Football transfer window: How transfers take place? How clubs invest billions - Explained

Football transfer window: Lionel Messi going to Inter Miami in Major League Soccer (MLS) in the USA, Real Madrid spending over €100 million to sign young English midfielder Jude Bellingham from Borussia Dortmund, 2022 FIFA World Cup winner Alexis Mac Allister signing for Liverpool for just €42 million from Brighton & Hove Albion and many big names moving to Saudi Arabia to earn big fat pay-cheques at the fag-end of their careers. This year's football transfer window has seen a lot of surprises and truckloads of money as we approach the next season with the international break going on.

As most players are either enjoying the break after a long season or are on national duty, the main focus now turns to the clubs and the agents who represent the players for a change in the clubs, a better wage, or an extension of the contract.

But all this might sound Greek to anyone who doesn't know how to speak football. For them, here's an explainer on each and every jargon that is used in a football transfer window.

How a transfer takes place, who all are involved, and most importantly, how the money flows in a single transfer window — let's dive right into it.

What is a transfer in football?

A transfer in football is a business transaction between two teams in which a player moves from one team to the other.

What is a transfer market?

The transfer market is the space in which football players can be transferred to other clubs. The transfer market consists of a list of available players as well as the money travelling between teams as they compete to buy and sell these players.

What is a transfer fee?

If a player is under contract with one club and another club wishes to sign them, the latter club is usually expected to pay a compensation fee to the former club, which is referred to as a transfer fee. The transfer fee takes into account a number of factors, including a player's perceived skill, current contract duration, commercial value, and potential worth, among others.

When can a transfer take place?

The period when transfers take place is termed the "transfer window." There are two official transfer windows per season, during which transfers are authorised. These are sometimes referred to as "registration periods" as well.

The two transfer windows are commonly called the "summer" and "winter" transfer windows, with dates falling during pre-season and the mid-season, respectively.

Each national football association decides when these transfer windows for the men's and women's football seasons will take place. 

What is a transfer request?

A transfer request is an official request given by a player to the club with whom they still have a contract to allow them to terminate the contract, leave the current club, and sign and play for another team.

If a club refuses to sell a player and rejects transfer requests repeatedly, the player may make a formal transfer request in protest against the club.

Transfer claims are frequently used to express a player's dissatisfaction or discomfort with their current team or club and serve as a form of 'come and get me' plea. 

A player mainly requests a transfer when they think they cannot play in the system or style of the team, don't get enough play time, aren't satisfied with their role in the club, or, when they are being pursued and want to go to another club.  

What is a free transfer?

When a player's contract at a club is due to expire or has expired, he can move to another club without having to pay a transfer fee by the buyer club; this is referred to as a free transfer. Players are free to speak with other clubs without paying a transfer fee to their previous club.

Following Bosman's ruling in 1995, such a transfer is sometimes referred to as a Bosman transfer.

What is Bosman's ruling?

In 1990, Belgian footballer Jean-Marc Bosman, at 25, was nearing the end of his contract with Belgian club RFC Liege. His two-year contract with the club had not gone as planned, and the Belgian midfielder was offered a better contract by French second-division side Dunkirk.

Prior to the Bosman ruling, a player could not leave a club at the end of their contract unless the club consented to let him go for free or earned an agreed sum from the club they were moving to.

RFC Liege sought a fee that was well out of reach for Dunkirk. The sale fell through, and Bosman's salary at Liege was reduced by around 75%.

Bosman appealed through lawyers Luc Misson and Jean-Louis Dupont, bringing the matter to the European Court of Justice against the Belgian FA, RFC Liege, and UEFA, invoking the 1957 Treaty of Rome, which allowed the free movement of players throughout Europe.

The five-year court battle that followed finally settled on December 15, 1995, and it was ruled in favour of Bosman. This verdict would later help reshape the face of modern football transfers.

How does a transfer happen?

A transfer in football occurs when two clubs agree on the terms of the sale, that is, the transfer fee, as well as additional clauses in the deal, and the purchasing team agrees on a contract with the player — which specifies the salary of the player, the role they will play in the team, and also any additional bonuses based on the player's performance for the season. The buying club can also put a "release clause" in the contract of the player.

A transfer, like any other economic transaction, can take a number of different forms. When a club wants to sign a player, an official inquiry is usually made to the club the player has a contract with to see if they want to sell the player.

The club to which the player belongs either puts them up for sale in the transfer market or the player makes an official transfer request to the club. If a team is willing to sell a player, the player is naturally approached by other clubs that are interested in signing the player. They negotiate with the player's agent or advisors to get the transfer underway.

There are various moving parts involved in executing the transfer. The two teams must first agree on transfer fees and any other stipulations, such as sell-on percentages and other financial incentives.

Following that, the buyer club must negotiate a new contract with the player, seeking to meet the terms requested, which include salary, bonuses, contract length, and other factors.

In rare cases, the player is also given the privilege of owning their own team or having a stake in a newly formed team in the league they are playing in, as well as a percentage of the profits from the main sponsors of the league. This case is reported to have occurred twice in the history of football and only in MLS. Once with David Beckham when he moved to LA Galaxy and the second time with Lionel Messi as he moved to Inter Miami.

Sometimes a club that is interested in a player follows a practice called "tapping up" to get the desired player from the club the player is under contract with. 

What is a "release clause"?

In some contracts between a club and a player, the club places a price tag on the player they are signing. If, in the future, another club wants to buy the player, they have to pay the already decided amount, which is mentioned in the player's contract by the player's current club. This practice is basically known as "triggering the release clause". In other words, a release clause is also known as a "buy-out clause". 

If a club triggers a release clause for a player, the club that the player currently plays for is compelled to sell the player to the buyer club for the amount that is mentioned in the clause. Most contracts don't contain a release clause, and it is the mutual decision of both the club and the player to have one in the contract. 

What is 'tapping up'?

'Tapping up' is the practice of encouraging a player to switch clubs without first going through official club channels. The interested club persuades the player to leave their current club without informing the club the player currently plays for. 

The practice is considered unethical and theoretically unlawful, but it happens all the time and is impossible to regulate by regulators such as UEFA or a country's football association. Sometimes the agents that represent a player also follow this practice in order to get a better deal for the player, which in turn gets the agent a handsome commission as well.  

What does a player's agent do?

A football agent represents a player's general interests, but especially during contract negotiations.

In contract discussions, the agent serves as a player's legal representative, tasked with getting the best possible arrangement for the player they represent. 

A good agent will be well-versed in the legal nuances involved as well as a skilled negotiator, much to the dismay of clubs.

Agents receive fees for their services, which are usually a percentage of the player's salary, as well as bonuses for their participation in transfers in some situations.

In most cases, the family members of the player act as their agents. This can be seen in the cases of Lionel Messi and Kylian Mbappe. 

On the other hand, some players are represented by actual agents who have been working in this industry for a long time. This can be seen in the cases of Cristiano Ronaldo, Zlatan Ibrahimovic, and Paul Pogba.

What is a loan transfer deal?

Sometimes, a player is transferred to another club, with the latter club not having to buy the player from the club the player is currently under contract with. The player is said to be loaned out, with the player's salary paid by the club they still have a contract with. 

Sometimes arrangements are made in the deal such that the latter club has the option to extend the loan period or buy the player after the end of the loan period. 

Also, the former club can put a clause in the deal where they mention that if the player plays more than a certain number of matches or is present on the pitch for a certain amount of time, the latter club are compelled to buy the player at the end of the loan period for a price already decided during the negotiation.

How is the transfer money distributed?

When a transfer agreement is made and all the parties involved agree to the terms and conditions laid down for the transfer, the transfer fee goes to the club that sells the player, and sometimes some amount can also go to the club that the player was first bought from. This happens when the player who initially played for a club goes to another club and puts up a "sell-on clause" when the deal is done. This means that if the current club sells a player, they have to pay a certain amount to the club from which the player was previously brought. 

A part of the money from the transfer fees goes to the governing body of the transfer market as taxes. The tax amount is determined by the player's value and classification. But generally, most of the money goes to the club that sells the player. 

Where does the money come from? 

Football as a sport is already a big money-making business. According to the governing body of football, FIFA, they made a record $7.5 billion in commercial deals connected to the 2022 World Cup in Qatar.

This shows the potential of the money made from football. The clubs, especially in the European leagues, also make a ton of money as they have to support their operations in the transfer market as well as sustain themselves as organisations. 

Most of the money comes from commercial sources like sponsorship deals and the sale of match tickets. Some of the money also comes from TV and broadcasting rights, which are distributed by the league to the clubs depending on the viewership they bring. 

Clubs like Manchester United, Manchester City, Real Madrid, Bayern Munich, FC Barcelona, and Paris Saint-Germain made almost €4 billion in total revenue in the year 2022, according to Deloitte.

A club can also make money by selling a player on the transfer market and reinvesting the money in getting a new player. 

Clubs like SL Benfica, Borussia Dortmund, and AFC Ajax have benefited from this practice of scouting young players who might have the potential to be good players, signing them for dirt cheap prices, developing them, and selling them to other bigger clubs at a higher price. According to data taken from Transfermarkt, these three clubs have made more than €1 billion each in player sales since the turn of the century.

Apart from that, investments from club owners also help certain clubs boast money in the transfer market. 

Clubs like Manchester City, Newcastle United, and Paris Saint-Germain are owned by oil-rich Middle Eastern countries, that have pumped a lot of money into these clubs in recent years.

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