Third party ownership of football players

Read about the football player analysis that almost all newspapers around the world have recently highlighted the ‘hidden’ money in the transfer of Neymar from Santos to Barcelona and the resignation of the president of Barcelona. Many journalists, followed by public figures in football, put the blame on the shoulders of third party ownership (TPO).

What is TPO?

We can find several definitions for TPO, but it is best to use a wider definition that includes risk and all of the ways that a third party can become the owner of economic rights:

“ Third party ownership is a tool that clubs can use to share risks, catalyze hiring players and anticipate revenues which are just random expectations, through the assignment of a percentage of the economic rights tied to federative rights they possess, and such assignment shall not impair or affect the independence and autonomy of the club in decisions regarding the federative rights, transfers and sports performance of the club.”

As a social reality, in football the distribution of wealth isn’t just between the clubs, players and national federations, which allows a gulf so great that an athlete often receives a salary from his club that is higher than the budget of a rival club for the entire season, and here we are not referring to smaller, less well known clubs, but clubs that play in the most elite competition on the planet, the UEFA Champions League.

TPO is a tool that sometimes allows the economic and sporting survival of clubs. It is also a good mechanism for attracting money from investors to the football world.

Like almost everything in the world, if the use of TPO is not reasonable and responsible, the effects are dangerous. We can say the same about cars, food, alcohol, etc.

In the case of TPO, the biggest problem is that the vast majority of people, even within the world of football, do not understand the mechanism and its limitations. To try to cast light on the subject, I wrote the book Third-Party Ownership Of Football Players – Why are the big actors in the football market afraid?,1 with easy to understand language and practical situations experienced by associations, clubs and agents.

A lot of wrong information about TPO is spread daily via specialised newspapers and websites, always painting TPO as a villain in the football transfer market. As an example, I briefly analyze free players and their agents, a common situation in which TPO is cited but is not actually present.

Two definitions are very important for understanding TPO: federative rights and economic rights.

  • Contractual federative rights concern players registered with a national association recognized by FIFA that binds the player to a club.2 This club registration creates various duties and rights. The principle is the right to be compensated for breach of contract without just cause. These rights and duties are under guarantee by all pyramidal systems of rules governing the football world.
  • Economic rights are linked to federative rights, and can be defined as any expected financial revenues derived from the federative bond between player and club.

From these two simple definitions, it is not difficult to understand that without a club contract (federative rights), there are no economic rights and therefore TPO is not relevant.

In the same sense, we must conclude that a free player cannot hold “economic rights”, he is free of “federative rights” and can sign a new contract with any club that he wishes, which includes negotiating some economic rights in this new club for a share in future transfers. If in this situation (i.e. being a free player) the player receives some money from the new club, this money is a salary or signing fee, not a transfer fee for federative rights, so TPO is not applicable. You might be interested in reading this post about Bayesian networks for unbiased assessment of referee bias in football.

We have heard a few times about the “expectation of economic rights”, which can only exist in the future for a club that has signed a pre-contract with a player (six months before the current contract ends) because, in this sense, there is an expectation of federative rights. Again, if free players cannot hold economic rights, it is logical that there is no expectation to hold onto.

The same understandings are applicable to the agents of free players, no existing federative rights means no economic rights to be paid for by the new club. In case of licensed players’ agents, it’s important to highlight that Article 29 of Regulations Player’ Agents3 prohibits players’ agents from “owning any interest in any transfer compensation or future transfer value of a player”.

It is impossible to analyse the case of the Neymar transfer to Barcelona without reading the contracts, but is clear that we can only talk about TPO over the amount received by Santos FC (inside the FIFA TMS system), because all other amounts, outside of compensation for the early termination of federative rights, are not part of TPO.

Sometimes in the end, the “villain” is the real victim….