As Porto confirmed the £24.5m deal involving star striker Jackson Martínez heading across the border to join Diego Simeone’s phenomenally efficient project at Atlético Madrid, I was greeted with many articles from various broadsheet publications telling me just how much money FC Porto has made through transfer dealings within the last decade, citing various big money deals, such as Hulk’s £38.5m move to Zenit St Petersburg, or Eliaquim Mangala’s £40m move to Manchester City last summer, as examples. Porto have generated a reported £517m profit in the transfer market over the last decade, painting a picture of a miraculously lucrative player trading system. Benfica, the other Portuguese superpower, have also managed to make substantial amounts of money solely through dealings in the transfer market. Clubs further down the monopolised ladder that is Portuguese football, such as Braga, Sporting, and Vitória Guimarães have also been successful in the transfer market, although not quite on the same scale. But just how much of this supposed profit, gained using the simple economic theory of buying low and selling high, is channelled directly into the cash flow of the Portuguese clubs, and why have they not used it to propel themselves into the footballing elite?

Third party ownership (TPO) has been a controversial topic within the footballing world since it came to the forefront of sporting politics at the turn of the century. Without going into too much detail, TPO can simply be described as the ownership of a player’s economic rights by third-party sources (i.e neither the club, nor the player himself). Examples of such ‘third parties’ include so-called ‘sports-management agencies’, such as former Chelsea and Manchester United chief executive Peter Kenyon-linked organisation Doyen Sports Investment, or super agent Jorge Mendes’ GestiFute, a company which links the idea of TPO with the agents of the players, such as the founder, Mendes, as it is primarily a company providing agent services for footballers. Aside from being banned in English football, TPO flourishes worldwide, and these investment groups are able to make serious amounts of money in a simple process which works as follows: clubs unwilling to pay the full fee/wages to sign a player they want can call upon third parties to collaborate in the investment, normally getting the third party to ‘buy’ a certain percentage of the player’s economic rights. The idea is that the player will develop at the club, which becomes an intermediary, and gets sold for a far larger amount of money than paid for initially. The third party receives the same proportion of this fee as they contributed to the initial purchase fee: for example if a third party buys 20% of a player’s rights for £200k in a £1m transfer, they will receive (or retain) their share, gaining £10m from a £50m future transfer. Investment groups mainly target South American youth academies, exploiting the somewhat cheap market, and can even suggest a player to a European club, in hope of signing a % of the player’s rights. A famous example of TPO succeeding was with the sale of Radamel Falcao to Atletico from Porto, mirroring the aforementioned Martinez move. Atleti agreed a €40m total fee for Falcao, however Doyen owned 55% of Falcao’s economic rights, thus Porto only received €18m euros from the deal. Doyen could easily have given up their stake for a healthy €19m from when they initially helped Porto sign him from River Plate, but kept their stake, in anticipation of a further, more expensive sale. Having the majority of Falcao’s economic rights, they managed to engineer a huge €60m move to Monaco, with the help of Mendes, eventually giving up their stake for €33m. Doyen haven’t stopped there: last summer Doyen announced plans to invest a further €200m on securing third party stakes in young talents, having already spent half that in recent years.

So, where does TPO tie in with the recent transfer success in Portuguese football? 3 of Porto’s 4 largest player sales (Hulk, Falcao, and Mangala) involved third parties which took home 30% or more of the transfer profits. It is worth noting that both Falcao and Mangala are clients of GestiFute. Danilo, the Brazilian right back who recently completed a £24m move to Real Madrid, was part owned by offshore intermediaries. Yacine Brahimi, who has been linked with a host of top clubs after an eye-catching 2014-2015 season, is another one of Doyen’s investments. European Even James Rodríguez, the other of the 4 sales, was only 100% owned by Porto as a result of them selling 45% of young prospect Diego Reyes’ economic rights to an investment group, who is now being followed by many big clubs. Benfica’s sales of Ángel Di María and Fábio Coentrão to Real Madrid, and Ramires to Chelsea, all involved Benfica receiving at most 80% of the total fee. The 2 former players’ deals were brokered by GestiFute, as both are clients of Jorge Mendes. Jorge Mendes’ success (excellently explained by the Guardian’s David Conn here) comes partly as a result of his networking with sports investment groups: he works together with groups such as Doyen, who own percentages of his clients’ economic rights, and uses this to find deals, perhaps sometimes against the player’s interests (see later). The Guardian’s investigation into the legitimacy of TPO describes Mendes as being “serially involved with Kenyon in advising on the third‑party ownership of economic rights in players”. Effectively, Mendes ‘advises’ players to move, perhaps sometimes against the player’s will, a ‘conflict of interest’ which is strictly illegal under FIFA jurisdiction. Mendes’ ability to manipulate such sales, and the domineering nature of TPO means that the Portuguese league loses its best players every year, and this is exactly where the paradox of Portuguese football is rooted: Portuguese clubs who are not in healthy financial situations (effectively all Portuguese clubs) can attract some of the best young talents, having been located through thorough and extensive scouting methods, with the help of a third party: the best of these players will offer the club 2 or maybe 3 seasons of top quality service before being sold to a European superclub, with the Portuguese club only receiving a fraction of the profit. This paradox is efficient particularly for a club like Porto, who consistently overachieve in Europe, as well as challenging domestically, as shown in the diagram below. So, is it more a continuous cycle of austerity than a paradox? Whilst TPO provides access to otherwise unreachable talent pools and aids Portuguese football immeasurably, it also damages the continuity of club football and seemingly destroys any opportunity for the league to make the step up from being a 2nd rate league, into a top 5 ‘big league’.

The English FA banned TPO entirely in 2008, after the controversy surrounding Carlos Tevez and Javier Mascherano’s moves to West Ham. FIFA and UEFA have been nagging and whining about TPO for quite a few years now, with the likes of Michel Platini labelling it as ‘modern slavery’, but with all the leadership furore and corruption allegations, it is unlikely that we will see either organisation make any significant changes in regards to the legality of TPO for a while. Not that they would actually do anything anyway. Is it inconceivable to say that banning TPO be beneficial for Portuguese football in the long term? Ignoring Porto (and possibly Benfica), who have consistently posted acceptable balances during the last decade as a result of their excellent transfer policy, one has to consider the financial state of other clubs. In terms of branding and sponsorship, Brand Finances ranked Benfica as the 40th most valuable brand in world football: the only Portuguese club to make the list. In fact, the total brand value of all Portuguese football clubs was comfortably the lowest of the top 10 football leagues as shown in this graph:

This lack of marketability creates a sizeable economic disparity between the Portuguese football leagues and the leagues of other European nations. The Portuguese banking crisis last summer resulted in share prices plummeting and many privately funded football clubs being severely wounded. The large majority of Portuguese clubs such as Sporting Lisbon, already deep in debt having spent €121m on a new stadium in 2004, consistently fail to sell out their stadiums: they had an average attendance record (34,988) of just 69.8% of stadium capacity (50,095) ranked 62nd out of the top 70 capacity stadiums in the 2014-2015 season. Removing TPO would result in Portuguese clubs having offers rejected from Brazilian/Argentine clubs, and more wealthy clubs, particularly in Spain, where similar scouting networks are in place, pouncing and signing the best young talent available. The remarkable transfer profits mentioned at the beginning of this post would be effectively out of reach. Benfica and Porto also fail to sell out their respective stadiums, both being even lower on the attendance to capacity ratio rankings for the top 70 capacity stadiums. In fact, the average attendance for Primeira Liga matches in 14/15 was a very low 9,945, despite having an average stadium capacity of 22,297: more than half of the clubs in the division failed to fill out more than 50% of their stadiums for the duration of the league campaign. After the Portuguese financial crisis of 2010, and the national side’s recent failures in major tournaments, many are simply refusing to pay the required money for tickets.

The Portuguese paradox of TPO was illuminated once more in last summer’s transfer window, when on one hand Sporting CP President, Bruno De Carvalho, lashed out at the system, claiming Doyen had ‘manipulated’ the transfer, having sold Marcos Rojo, who was 75% owned by a third party, and he labelled TPO as a ‘monster’, saying it was a ‘menace to sports and all football’, and on the other hand, the Porto Chairman, Jorge Pinto Da Costa, once described by the great Arsène Wenger as the ‘Brain behind Porto’, and former Sporting President Luís Godinho Lopes had to publicly rebuke De Carvalho’s attack on TPO, fearful of his words placing TPO’s future in Portuguese football in serious doubt.

Revolutionaries such as De Carvalho will continue in their quest to eliminate TPO from football altogether, as will many of the football associations who have already banned it, however, as long as goliaths in the game such as Mendes and Pinto Da Costa retain their huge power and remain content with using TPO to their advantage, it is difficult to see Portuguese football without TPO for the foreseeable future. But what if FIFA and UEFA finally put their money where their corrupt mouths are, and TPO is banned globally? Would Porto just collapse? Well, the money previously dedicated to finding talents from distant lands could be used to improve internal youth development, and both a drop from 80% of the squad being foreign for the 2012/2013 season to just 65% this season, and the appointment of Spaniard Julen Lopetegui, known for his ability to nurture young players (having managed Real Madrid B and Spain’s U19s, U20s, and U21s squads), suggest that the ever-savvy Pinto Da Costa could be preparing for life without TPO. Benfica’s exploitation of the impressive Serbian (TPO-free) youth systems saw them create an epicentre of a 2 time title winning and Europa League final reaching side which was eventually dismantled for large profits.

My personal opinion on the matter? Mendes’ GestiFute will continue to monopolise the talent pool both within and entering Portugal, as will Doyen, both making extraordinary amounts of money which paradoxically won’t be used to improve Portuguese football itself. At least until FIFA manage to emerge entirely clean from the current mess and to be in a fit enough position to pull off such a controversial embargo. I just hope by that time Portuguese football has escaped its best friend and yet its own worst enemy; the gift that keeps both giving and taking, and is ready to develop without being under the deadlock of the paradoxical issue that is third party ownership.