The Beginning of the End for the Portuguese Soccer Empire

If you want to understand the inner workings of the 21st century soccer in an impatient instant, look no further than Portugal.

In the last decade, Portugal produced leaders of the sport in nearly every facet: one of the most prolific goalscorer in history in Cristiano Ronaldo; a Bismarckian, win-at-all-costs manager in Jose Mourinho, perfect for the uber-capitalist, fast-rotating dynamism of elite soccer clubs today; the proto-Moneyball club executive in FC Porto chairman Jorge Nuno Pinto da Costa; and the most influential “super-agent” in the sport in Jorge Mendes, who represent both Ronaldo and Mourinho.

I argue it is Portugal — rather than recent World Cup champions like Germany or Brazil — that has been a hegemonic figure that reshaped the sport and the economics around the sport in the new century, but that all may have ended literally yesterday. FIFA’s ban on third-party ownership of soccer players outside of the clubs who employ the players, starting on May 1, may spell doom for the Portuguese influence in global soccer.

Pinto da Costa and Mendes has the most to lose due to the ban. While third party ownership (TPO), where non-soccer related investors were allowed to buy stocks of a player’s future to profit from his next transfer fee, was brought to the European mainstream by an Iranian-British agent, it’s the Portuguese that perfected it. Pinto da Costa’s Porto and its rivals Benfica became a factory in turning raw talents of Latin American players bought for cheap to turn them into bonafide products that sold high to clubs with deeper pockets.

Third party ownership in Porto and Benfica’s model was like Moneyball — finding its island of misfit toys from impoverished South American clubs — fused with financial speculation with the fiery eagerness of years before the Great Recession. The third parties are run by shadowy investors running under the cover of generic company names like Global Sports Agency and Media Sports Investment Fund. Mendes too made his living by playing both agent and investor, buying player’s rights to some of the biggest names in soccer.

Porto and Benfica also made out like bandits during the process. While selling its top players for over 600 million Euros total since Mourinho led Porto to a Champions League trophy in 2004, Porto continued to win while playing attractive soccer. Since 2004, Porto won seven domestic league titles. This year, Porto advanced to the quarterfinals of the Champions League, the premier European club competition, and pulled an upset against Bayern Munich, arguably the most talent-packed club in the world, at home. (They lost 6-1 in the away leg however.)

Benfica, to a lesser extent, won three domestic titles and finished runner-ups in the last two Europa League, the second-tier European club tournament. After winning last year’s Primeira Liga, Benfica gutted its roster for over 141 million Euros in transfer fees — and over 71 million in profit.

But with FIFA banning its means of financial and on-field success, on the basis that the investors are sapping money of the sport for their own profit and may corrode the public confidence in the integrity of the sport, the future of Portuguese soccer hangs in the balance.

If left to exclusively their domestic revenues from tickets, TV rights, and other commercial means, Porto and Benfica will quickly fall off relevancy on a global stage. Portugal is a tiny market with a tiny TV revenue for its Primeira Liga clubs; while Porto earned 18 million Euros in 2014 in TV rights, Cardiff City — who finished last in the 2013-14 English Premier League — made over 84 million Euros from its lucrative TV deal just because it plays in the most-watched league in the world.

In an increasingly unequal market where Real Madrid and Barcelona make 519 and 483 million Euros in revenue respectively and Porto only 200 million in 2014, stripping the smaller clubs of its main mean of revenue only speeds up the disparity of club competition. As Mendes, who fervently protested the ban, said, “”what do [FIFA] want, to have a competition between only Real Madrid, Barcelona, Bayern Munich and Manchester United?” While a biased source, Mendes does have a point.

The ban does not just impact Portuguese clubs. It will ripple through historically top-tier and now cash-strapped clubs in the Netherlands, Scotland, Spain, Turkey, Brazil, and Argentina. Most of the top clubs in the countries are already in worse financial shape than Porto and Benfica, who at least stayed competitive through TPO transfers.

But what is also unfair is the pressures third party entities impose on star players, turning them into indentured servants. For example, Colombian striker and Mendes-represented player Radamel Falcao had his move to Chelsea stopped because Mendes and other third parties demanded 300,000-Euros-a-week wages and a 60 million Euros transfer fee so that, when Falcao gets his payday, there will be enough money for the numerous investors to make a profit. Chelsea declined, and Falcao soon moved to lesser prestigious Monaco, the Russian tycoon-owned club that can afford Falcao’s demands.

While you may not feel sympathy for Falcao, think about the hundreds of impoverished South American teenagers who sold parts of their rights in hopes of breaking into a gateway European club like Porto and earning the giant paycheck by the Chelseas or Real Madrids of the world. Trading one’s freedom to speculative investors sounds as good as Faust’s deal with the devil.

So what now for Portuguese soccer? Most expect a short-term decline for Porto and Benfica in European competitions, as they can’t afford to keep up with the Joneses.

Long-term, some expect a inward-looking financial plan where they develop talent through their local academies rather than South American imports. Some point to Benfica’s recent surge of player transfers from Eastern European countries — devoid of the TPO culture — as a sign of the club bracing for life without third party ownership.

But some expect business as usual, as Portuguese agents like Mendes and executives like Pinto da Costa, who’s been running the Porto show for over three decades, figure a crafty loophole around the TPO ban. They’ve been barons of industry for years, and one policy change should not dethrone them.

Perhaps the Portuguese hegemony is not quite over yet. But for now, as we step into a new era of FIFA’s newest attempt at financial parity, it’s better hold on and not cash out too soon.

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SEUNG Y. LEE | @sngyn92

Seung Y. Lee is a freelance journalist based in Berkeley, California. A UC Berkeley alumnus, he has previously worked at the Los Angeles Times and the San Francisco Chronicle. Seung is a 2015 Dat Winning fellow. You can find him watching Tottenham Hotspur matches alone on weekend mornings.