⚽ The Flawed Economics of Football Academies

It’s so difficult to win a Ryder Cup away from home. My stomach was completely gone for an hour last night but what amazing TV the Ryder Cup was! Magical stuff in New York.

Alas, this week I give all newsletter readers a sneak peak of whats to come. On Wednesday I will release a video titled “Are Football Academies worth the Investment?”

It’s a topic that I’ve wanted to approach for a long time.

The video is one of my better ones. It’s detailed, it’s comprehensive, almost a little sad in nature. In the video I likened the academy system in the UK as lottery. That won’t make sense to you just yet, but as newsletter readers I want to show you all in particular exactly why I drew that comparison.

To do that I will give you all an idea about the system for youth compensation in the UK. This system quietly defines modern football’s talent economy as we know it…

It starts with the FA. They implemented a system designed to protect clubs that develop players. If a big club signs your best 15-year-old player, you won’t be left empty-handed. The smaller club gets paid and this happens through two main avenues:

1. Training compensation. This is paid to a club when a player under 23 signs their first professional deal elsewhere

2. Solidarity payments. This is a cut of future transfer fees (up to 5%) on the provisory that the club trained the player between the ages of 12 and 23

To make it simpler, smaller clubs take on the risk. Bigger clubs pay for skipping the process. Therefore every youth product holds some form of intrinsic value.

But when you look closer, the numbers feel less like protection and more like… a finesse.

The Elite Player Performance Plan is the system in place for young players in the UK. Since 2012, the EPPP has used a fixed tariff to determine compensation. The fees are tied to the player’s age and the category of the academy that they are leaving. It looks something like this:

• Ages 9 to 11: £3,000 per year of training

• Ages 12 to 16:

  • From a Category 1 academy: £40,000 per year

  • From a Category 2 academy: £25,000 per year

  • From a Category 3 academy: £12,500 per year

So if a Category 3 club trains a player from ages 12 to 16, the total payout if that player leaves is £62,500. That’s it. Even if the player becomes the next Jude Bellingham. The system pays no premium for potential, no premium for market value, and no back-end share of a blockbuster sale. It’s purely input-based, not outcome-based.

Bonuses sometimes exist for appearances, but they are capped and not tied to the player’s resale value.

I found this rather mad. I had no idea the system worked this way.

Before 2012 and the introduction of the EPPP, tribunals could award compensation based on potential. Jermain Defoe was a perfect example.

In 1999, West Ham signed 16-year-old Jermain Defoe from Charlton. The tribunal gave Charlton:

• £400,000 up front

• £250,000 for every 10 first-team appearances, up to 40

• £1 million if he reached international honours

• 15 percent of any future sale

Today, under EPPP, if Defoe had trained at Charlton from 12 to 16, the total fee would be capped at £62,500. No upside, no sell-on clause, no reward if he became world class!

An international example is also fascinating. Genk, popular Belgian club developed Kevin De Bruyne through his teenage years. When he moved to Wolfsburg, and then to Manchester City for £76 million, Genk received:

• €660,000 in training compensation

• €2.28m in solidarity fees

€3m is not terrible, but not transformative. Wolfsburg, who held him for two years, made tens of millions in profit. The academy that made him, got roughly four percent of the total fee.

And that was a relatively generous outcome. In many other cases, if a player moves before signing a professional contract, the training club receives almost nothing.

Under FIFA rules, training compensation is based on the average cost of developing a player at the buying club, not the value of the player himself.

A 16-year-old can leave Belgium or the Netherlands for a Category 1 English club, and the academy he leaves might see less than €100,000. Not because the player isn’t valuable, but because the formula says so.

I’ve watched football for three decades and only learnt this was in place in the past month.

Brentford shut down their academy after they lost two highly talented defenders to this scheme in 2017. Josh Bohui being one, pictured in the thumbnail

Genk, Metz, Anderlecht and many other smaller European clubs are frustrated. And that’s why youth development, while romantic in theory, has become a minefield of risk in practice.

If you’re building an academy today, it doesn’t feel like you are playing on a level field.

I encourage to watch the full video when it’s released this Wednesday at 5pm.

Oh, and at the same time. Saudi Series information will be coming too!

The thumbnail looks like this:

See you next week.