Economics of Football: Transfers

One week you’re playing in the Championship; away days in Wales and Hull… Come the end of January you’re sitting beside Auba and ESR in the Emirates Stadium. With millions being spent globally, players are being moved around like chess pieces in an ultra-efficient global game on transfers. Here’s a look at the multi-billion dollar transfer market in some more detail.

Let’s establish the basics, FIFA sets aside 3 months per year in which transfers can occur. One window exists in July and August and another in January. There are two parts to a transfer: the contract and the transfer fee. If a player is still contracted, bidders are required to pay a transfer fee to the player’s current club. If accepted, the bidding club can negotiate a new deal with the player. Should both the transfer offer and contract offer be accepted, the transfer is complete.

Ok, let’s get specific. While this may have been managed primarily through phone calls and faxes in yesteryear, FIFA’s TMS (Transfer Management System) modernised the process. Every player is registered into the TMS. The bidding club will upload all information on the deal (transfer fees, clauses etc.) and the selling club must do the same, inputting pre-negotiated details. Should the details match, a transfer can occur. Relying on both parties to input details of the deal ensures accuracy. 

Talking Money

Funds for a transfer come directly from a club’s balance sheet. To see how football clubs make money in the first place, check out the first part of our series on sponsorships here.  Some clubs pay the transfer fee upfront, while others will split it over multiple instalments. As with any business deal, everyone wants a piece of the pie. 

To start, the league will take around 5%. Then there are agent fees. In the last year, £378m was paid out to agents. On 117 occasions, an agent pocketed more than $1M (£760,000) in commissions. These figures are on a total of £3.25b in total transfers; over 10%.

Agents are taking the largest clip on low value deals. On transfer unders £380, agents make almost 20% on average, stunting the incomes and growth of small scale leagues and clubs. FIFA is looking to enact a 10% maximum agent fee according to the Guardian.

For a deeper understanding of the second part of this equation, wages, check out our 2nd instalment in the Economics of Football series here.

Bank Breakers

Every year it seems the transfer record is broken. With clubs paying more and more for young talent, it’s only a matter of time before we see a billion dollar transfer. Perhaps Rondaldo Jr in 2030? 

Neymar’s transfer to PSG at 25yo registered as the biggest in history and nothing has come close. Dembele and Felix were both 20 years old with barely more than a YouTube highlight reel to their name when they became 9 figure transfers to Spanish powerhouses.

While only the biggest clubs have access to the top players, big money transfers provide funds to smaller clubs. For some clubs, buying and selling players will bring in more money than ticket sales and jersey sponsorships ever could. Southampton and Ajax are two of the best. The Saints have never spent more than £21m on an incoming transfer. They have sold 7 players for more than that in their history including Van Dijk for £71m and Mané for £35m to Liverpool. Meanwhile, Ajax have never bought a player for more than £19m while selling 10 players for more than this figure including De Jong, De Ligt and Suarez.

In terms of an absolute profit, some of the highest profit deals see players moving from big club to big club. Aside from the biggest transfers mentioned above, deals like Ronaldo’s 2009 transfer to Real brought in a £67m profit for the Red Devils. Such deals may not have the highest percentage return but as an absolute figure, they’re hard to beat.