The far-reaching effects of FIFA's ban on third-party ownership

Leander Schaerlaeckens
Neymar (C) holds his new jersey with the FC Barcelona Vice-President Josep Maria Bartomeu (L) and FC Barcelona Sport Director Andoni Zubizarreta during the official presentation as a new player of the FC Barcelona at Camp Nou Stadium on June 3, 2013 in Barcelona, Spain. (Photo by David Ramos/Getty Images)

Starting on Friday, the rights to the world's soccer players can no longer be owned by anybody other than the clubs that buy them. That is to say, for any transfer deals made as of May 1, no investment company, agent or other third party can purchase a share in the player's rights.

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This may sound like so much legalese and inside baseball minutiae, but FIFA's new ban on third-party ownership, first announced last December, will have far-reaching effects on the soccer world.

(For a brief explanation on third-party ownership or the new ban, click here and here, respectively.)

In recent years, third-party ownership has become prevalent in soccer. South American clubs have relied on it heavily to stay competitive. With their cash flows sagging, third-party owners – essentially paying large chunks of players' transfer fees, and sometimes salaries, in exchange for commensurate equity in their rights – have allowed a lot of clubs to raise much-needed funds. These deals were either made when a player was brought in or afterwards, when a portion of their rights might have been sold off as a way to monetize expected earnings immediately – kind of like futures on the stock market.

In many leagues, this has become so common that some clubs have basically become clearinghouses for third-party owners – often powerful agents, taking a share in their clients – to shuttle their wares through on their ascent to maximum market value. The Portuguese league is apparently rife with this practice. But then the ends have been used to justify the means, and FC Porto, which has played the third-party game for years, reached the UEFA Champions League quarterfinals this year. (Here's an excellent breakdown of Porto's business model from a few years ago.)

But these deals can get ever so messy. When Barcelona bought Neymar from Santos in the summer of 2013, it turned out that the player owned about 10 percent of himself – imagine that – through his own promotional company, while his father controlled a large chunk of his rights as well. Various companies also had stakes and Santos had only retained a fraction. So when Barca's $70-odd million transfer fee came through, it had to be divvied up in all kinds of ways. That's when it got complicated. There are reports that the transfer sum was actually more like $100 million, but that it was misrepresented. Speculation is that this was done for various parties to save money on taxes and such. This embarrassing ordeal forced then-Barcelona president Sandro Rosell to resign, as the whole thing is still being investigated by Spanish authorities.

FIFA is right to come down on this practice. Third-party ownership brought far too many interests into the game with no objective but to drain as much money from it as possible. If it wasn't profitable, after all, it wouldn't be happening. (There are probably few ways of get rich quicker than to buy up 10 percent of the rights of a few dozen teenaged soccer prospects from Brazil and Argentina.) Many clubs, meanwhile, slowly lost control over their own affairs – if you're a minority owner of a player, you have little say in whether he stays or goes – and the already-shadowy transfer market became even more convoluted.

But then a lot of clubs leveraged this scheme to stay relevant, or even just to stay in business. Some relied heavily on this quasi-credit line. This ban, while a very healthy step to take for the overall well-being of the game, will dump some clubs even further into financial peril. And many, especially from the smaller countries, will see their relevance in continental competitions recede.

Leander Schaerlaeckens is a soccer columnist for Yahoo Sports. Follow him on Twitter @LeanderAlphabet.