. The leaders in this field are Benfica, Porto and Ajax, but other clubs, such as Red Bull Salzburg, Sporting Lisbon and Genk are on the rise. In 2019-20, Ajax  and Benfica each generated over € 200 million of transfer income. It is likely these player trading clubs will not make as much from this important revenue stream in 2021 as the pandemic hits home. 

Development

Removing transfer fees would also have an indirect effect on the game in that it would curtail some of the activity that acts on the periphery of the industry. Intermediaries may find their income goes down dramatically. Conversely, with expenditure on player acquisition no longer an issue, it is not out of the question that player wages might increase – if the money is still there, of course.

The transfer market in women’s football is only just getting underway and in 2020, international transfers broke the 1,000 mark for the first time, an increase of 24%. A new world record was created when Chelsea signed Pernille Harder from Wolfsburg for £ 250,000. At this stage of its development, the women’s game could easily implement a ban on fees in the future.

One unforeseen consequence could be a rise in illegal activity in order to encourage transfers. Given the football industry is now a global business that has begun to ape other corporate sectors, the eradication of transfer fees is unlikely to be endorsed by clubs, associations and even governing bodies – unless, of course, there is a huge disaster waiting to happen. It will be a case of “turkeys don’t vote for Christmas” even if it delivers longer-term benefits. Question: When did football ever think long-term?

@GameofthePeople
Photo: PA

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