Third Party Ownership in Football Manager

Football Manager Third Party Ownerships – The Turning World?

As we have been enticed with 26 new features overall the past week (week 37), there was one new Football Manager 2014 feature or more precisely an realistic improvement that I would like to emphasize, as it might influence on how the Football Manager transfer market will be. In the real world of football transfer market, we have become used to sometimes strange moves, extraordinary price tags and great players who takes some weird choices in their career.

Yes, we are talking about the sometimes invisible strings behind transfers; the agents and investors, and their major influence in third party ownerships. Since Football Manager 2014 will come with the ability for agents and investors to make offers, have interest in specific players and basically owe a percentage of them, we found it important to take a closer look on the pros and cons of third party ownerships; the different types of it, which countries who embraces it, and how it might influence the Football Manager transfer prices and changes to the FM14 transfer market.

Third Party Ownership – The Basics

Source: Deloitte Analysis; Football Money League

For some clubs their financial situation have never been better. While a big club like Real Madrid has recorded some record breaking financial growth the past 5 years, other clubs and leagues are on the verge of bankruptcy and is struggling on a day by day basis with covering the players wages and cut the cost. Football has not only become commercialized, but with the astonishing amount of money within football, external investors and financial business men have set their eyes on the commercial side of football by looking for new ways to set their investments and finally get millions of dollars in profit.

Third party ownerships have become more and more usual in recent years as the difference between football clubs and leagues have become more significant. For agents, sports-management agencies, individual investors or investor companies and bank fund groups it has become one way to get a foot into the football world and invest in percentage “shares” of a player, similar to owing a majority of limited companies or buy stocks.

Third Party ownerships is a term used when the investors will buy out or owe a percentage interest of a players economic rights. The economic interests and financial risk is therefore divided between multiple sources, but never 100% by the club itself. In the worst case scenarios, one player can have multiple “investors”, all owing a bit of the player, who have different economic interest in the players future footballing career.

Third party ownerships differs from co-ownerships, as the financial rights of the player is not divided between two football clubs. This type of investment is normally carried through when a sport-management agency, individual investor, company or groups of investors sees potential in a player, and the chance to get future profit of a young talented player.

Countries and leagues who accept third party ownerships
The practice of third party ownerships has its origin from South America and have become common in European football as well. As it’s difficult to provide you with the full list of countries and leagues in America and Europe who allows this, it is easier to hand you the nations and leagues where third party ownerships are not allowed or banned; England (Premier League), France (Ligue 1), USA (MLS) and Poland.

Based on previous years events it is a common practice in Brazil, Argentina, Spain, Portugal and Italy, where great clubs like Porto, Benfica, Santos, Corinthians and Parma have become very significant of keeping hold of players under third party ownerships. You can read more about a real-life example of how third-party ownerships works, in this case how it influences Porto here.

There are many different types of third party ownerships, some very complex, but like anything else in life, there are of course risk and benefits for both parties, that we will discover now.

Pros and Cons of Third Party Ownerships

To fully understand third party ownerships and how it may influence Football Manager 2014 it’s important to look at the benefits and drawbacks of the practice. While there are different types of third party ownerships and agreements which can make it very complex both to understand the full terms of, the most important pros and cons are;

a) Insolvent clubs and/ or financially limited clubs will have the chance to compete with the “big boys” in the transfer market (clubs who are more financially strong) in terms of keeping hold of young talented players and attract players to stay at their club, players they normally can’t afford. Agents and investors will share the financial risk and burden of developing these youngsters. ⁱ

b) These clubs will also be able to attract players with higher reputation as they can buy a player for a cheaper price than if the sports-management agencies, personal agents or investor groups didn’t ow a huge share of the players market price. ^ii/iii


c) With the financial burden and decreased risk of buying new players, it will be easier for them to buy more players as the overall cost is divided at between different parties instead of the club alone. This will make clubs who normally can’t afford outstanding players, the ability to offer them a contract, increasing the competition of the league. One of the biggest examples of this is Parma, who can be described as a club with no money. Parma has 226 players in their ranks, either on loan as part of co-ownership agreements or at nursery clubs, otherwise known as feeder and partner clubs in Football Manager 2014.


(Note! I can’t be to determined to say that Parma take full advantage of the third party ownerships, but a team with 226 players makes it evident that some financial income will come when a future transfer have been arranged.



i) One way to secure some money for these clubs is to let some investors cover the cost of training and accommodations, so the talented youngsters can stay at the club until their potential is discovered by better clubs. When sold, these clubs will at least be entitled for compensation of his development, while the investors will get a return of their investment by being entitled to a percentage of a player’s future transfer fee.

ii) Clubs will therefore look to sell an percentage of players transfer rights to investors as a way to raise money and strengthen their squads.

iii) An agency or several individual agents can approach a club and look to buyout a percentage of the players contract and economical rights. The player will be outsourced to another club by the agent as kind of a loan deal to increase exposure and hopefully get an even higher return of the investment. Some would claim that the player in these situations as nothing to say in regard to his future career or which clubs he will be loaned out to, as the agents and agencies have the full entitled rights to employ him at the clubs they cooperate with.

d) As the amount of young talented players have grown massively for the past ten seasons it’s important and beneficial to them to have agents and sports-management agencies who are always looking to protect their interests and guidance them in the world of transfers and contract negotiations. For a foreign youngsters these investors may often pay for a players training and accommodation which ensures that the player can get an opportunity to showcase his performances and skills on another level than set. These agents and agencies will look to promote the youngster out. Of course they are looking for a higher return of their investment, but these professional companies will (in most of the times) work for the benefit of the player.

e) Third party ownerships is one way for smaller clubs which lacks funding, to stay competitive by working in the grey zones by taking advantage of the somehow inventive financing technique.

a) One of the major concerns are the most obvious ones according to common ethics and morale, as FIFA would like to ban third party ownerships all over. The FIFA rule clearly state that “No club shall enter into a contract which enables any other party to that contract or any third party to acquire the ability to influence in employment and transfer related matters its independence, its policies or the performance of its teams. As UEFA puts it, a player shall be 100% contracted by the club and that it’s wrong for any parties to have the economic rights of any human being. So could it be reckon as a type of modern slavery?

b) Another major thing worth mentioning is that these business men, agents, agencies or investment groups may have interest of several players around the world, sometimes also representing managers and owing shares in a club. Overall will not these interest finally conflict? Of course no party can act in two capacities when a player is transferred; meaning both own a portion of the player and represent them in the transfer process, being on both sides of the table when a contract negotiation should be agreed.

How can they operate without manipulating the outcome for their own benefits and manipulating the transfer market? For some business men and as they could literally employ a promising talent with a potential value growth in one of their own clubs?

c) Clubs will take any legal means necessary to gain a competitive advantage over the others. Shouldn’t football and the clubs within the different leagues play on equal terms, as far as this statement ever can be possible?

d) As these investors requires that a transfer is being made in order to get return of their investments, they could look to put pressure to ensure that these transfers happen t the right time. And with their excellent connections and relations between clubs, leagues and prominent administrative staff of football world, they can easily influence the transfer market.


e) Accroding to the UEFA’s financial fair play regulations, clubs who take advantage of the third party ownerships will have a distorted financial situation than those countries who ban it, as it can be looked as a way of defraud costs because of the cost of wages will be lower than if they owned the player 100%.

f) Clubs who will not naturally be in the position to attract players, as the financial situation and revenue is not there, will suddenly be in position to attract better players or increase their capital. Shouldn’t those clubs who are professional and earn the most money through ticket sales and commersial be the ones who also “wins” on the transfer market?

The football world today is kind of bias in terms of third party ownerships. Of course there are clubs, managers and boards who frowns upon it, and want nothing to do with it, while others embrace it and hoping that they some day will finally be handed the joker and be able to feature the next Lionel Messi or Cristiano Ronaldo in their ranks.

We won’t discuss what we believe is right in the practice of Third Party Ownerships, but in my point of view it’s deadline day for FIFA to arrange an overall agreement of the practice; either ban it all over or approve it. I feel it’s time to look at all aspects of the third party ownerships practice and take the final call. One reason for this is how the daily situations is for directors of football, manager and all involved with dealing with the transfer market. For those involved it is a complicated issue when buying players as it’s sometimes difficult to know which parties who have the final rights of the player.
One example of this is how long it took before the Neymar saga was put to an end, as several sources claimed they had the rights to get a return of their investments.

Football Manager 2014 Third Party Ownerships

Confirmed news about third party ownerships in FM14
Football Manager 2014 will feature the ability for certain clubs to encourage business men, agents and investors to fund deals by getting a percentage ownership of the player, similar to the third party ownerships discussed above.

This will be most common in Eastern Europe, South America and some parts of Southern Europe.

Players owned by third party parties in Football Manager 2014 will be signed on shorter contracts. This will be more appropriate to better model South American transfers in real life.

Discussion

The developers of Football Manager 2014 has said the new edition will become the most realistic version ever. If the third party ownerships and a not yet known improvement to the staff role of agents will feature in the full extend as discussed above, it is clear to see that it will add more realism to the game.

Even though I’m writing this one and a half month before the official Football Manager 2014 release, I think if this is implemented correctly (as in real life), it will be a number of issues to deal with, some which might ease your worries while others might add more frustration when delving into the transfer market.

One of the first issues (if third-party ownerships is added as in real life), is the problems when dealing with all the parties. Perhaps the new live negotiation feature will make it easier, but like in real life, you will need to negotiate with all the different parties.
Hopefully they haven’t added the full realism to it, so when handing in your contract offer you only need to deal with the club and personal agent as it is today. Then the percentage of his ownerships is divided for the different sources afterwards.

As this is normally a practice used for agents to secure the ownership of youth players it might be the case when FM14 releases, that you will be frequently approached by agents and agencies wanting to buy out a percentage share of their contracts. You will then be able to lower costs and be in a better financial situation than if you had 100% ownerships of all players.

It might become more difficult for English, French or Polish clubs to obtain a players signature who are under third party ownerships. As we saw earlier this summer, Arsenal wasn’t able to secure the signature of Bernard because of third party ownerships. For clubs who wish to buy a player under the practice it might be more difficult to obtain his contract for the “right price” as these third parties can try to drive the price up, similar to the Neymar saga.

One other concern (if it’s added as in real life) is the way agencies and investor owns nursery clubs and academy. Will we experience that an agent suddenly buy out the players contract and releases him on free transfer, before selling him to one of their nursery clubs? If you are a manager for this nursery club, will you frequently get players into the squad that you don’t want or don’t need?

Of course this will only be assumptions until we can experience if for real in FM 2014. We will update this article with all important information about third party ownerships in Football Manager 2014 after the release of it.