Big business is about to send football into hyperdrive

As it gets round to the time of office parties and canapes, let’s try a joke: what are the similarities between an Irish company famous for botox, Manchester City and the producers of Viagra?

The answer is not, though the minds of the more depraved may have jumped to it, anything to do with poking wholly fabricated fun at Manuel Pellegrini’s shopping outlets. Nor is it even especially funny; in truth, the answer is as dry as a cheap Christmas turkey.

 

But that’s exactly the nature of office parties; even as you pretend to laugh at the jokes of a man you think is called Steve from accounts, you’re furiously scouring the room for a bar that seems to have merged seamlessly with the shadows, hoping against hope that the fire alarm will miraculously go off and drown you, Steve and all the canapés.

The answer, in fact, is that all featured heavily in the Financial Times of last Wednesday.

Football is ill-accustomed to the salmon pages loved by London’s movers and shakers; if there is any shade of pink natural to Manchester City, it is that usually to be found on the boots of Aleksandar Kolarov. Yet there it was, right there in print – the complexities of Pfizer’s move on Allergan were forced to take a back seat, as the headline of Britain’s premier financial newspaper screamed ‘Chinese make big play with Man City stake’.

Pigeons are not soaring from Nelson’s Column in droves, nor are professionals in the square mile spitting coffee priced according to how Italian and polysyllabic the name sounds down their immaculately tailored suits. It’s less of a scream, more of a rumble.

Yet it’s no less important for it – the debut now is that of football, newly emergent in the financial world.

It’s long been common wisdom amongst fans that football today is in an era of big business, with fans sold downstream in the name of profit and the tastes of emergent Asian markets dictating the colour of jerseys in south Wales.

Even as the controversy of the Glazers’ leveraged buy-out of Manchester United in 2005 spawned the Red Devils’ proto-Corbynite offcast, F.C. United of Manchester, fans in Hull were readying themselves for conflict with owner Assem Allam over their very name.

It is commonly believed that an owner can be good for the club or good for business, but never both. Whilst Roman Abramovich (who has pumped vast sums into Chelsea since 2004) views Chelsea as something between a hobby and a private fiefdom, caring nothing for losses in the quest for prestige, Ipswich Town’s Marcus Evans is criticised for investing little in a team that reached the Championship play-offs last season with a squad costing just £110,000.

Losses, it is said, are endemic to football and inimical to business. So, goes the aphorism amongst fans, business is bad.

In fact, none of this is true.

Football has hardly operated as a business to this point; whilst owners like Mike Ashley – who succeeded in business long before becoming involved with football – carry with them the preoccupations and mind-sets of their careers, football has never before provided a good opportunity for profit.

Operating losses have long been part and parcel of modern football, a fact that owners have to shoulder and reconcile themselves with. Whilst Manchester United may be listed on the New York Stock Exchange, the Glazers maintain themselves as the only major business player at Old Trafford.

At best, clubs have only ever been merely the private fiefdoms of prominent businessmen.

Yet whilst operating losses might formerly have been essentially a tax on the pretensions of owners, football is changing.

As the Financial Times notes, higher revenues – with the team who come last next season set to earn more than those who win the Premier League this season – coupled with cost controls in the form of Financial Fair Play means that clubs are making more money and keeping it. Profits are no longer going straight into the pockets of overpaid stars.

 

Nor is it impossible to be both a good owner and a businessman. After the 2008 purchase of Manchester City by Sheikh Mansour bin Zahyed al-Nahyan’s Abu Dhabi United Group, gold flowed from Eastlands more readily than it departed from the crisis-struck City of London.

In this time, City have recorded vast operating losses; according to financial reports filed with Companies House, City Football Group lost £63.4 million up to May 2014. In the meantime, between them ADUG and CFG have acquired clubs on four continents, overseen the regeneration of east Manchester and acquired a huge property portfolio. Only one of these directly concerns football.

The media has tended to miss the point, and so the significance, of this. Reports of the US$400 million deal between CFG and a Chinese consortium headed up by CMC Holdings and CITIC Capital have tended to depict the consortium as purchasing a 13% stake in City itself, much as the creation of New York City FC in 2013 or the acquisition of then Melbourne Hearts in 2014 was depicted as an insatiably hungry Manchester City acquiring sister clubs at all four corners of the globe.

In reality, this is the aggrandisement of CFG itself, the overarching franchise bedecked with a crown in which Manchester City is simply the jewel that has shone brightest and longest. This is a business project, of cooperation and mutual enrichment, to spread expertise, share intellectual property and provide mutual assistance across the globe.

Whilst Melbourne City coach John van ‘t Schip praised David Villa’s guest appearances in 2014 when on loan from New York, which tripled attendances, the beneficiary of this was not just the Australian club, nor even the A-League, but CFG itself. Business, it seems, is the Promethean bringer of fire to global football, giving a stimulus like no other.

Nor is this limited to big clubs and major acquisitions. Whilst few can afford Mansour’s wealth and footballing empire, the changes in football that have made revenues soar even as clubs are able to keep wealth from simply disappearing into the pockets of players have piqued the interest of foreign equity investors.

In both the US and China, markets are paying attention; this year, PEAK6 acquired 25% of AFC Bournemouth just days before private investors acquired stakes in Crystal Palace. This is the first time that overseas professional investors have acquired minority stakes in Premier League clubs.

These equity investors are interested in football as a business proposition; their sporting interest is purely incidental. If the spectral demon conjured by fans to describe modern football has any form in the real world, it is perhaps these investors, uncaring and commercially orientated. Yet, again, fans have it wrong – these investors are good for sport.

 

Even as the connections of Bournemouth with America opens up new sponsorship opportunities and revenue streams hitherto blocked to a tiny South Coast club, Crystal Palace’s place in the Premier League is cemented yet further with some needed financial muscle.

Even as Li Ruigang, Chairman of CMC Holdings, is gambling on the success of CFG, bringing with him a wealth of contacts, opportunities and experience to aid the expansion into China of an ambitious footballing model.

Perhaps most positively of all, even as big clubs benefit, little ones can too. As the Premier League’s revenue stream becomes truly gargantuan next season with the £5.14 billion television broadcasting deal, more investors are likely to come.

In the hope of higher profit margins, many are likely to gamble on the success of traditionally smaller clubs, injecting a much needed source of revenue and galvanising hitherto stagnant footballing clubs to perhaps new heights.

At the very least, the Premier League is set to have more purchasing power than ever. Business, it seems, is not all bad for football.

Football is changing. It may not be fast and it may not be loud, but it is changing nevertheless. Much of this drama will be played outside England; the rise of upcoming American franchises like Miami Beckham United and the intended ‘football revolution’ of Chinese Premier Xi Jinping will likely determine the interest in and extent of investment in football over the next decade.

Yet what is for sure is that this is to be welcomed, both for World football and the Premier League.

As the call goes up to cash in on the cards, the Premier League seems to be sitting on a flush.

Author Details

Thomas Wyer

Student and football fan. Aspiring Guillem Balague but have more in common with Chris Kamara. Managing to support both Ipswich and Galatasaray which, like being indifferent to marmite, makes me a bit of an oddity.

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