Third-party ownership in the football industry

Third-party ownership (TPO) of football players (Chadwick & Hamil, 2009; Reck & Geey, 2011; Robatinho, 2014) is an emerging phenomenon in the international football industry (Baroncelli, 2004; Dobson, Goddard, 2001; Kesenne, 2007); it is recognised in different ways depending on the perspective adopted by the parties involved in its utilisation.

First of all, TPO in the football industry can be observed as a financial instrument through which third parties – such as investment funds, public agents or private investors – acquire a share of a footballer’s rights. This instrument helps clubs in the acquisition of young footballers and guarantees economic earnings to third parties.

In other words, TPO of footballers (Capasso and Rossi, 2013) is a useful instrument to reduce the financial requirements of football clubs in the acquisition of professional football players’ rights, though there is no common regulation among countries and federations at the international level.

Thus, TPO of professional football players can be an instrument for the capitalisation of the intellectual property of footballers, or an economic instrument capable of funding the growth of footballers and reducing the financial requirements of football clubs.

Although the phenomenon arose outside of Europe, federations such as UEFA and FIFA have forbidden or limited the acquisition procedure of professional footballers’ rights by individuals outside of football clubs to avoid interference with their regulations on Financial Fair Play.

In fact, TPO of footballers can be a means to avoid the Financial Fair Play rules issued by UEFA in “Club Licensing and Financial Fair Play Regulations” (Adreff, 2011; Warmoll, 2012). The phenomenon can increase the creation of capital gains through the transfer of football players’ rights, reducing club investments and modifying the cost structures of clubs in terms of less amortisation and lower wages and salaries.

Starting from the agreement signed by FIFA, UEFA and the European Union in 2001, the sale of footballers has been regulated at the international level.

Under the FIFA regulations, article 18 bis (“FIFA Regulations on the Status and Transfer of Players”) does not specifically prohibit TPO of football players; it establishes that no club should be committed to contracts that permit parties/third parties to meddle with working relations and the transfer of football players, as well as the actions and activities carried out by the team. So, the FIFA Commission can take disciplinary action against clubs that do not respect its obligations regarding third parties and footballers.

Moreover, according to article 18 of the “Regulations of the UEFA Champions League 2012-15 Cycle, 2012/13 Season”, participation of footballers in UEFA club competitions is only possible when they are registered with their relevant federation.

The Premier League (under rule U.36) and the English Football Association, meanwhile, prohibit all forms of TPO of football players.

Although debate in Europe on TPO regulations is still ongoing, the phenomenon can increase the replacement rate of footballers players, with a view to obtaining returns on the transfers of shares of footballers rights.

In 2013, the KEA, European Affairs and the Centre for the Law and Economics of Sport analysed the transfer rules of professional football players by investigating the laws of the European Union and the TPO with an economic perspective.

Starting from the analysis of international federations’ regulations, it is possible to identify some advantages from TPO of footballers:

  • It involves professional footballers as beneficiaries of investments made by third parties such as investment funds.
  • It can be a new economic instrument aimed at funding the growth of young footballers, especially coming from developing countries where the phenomenon was born.
  • It can be an instrument of securitisation of the intellectual property (Hillary, 2001) of footballers.

In future football business models (Conn, 1997), the possible regulation of third-party ownership should be oriented to define the rights and objectives of both the external investors and of the football clubs at the same time.

In the light of these considerations, the phenomenon of TPO of professional footballers can be introduced into and regulated in future football business models through adequate discipline coming from national federations and international organisations. The aim is to promote harmonisation of the regulations on the TPO of professional football players.

References

Andreff, W. (2011), “Team sports and finance”, in W. Andreff and S. Szymanski (eds), Handbook on the Economics of Sport, Cheltenham, UK: Edward Elgar Publishing.

Baroncelli, A. (2004), “Le regole del gioco”, in U. Lago, A. Baroncelli and S. Szymanski (eds), Il business del calcio, Milan: Egea.

Capasso, A. and M. Rossi (2013), “Systemic value and corporate governance. Exploring the case of professional football teams”, Business System Review 2(2): 216-2136.

Chadwick, S. and S. Hamil (2009), Managing Football. An International Perspective, Oxford: Butterworth-Heinemann.

Conn D. (1997), The Football Business: Fair Game in the ‘90s, Edinburgh: Mainstream.

Deloitte (2010), Annual Review of Football Finance, June.

Dobson, S. and J. Goddard (2001), The Economics of Football, Cambridge: Cambridge University Press.

Hillary, J. (2004), Securitization of Intellectual Property: recent trends from the United States, Washington: Core Institute.

Reck, A.N. and D. Geey (2011), “Third-party ownership & UEFA’s FFPR: a Premier League handicap”, Sport & EU Review 3(2), December.

Robatinho M. (2014), Third-party ownership of football players. Why are the big actors in the football market afraid?, Bloomington: Booktango.

Késenne, S. (2007), The economic theory of professional team sports. An analytical treatment, Cheltenham, UK: Edward Elgar Publishing.

UEFA (2012), UEFA Club Licensing and Financial Fair Play Regulations, Nyon: UEFA.

Warmoll, C. (2012), “Fair play rules set to disrupt football finances”, Accountancy 148(1426): 65.