A lot of talent die in Africa due to the lack of adequate investment in young and upcoming footballers. Imagine a raw and enterprising talent from a remote locality in Africa, who could not even afford a pair of football shoes or tuition fee to be in a standard football academy where his talent can be groomed. What happen to such lad is after sometime he will probably be forced to go into other trade.
Unfortunately, such incredible talents are mostly from very challenging background and with my experience working with Inspire Football 4 Life Projects, I have seen a lot of these spectacular talents locked in some rural areas, with no funding to launch out.
Before now, we have gone ahead to establish Golden Boots Capital investment as a way to turn around the situation and give a lifeline for some of these raw talents in Africa.
Golden Boot Capital Investment is a platform where a player, club and an investor can come together to seal a Third Party Ownership ( TPO) or Co-Ownership deal regarding a player's economic rights and future.
Several players in Africa with no money to further their football career seek for this kind of third party investment deals, where an investor fund a player's welfare, training, travels and trials expenses for a percentage of the player's future transfer fees.
We use the MTE Masterclass Talent Exhibition to showcase some of these talents to potential investors. The investor selected a talent and sign a TPO agreement with him or her.
Maybe, I should have first explained what Third Party Ownership (TPO) means in football career and the transfer market system.
What is Third Party Ownership (TPO)?
Before I begin breaking down these interesting football transfers for you there are 3 terms that you need to keep in mind: Federative Rights, Economic Rights, and Third Party Ownership. I’ll try to explain these terms as simply as possible as we proceed, but since some readers may not be keen followers of football allow me to start from the basics.
In professional football a Player signs an Employment Contract with a Football Club. The Player has the freedom to sign with whichever Club he chooses. Provided, of course, that the signing Club is ready and willing to register him as one of its players and offer him a contract. Once the contract is signed then the Club “owns” the Player. I use the term “own” loosely because essentially, you cannot really own an individual- person, but in the football world you can have certain limited rights over this person.
When a Player signs for a Club a number of transactions take place; first of which is the employment transaction- signing of the employment contract. The signing of an Employment Contract activates two sets of rights: Federative Rights and Economic Rights.
Federative Rights belong to a Club by virtue of being affiliated to FIFA and the national football body of a country. These rights include the right to register a Player with the national organisation, the right to recognise, train and use the Player as part of its squad during league competitions, the right to use the image of the Player to promote the team or squad, the right to “loan” the Player to other Clubs for a certain period, the right to “sell”/transfer the Player to another Club. Some people use the term Registration Rights and Federative Rights interchangeably. A much simpler definition: Federative/ Registration Right is the right to play in a club or league.
Economic Rights are the rights to receive proceeds from the sale of a Federative Right/ Registration Right. For instance- the right to receive transfer fees when transferring a player from one Club to another.
If a Player is being transferred from one professional Club to another then the receiving Club has to pay a transfer fee to the Player’s former Club. But if a Player signs up with a Club as a first time professional transitioning from Amateur status or as a Free Agent then no transfer fee is involved. Such a Player is only entitled to his wages and a signing bonus and cannot legitimately be entitled to a transfer fee. The proper beneficiary of the transfer fee is the owner/custodian of the Player’s Economic Rights- which is the Club. So, essentially Economic Rights cannot be divorced from Federative Rights and only a Club is entitled to the Economic Rights of its Player.
So then, how do individuals get to own the Economic Rights of a Player? This is where Third Party Ownership (TPO) comes in. TPO is an arrangement whereby a party not employing the Player retains the interest in/holds the Economic Rights of a Player. The third party could be an individual, a business entity or a group of investors. A TPO agreement gives the third party, which is not a Club, the ability to own all or part of the future transfer fees of a Player. Just for emphasis, the third party is NOT the owner of the Player but the owner of the Player’s Economic Rights i.e. rights derived from the commercial revenue/earnings of future transfer value.
TPO is a controversial practice and has been banned in the English Leagues, France’s Ligue 1 and Poland, but is quite popular in other European countries such as Portugal and in South American countries such as Brazil and Argentina.
Three Kinds of TPO Arrangement
There are several ways of becoming a Third Party Owner (Third Party Investor is the more politically correct terminology):
1. Investment in Player's Training Development and Recruitment
First method is by the Investor purchasing the Economic Right directly from the Player. The Investor provides the young amateur talent with resources, football boots, better accommodation, connections to professional clubs, and connections to world-class agents in exchange for a share in his future Economic Rights commensurate to the investment made. Upon the Player’s first signing with a local, regional or international Club- the Investor, so long as he is in agreement with the Player and the Club, may own a share of Economic Rights.
That’s the catch right there. From a legal perspective, one cannot give that which he does not have. This is the standard law of contract. In this case, although the Player signs a direct commercial agreement with the Investor, the Player is not the actual owner of his Economic Rights at the time. This is because he does not have an Employment Contract with a Club in place. Remember, it is the signing of the Employment Contract which activates the Federative and Economic Rights.
Either way, during his first signing the Player and Investor must disclose this economic arrangement to the Club. I tend to think that the only reason that the Clubs agree to TPO in the first place is because they may not be in a position to offer a salary or signing bonus that would match or surpass the Investor’s money and resources to uplift the Player. Additionally, the Club will be in a better position to benefit from the Investor’s connections to bigger clubs which means they would get some revenue once the Player is transferred.
2. Investment in a Football Academy
Second method is by investing in Academies. Academies are created to tap into the talent pool of young upcoming internationals who shall make it on the world stage. Investors fund these academies in exchange for a percentage of the Economic Rights of Players within those academies. These academies usually have Clubs that they affiliate to, which in turn register their young players.
3. Investment In Club's Purchase of A Player
Third method is that of high risk Investors who purchase the Economic Rights of a Player by financing a Player’s transfer to a Club. If a Club can’t afford to pay the full transfer fee of Player, third party Investors step in to share the transfer costs in exchange for a percentage of the future transfer fee of the Player. This way the Clubs retain Players they would otherwise not be able to afford. The Investor gets comfort in their investment through the contractual TPO documentation- if an offer comes through from a Club that the Investor is not comfortable with, then the purchasing Club has the option to buy him out.
A Case Study of Carlos Tevez and Javier Mascherano
This was the case with Carlos Tevez and Javier Mascherano. Their Investors connected them to West Ham United in order to get them more exposure. In both cases the Investors got good returns as Liverpool purchased Mascherano (buying out the Investors) and Manchester City eventually ended up buying out Tevez).
However, this type of arrangement was viewed by England as having an element of Third Party Influence. At this stage it is important to distinguish between Third Party Ownership and third party influence. Influence is the ability of a third party to sway the decision of a Club and the decision of a Player.
Back to the Tevez case; Carlos Tevez signed with West Ham United, while under a contractual TPO agreement with an Investor allowing the Investor to influence when Tevez was sold and to whom. West Ham failed to disclose this arrangement to their governing body and they were charged by the Premier League. The problem was that West Ham picked up a world class player without paying the commensurate fee and kept him in the Premier League and consequently traded him on for profit, which led to a 5 million pound fine by the FA Premier League Arbitral body. This issue also set off proceedings against West Ham by Sheffield United- which was relegated due to (according to them) Tevez’ impact on the overall rankings. They sued for damages, and finally settled for compensation worth 18 million pounds.
FIFA has a worldwide prohibition on third party influence– see Article 18bis of FIFA Regulations on Status & Transfer of players:
“Article 18bis Third-party influence on clubs
1. 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.
2. The FIFA Disciplinary Committee may impose disciplinary measures on
clubs that do not observe the obligations set out in this article.”
However it is possible to have TPO without third party influence because a TPO is a contractual arrangement which simply allows someone to profit from a future transfer. A TPO agreement should not give the Investor the ability to own a Player’s Registration Rights or imply that a Player has to do a certain thing otherwise it would be in breach of 18 bis of FIFA Regulations.
The Football world is still very much divided on the issue of TPO. Those opposing want a complete ban of the practice worldwide, while the proponents seem to be relishing in its benefits.
Some of the Benefits of TPO
Platform for player development that might not have been possible without TPO: it raises the standards of Players.
TPO balances out inequalities within the football regulatory framework. This is true especially in Europe where the English Premier League (EPL) has the luxury of banning TPO due to its economic muscle. Clubs in EPL own massive stadia, benefit from millions of pounds worth of broadcasting rights, and earn considerable amounts generated from merchandise revenue. Poorer Leagues and Clubs across Europe have none of those benefits so the only way to compete efficiently in Europe is by using an additional source of finance i.e. partnering with Investors to provide the revenue that they otherwise would not have.
Additionally, TPO mitigates Club losses by not only sharing the reward with Investors, but sharing the risk too. Acquiring a world class Player is a big investment and a huge financial risk. If the player flops or does not perform as expected then the Club has saved itself a lot of money.
Complaints against TPO
TPO is like a human owning another human and is no different from slavery. This is not the case. The Investor does not own the Player, he owns the Economic Rights of the Player. Either way, Clubs trade players as assets during transfer windows- this is simply another level of this commercial transaction.
A lot of money is being extracted from the game, that would otherwise go towards the clubs, the football community, grassroots. This is true, but sometimes the Transfer Fees do not necessarily reach the grassroots… Just take a look at African football.
Integrity of competition issue– since it is up to the purchasing Club to investigate the status of the Player that it is interested in some Clubs may not be forthright about TPO arrangements of some of their Players. There needs to be transparency regulations in order to know who is owned by what, and the shares involved. This seems to work in Portugal. Portuguese Clubs publish details of players who are subject to TPO arrangements and even breakdown percentages of ownership, FC Porto is a good example. This gives TPO some degree of transparency. This model is probably the way to go if TPO is to have a future but regulations on these are required.
Third party influence is still possible, especially if an Agent is the Investor. An agent as a third party could potentially influence a Club’s decision due to the authority/ control/power over the Player he is representing. This is because Agents have an economic interest in trying to move a Player on, they are incentivized to move players on to a bigger club offering more money from which they’ll make a percentage off the fee of increased wages. Of course it is a possibility that Agents may abuse their position to influence decisions, but their primary job is to shop for the best deal for their Player. So, this is something that shall need to be handled at a regulatory level.
Conclusion
Despite the complaints and complications, TPO is very much important arrangement to discover, develop, expose and help recruit some of these avalanche of incredible football talents locked in Africa.
This article is base on research finding and written By Benson Chukwueke, A Sports Marketing and Management Consultant in Lagos Nigeria.
