Transcript Does European Football need a transfer market?

Does European Football
need a transfer market?
Stefan Kesenne
Univ. of Antwerp and KULeuven
European Court of Justice, 1995
the Bosman-verdict
 Abolition of the current transfer system:
Only end-of-contract players are free to move to another
team without a transfer fee.
 Abolition of the 3+2 –rule
A team can field an unrestricted number of foreign
European players.
The abolition of the transfer system hasn’t changed
much in European football, because clubs
reacted by lengthening the contract duration (up
to max 5 years), and continued to trade undercontract players for ever higher transfer fees.
- between 1996 and 2011, the number of tranfers has
more than tripled, from 5700 to more than 18000.
- between 1996 and 2011, annual transfer spending has
increased from 400 million euro to more than 3 billion
euro, that’s a rise of more than 700% (octupled).
- less than 2 % of the money from transfer fees went to
the smaller clubs.
Recent European Commission
study has stated that:
Football transfers need overhaul to keep
game competitive by:
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
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Capping transfer fees
A fair play levy on transfer fees
a limit to the number of players per club
Regulation of the loan transfer system
Support for the implementation of UEFA’s financial fair
play
 In my opinion, some of these EC proposals are steps in the right
direction, but they don’t go far enough to restore competition in
European football. Even with UEFA’s FFP, that is: without sugar
daddies, the competitive imbalance in European football will not
disappear, but it might change the competitve balance within
national championships (See recent study by Thomas Peeters and
Stefan Szymanski, 2013).
 In 1995, the European court and the Bosman lawyers only
concentrated on the abolition of the transfer system for end-ofcontract players, because J-M. Bosman was at the end of his
contract with FC de Liège, but also because it is pure juridicul
nonsense that you are not free at the end of your contract.
 Maybe, the lawyers of Bosman should have taken their case further
and abolish the tranfer market completely. I plan to contact Luc
Misson and Jean-Louis Dupont again to talk about the next step.
 Originally, the transfer system was created to guarantee more
competitive balance in a league, and to hold down player salaries.
 But that is exactly what has not happened in European football.
 The current system with its skyrockening player salaries and its
transfer payments, only between the richest clubs, has become a
closed circuit which is leading European football towards ‘de facto’
closed leagues, with increasing competitive imbalance in both
national and European competitions.
 Consider the transfer fee of 94 million euro for Ronaldo, paid by
Real Madrid to Mann U., what is it compensating? A one-way plane
ticket between London to Madrid cannot be that expensive.
 What the EU study says is that we need a transfer system which
contributes to the development of all clubs and young players.
 Does European football needs a transfer market at all? It does not
exist in any other industry of the economy, why in sports?
Everybody agrees that
compensation for youth training is
important
 Leagues should create a compensation fund for youth training, that is
financed by a contribution of each team as a percentage of its budget.
 The money should be distributed by the league among the teams based on
the quantity, and the quality, of their youth training, regardless the fact that
the player stays or leaves the team.
 So training compensation and the transfer of a player should disconnected.
Each player can move at the end of each season, without a transfer
payment. Transfers during the season should be forbidden.
 However, contracts should still be respected and honoured.
A one-sided break of contract should be fined with an amount that is fixed
by the league or the court, in order to prevent that clubs would turn it into a
disguised transfer fee.
Modelling the compensation system
Assume an n-club league:
Ri  R[mi , wi ] all i :1  n
Each club contributes µRi to the Youth fund  µ

n
j
R j   nR
Each club receives a share si from the fund, depending
on its youth training efforts (quantity and quality)
R  (1 µ)Ri  si µnR
*
i
with

n
s 1
j 1 j
Before and After Sharing
Ri*  (1  µ) Ri  si nµR with
s
j
j
1
If each club puts the same effort in youth training,
so
si  1/ n
the same amount of money from the
nsi  1 , each club receives
*
fund, that is:
µR
, and
Ri  Ri  (R  Ri )
In this particular case, the after-sharing
budgets of small clubs will be
,
higher because they receive more money from the fund than they have
contributed.
In general, the budgets of small and large clubs, before and after the
youth compensation, will be the same if their share of effort in youth
training will be the same as their budget share, that is if:
Ri
Ri
si 
So, a club will see its budget go up if
si 
Ri
 Rj
R

j
nR
So, in win-maximization Leagues (such as the
European football leagues), this youth training
compensation system can improve the competitive
balance
If in a league, where all teams are win maximizers, the share of effort
that small clubs put in youth training is larger than their low budget
share, we can derive that starting from:
Ri*  (1  µ) Ri  si nµR with
s
j
1
Ri*
R
 Ri  nsi R  0 if si  i

 Rj
So, if the EU and the football leagues are serious regarding the
importance of youth training compensating, they should make
µ large enough, and simply abolish the transfer market.