Examining the Evolution of the European Football Transfer Market
On August 13, 2017, Paris St. Germain, a French football team, shocked the European football world by announcing their 222 million Euro (263 million USD) transfer agreement for one of the world’s best players in Barcelona winger Neymar da Silva Santos Júnior. Barcelona plays in the Spanish La Liga which requires each player under contract to have a “release clause” in their contract. The previous high transfer fee was 115.6 million USD, as Manchester United of the English Premier League bought former Juventus player Paul Pogba, making the possibility of a club meeting Neymar’s release clause seemingly impossible. The ramifications of the transfer were evident as soon as it happened, as PSG did not stop at signing Neymar. They diverted their attention to then 18-year-old French winger of AS Monaco, Kylian Mbappe, signing the teenager on an initial loan with an obligation to buy for over 210 million dollars. The initial loan was an attempt to circumvent the financial fair play rules that UEFA, the European football governing agency, had instituted to prevent clubs with tremendous financial backing from spending more on transfers than their earned revenues from competition gives them (Uefa, 2019).
The football transfer market operates differently than the typical American sports market. In leagues like the NFL, MLB, NHL, and NBA, teams acquire players in several different ways. Often teams add players to their team through a drafting of college or high school players, through trades of players, draft picks, and/or cash, or through free agency, where players whose contract has expired are eligible to sign deals with other teams. In the European transfer market, teams can acquire players in different ways as well. Teams often have academies where they sign youth players at a young age, develop them, and promote them to the first team when clubs see fit. Likewise, they can sign players via free transfers, where no transfer fee is owed to a club as a result of the expiration of the target player’s contract. For players in a different league, they can come to a pre-contract agreement in January to sign when the transfer market opens in June. For example, an English team can contact a player from a club in the Spanish league and agree to a deal. The main source of player acquisition is in the form of transferring players. A team can contact another for a player, and offer the amount of money they see fit for a player. In some instances, players can be swapped with or without an additional fee. Some players have a release clause in their contract. If a player has a release clause, another team can pay that and skip the negotiations with the club and immediately negotiate with the player on a contract. In any case, the transfer agreement is dependent on a contract agreement between the player and the club attempting to buy the player.
Paris St. Germain is owned by the Qatar Sports Investments, a subsidiary of the Qatar Investment Authority, the state-run sovereign wealth fund in Qatar. Essentially, PSG has a huge amount of funds at its disposal to inject talent into its team. PSG has continuously done this with big-name transfers in an effort to win the UEFA Champions League, and build the club’s brand globally. This is not the first time the footballing world has seen big-name transfers. Florentino Perez of Real Madrid made it a point of bringing in big name players throughout the 2000’s and early 2010’s with stars like Zinedine Zidane, Ronaldo Nazário, Luis Figo, Kaka, Cristiano Ronaldo, and Gareth Bale, the latter two breaking world record transfer fees at the time. The pace of record transfer fees grew rapidly. Kylian Mbappe’s fee alone would be almost twice that of the old world record fee, while Neymar’s is close to three times the old world record.
The ramifications of these two transfers could be seen almost immediately. Flush with cash, Barcelona attempted to replace Neymar with transfers of their own. They first splashed over 120 million Euros on 20 year old Ousmane Dembele, a French winger playing for the German Bundesliga’s Borussia Dortmund. In January of the following year, they spent over 135 million Euros on Liverpool winger Phillippe Coutinho. Dean Jones of Bleacher report notes, “the Neymar transfer changed the market for everyone—players, agents, clubs and backers. Suddenly nothing seems impossible” (Jones, 2018). Following the transfer of Coutinho, Liverpool then broke world record fees for a defender and goalkeeper to acquire Dutch centre back Virigl Van Dijk, and Brazilian goalkeeper Alisson. The price of a player has grown by 300% since 2011, with year over year inflation of 26%, and reaching 31% (Poli, Ravenel, Besson, 2019). Meanwhile, these transfer fees are being spread out over time demonstrating that clubs are being strained financially to meet these high funds and are reaching their financial capacity for these moves (Poli, Ravenel, Besson, 2019).
Since Neymar’s transfer, teams have begun to pay big money for young, relatively unproven talent. The record breaking fees for players like Cristiano Ronaldo, Gareth Bale, and Paul Pogba were for players who had proven themselves to be among the world's best players consistently from year to year. Now, players who had played one good year were bought for over 100 million Euros. Seeing the inflation of the young player prices brought great emphasis into finding players before they turn into something big. Real Madrid in successive summers invested heavily in 17 year olds Vinicius Junior and Rodrygo for over 45 million Euros a piece in an effort to find the next Neymar all in an attempt to find potential world class players before they cost these new hyper-inflated prices.
It’s safe to say that Neymar’s transfer to Paris St. Germain created an entirely new European transfer market. Teams became flush with cash. Other teams knew these teams were equipped with cash and charged higher fees for their players. This seemingly endless cycle has caused the average transfer price to triple over the last decade, creating financial struggles for teams. Teams with more financial backing are able to swing more of these deals, and, as a result, the disparity between the top teams in the leagues and the lower teams has grown. Meanwhile clubs have placed greater emphasis and focus on finding and developing young players in an effort to build their teams. Developing their own talent is more feasible for most clubs since it is not financially attainable for many clubs to spend tremendous amounts of money on players in an effort to improve their teams.
Works Cited:
“FIFA Publishes Report on Ten Years of International Transfers.” n.d. Accessed April 12, 2022. https://www.fifa.com/legal/media-releases/fifa-publishes-report-on-ten-years-of-international-transfers.
Hoey, Sam, Thomas Peeters, and Francesco Principe. 2021. “The Transfer System in European Football: A pro-Competitive No-Poaching Agreement? - ScienceDirect.” 2021. https://www.sciencedirect.com/science/article/pii/S0167718720301181.
Jones, Dean. 2018. “One Year On: How Neymar’s Transfer Has Changed Everything.” August 3, 2018. https://bleacherreport.com/articles/2789226-one-year-on-how-neymars-transfer-has-changed-everything.
Poli, Raffaele, Loïc Ravenel, and Roger Besson. 2019. “Financial Analysis of the Transfer Market in the Big-5 European Leagues (2010-2019).” September 2019. https://football-observatory.com/IMG/sites/mr/mr47/en/.
Smith, Rory. 2020. “The Fluid Morality of Soccer’s Transfer Market - The New York Times.” September 2020. https://www.nytimes.com/2020/09/11/sports/soccer/premier-league-transfer-window.html.
UEFA.com. 2018. “Financial Fair Play | Inside UEFA.” UEFA.Com. June 13, 2018. https://www.uefa.com/insideuefa/protecting-the-game/financial-fair-play/.