Pitch to Pro
Pitch to Pro is the official podcast of Ozark United FC. This will be our platform to tell our story about the club and the special place that we call home, Northwest Arkansas. This is a journey. We want to bring you along for the ride. We'll share what's going on behind the curtain, help educate the community at large about soccer, Our league, and give updates on the progress of the club along the way.
Together, we'll explore and unpack our journey to professional soccer, the magic that is NWA, our community, and talk all things soccer from on the pitch to behind the scenes, telling the story of our club.
Pitch to Pro
Ep. 25 - Transfer Window: Inside the High-Stakes World of Soccer’s Transfer Market - Part 2
Ever wondered how soccer agents navigate the high-stakes world of player transfers? Find out as we unravel the complexities of negotiations, transfer fees, and buyout clauses in our latest episode. We promise to shed light on the pivotal role agents play in securing top deals for their clients, while also deciphering how these financial mechanisms influence club strategies and player movement.
But that's not all—brace yourself for an in-depth discussion on financial fair play, with a special focus on Chelsea's recent spending spree. We explain how clubs amortize transfer fees over the length of player contracts and reveal the clever strategies teams employ to comply with financial regulations. Plus, we capture the drama and excitement that peak during transfer windows, setting the stage for the upcoming season. Tune in to get your comprehensive guide to the financial and emotional stakes of soccer transfers!
Pitch to Pro is the official podcast of USL Arkansas. This will be our platform to tell our story about the club and the special place that we call home, northwest Arkansas. This is a journey we want to bring you along for the ride. We'll share what's going on behind the curtain, help educate the community at large about soccer, our league, and give updates on the progress of the club along the way. Together, we'll explore and unpack our journey to professional soccer, the magic that is NWA, our community, and talk all things soccer from on the pitch to behind the scenes, telling the story of our club. Pitch to Pro Podcast is proudly sponsored by PodcastVideoscom. Podcastvideoscom is Northwest Arkansas' premier podcast recording studio, equipped with industry-leading equipment. The recording studio and services save you time, money and hassle. They are dedicated to helping you create, record and publish high-quality podcasts for your audience. Welcome back to the Pitch to Pro podcast. I'm your host, wes Harris, managing Director for USL Arkansas, northwest Arkansas's professional soccer team playing in the United Soccer League.
Speaker 1:Last time we started getting into the topic of player transfers and that market and we're going to pick that conversation right back up where we left off, so let's get to it. So we talked a little bit about these transfers and there's a lot of money involved. There's a lot of negotiating involved. Yes, there are player agents involved and so they come into play. They represent the player's interests. It's much like it happens with professional sports as we are used to here in the United States. They come in and represent the player's interest in negotiations. Oftentimes this is not necessarily with regard to the transfer fee. They can't necessarily have an influence there. It's kind of a gray area. The club for sure sets that, but the agent I'll come back to that in a second the agent is more responsible for negotiating the contract and getting the player the best possible uh right contract and salary and conditions and bonuses and all these other incentives, uh with their new club. What happens sometimes is a club and an agent and a player may not have the best working relationship and so the club and the club may not want to sell them, but they are entering into the process a little bit begrudgingly. Better contract with the player is to set a above market value transfer price for the player so that clubs are like I'm not willing to spend that, and so that then kind of puts a bit of a wedge in the player's plans to leave the club and the agent and all that kind of stuff. So then there's some negotiating with the current club and the agent around the transfer fee and why are you guys doing this, what do we need to do? And they kind of talk through that. That's a little bit less common, but you do kind of see that. So I just wanted to mention that.
Speaker 1:But agents are often paid as a percentage of their client's salary is how they get paid, and so they're incentivized right To get them more money in their contract. Sometimes they can get criticized for potentially again stalling or subverting certain deals for better offers elsewhere because it means more money for them. There's a lot of legalese, a lot of ethics involved here I'm trying not to generalize and a lot of it's tough to prove, but unfortunately it is something that happens. There were, you know, just to give you guys an idea, how much do these guys make? I'm going to the extreme here, but there's a uh, you know, group of agents that have become so good at what they do, uh, and amass such big names in their client list that they call them super agents, right. And so there was a, probably the most well-known. Unfortunately, he passed away in 2022. Mino Rayola was one of the best ones. He had some really, really big names and was estimated to have a net worth close to $100 million at the time of his passing Just to a successful negotiation. Um, you know, as part of a player transfer as well. So that's a little bit of how agents kind of come into play there. Okay, player transfer fees this is the money that is spent by the purchasing club to buy a player from their current club.
Speaker 1:As I've mentioned before in the episode, sometimes these are fixed as a part of a player's contract to have what's called a buyout clause. That essentially puts a limit or a max purchase price or a fixed price on a player if a club wants to buy them. There are pros and there are cons to this, so a pro to this could be. A lot of times you see the buyout clauses with players that are promising but still developing. So they haven't quite hit that upper echelon tier of talent in the world that you would call world-class, top class. They're typically younger, they're typically still early in their career. They're developing, but they show a lot of promise, and so what can happen is they show that promise, they get an interested party at a club but in your negotiation with the player you don't want to let that player go if you see a lot of promise in them for too cheap. And so, depending on what the market does and all these different things, there's a lot of variables.
Speaker 1:But essentially what that says is it both puts a ceiling and a floor on what you are going to get for that player. And so if a club comes asking about the player, here's the buyout. You want to buy them. Here's the buyout clause $30 million or $40 million or $50 million, whatever it is. So that's a potential. If you want to buy this player, they show a lot of promise. You have to pay me at least $50 million because of the future value that I know that they are going to deliver for you because they're still growing. They show a lot of promise. It's going to be typically overpriced based on what the current fair market value is, but they show a lot of promise and I know I'm going to get that at least that amount. So that's a good part, for you know that's a pro for the current club, the club that owns that contract.
Speaker 1:The downside to that is if you undervalued or underestimated that player's development and their worth or potential worth, and you're not going to get as much as you could for them on an open market without a buyout clause. So it's binding. So what that means is let's do the flip side. Maybe that player you know developed a lot quicker than you had anticipated and they are delivering on the field. They're massive for you, keeping all things created equal, they're kind of creeping into that upper echelon of players sooner than what you might have anticipated. But now you're tied into this price that you set with them on their contract $40, $50, $60 million, whatever the buyout clause is. It's agreed upon but it's set. And so if a club inquires, they know these contracts are known and so they know that this player has a buyout clause and they may, on an open market without that, be worth 75 million, but you're only going to get 50 million for them because that's what's in the contract as a buyout clause. And so in that regard, sometimes for these clubs it can be a little bit of a con. It makes you feel a little bit jaded and cheated out of a little bit of potential revenue on that transfer, but at the end of the day it is something that agents and players and clubs will use again as some of their negotiating tactics with each other as they lock into these contracts with their players.
Speaker 1:Generally, transfer fees have just skyrocketed in recent years. Um, I think it almost positive. It was Gareth Bale was the first to crack the 100 million mark, and that was back in 2013, from Tottenham Hotspur to Real Madrid, and since then there have been I believe, 16 or more, pending current events, but I believe 16 or more players that have cracked that. There's even been a player that has cracked the $200 million mark, and that happened four years after we hit the $100 million mark, and that was Neymar, who went from Barcelona to Paris Saint-Germain for nearly $243 million, again four years after the $100 million. It was this massive news first player ever to do it and four years later you went to $243 million. So it was a little bit of a joke, but you also had a year later, kylian Mbappe went for almost $197 million in 2018, from Monaco to again Paris Saint-Germain. So, with two players, psg spent $440 or $450 million or whatever it is. So just insanity. Insanity compared to what history had been.
Speaker 1:So, just like club revenues have kind of skyrocketed over the last 10 years, so too, does that then mean in terms of what they're willing to spend on players? And so we've certainly seen that. Um, there was, like I said, almost 10.9 billion in in, uh, overall player transfer spend. It's gone up, I think. Even that was like I think premier league spending was up like 30 or something like that last year. So, um, it's going up. It's a little bit ridiculous.
Speaker 1:Um, one thing to note about these player transfer fees is they don't happen as a lump sum all at the point of contract signing. There's obviously a little bit you know and agreed upon is all part of the negotiations is how much upfront. But these fees are amortized over the length of the player's new contract at the purchasing club, which is most often anywhere between three to five years. So what that means is is that 200 million or a hundred million or whatever it is, is, you know it creates a schedule of payment over those five years. Some just do it equally, some stack it in the front and later in the back, vice versa. It's all up to the negotiation between those two clubs, but they're amortized over the length of the purchasing clubs. Deal with the new player.
Speaker 1:One of the ways that and I'll talk about this in this next segment. What is to keep these clubs from spending 500 million that can afford it right With wealthy owners? What's to keep them from doing that? So a few years ago there was this concept and institution of something called financial fair play, and so that's been instituted in a lot of different leagues, a lot of top leagues around the world. It's called different names in different countries, but essentially it states and puts a limit on the net operating losses that a club can incur without ownership injection of cash. So the owner cannot say, oh, I'm losing money, I need to hit the financial fair play limit, I need to add 50 million or whatever it is. Whatever they're over the limit, there's a limit to how much they can put in and they have to be within that. You know, net operating loss limit over a three-year rolling period. So every year you get a new one that dropped off on the history and a new one added to the most recent season and that's your current three-year observance period or window for when they're tracking you on all of your transactions and your P&L and your net operating losses as a club. So as an example of how you could use the amortization and all of these things to get around financial fair plays.
Speaker 1:Chelsea actually did this. Chelsea got new ownership, american ownership, and they went on this massive spending spree. They spent almost, I think, a little over $1.3 billion if I'm not mistaken I'd have to go check myself but in one transfer year, one year that is obscene, unheard of. Until that point, the way that they were getting around it was they were locking their players into 10 year contracts and so that all of that spend, or a good chunk of it, on the players they knew they wanted to keep or they spent the most on they, they sent that over 10 years instead of traditionally five. Right, and so that's been interesting, because that's really one of the first times that that's really been done to the degree that it was, and so we're starting to see now some of these clubs that are finding themselves as kind of things start to actualize right with their P&L and all those different things. They start to understand oh, we might be in some trouble on financial fair play. We need to get rid of some players in this next transfer, offload some of their bigger transfer, both amortization of transfer fees, but also wages and salaries, and so that is something that is going on now and you're hearing and seeing some news, newcastle being one, chelsea another and some other clubs but essentially, financial fair play.
Speaker 1:Coming back to it, it was designed to deter clubs with wealthy owners again from spending beyond the business's means, in excess beyond the business's means, because they still allow you to spend beyond the business's means, they still allow you to operate at a pretty significant and substantial operating loss, but not going so far that if those owners ever left, they would be turned into insolvency, they would go bankrupt, they'd go go away, and it's just not a sustainable model. And so the other way is and and and. The reason that they would do that is to buy up all the best players. Yeah, I can pay you whatever I want. I, I, you know I'm not wealthy, you know there's an argument to be made if that truly does what it's intended to do. Uh, financial fair play, you know, and try to make this more competitive and on equal playing fields, cause everybody's held to the same standards, even though not everybody's owners are as rich as each other's. But that's for another episode.
Speaker 1:Um, there's consequences to breaching financial fair play rules and going outside of those bounds. So, for example, this just happened in the Premier League this past year is a big deal. Everton and Nottingham Forest, two clubs in the Premier League, were deducted points and, as a result, that impacts their place in the standings of the Premier League. Last year for breaching these rules, in fact, everton was found twice and remember, in England and in most leagues around the world there's promotion and relegation. So let's say you were on the bubble and then you breach financial fair play and you got deducted points that sent you into the relegation zone the bottom three teams at the end of the season, not on performance, but because you breached your financial fair play rules and were deducted points. Now you were relegated as an even more significant, much more significant impact than any fines or points deduction that you could have, and so it's a really big deal. Clubs watch it like a hawk and, like I said, there's several that are trying to offload some of their top heavy player wages and transfer amortizations and all those things to get off their books. That's a little bit about financial fair play. There's obviously a lot more that goes into it.
Speaker 1:A question that I get asked quite frequently is where will we get players? We will get them from the transfer market globally, just as all these other clubs do. Yes, we'd love to find local talent. We're providing the pathways to try to do that. Absolutely nothing would make me happier than to see local talent step onto the field and play for USL Arkansas. I know at some point that's going to happen. The talent is here, you know. But, yeah, we'll participate in this transfer market.
Speaker 1:Our fees are nowhere near what you know I was talking about in the episode and giving us examples. We do not have a hundred million dollars to go spend on a player Absolutely not. Um, to give you guys a frame of reference, the USL broke their uh transfer record last year, uh, and, and broke the $1 million mark for a player from a purchasing club, from a player from a USL club, and that was Josh Winder, from Louisville City to Benfica in Portugal in 2023. I think it was like roughly 1.3 million. But, yes, developing good talent, selling them on to see their careers grow and offer them new opportunities, buying players, purchasing loans of players, loaning some of our players out that is all part of the game and it will certainly all play a factor for USL Arkansas and our sporting or technical team that will be in charge of that.
Speaker 1:Look, there's a lot more that we could unpack, but I think that this gives us a really solid basic overview of player transfers, why you may see a lot of news in this space over the coming weeks. As teams scramble to bolster their squads for the upcoming season, it gets really competitive. There's a lot of drama. There's a whole industry around transfer rumors. So be sure to tune in to the next episode of Pitch to Pro and until next time, cheers Northwest Arkansas.