The Business of Football Turned On Its Head

By: chris | January 31st, 2008

On January 31, 2008 - a date which will go down in history for the economics of global football - The Court of Arbitration of Sport in Switzerland allowed Andy Webster to sign for Wigan Athletic for the remaining amount Hearts owed him over the life of his contract.

As a result of the decision for Webster, any player under 28 years old can buy out their contract after 3 years for the remaining salary they are owed, while anyone over 28 can do it after 2 years of their current contract. FIFA can decide to multiply the value owed by a factor of 1.5, but no more. Just as Jean-Marc Bosman’s historic ruling in 1995 allowed for the Bosman transfer, we now have a Webster transfer. The balance of power shifts once more to the players.

Quick example: If player X signed a 5 year contract when he was 22 for a sum of €20m at €4m per annum, he will be eligible to buy out that contract for €8m when he is 25 or €4m when he is 26.

A player older than 28 can do so one year earlier under the same circumstances. In the case of an extension, the 2 or 3 year period begins when the extension begins.

If, say, this player X’s name happens to be Lionel Messi…that’s where this becomes a major issue. What should be a record breaking transfer becomes a relatively small drop in the bucket for one of the greatest talents to grace the planet. Imagine if Zinedine Zidane had been allowed to join Real Madrid for €6m instead of €76m. Or if Gianluigi Buffon had joined Juventus for €3m instead of €52m. Madness, yeah? Well, here’s the madness.

The ruling is truly massive. Not Bosman massive, but massive nonetheless. Everything you thought you knew about contracts, transfer fees, wage packets, etc from the last dozen years can be thrown out the window. We will be ushering in a new era of player economics in football, an era potentially characterized by shorter term contracts, contract buyouts, higher salaries, lower transfer fees and increased squad turnover. So much so that one lawyer involved fears that we have seen the last contract of more than three years.

The winners here are the players and especially the agents, who still have to do nothing to justify the contracts but will see hefty pay raises anyway. The negotiating positioning has increased exponentially for players, as will many salaries eventually. The “rights” to contracts will no longer be as important as the contracts themselves.

Sepp Blatter has already decried the verdict as “damaging” and, while we’ve been known to criticize Sepp a time or two before, he may very well be correct. Thus Article 17, the original ruling, will now have to be amended to reflect these changes and specific details regarding the economic compensation, year limits and effect on players under the age of 28.

“The decision which CAS took is very damaging for football and is a pyrrhic victory for those players and their agents, who toy with the idea of rescinding contracts before they have been fulfilled.

“CAS did not properly take into consideration the specificity of sport as required by Article 17, paragraph 1, of the regulations on the status and transfer of players.

“Because of this unfortunate decision, the principle of contractual stability, as agreed in 2001 with the European Commission as part of the new transfer regulations and which restored order to the transfer system, has been deemed less important than the short-term interests of the player.”

* - FIFA has launched an appeal, of course.

The true effects of this will take some time to play out. How the balance of power shifts when it comes to player contracts may not be as consequential as what this means for the balance of power on pitches throughout the world. The rich will get richer as salaries sky rocket and the little teams which rely on diamond-in-the-rough scouting, modest-at-best wages and a little bit of prayer will surely be hit the hardest by the decision as squad turnover hits an all-time high. Little clubs which rely on the occasional jackpot transfer fee for sustainability will suffer greatly. A new era may be dawning as we prepare to romanticize the underdog as never before.

There will also be many other factors which may now come into play, and the first that pops to the forefront of my mind is taxes. How will tax rates effect the contracts in various leagues? Such as Italy - and don’t quote me, this is coming from basic research over the summer - which has a tax rate that is 15-20% higher than Spain. It may not greatly impact the likes of Internazionale, Juventus, Barcelona and Real Madrid, but what about the mid-table clubs? Or lower?

I also wonder whether this means that we’ve decided to pick up the pace and transition from a Sunday stroll to a full out sprint towards the eventual formation of a European SuperLeague where the football is glorious and the wage packets are bountiful. One would gather the idea is at least floating around the minds of a few suits at The Artist Formerly known As G14.

A transition period is ahead and we probably won’t know the full extent of the impact for many years. Whatever the duration, the business of football - and perhaps association football - as we know it will change.