WHY would anyone invest in football? Historically, the game has failed to provide even a modest return and often, the club owner has merely been the scapegoat for disappointed fans. Although football has changed and, at the highest level, clubs are making profits, owners are rarely appreciated and certainly not liked. The number of clubs who have ownership issues in England, for example, is extraordinarily high.
At the start of January, Charlton Athletic, who had been part of the multi-club empire of Belgian Roger Duchatelet, was taken over by East Street Investments, a company that has Abu Dhabi backing. Charlton fans had long been unhappy about their previous owner, but with the arrival of middle eastern money, there will undoubtedly be raised expectations in south London.
At least 25% of the Premier League is less than enamoured by their club owners, including Arsenal, Manchester United, Newcastle United and West Ham United. The test for any owner is based on the team’s performance – if they get on-pitch activity right, then the benefactor is looked upon favourably. If the team struggles and there’s a lack of “investment”, the owner is deemed to be a bad one. It’s a black and white situation.
KPMG Football Benchmark’s latest paper on ownership, based on academic research undertaken by Bull and Whittam1, lists four different motivations behind buying a football club: strategic capital; economic capital; cultural capital; and social capital.
Strategic capital often implies a political reason for owning a club. As KPMG says, football can be a vehicle for countries, companies or individuals to grow their brand awareness. Paris Saint-Germain and Manchester City are two good examples of this type of investor behaviour. PSG pulled-off the greatest soft power play when they paid € 200 million for Neymar, out-muscling Barcelona in securing their prize asset. Although Qatar has been on something of a charm offensive as their World Cup looms, the Neymar transfer did nothing for their reputation but merely demonstrated how deep their wallets are.
Economic capital is used to achieve global ownership, as seen with US sports franchise owners. “A key reason behind football club investment is to operate it as a business in order to gain dividends and capital growth,” said KPMG. The Glazer family’s ownership of Manchester United is a good case study, although they are, in many ways, typical of US investors. At present, the Glazers are coming under fire once more as Manchester United underperform, despite being the richest club in England. Arsenal fans are extremely unhappy about Stan Kroenke, staging protests and asking him, “We care, do you?”.
Over in east London, West Ham’s supporters recently confronted the Sullivan-Gold axis, an ongoing struggle that is partly fuelled by the club’s unsuccessful move to a soulless new stadium.
There are other reasons why a wealthy individual or company might consider buying a football club, such as tax optimisation, speculation for future gains from playing success, the chance to leverage property development, access to high net worth individuals. Some potential new owners quickly lose enthusiasm if the club’s ground is somehow out of reach
One theory about the rationale behind the investment into Wolverhampton Wanderers by China’s Fosun International was the possibility of HS2-related business. Fosun has links with engineering companies, including high-speed rail experts.
Cultural capital amounts to local ownership, such as wealthy businessmen (a traditional football ownership model in many ways) and philanthropic individuals who want to put something back into the community. This is more typical of clubs from smaller towns and is invariably a world away from the top level of the game.
Social capital is characterised by supporter-ownership, which has its limitations, although it hasn’t compromised clubs like Real Madrid and Barcelona, both of whom are still fan-owned. In Germany, the 50+1 regulation means that virtually every club has an ownership model with fans holding the majority share.
With many clubs now broadening their business model – Real and Barca are branching out into start-up initiatives – the shape of the world’s football clubs is changing. The wealthier they become and the more revenue opportunities open up, the likelihood that they will change hands among the very rich. Newcastle United, whose fans have had a running battle with retail tycoon Mike Ashley for the past few years, may be the next Premier League club to be sold as Saudi Arabia’s Private Investment Fund closes in on a deal. While the Geordies will be pleased to end the decade-long Ashley era, some will have a dilemma over Saudi ownership and whether it sits well with their own values, given the country’s poor human rights record.
Ashley’s commitment has been questioned by fans for some years. The equation is simple – owner commitment effectively means a willingness to inject cash on a regular basis and supporter goodwill comes from the club being successful. Newcastle have not been successful and they have not spent well.
If the club is as wealthy as Manchester United, the perception is there’s no excuse for not being successful. Hence, the fans are currently very unhappy. The margin between success and failure is so narrow that the manager has to bear the brunt of “failure” – from an owner’s perspective, if investment does not lead to instant gratification, the manager goes, not the owner and not a whole training ground full of players.
There are many examples of “good owners” that are not always publicised. Leicester City’s late chairman, Vichai Srivaddhanaprabha, was a popular figure and his wealth helped the club win the Premier League in 2016. Less high-profile club owners such as Tony Bloom (Brighton), Dean Hoyle (formerly Huddersfield) and Mike Garlick (Burnley) have all won enormous respect for the way they have run their clubs.
But fans should never believe their ownership structures are in place forever. Some do last a while – nobody envisaged 15 years of Abramovich, for example – but mostly, they are global business folk and when the portfolio doesn’t look right, or when public opinion strays too far away from them, they will move on and sell their asset to the next eager tycoon. Premier League clubs are, in the main, an attractive proposition, especially in the age of spiralling broadcasting fees. It may be a different story if the bubble should suddenly burst.
1 Bull, M. and Whittam, G. (2020) “Sustainable value creation? Entrepreneurial orientations in the football industry”. International Journal of Entrepreneurial Behavior & Research. https://www.emerald.com/insight/content/doi/10.1108/IJEBR-07-2020-0498/full/html