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

Football’s experts and influencers – some of the people we listen to

ONE OF the big changes in the football business world has been the recognition that the most popular sport on the planet now carries far greater weight than ever before. Admittedly, the game is dismissed as being the most important of the unimportant things in life, but in terms of contribution to the economy, social relevance, employment and community, football can no longer be regarded as trivial.

The rise of football as a business sector has, quite naturally, given birth to agencies, consultancies, intermediaries and commentators who earn a living on the back of global football. Equally, these companies and individuals also provide intelligent insights and interpret the economics, politics and data that gets produced.

While many fans care little for anything other than the game of football itself, understanding the background, financial structures and key elements of reporting allows people to understand why a club is successful or unsuccessful.

Game of the People  has worked with many of the key players in this industry and has provided editorial content for a wide range of reports and papers. The following is a list of some of the people we consider to be important and influential in this field. The list is not in any order and represents a selection of our most used sources. Needless to say, the list is being added to by the week. We welcome suggestions and recommendations.

UK Media: We see the Guardian as having the best stable of journalists when it comes to football – away from match reporting, writers such as David Conn and Jonathan Wilson are not only excellent scribes, but they lay a level of intelligence and sophistication to their work that is unmatched. David Conn has a strong business element to his writing but also understands the culture of the game, witness his coverage of the Hillsborough disaster trials. Jonathan Wilson, as well as being an incisive historian, has the ability to explain how football is played and how it has evolved down the decades. And there are others from the Guardian deserving of praise and respect, including women’s football expert Suzy Wrack and Italian football authority Nicky Bandini. The Athletic has lured a number of writers away from newspapers, such as Amy Lawrence and Raphael Honigstein while the Times has the likes of Henry Winter and Alyson Rudd (who was named GOTP’s top journalist in 2019). 

Swiss Ramble: This gentleman, a Brit living in Switzerland, provides possibly the most accessible and lucid explanation of football club accounts. His analyst-level content is football finance 101 for journalists, clubs, agencies and anyone with an interest in the game’s economics. And it is quite possible that he gets nothing for his considerable work. There are countless reports that reference Swiss Ramble and plenty who take his content and give no credit to the Zurich-based Arsenal fan. He is, without a doubt, social media’s foremost analyst.

KPMG Football Benchmark: KPMG’s Football Benchmark team is based primarily in Budapest, but it’s an international group led by Andre Sartori, a Juventus-supporting Italian. They came to the game after their corporate rivals Deloitte, but their European Elite report has become one of the “go-to” papers on football club evaluation. KPMG also produces a rolling player valuation tool and are regularly interviewed on TV.

Inside World Football: Experienced journalists form the backbone of this news portal which covers a broad range of topics and geographies. The site has a number of well respected writers including Mihir Bose and Andrew Warshaw. As a reference tool, Inside World Football is invaluable.

Soccerex: An events-driven company founded by Don Revie’s son, the late Duncan Revie, which stages conferences in various parts of the world. Soccerex published its third Football Finance 100 earlier this year, a report on the financial health of the top clubs.. Soccerex’s events are great networking opportunities and invariably have some top notch speakers.

Brand Finance: Brand Finance are based in the City of London and evaluate brands across many sectors and geographies. Included in their very considerable portfolio is the Football 50, which has been expanded to take the form of an annual that includes expert opinion, data and research findings. Their publications are backed by sound methodology and industry viewpoints.

Deloitte: Deloitte’s Football Money League is really the product that started the ball rolling in football finance. Although Deloitte’s research is primarily based around revenues and the elite end of the game, rather than other contributory factors, the presentation, editorial and format provides a clear snapshot of a club’s strength. Deloitte also produces an annual review of football finance, which is equally interesting and informative. These are the people that other companies aspire to emulate.

CIES Football Observatory: The Swiss-based CIES are the data gurus of the football world, producing reports that range from basic information about performance, player values and demographics to some quite obscure topics. So strong is their offering that other companies aim to partner with CIES to make use of their skills. We live in the data age and CIES are at the heart of football’s transition to a more scientific game.

Soccernomics: If Deloitte were the groundbreakers in producing club analysis, then Soccernomics , the book written by Stefan Szymanski and Simon Kuper, provided the ultimate text book. Soccernomics is more than a tome, though, it is arguably the most intelligent volume written about the game. Soccernomics is also an agency, comprising Kuper, Szymanski and Ben Lyttleton. They advise clubs, federations and businesses across the football landscape. The book, though, is what sells Soccernomics, it is an essential companion for anyone interested in how football works.

Academics: Kieran Maguire of the University of Liverpool’s Sports Business unit is one of the pre-eminent figures in football finance. He wrote The Price of Football  (if you can get hold of it) and has featured regularly on TV, in newspapers and websites. David Goldblatt, a larger-than-life character, has written some outstanding books, such as  The Ball is Round,  The Game of our Lives  and  The Age of Football. Also worth mentioning are: Simon Chadwick, Director of the Centre for Eurasian Sport Industry and Professor of Eurasian Sport Industry; Paul Widdop, senior lecturer at Manchester Metropolitan University; Daniel Parnell of University of Liverpool; and Rob Wilson of Hallam University. There is a growing field of experts who have recognised the contribution made by football to society and the global economy. All of the aforementioned, who represent a far wider body of men and women from the field of academia, are worth listening to.

 

@GameofthePeople