US appetite for English football – no sign of abating

A YEAR ago, Arsenal fans were calling for owner Stan Kroenke to ship-out of North London, Manchester United’s legions were pouring hatred on the Glazer family and Todd Boehly was a relatively unknown figure in English sport. Move the dial forward and Boehly and his consortium now owns Chelsea, the Glazers are supposedly looking for the best exit route from Old Trafford and Arsenal are standing astride the Premier League and all in the garden seems rosy. Nobody appears to be calling for Kroenke to leave the Emirates Stadium, proving that nothing lasts forever in football, not even the ire of dissatisfied customers.

US football club ownership is a growth industry: In 2022, Chelsea and Bournemouth were acquired by American investors, bringing the number of 100%-owned Premier clubs to six and another four that have minority US investment. Almost half of all Premier League revenues in 2021 were earned by US entities.

With Russia and China seemingly out of the picture, the most likely type of investors in English football are from the US or the Middle East. While the US sports team owner seeks some form of return, the likes of Saudi Arabia, Abu Dhabi and Qatar are looking for credibility and a way to improve their image. American owners are very different from the former Chelsea benefactor, Roman Abramovich, who poured money into the club and only asked that he could exercise his power by hiring and firing his managers.

The appeal of clubs from England and the other top football markets is driven by the revenue potential of the leagues, notably from commercial and broadcasting income streams that have grown enormously in the past decade. “There’s a feeling that these markets are not yet saturated, so there’s still scope for growth,” says former investment banker Craig Coben. “And the clubs have enormous fanbases that go back decades, with a degree of fan loyalty stickiness which can be leveraged.” US investors believe the longevity of the clubs, a crucial part of the heritage of English football, creates a certain type of immunity from business obsolescence.

There is a downside for US sports investors in that European leagues are open and clubs can suffer relegation from elite divisions, thereby decimating their income. This is in stark contrast to US structures. “Relegation can be an enormous blow, not just for the clubs, but also the owners,” adds Coben. “In the US, salary caps, the lack of relegation and the so-called college draft that enables less successful teams to have first choice on emerging young talent, all act as a stabilising mechanism.” It also means US team owners, because of greater certainty, can implement greater levels of cost control and future planning.

Coben describes Premier League football as a “hook and claw, somewhat carnivorous league,”, a form of “survival of the fittest”. Nevertheless, the cut and thrust of English football, indeed the European game, does not seem to have deterred partners. “Some have lost their shirts on football, but more recently, data has been informing decision-making. The US is at the forefront in the use of data and this has given investors greater confidence to enter the market,” says Coben.

There’s little doubt the value of elite football clubs has risen substantially over the past 10 years. When Boehly’s consortium purchased Chelsea, £ 4.25 billion changed hands. Abramovich, in 2003, paid Ken Bates, the Chelsea chairman, just £ 140 million for the club. When both Liverpool and Manchester United’s owners suggested they were open to offers for fresh investment, the anticipated valuation of the clubs fluctuated wildly, with United hitting the US$ 5 billion mark. “The top names haven’t just spent a lot of money on players and wages; at the same time, the strategic approach of some clubs has also dramatically increased the value of their franchises,” says Coben.

The value of club brands, a reflection of global franchise building, has also climbed substantially – in 2012, Manchester United’s brand was valued at US$ 853 million but by 2022, it had grown to US$ 1.45 billion. Manchester City, meanwhile saw their brand value rise from US$ 302 million to US$ 1.5 billion (source: Brand Finance). Contributing to this impressive growth rate has been broadcasting fees, increased sponsorship and the increasing polarisation of European football.

Will it continue or is the US penchant for European football assets a passing phase? With the global economy on the brink of a downturn and the ongoing war in Ukraine threatening to turn the lights off across parts of Europe, there will be challenges. “A lot of potential owners are very well capitalised and there is a high level of innovation that can access green-field opportunities in football, but after all is said and done, spending money on football is discretionary, so if the macroeconomic situation deteriorates, that could change investor sentiment. At the moment, however, it is difficult to see the current appetite subsiding,” says Coben.

So, what type of football club owner do you want?

WHY would anyone want to invest in a football club? It is a no-win situation, largely because football fans are fickle, clubs are not really big, well-run businesses in the scheme of things, and the owners are expected to stump-up cash and not expect any sort of return. In short, football club owners are benefactors, or at least, that’s how many supporters see the owners .

Liverpool, by their own lofty standards, are having a challenging time. This can be translated as the natural cycle of a club, where a successful side needs replenishing but a shabby job of succession planning has been carried out. Liverpool’s recent history has been built on some smart transfer dealings and an outstanding coach in Juergen Klopp. But his team has started to age and his methods are no longer innovative. Most managers go through this cycle as their unique selling point starts to be copied and bettered by others. Klopp is far from finished, but he’s no longer unique and the clubs and coaches that have been observing him have discovered what makes him tick.

Furthermore, the team that he relied upon now needs a rebuild and they need to start replacing some key figures. The likes of Henderson, Milner, Salah, Firmino and Van Dijk all need to be phased-out at some point in the near future.

Klopp is so popular that the easy response is to blame the owners of the club, Fenway Sports Group. They have done their bit and they’ve also given Klopp the resources to build a very good team. But in recent years, their investment has slowed considerably. There’s logic in that strategy, especially as the football industry has gone through the pandemic and seen some revenue streams badly impacted. FSG have adopted a transfer market policy that maintains a modest net spend. In some ways, this is a sensible tactic, but Liverpool are competing in a very uneven playing field. They always have and they’ve been beneficiaries themselves.

It is unreasonable for Liverpool fans to call for FSG to be gone? That the club should be put up for sale. Why? FSG are not reckless, they are not damaging the club or football by the way they operate. Maybe they are refusing to even trying to compete with state-run clubs, but is that so wrong?

For some years, Liverpool have believed their way was more ethical than the model that brought Chelsea success and then elevated Manchester City. They are not the only club to feel aggrieved by “new money” clubs like Chelsea and City – Arsenal and Manchester United also resented the rise of the new order. To Liverpool’s credit, they came through this and because of Klopp, they have battled cheek-to-cheek with City. But fighting on four fronts burned them out in 2021-22.

FSG, as owners of Liverpool FC, can do what they like. They are also in it for the long game, so they will know exactly what they are doing, be it conserving their cash or building a war chest in case there’s another twist in the covid tale, which is a possibility. Because they have decided to be more cautious in the transfer market doesn’t mean they should go. Who has the right to demand an owner departs a club?

And if FSG were to put the club up for sale, what sort of owner do Liverpool fans want? The rising force in club ownership is not hard-line middle eastern regimes, but US business. And this means a very different way to the likes of Roman Abramovich or Qatar Sports Investments. The US team owners run their assets with a view to making a return. Liverpool already have a US owner, so do Arsenal, Chelsea and Manchester United. Arsenal fans have been willing Stan Kroenke to leave for a couple of years, but given they are now currently top of the Premier League, the complaints have stopped. Chelsea are now US-owned and Todd Boehly won the fans over with a record summer spending spree. But if the results started to go bad, Boehly would be under pressure. Manchester United and the Glazers have a rocky relationship and the fans want them to leave, but if United were to be successful, you wouldn’t hear many complaints. Two years ago, everyone was praising Fenway, but now they are supposed to sell to satisfy the fans.

At the end of the day, football is not sustainable without the billionaire owners. They might not be liked, but without their dollars, the big clubs would not be able to compete. If Fenway were to sell Liverpool, it is just as likely that another tycoon with no apparent connection to the game would come along. And once again, it would be a cyclical situation. Good times, bad times… or maybe just less successful times.