Football Transfer Market: Behind the Scenes
10 minute read · Issue Number 21 · June 19th, 2020
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It’s great to have live sports back on TV!
I was fascinated to see some leagues such as La Liga and the Premier League host in-game DJs who use FIFA videogame sounds to add excitement according to what’s happening in-game.
I’m a huge Chelsea fan, and this week something glorious happened. Chelsea signed my favorite striker, future Hall-of-Famer Timo Werner from RB Leipzig for a total fee of 53 million Euros.
[Insert celebration GIF here]
Given my (palpable) excitement of such news, I was curious around transfer negotiations between football clubs. Therefore, this week, we’ll learn about what happens behind curtains in the world of soccer players transfers.
Multiple issues surround the transfer of any player – transfer fee negotiations, agents’ commission, contract negotiations, image rights, work permits, taxes, international clearances, and many more.
The media covers the tip of the iceberg of the transfer market business. Nevertheless, depending on the size of the agreement, dozens of people might be working behind the completion of a specific transfer deal.
Let’s start from the beginning.
The Transfer Market
Transfers have been a critical component of the football industry. Teams continuously look for fresh talent who can help the team compete to win and to increase the popularity and attractiveness of a club to the fans.
Transfers also serve as financial investments, where a team can sell a player and reinvest the earnings on the playing squad or the team’s infrastructure.
In practice, the first phase of a signing begins with a group of scouts whose mission’s to find new talent for a specific team.
Usually, big clubs will have multiple scouts dispersed around various countries hunting for:
New, undiscovered young players;
Experienced, known athletes;
Those scouts will provide a list of targets that could potentially fit the needs stipulated initially by the team or the manager.
The transfer fee is the first step into buying a player before even negotiating his salary.
When a club is interested in buying a player who’s actively under contract with another team, the clubs must agree on the fee that ends the current contract of the player.
Transfers that involve a fee are restricted to transfer windows, which happen in January and during the summer.
If the player is out of contract (say free agency), there’s no need for a transfer fee.
The fee amount depends on multiple factors such as age, current contract terms, international popularity, time remaining in his current contract, playing position, potential, and more.
For example, today, 21-year-old Kylian Mbappé is 3x more expensive than 35-year-old Cristiano Ronaldo, not necessarily because he is more talented but because of his future potential.
It could take from hours to months to agree on a transfer fee, which besides the value of a player may also account for:
A sell-on clause to benefit the club when selling;
Add-ons derived from player’s achievements; and
Add-ons derived from club’s achievements;
Additionally, there are a few circumstances that may provide negotiating power for a club:
If the player is happy at the club or if he requested a transfer.
If the player has six-months left in his contract, and he could then move for free six-months later.
To finalize any deal, the teams involved must fill-up the FIFA TMS (Transfer Matching System), which practically makes the signing official.
Once the teams set a transfer fee, both organizations will sign the transfer agreement. Such an agreement should include:
Transfer fee guaranteed and the date and number of future payments
A sell-on clause if the player transfers again in the future
Add-on compensations, in the event of specific occurrences (i.e., the team making it to the champions league next season)
It is essential to know that the transfer fee reported by the newspaper and the media may not be accurate at all.
Consider the following example:
The newspaper might say:
“Barcelona pays 50 million Euros for Mexican superstar.”
However, the transfer agreement might state that Barcelona will pay:
25 million up-front;
10 million after one year;
5 million if Barcelona wins the Champions League next season;
5 million if the player scores +15 goals in his first season,
5 million after two years.
On occasions, teams will not pay the full amount stated by the media.
Furthermore, the transfer fee does not account for the salary of the player, which means that the investment is way more significant than the known amount paid.
For example, elite players in European leagues earn over 100 thousand Euros per week, which accounts for 5.2 million Euros per year. In 5 years, the team must be willing to invest 26 million Euros.
Our Mexican superstar would cost Barcelona 50m + 26m in the case of complete fee payment, considering this is a basic wage system. More complex salaries include bonuses, compensations, image rights, and other stipulations according to the interests of the parties involved.
Agents (brokers) are the ones looking to satisfy the interests of the players (products).
In every transfer, the player’s agent will get a commission paid by the club on behalf of the contracted player.
Commonly, the commission is 3-5% of the accorded player’s salary.
If we take our Mexican superstar as an example, if the team agrees to pay the player a salary of 100 thousand Euros a week, they would also agree to pay the salary of 3-5 thousand Euros a week to the agent.
All these are added costs to the team buying the player.
Interestingly, on a few occasions, a player may have multiple agents trying to find the best deal. In some cases, many individuals will claim to be the agent of a player without the athlete’s consent. These all add to the complexities of dealing with agents and completing a transfer in the market.
Agents in the transfer market in football are leading agreements worth millions, and such business is also vulnerable to several illegal uses of money. Some agents may be obtaining additional – non-disclosed– benefits, evading taxes through different money management strategies, or interfering with the interest of the parties involved.
At a conference I attended in Copenhagen, Mezut Ozil’s agent Erkut Sögüt said:
“The sports business can get dirty as any other business, you must be careful on chosing who you do business with.”
While it’s fascinating to learn what goes on behind the scenes of a transfer in the football industry, it’s also evident to see now why large deals can be so complicated, time-consuming, and expensive.
Nevertheless, I still think we’re just scratching the top of the business behind the football transfer market.
Until next week,
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