Football's big competitors: Netflix and videogames

The European Club Association spoke about the hottest topics of the day to representatives of 140 football clubs from 45 leagues from around the world at the TransferRoom conference in Madrid.

New rules for loan deals between clubs, updated regulations for agents, the threat to football of Netflix and other streaming platforms, and Brexit, were just some of the items on the agenda during a presentation of the European Club Association (ECA) to representatives of more than 140 football clubs, including LA Galaxy, Atlético Madrid, Manchester United and Liverpool, at the TransferRoom summit in Madrid on Monday.

The summit brings together users of TransferRoom, an online subscription-based platform which aims to match clubs looking to buy and sell players, and the ECA, the representative body for football clubs regularly taking part in European Competitions, were in attendance to update some of the biggest decisionmakers in the game on the biggest topics affecting those involved in the industry.

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Charlie Marshall, the ECA’s Managing Director, began by highlighting the risks posed to football by the changing consumption habits of younger fans. “Gone are the days that the match in the local stadium on a Saturday afternoon was the main attraction”, explained Marshall highlighting the huge range of entertainment options available to youngsters, including Netflix, HBO, Facebook and video games. “We are in danger of losing fans if we don’t catch them early enough”, he noted, with a “decreased willingness to pay for sport” a major risk to the number of future followers.

As an example of falling attention, the cumulative direct reach on television of the Champions League in 2017-18 was two billion, but this fell in 2018-19 to 1.1 billion, although the move to pay-per-view platforms from free-to-air explains much of that fall. In certain markets, however the story is far rosier, with an increase in audience in that period in India of 232% and 101% in the USA. And in terms of attention, the Champions League is now by far the most followed media asset on Instagram, with 50.3 million followers, compared to 41.3 for the NBA, the next most followed sports asset on the photo sharing platform.

What’s also not in doubt is the fantastic revenue growth experienced in the European competitions, with overall club revenues increasing four-fold since 1996 to a total of 21 billion. The risk though, according to Marshall, is a falloff in media revenues going forward.

The ECA, says Marshall, have identified three categories of clubs: small, medium and large with each group having very different goals: to stay alive, to stay relevant and to stay global. If transfer markets, which are a huge part of clubs’ budgets – European clubs alone spent 6.7 billion euros in the summer of 2019 - become more streamlined and clubs could find more consistent value, they would likely have more success in financing their operations. From global expansion to existentialism, clubs have vastly different concerns and the gap between these clubs is getting bigger.

“This is a story of increasing consolidation,” Marshall said. The top 250 players by value 10 years ago were owned by 57 clubs. That figure is now down to 50.

Another part of the story for clubs is that with the amount spent on transfers rising, clubs are often unable to pay for transfers up front and are being forced into more complex methods of financing deals, leading to balance sheets being more exposed by structures including buy-backs, obligations to buy and various other features. In effect, said Marshall, “clubs are playing with more and more debt on the pitch”.

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New regulations for football

After Marshall’s presentation, Jose Luis Andrade, the ECA’s General Counsel, explained a number of detailed requirements being brought in or considered including alterations to the rules on agents, loan deals and solidarity payments.

“FIFA are bringing agents under its jurisdiction again,” said Andrade after leaving them to their own devices two years ago. They will implement a licensing structure with agents forced to apply for a license, pass an exam and engage in continued education in order to keep that license. The hope is that we will see “increased professional and ethical standards,” says Andrade, with the likelihood there will be “fewer agents but more qualified agents."

Under FIFA’s new guidelines, each party to a transaction will be required to have their own agent – buying club, selling club and player. The only exception allowed will be where an agent works for both buying club and player. “Their interests are somewhat aligned, because the agent will be aiming to bring the transfer fee down, leaving more money for salary”, explained Andrade. Another major development is that players must pay their own agents: “Players should care more about what agents do, because they have to pay them”, is one outcome foreseen by the changes.

In terms of fees, the agent for the selling club can charge up to 10% of the transfer fee negotiated, while the agent for the buying club and the agent for the player can charge up to 3% of gross salary. Where the same agent acted for both buying club and player they can charge up to 6% of the gross salary.

After serious concern about the number of loan deals being reached by certain clubs – Chelsea had 41 players out on loan at the end of last season – new rules are being introduced to cap international loans to a maximum of eight incoming and eight outgoing starting in 20-21. That will become six outgoing and six incoming in 22-23 season. The only exception would be if the player is under 21 and has played at his club for more than 3 years.

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What’s more, in an effort to prevent what’s known as farm situations, there will be a limit of three loans - three incoming and three outgoing – between any two individual clubs. “They [FIFA] realised that certain clubs had a lot of players under contract,” Andrade explained, which limited access to the talent pool for other clubs. “If you are engaging in this behaviour, the lawyer continued, the chances are "you’re probably not creating the right environment for players to develop if you’re consecutively loaning them out.”

One small but important detail is that in the future, “each loan can only be for one season maximum but it can be renewed at the end of each season”, meaning that players cannot be forced into a multi-season loan, but rather will be able to choose each season whether they wish to continue.

Solidarity payments

Changes too are coming to the solidarity payment regime, which provides for payments to be made to the club which developed a footballer on subsequent transfers, to ensure clubs are compensated adequately for their youth coaching. The latest idea is to make these payments applicable to moves after a player has left his originating country.

The Van Dijk situation was cited: “He was trained at Grongingen and moved from Celtic to Southampton and then on to Liverpool but the Dutch side were only paid a solidarity fee for the first move. Under the new rules, they will be paid for all of the moves”.

Brexit and football

In the Q&A session at the end of the meeting, the clubs were keen to know how Brexit could affect football transfer markets, when and if the UK leaves the EU, with the expected date currently the end of January 2020 – depending on the outcome of the UK General Election on December 12. Would EU-passport holding footballers in the Premier League, for example, be required to request visas? According to Andrade, “a lot will depend on the immigration deal that the UK gets.”

Andrade pointed out that one major area where Brexit could have an impact is with younger players. Currently, minors under 18 cannot be transferred under FIFA rules, but there is an exception for this within the EU for 16 to 18 year olds. After Brexit, therefore, UK clubs would be unable to sign EU youngsters, meaning the end of moves such as Cesc Fàbregas heading to Arsenal when he was 16. That change could of course be a boon for young UK players but it would also cut off a large amount of potential talent from Premier League clubs.

Marshall said there are hopes that a deal can be brokered to slacken restrictions on the transfer of minors like the one Switzerland has. “Switzerland has an agreement in place which makes it equivalent to other European countries in that respect,” says Andrade and he expects the same agreement to be made even if a worst case Brexit scenario unfolds.