Wednesday, 14 November 2012

The Global Player Exchange

With the global football transfer market worth an estimated $3 billion, financial holding companies are increasingly interested in buying up the transfer rights of the world's biggest stars. And the returns can be enormous.

The transfer market is a complicated system but can be simplified to this: most football teams have "youth systems" that train young talent of all ages. Barcelona's La Masia Academy, from which Lionel Messi, Xavi, and Andres Iniesta were developed, can be considered the pinnacle of these youth systems. If players are good enough, they can make the first team as teenagers. In some cases, opposing teams do youth transfers to continue developing a young player but to also bring them to the club for cheaper than a full fledged star. From then on, each time the young player changes clubs, his original club that developed him will get a "development fee" and the rest of the money involved in the transfer will be given to the team transferring the player out.

In most instances, the team owns all of a player's transfer rights. If he leaves, they get all of the money involved in the transaction. However, with the top heavy nature of modern day football, the bottom table clubs are suffering financially, resulting in these clubs selling portions of their player rights to holding companies as a method of financing their operations. If, for example, Radamel Falcao (pictured above) were to leave Atletico Madrid, Natland Financieringsmaatschappij BV would net 5% of the estimated 50 million euros he's worth.

Now as a fan of the sport, I think it's great that the value of players is going up, a testament to the popularity of the sport and the status of footballers as marketable stars. However, the concept of buying player stock worries me. The upper tier of clubs, in the league of Barcelona, Real Madrid, Manchester City, etc. have enough financial power to hold on to their players without selling their rights away. This allows them to inflate the price of their players, making it virtually impossible for opposing teams to pull a star from their ranks; the reported $1 billion buyout clause in Cristiano Ronaldo's original contract at Real speaks volumes for this case. The lower tiers would have no choice but to sell out to financial holding companies and lose out on huge transfer market gains should the player develop into a bona-fide star.

And what about a player that negotiates his own player rights? If they have yet to reach it big, but a company offers a great deal for even 50% of their transfer rights, said player can lose out on millions of euros over the course of his career. This can put youth players in poorer markets at even more of a disadvantage. With the market for third party transfer rights valued at $500 million, that is half a billion dollars that can be pumped back into the system, back to the ailing bottom tier teams. The Premier League is ahead of the game and bans third party ownership of player rights, it's about time for La Liga and the Bundesliga, among the other top tier leagues, to follow suit. Empowering the players and the teams that develop them will ultimately be the first step in bringing back a competitive landscape to association football.


-Aureen Sarker (Photo Credit: Atletico Madrid S.A.D)

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