Basics on Professional Football in Russia
Prokopets, Mikhail, The International Sports Law Journal
The Russian Football Championship is undergoing rapid development. The standard of Russian football is constantly rising. Both the Russian national team and clubs have recently achieved major successes in the International arena (bronze medals for the national team at the Euro, wins by Zenit and CSKA at the UEFA Cup and the European Supercup). The Russian championship is universally recognised as now being strong enough to draw level with the four leading European championships (England, Germany, Italy and Spain) and has reached or exceeded the levels of the championships in the Netherlands, Belgium, and even France. Like any other rapidly developing field, Russian football is inevitably encountering a large number of challenges, and I will be able to cover only a handful of these in today's talk.
At the current time, almost nothing is known outside of Russia about the structure, unique characteristics and problems of Russian football, while there is more than enough information available about the other championships. Let us try to fill in the gaps.
In this talk, I would like to touch on problems in the structure of football competitions, problems faced by the Russian premier league, and problems related to TV broadcasting and the activities of agents.
The current structure of Russian football can be illustrated by the following outline:
The Russian Football Union (RFS), as a member of FIFA and UEFA, and in compliance with their internal rules and regulations, performs the general supervision and management of Russian football. The RFS was founded and acts as a non-profit organisation and an all-Russia public organisation, and has its members almost in all of the 83 constituent members of the Russian Federation.
For the immediate organisation and implementation of competitions, three separate legal entities have been created: the Russian Premier League (RFPL), the Professional Football League (PFL) and the Amateur Football League (AFL). all these organisations are founded as non-profit organisations, and have their own personnel, separate from that of the RFS, and are directly responsible for organising and holding competitions.
The RFPL was created in the form of a non-profit partnership, and brings together all clubs playing in the Russian championship premier league (the highest league), which are members of the organisation, while the management of clubs is implemented by the League Board, which takes all the key decisions with respect to the activities of the RFPL.
In essence, the clubs themselves take the key decisions (for example, regarding the number of league players, the number of teams playing, the sale of championship broadcasting rights, and the distribution of monies received) with respect to important aspects of the league's activities, and it is important to note that this takes place in a fairly efficient and rapid fashion, due to the small number of clubs.
Sixteen clubs play in the RFPL, the last two of which leave the RFPL at the end of the season.
It is worth noting that the RFPL has a limit on the number of league players: no more than 6 league players can be located on the field at any one time.
The Professional Football League (PFL) Association was founded in order to organise and host championships for the first and second divisions.
It brings together first-division clubs (22 teams) and second-division clubs (80 teams). The second division consists of five zones, into which teams are moved based on their geographical location. Five zone winners are entered into the first division, and the five teams left at the bottom of the league are moved into the amateur league.
The PFL also has a limit on the number of league players: in the first division, no more than two league players can be on the field at one time. In the second division, no league players may play at all.
Unfortunately, the crisis impacted all of Russian football very heavily in 2008, and especially PFL clubs. FC Khimki, an RFPL club, was almost declared bankrupt, and only desperate demonstrations by players helped to find the money to finance the club, at the last moment.
At PFL the situation, sadly, is even worse. The number of active clubs will most probably be cut in 2009 from 22 to 18, as about 5 different PFL clubs have already declared bankruptcy, and several others are on the verge of bankruptcy. Second-division clubs that were invited to replace bankrupted clubs sometimes do not wish to play in the first division, due to the high membership fees and the high cost of travel.
It is worth noting that football is not profitable in Russia for any club in the premier league, and all the more so for PFL clubs. The serious problems faced by clubs are primarily related to the fact that the majority of clubs have municipal funding, and during the crisis the state has heavily cut funding for professional sports, which has led to the bankruptcy of many clubs. Unfortunately, RF legislation does not yet stipulate concessions and privileges with respect to sponsors of sports teams, and for this reason it is not beneficial to commercial entities to fund them.
The relations between the RFS and leagues take the form of agent contracts, according to which the RFS transfers to the PFL and the RFPL the right to organise and host football competitions.
Nevertheless, overall control over RFS competitions also includes, amongst other rights:
- the right to confirm the results of competitions;
- the right to organise refereeing;
- organisation of the work of committees (such as the disciplinary
committee, the committee for licensing agents, the dispute resolution chamber, etc.).
In addition, the RFS is responsible for the Russian national team and 14 other football teams, hosting the Russia Cup, beach football, mini-football, women's football, football for the handicapped and veterans' football.
I would like to say a few words about the RFPL league, which is responsible for hosting the premier league championship.
In November of 2007, a general meeting of the RFPL elected Sergei Pryadkin to be RFPL President for a term of 3 years.
This date is noteworthy, because previously the president was elected for a term of 1 year, and the president had to be the head of a club with RFPL membership. This meant there were two significant drawbacks: first, the club that provided the president received an unofficial advantage in the form of administrative resources; and second, the term of office was so short that as soon as a new president had come to terms with the status quo, his term was already coming to an end. Incidentally, the main goal of the league was to start earning money for the clubs, and previous presidents were not always successful at achieving this goal.
With respect to the business side of football, Russia as yet lags far behind her European colleagues. According to estimates taken from open sources, the aggregate income of the leading six professional European football leagues (including the RFPL) at the end of 2007 amounted to approximately 11 billion USD.
The main income flows are:
a) sales of broadcasting rights for national championship matches within the country and the sale of International rights (up to 65% of total income);
b) title and commercial sponsorship (20-25%).
Meanwhile, the income of the RFPL comes from sponsorship (52%) and the sale of broadcasting rights (47%). Income from other commercial sources is insignificantly small, and amounts to less than 1%.
To understand the current situation, it is important, and of some interest, to compare data on the income from the sale of TV broadcasting rights and the volume of advertising markets in 2007 (in US dollars).
Country TV Income Size of Proportion (%) advertising market UK 2.06 billion 25.8 billion 7.9 Spain 0.90 billion 8.8 billion 10.2 Italy 1.50 billion 11.1 billion 13.5 France 0.90 billion 13.3 billion 6.7 Germany 0.63 billion 21.8 billion 2.9 Russia 0.015 billion 9.5 billion 0.15
The total sponsorship in the European leagues amounted to approximately 330 million EUR in 2008.
For example, the English Premier League renewed a sponsorship agreement with the Barclay's banking group, which expired at the end of the 2006/07 season, for another three years. The contract sum was 65.8 million GBP (approx. 100 million EUR), compared to the current volume of 57 million EUR for three seasons.
In Russia, the proportion of sponsorship, as a percentage, amounts to approximately half of the income of the Premier League, which fails to correspond to the development trends seen in the European market. In absolute terms, the sum is very small-24 million USD, which is several times smaller than similar sponsorship contracts of the leading European leagues. The main sponsors of the RFPL are Russian companies (Rosgosstrakh, Megafon, TNK and Baltika).
Western companies are mainly represented by their Russian subsidiaries (Pepsi and Nike). The parent companies of these sponsors are not yet rushing to invest larger sums in Russian football. However, negotiations are in full swing to increase the cost of those sponsorship agreements that are due to expire in 2008.
In the English Premier League, income derived from the sale of rights and sponsorship is distributed on the basis of a resolution of the clubs' general meeting. Some of the funds are allocated to the Professional Footballers' Association.
The remaining funds (the vast majority of the income) are divided into three categories (50% equally between all the Premier League teams, 25% depending on the position held, and 25% depending on the number of broadcasts of that club's games).
The Russian Championship assumes the English model for distribution of income from the sale of rights. The only changes are to the percentage relationships (40% equally between 16 teams in the current championship, 40% between 14 teams and depending on the position held in the previous championship, and 20% depending on the number of broadcasts on the Perviy Kanal TV channel in the current season).
The sums received by Russian football clubs from TV broadcasting are very small, and cannot significantly influence clubs' budgets. This is primarily due to the fact that, just a few years ago, football was broadcast free, via public-access T V, and many TV viewers are still reluctant to switch to paid channels and pay for something that they believe they have the right to watch for free.
Moreover, the low cost of the contract is also influenced by the lack of competition amongst cable channels. Russia essentially has just one high-standard cable channel, NTV+.
The Near-Term Plans of the RFPL (2008-2010)
The near-term (2-4 years) plans of the RFPL are fairly ambitious. First, the RFPL is expected to increase incomes for clubs, given that the league does not currently utilise many commercial opportunities.
Changing the tournament format:
Currently, RFPL competitions are run on the spring-fall system, which does not match the European calendar, and creates serious problems for our clubs when participating in European cups. In the last few years, there have been discussions about switching to the European calendar, i.e. fall-spring. Most likely, the change will be implemented over the coming 2-4 years.
It is planned to increase the annual income of the League from the sale of commercial rights to 90-100 million USD (or 70-80 million USD, given a poor economic situation).
The main goal in the second stage (2010-2012) is to increase the annual income of the Premier League to reach 200-250 million USD (or 150-200 million USD, given a poor economic situation).
Attendance of the premier league is very small, compared to European levels:
The average attendance of the Russian Championship in 2007 was 13,500, and rose to 15,000 in 2008.
Currently, only one stadium in Russia meets the highest category, "A", and can host the finals of International tournaments. This is Luzhniki (the Champions League final was held here in 2008). Also praiseworthy are Lokomotiv and Arena-Khimki stadia, which were built to European standards. Stadia are now being built by PFC CSKA and FC Zenit, while FC Dinamo is reconstructing its stadium.
Strengths and Weaknesses of the Russian Business Model
- TV and commercial rights are sold by the League centrally, which is the dominant trend in the leading European championships;
- a good showing by the Russian team at Euro 2008 drew the attention of potential sponsors to the Russian Championship, and provided the stimulus to raise the level of play, boosting viewer interest and, therefore, TV broadcast ratings.
- the Russian Championship is not held in a single system, together with the European championships;
- it is impossible to secure sponsorship from beer producers and sweepstakes (Russian legislation forbids placement of advertisements for beer and gambling at stadia an on TV);
- the absence of competition on the paid TV market makes it impossible to significantly increase the price of rights for Russian TV channels;
- the absence of any other well-developed commercial products, that could be sold on the Russian and International markets.
The RFPL is currently considering several other, additional business development ideas, such as:
- merchandising and licensed products;
- attracting additional income sources by consolidating rights and assets on a non-exclusive basis, and the transfer of marketing and commercial rights by clubs within the RFPL;
- image and marketing rights to players, and their use for the commercial benefit of the league (on a non-exclusive basis);
- the transfer of rights to the use of images, the brand and logotypes of the club for centralised packaging of sponsor proposals, and development of additional football product opportunities;
- analysis and identification of new football products and services, currently in demand on the market.
Options for new products and services:
- creating a "football bar" for supporters, using existing federal chains and attracting new partners. Such bars can be used for holding football sweepstakes, and as points-of-sale for accessories and licensed products, and it will be possible to utilise such premises for the benefit of RFPL's official suppliers;
- organise a common system for the sale of football accessories at stadia and at specialist outlets (engaging a partner). Development of a product range, distribution system and control system.
I would like to explain why I chose football agents as one of the problems to be discussed today. The fact is, that on 1 January 2009, a new set of rules came into force in Russia on the activities of agents, based on a new, 2008, edition of the FIFA rules. In addition, there has been a very lively discussion in football circles recently, in which football agents have been given numerous bad qualities, which they do not actually possess. In Russian football today, agents are being accused of a great deal: for example, that they act as intermediaries for bribing players and judges, that they serve as instruments for money-laundering by club owners, and that they fail to perform their immediate duties-helping football players progress in their careers.
Nevertheless, I would like to highlight several nuances, which distinguish the RFS rules from those of FIFA and the European rules and regulations on agent activities.
First, in compliance with RF legislation, for RF citizens to be employed abroad, they require a licence. That is to say, agents may secure employment for players in Russia, having no more than a FIFA licence. However, in order to secure employment for a football player abroad, it is necessary to have a licence issued by the relevant immigration service.
Second, fairly severe sanctions have been requested, and introduced, with respect to football agents, footballers and clubs who violate these rules. There are around 20 different sanctions, and the maximum fine is 1,000,000 RUB.
FIFA's new rule, concerning limitation of the period of validity of an agent's licence to 5 years, was found by some to be perplexing and even disagreeable. Many consider this limitation to be unnecessary.
Third, the RFS has established limits on the compensation received by agents from a footballer: 10% for adult footballers and 3% for footballers under 16. Although many agents say that they do not take compensation from minor players, the RFS considered it necessary to reinforce this on paper.
Another new requirement stipulates that the RFS must be provided with a document, signed by the footballer, confirming the receipt of a hard copy of his agent contract. This rule appeared after frequent complaints from footballers that agents were not issuing them with copies of their contracts.
Another new rule relates to the relatives of footballers and their lawyers; although the RFS rules do not apply to them, they can now, if they wish, communicate with the RFS about their clients.
Following the example of England, the RFS also introduced registration of foreign agents operating in Russia. This took place after the RFS began to receive complaints concerning some foreign agents. Now, every such agent must register with the RFS. Otherwise, notification about a violation will be forwarded to the relevant national association, with a request to impose sanctions.
In addition, the RFS now has the possibility to exercise fairly rigid control over the activities of agents. at any moment, the RFS has the right to request any information from agents concerning their activities, including financial activities. This new rule, too, failed to meet with agents' approval.
In conclusion, it can be stated that although the activities of certain agents does give grounds to suspect they may be playing a dishonest game and possibly be violating the rules of FIFA and the RFS, it must also be understood that this is only one side of the problem. Many, if not all, agent violations would be impossible without the collusion of dishonest managers and club staff. After all, any deal reflects the will of two sides, and to heap the blame onto the agents alone would be tantamount to turning a blind eye to the problem.
by Mikhail Prokopets *
* YUST Law Firm, Moscow, and former Senior Legal Counsel to the Football Union of Russia.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Basics on Professional Football in Russia. Contributors: Prokopets, Mikhail - Author. Journal title: The International Sports Law Journal. Issue: 1-2 Publication date: January-April 2009. Page number: 131+. © 2006 ASSER International Sports Law Centre. COPYRIGHT 2009 Gale Group.
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