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The Market In Football Players

Fri, 24 August 2007

With the transfer window due to close from 31 August 2007 to 1 January 2008, are the rules on transfers in European football an unnecessary encumbrance on the movement of players?

Since the transfer window re-opened in May at the close of last season, only the transfer of Fernando Torres from Atletico Madrid to Liverpool for a reported £27 million comes close in scale to the reported £31.8 million paid by Chelsea to AC Milan for Andriy Shevchenko from AC Milan to Chelsea last May. The transfer window will only re-open again from 1 to 31 January 2008.

In fact, transfer fees across Europe have generally been falling since 2001 when Zinedine Zidane moved from Juventus to Real Madrid for £46 million, a consequence of the Bosman ruling, the 1995 decision of the European Court of Justice allowing players to move freely between clubs in the European Union at the end of their contract.

Footballers are essentially employees, providing footballing services to their employers (football clubs) for a salary. Football employment contracts tend to be for a fixed term. When seen in that light, it would appear surprising that the employer club could require a transfer fee at all to allow an employee player to move to another club even after the expiry of the fixed term.

As early as in 1960, George Eastham, later a member of England’s 1966 World Cup winning squad, had succeeded in the English High Court against Newcastle United, for its refusal to let him move to any other club even after the expiry of his contract, by retaining his registration. Eastham subsequently moved to Arsenal.

However, under the rules of football’s various governing bodies, as long as a club holds a player’s registration, he cannot play for any other club. Clubs, especially in Europe, relied on this to continue to insist on a transfer fee or keep players against their will even when the players’ contract had expired. These practices came to an end with the Bosman ruling. (This is to be contrasted with the current recent case where Gabriel Heinze situation at wanted to leave Manchester United, where the player is for Liverpool while he was still under contract to the club). These practices came to an end with the Bosman ruling.

Yet two major restrictions remain on the free movement of players in Europe. The transfer window is one. The other is a regulation that allows clubs to receive a transfer fee for players under 23 years of age, even after the players’ contract had ended, which UEFA, European football’s governing body, negotiated with the European Union after the Bosman ruling, ostensibly, in order to protect smaller clubs and the development of young players. In 2003, FIFA, the governing body of world football, also introduced regulations that allow a club that first developed a player to receive a percentage of any subsequent transfer.

Not many of us would accept artificial rules that prevented us from changing employees during significant periods of the year, or required our new employer to provide substantial compensation to our former employer, even when we are not bound by a fixed term contract.

The early 1960s was an important stage in the recognition of players’ rights as employees. In 1961, a year after the Eastham case, the maximum wage of £20 in England was scrapped, through the efforts of Jimmy Hill, then Chairman of the Professional Footballers Association.

The maximum wage that had existed in English professional football from its inception in 1885 until 1961 is a far cry from the state of play today, when top players earn well in excess of £100,000 per week – more than £5 million pounds a year. A survey in 2000 revealed that as many as 100 Premier league players earned a basic salary of £1 million pounds a year. In Deloitte’s Annual Review of Football Finance issued on 31 May 2007, it was reported that the total wages in the Premier League in 2005-06 was £854 million and that the average footballer in the English Premiership will earn more than £1 million next season.

Including sponsorships and endorsements, the salaries of the top players in the world are considerably more than £5 million pounds a year.

On the other hand, the income of top football players are just beginning to catch up with those of other sportsmen, in particular, those who are celebrities in the United States rather than in Europe.

If a professional footballer can avoid serious injury, his career at the top of the game lasts 10 to 15 years. Ultimately, footballers legitimately seek to earn what the market can bear. The market is made up of football clubs, who in turn cover the costs with increased TV revenue, or pass on the costs to the fans by way of increasing ticket prices or increased merchandising. It is inevitable than young men earning as much as top footballers do these days will spend it on expensive cars and houses. It is in any event preferable to squandering their wealth on sex and alcohol, as players such as George Best did in the swinging 60s.

However, restrictions on the free movement of players, such as transfer windows, and player registration, distort the market in professional footballers. As in any market, artificial restrictions or distortions only serve to benefit middlemen, such as agents. In April 2006, the Independent reported that football agents take £125 to £150 million out of the English game each year. Several top managers have criticized agents for inflating the price and salary demands of players. The role agents play in the transfer market were also the subject of both a BBC Panorama program in September 2006, and the Stevens inquiry report published in June 2007, which investigated corruption and other illegal activity in the football transfer market in England.

Of course, if an agent is able to get a player the best deal he can from a lucrative transfer, then he has fulfilled his purpose.

The role of players’ agents and advisors has further come under scrutiny in relation to Kia Joorabchian, a multi-millionaire businessman of Iranian descent. Unlike FIFA rules, Premier League rules prevent a player from being “owned” by both a club and a third party. Joorabchian, through his company, Media Sports Investments (“MSI”), continued to own at least part of the rights to Carlos Tevez and Javier Mascherano when they signed for West Ham United with much fanfare on transfer deadline day last year, 31 August 2006. West Ham was subsequently fined a record £5.5 million, and Sheffield United, which was relegated because West Ham was not deducted points, continues to try to pursue the matter through the courts. Mascherano has since moved to Liverpool, and Tevez to Manchester United, on loan deals, with MSI continuing to own the players’ “economic rights”.

All sporting competition requires a balance between competition between participants, and their co-operation in maintaining proper structures and a level playing field. There is of course a strong argument that this co-operative competition requires restrictions on economic freedoms. The increasing domination of a few clubs, and the increased concentration of wealth and the best players at those clubs, reflects a growing imbalance in European football, despite the restrictions that continue to exist in the player transfer market.

The fact remains that these restrictions do not serve the purposes for which they were implemented, and are in many ways counter-productive. European football might well be better off if they were scrapped.

Maintaining a level playing field over the course of a season may well be better achieved by imposing budgetary constraints on clubs, a concept that would be familiar to participants in fantasy football leagues. In each major league in Europe, the total amount of transfer fees or salary that each club can incur each year is capped, without imposing a salary cap on individual players. The caps, which would apply across a league or a division of a league, would be based on the total revenue of the league or division in question – for example, if each club in the English Premier League could only pay up to £100 million in player salaries and incur up to £100 million in transfer fees net of transfer fees received each season.

(The article as appeared in the Weekend Today on 25 August 2007)

5 comments

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