The negotiations that take place during a transfer can be convoluted. But almost all of them involve the term ‘image rights’. These are effectively the rights to use the image of a player for off pitch commercial activities, which increase revenue to the club, and as a result, is a further way that a player can be compensated in his new contract. Paulo Dybala’s transfer to Tottenham fell through due to an inability to successfully negotiate the use of his image.
The rights in relation to an image can be found in anything from a player’s face, voice, nickname or number. These can be utilised in relation to sponsorship deals, endorsement deals, product lines, exclusive photo shoots and merchandising deals. In the UK, there is no codified legislation that protects image rights, thus the need for players to be advised before entering into contracts is even more important.
Football clubs are so much more than the sport itself. They are brands, forms of media that look to dive into any profitable market, and as a result their players become facets to drive revenue even further. This is something that players and their agents must realise and use as leverage with particularly marketable players. The clubs will want these high profile, marketable players, taking the lead in advertising and promoting the brands or products.
Therefore, there comes a greater need to protect these rights, and exploit them successfully. They will need good advice in how to keep control of these rights and utilise them effectively for commercial profitability.
The Specifics
Protecting image rights and defining parties obligations in respect of them are usually recorded in an Image Rights agreement. It is advised that a particularly high-profile player, as the owner of their rights, should set up an Image Rights Company and be a sole shareholder & director – as a result they can assign their image rights to this company through a Deed of Assignment so that the rights vest in the company. The company will retain these rights and then can license them to their club for a fee. This allows them to manipulate the use of their image through a separate entity.
The benefits of this include the protecting of their image and ensuring that it is not misused, and there are potential tax benefits, as the fee paid to the company instead of the player will attract a lower tax rate (corporation tax rather than income), although HMRC will need to be consulted. It is also a way for players to maximise their earnings and help set them up for the future. The player is under responsibilities and duties as a director which they must uphold.
From a tax perspective, HMRC have been keen to ensure that clubs and players do not engage in evasive tactics when it comes to paying tax – Daniel Geey has explained that they have offered a deal to Premier League clubs which contains a Stage 1 cap, where ‘clubs can make maximum total image rights payments to all image rights companies of 15% of commercial income if commercial income is £80m. The player cap (Stage 2 Cap) is 20% of the total salary payments made to a player in the tax year’.
Where players need to be careful
Players need to exercise caution that they are not conflicted by different licensing obligations for their image rights – clubs may have an existing agreement with a player that restricts them from endorsing competitors. The clearest example of this is Messi being sponsored by Nike from the age of 14 years old, as did Barcelona, but then by Messi switching to Adidas in 2006, he caused many complications for the club. Some clubs can have over 40 commercial partners, it is thus important that these should not be contrary to players personal sponsorships. It works the same for managers, Jose Mourinho was sponsored by Hublot and Jaguar, whereas when he joined Manchester United, they had sponsorship deals with Bulova and Chevrolet. Negotiations surrounding image rights thus delayed his move.
Players and agents alike must ensure no club gets the option or rights to use their image in perpetuity – as with most footballers, they are constantly moving club. Defining the terms and length of the contract is of vital importance – but also that requiring that the clubs will cease using their image after the defined period. Jose Mourinho lost control of his image rights, and Chelsea still have ownership of the trademark for ‘Jose Mourinho’.
It is also worth noting that footballers are restricted from endorsement deals with gambling companies through the FA betting rules, and thus is a further restriction of their opportunities.
This article should have detailed why a player must seek expert tax, legal and financial advice before entering into any image rights contracts. All contracts surrounding image rights must be negotiated carefully.