By Jack Lang

“Santos turn down opportunity to increase stake in Ganso by 10%.”
“Ronaldinho owed $2 million in unpaid wages by marketing firm.”

Sometimes, stories in the foreign press are abstruse for reasons that go beyond language. Even in a global sport like football not all concepts, particularly in finance, are universally understood.

The notion of third-party investment in players is a prime (and timely) example. Headlines like those listed above still alienate a majority of football fans, schooled as they have been in the relatively straightforward financial dealings of football in the major European leagues. In Brazil, however, such stories appear on almost a weekly basis.

For the uninitiated: in South America, players are not always owned exclusively by their clubs. Non-footballing organisations buy portions of the economic rights attached to athletes, entitling them to a cut of future transfer fees. The motivation behind such agreements is easy to pinpoint. Clubs are offered a lucrative short-term revenue stream, whilst investors stand to profit should a player ever secure a big-money move later in his career.

Businessmen Reinaldo Pitta and Alexandre Martins, for instance, paid minnows São Cristovão just $7,500 for the economic rights of a certain Ronaldo back in the early 1990s. A few impressive displays at the South American U17 tournament later, the pair sold 55% of their stake to Cruzeiro for a cool $50,000.

Such arrangements have come under scrutiny in recent times. The first and perhaps most significant issue concerns the players themselves. The involvement of independent shareholders can influence the careers of young players, and not always for the better.

Consider the case of Santos youngster Paulo Henrique Ganso. The relationship between the midfielder and his club soured last year, when he was strongly linked with a transfer to rivals Corinthians. DIS, an investment group that owns 45% of Ganso’s economic rights, were widely thought to be the driving force behind the move, hoping to secure another payday before Ganso’s inevitable move to Europe.

Ganso, to the consternation of the Santos faithful, remained tight-lipped on the matter. His position was a difficult one: whilst surely recognising that Santos remained the ideal club with which to continue his development, he was loathe to publically contradict the desires of DIS.

In the end, common sense won the day and Ganso stayed at Santos. When economic and footballing motives conflict, however, the result is rarely as satisfactory. When Media Sports Investments (MSI) decided that former Porto midfielder Carlos Alberto would move to Werder Bremen in 2007, for example, the player was heartbroken: “My owners want something that I don’t want…I’d like to stay at Fluminense.” That a player should be so powerless to shape his own career provides ample reason to question the logic behind third-party ownership.

A second issue concerns fair play. Certain third-party investors have had privileged relationships with specific clubs, leading to an imbalance of resources. When Corinthians announced a formal partnership with MSI in late 2004, eyebrows were raised throughout Brazil. The company, led by the now infamous Kia Joorabchian, promised to invest millions of dollars into the São Paulo outfit, in return for a cut of future profits. The first team squad soon reflected the club’s financial backing. In came Nilmar, Roger, Javier Mascherano and Carlos Tévez – all of whom were owned (partially or entirely) by MSI.

The MSI deal propelled Corinthians to victory in the 2005 Brasileirão, but left a bitter taste in the mouths of most football fans. The title may have been won on the pitch, but it had been decided in the boardroom: by paying for players that would otherwise have been well beyond the club’s financial limitations (Tévez, for instance, cost over $20million), the investors gave Corinthians an unfair advantage. (The partnership, incidentally, fell apart two years, one relegation and several arrest warrants later. Hello, Karma!)

In recent months, two cases have provided cause for concern over another trend: third-party funding of wages. In order to compete with the salaries offered by clubs in Europe, Brazilian outfits are increasingly enlisting the help of external companies, who contribute to the wage packets of star players in return for their image rights.

When Neymar signed a new contract with Santos last year, football fans rejoiced: they would get to see the country’s best player at close quarters for the foreseeable future. As details of the deal emerged, however, it became clear that the Brazilian public wouldn’t just be benefitting from the contract renewal – they would also be paying for it.

Neymar’s wages were to be funded by the Banco do Brasil, one of the country’s biggest financial institutions. The bank, however, is state-run, meaning that Neymar would be paid – albeit very indirectly – out of the public purse. This arrangement was understandably lampooned by many experts, who claimed that rules of fairness were being bent in Santos’ favour. Thankfully, Santander stepped in at the eleventh hour, sparing the blushes of those involved.

The news earlier this year that Ronaldinho was owed over $2 million in wages by marketing agency Traffic brought a second issue into focus: that of trust. When Ronaldinho joined Flamengo in 2011, Traffic agreed to pay 75% of his salary in return for his image rights. The firm, though, reneged on their agreement after struggling to cash in on the player, resulting in the player receiving just a quarter of his wages over a five-month period.

So far, so incompetent. But a further revelation cast the affair in a more sinister light. It surfaced that Flamengo and Traffic had not signed a contract regarding the wage split – that the agreement was just a verbal one. Traffic’s contributions had not been listed in Ronaldinho’s contract, meaning that the former Barcelona man faces a legal battle with Traffic over the outstanding payments. He can be thankful that his financial security has long since been assured.

The lesson to draw from all of this? Independent firms cannot always be trusted to act on the best (sporting) interests of footballers. While the practice is not always nefarious, the motivations of third parties often come into conflict with those of the players in which they invest. As the Ronaldinho case illustrates, this problem is only exacerbated when the rights and obligations of the parties involved are not clearly defined. Football’s governing bodies would do well to monitor such cases in the coming years, in order to prevent more serious problems arising.

Jack Lang writes about Brazilian football on Snap Kaka Pop, which is part of the Guardian Sport Network. You can also read his articles at/on/in ITV Football, FourFourTwo.com, Soccer International magazine, In Bed With Maradona, Life’s a Pitch, The Equaliser, GhostGoal, and others.

Comments (9)

  1. Fascinating article. So looking for lessons closer to home, is MLS’ single-entity model closer to South American third-party ownership or closer to the European single-ownership model?

    In terms of influence over players’ careers, I’d guess that MLS players face similar pressure from the single entity model – that’s what the Re-Entry draft was supposed to solve. (But still leaves Ali Gerba out in the cold…)

    • Come again?

      How does it leave Ali Gerba out in the cold? He is terrible and not one club in MLS wants him. His options are try and find a USL team, go to the third division somewhere else in the world or find another career path.

      As to your first point Single Entity is nothing like Europe or S. America’s financial models. Thankfully

  2. Very interesting piece. Do you think that by keeping players like Neymar there that it will benefit the Brazilian national team?

  3. Top piece. Always good to see stuff about South America on here.

  4. Jack great stuff but I respectfully disagree.

    First, players get sold by proper clubs against their wishes all the time – third party investors don’t necessarily change that truth.

    Second, third party investors allow for increased investment in youth – imagine if Third Parties have not invested in Leo Messi’s growth hormone treatment while he was at Rosario? Or if, in the Ronaldo example, those third parties have not stepped in and invested and his career had fizzled?

    The MSI-Corinthians partnership is shady, but unholy corporate alliances exist in all businesses – are the Glazers and United that much better?

    Also, many English academies have “sell on fees” that are the same tactic – invest a bit early and reap a profit later. I can see how direct interference by third parties may be problematic, but I haven’t seen a third party exercise more influence or control than a club.

    If Brazil is the example against Third Party Ownership, then how come they export top talent regularly to European leagues, can now retain older stars like Dinho, and have held onto Neymar?

  5. Hi Elliott,

    Thanks for the comment.

    (1) You’re right, they do. My point is just that adding third parties to the mix creates another way in which players can find their interests overruled.

    Also, when players are sold against their will by clubs, they at least have the comfort of knowing that the club weighed up financial considerations against sporting ones (will X million dollars compensate for the loss of the player’s footballing ability?). When third parties push for moves, they don’t necessarily take this into consideration. If I was a player, I’d find the latter possibility more troubling.

    (2) A very good point, and one I ought to have touched upon here!

    (3) My point isn’t that third party investment is more shady than any other model. It is (or rather, can be) shady in its own right. The fact that other models are equally troubling isn’t really relevant here, I don’t think.

    (4) I’m not quite sure how sell-on fees are the same kind of thing. (Apologies if I’m being thick!)

    (5) I don’t think that third-party ownership is inherently wrong… maybe I didn’t make this clear. It can be a useful source of investment (as you suggest in your second point) and provides a lifeline to smaller clubs. I do, however, think it needs to be monitored, so that boundaries and responsibilities are established.

    As for the Ronaldinho and Neymar deals… it’s obviously great that Brazilian sides are finding ways to keep these kinds of players, but I don’t think that the models used in those two specific cases are particularly praiseworthy, for reasons outlined in the article.

    Again, thanks for the comment, very interesting stuff!

  6. Hi Jack, nice text. Good highlights about particularities in Brazilian market.
    But, regarding Neymar’s new contract, Santander ended up replacing Banco do Brasil as the new investor. You can learn more information from http://www.estadao.com.br/noticias/esportes,neymar-vai-ser-garoto-propaganda-do-santander,802426,0.htm

  7. Eraldo – yes, you’re absolutely right. Santander saved everyone’s blushes at the eleventh hour.

    I had meant to change that sentence… I’ll see if I can get it edited!

    Cheers

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