Club owners – the good, the bad, the prudent

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

@GameofthePeople

Photo: PA

Non-league can still be a stakeholder concept

THE NON-LEAGUE football world often lives within a false economy that does little to dissuade clubs from flirting dangerously with financial ruin. Some clubs live way beyond their means, paying out everything they accrue and agreeing players’ wages that are totally unrealistic when one considers the earning power of the clubs.

It’s a questionable  business model – often a club is propped up by a few individuals ploughing-in money to keeping the club afloat. Mostly, clubs that live beyond their means are not successful – the number of clubs that are actually successful is very small. Of course, it does depend on how success is quantified, but mostly, little more than 10% of clubs in a 24-team division can experience true success each season. It begs the question, is money being well wisely in the non-league game?

The precarious nature of non-league football is best illustrated by a crude calculation revealing that football alone will struggle to support a club. Take, for example, a club that generates £2,500 per match from an average crowd of 350. On the other side of the balance sheet, that club might pay out around £ 2,000 per week over a 40-week season. That generates a significant gap, to be met from sponsorship and social income. And that does not take into account any infrastructure costs, bills, rates or expenses.

The seductive charm of the benefactor

Organic growth is near-impossible for many non-league football clubs. Gates fluctuate, but there is only so much upside a club can extract from the local community. In a town of 40,000 people, 1% of the population is 400, a reasonable expectation. Taking it above 2% is probably unrealistic in an age when there are so many distractions for people. Likewise, economics and demography also play their part in making organic growth difficult, although not impossible. A service-led economy in small-town Britain means lots of small retail outlets and no large employers. Therefore, sponsorship is restricted and those organisations that are “global” or “national” gain very little from sponsoring the local football club. The most loyal and long-term patrons are the firms and outlets that identify with the local community. Sponsorship from this segment may also be relatively limited and it can be a slow and ultimately fruitless courtship for clubs looking for substantial backing.

The alternative for some clubs is to seek “an investor”, which translated into football speak is “sugar daddy”, who basically bankrolls the club and asks for little in return. It is the quick route to inflating the wage bill, but is only ever short-term. This has long proved to be an unsustainable model that is tantamount to introducing an addictive substance into the finances of the club. Given these relationships are invariably two to five years, weening a club off football’s own version of quantitative easing can often be catastrophic.

The money injected into a club is rarely put to long-term use. The aim is instant success and this is interpreted as directing the cash injection towards players’ wages. There is little, if any, intention in using the cash more practically, such as new facilities, dressing rooms or even transport. So when the cash is withdrawn, the club invariably has nothing to show for the benefactor’s “investment”.

What the real world needs, a benign dictator 

There is no doubt that many benefactors are generous and gain little in return for their “Investment”. For some it is about tax efficiency, for others the love of the club. And, in extreme and more sinister circumstances, you cannot rule-out money laundering or criminal activity. The club takes the chance, not the supporters, but it should examine potential investors and be aware of reputational risk.

A genuine benefactor’s cash can be put to good use, such as improving infrastructure, and in doing so, take the pressure off other fund-raising efforts. By doing that, benefactors leave a legacy when they have – inevitably – departed a club. The benefactor can act as the catalyst for empowerment, allowing the club to move forward and develop a strategy of true ownership. The concept of “stakeholders” is not a new word, but there are very few clubs that “walk the talk” and genuinely empower the people for whom the club is an important part of their life. Without volunteer labour, youth football, supporters and sponsors, the club does not have true stakeholders.

A stakeholder-driven approach to governance

The management of a football should not just comprise people filling key roles at a club. That gives the club’s committee a very “operational” feel. To run a club as a business with a strategy, objectives and long-term view, the influence at the top has to be diverse and focused. Club officials are invariably concerned with “running the club” – they are part-time, after all –  and have little time to “change the club”. This is not a criticism, it is an observation based on the increasing  demands placed upon part-time clubs.

A club’s executive should be structured around stakeholders with representation from: the Board (if applicable); stakeholder groups (Supporters, Sponsors, local youth organisations); representation from, but not all, of the management committee (those responsible for the operational side of the club). To ensure motivation and creativity remains at a peak, executive positions should be for a defined period and certain positions should come up for annual or bi-annual election. This ensures that personal thiefdoms do not develop and accountability prevails. It will also enable succession to be accounted for, something which few clubs are able to achieve satisfactorily.

Making fans into stakeholders

Sports teams at an amateur level, such as some football, rugby, hockey and cricket, are run for the players. At the next level up, sport becomes a spectator event. Non-league clubs at a certain standard are run for the supporters more so than the players, whose relationship with a club is very short-term. While supporters tend to remain with the club for a lifetime, or at least a considerable amount of their lifetime, players lead a transient existence.

Rarely, though, aside from supporters’ clubs, do the fans become stakeholders in a club. Supporters groups rarely have a stake in the club, often only used as a glorified “sponsor”. Supporter ownership, such as that pioneered by Ebbsfleet, has had mixed results, but has rarely been any more successful than the regimes that preceded them. Consensus management is almost impossible in a sport that demands immediacy and spontaneity.

German football has taught us, in an age of oligarch and Middle Eastern influence, that supporter ownership – albeit on a partial basis – can be successful. Given the importance of the fanbase in non-league football, supporter bodies should have a significant share in the club, ideally between 30 and 50%. The shares could be distributed among an elected body that represents the supporters.

There is, however, something of a trend emerging where clubs are being driven by the fans. Every week there seems to be news of another club exploring the “community ownership” route. This will surely grow in the coming years as non-league attracts more and more fans marginalised by the cost of big-time football.

Making sponsors into stakeholders 

What, many people ask, do sponsors get out of donating money to a football club? One thing they should perhaps get is a say in how the money is spent. Why not? Would this not encourage financial sensibility and greater transparency? This could introduce a new dynamic to the relationship between the local community and the club. An advisory board, if you like.

Introducing sponsors into the equation would also bring fresh thinking to the table and demonstrate to the community that the club is spending the money it receives wisely and with due respect to the people who have donated it. A supervisory board could comprise three or four representatives from the local business community, those with a connection and relationship with the club. This idea could also act as a “back-stop” for the club in ensuring that the club is behaving appropriately.

Making youth into stakeholders

There is a growing trend among corporate bodies and indeed, sports clubs, to portray themselves as philanthropic organisations. This is laudable, but is often greeted with some scepticism. At the highest level, there is a feeling that the club is merely doing this to ease its own conscience, or even benefit from grants and public sector hand-outs. Ultimately, the product that a football club offers is football itself.

Youth football is often detached from senior football to such an extent that the youngsters who play in youth structures rarely feel part of the so-called “parent” club. There are various reasons for this, but it can mean that young players graduate from the under-8 level to under-18 level and then disappear from view. Some of these players may end up with other clubs or eventually return to the parent club when they have gained experience elsewhere.

Youth development should be a priority for a non-league club and should be the breeding ground for young talent. If there is a level of football that should demand a certain percentage of homegrown players, it should be non-league.

In order for youth football to be a part of a parent club, the latter has to ensure its brand is compelling and strong enough to build a franchise where the creation and running of youth clubs adheres to its rules and conditions.

Commitment has to be two-way, but the parent club has to ensure it creates a structure that facilitates progression and nurturing – and belonging. This is a challenge, given that youth football is often disparate and reliant on parents who wish to be connected with their offspring’s out-of-school activities.

Making the community into stakeholders

If a club wants to claim it is “part of the community”, it has be represented on bodies other than those created by itself. It should also link-up with other sports organisations in its town to help form a strong “sport-oriented” body. Clubs can learn from each other. Although other sports do not attract the spectator interest of football, rugby and cricket clubs are generally better organised than football and have a greater level of player and youth engagement.

The way forward

Football is an emotional sport and old habits die hard. There is a real danger of too much “living for the moment” and not enough awareness of the consequences of ill-conceived decision-making. The heart, as they say, often rules the head. In addition, the blanket coverage of big-time football that dominates the media, presents non-league with tough competition.

All is not lost, though. When supporters of the top clubs claim “the club is ours”, they could not be more removed from reality. The club owns the supporters, not the other way around. The club drip-feeds the opium of top level football and all its commercial trimmings. The fans pay a high price to watch their teams, part with their money for souvenirs, shirts, food and drink and even pay membership for the privilege of paying even more cash for tickets. It is a bubble that, at some stage, may start to lose air.

Non-league football has the opportunity to engage with its audience and really introduce the concept of stakeholder ownership, and that doesn’t necessarily copying the model established by a group of former Manchester United players. In the past, there has been too much “capital and labour” division among those that sit in the directors’ box and those that follow the clubs. This is not to say that non-league clubs should become a myriad of “people’s republics”, but they should certainly be less like the old DDR! All factions, working together for the good of a common cause, should be the aim, with an underlying philosophy that recognises the value of gratitude.

“This really is your club,” should be the message that every ambitious club tells its supporters, its backers, its youngsters and the local community. Don’t just say it. Live it. Make it a reality, for the sake of the future of the game.

www.gameofthepeople.com

twitter: @gameofthepeople

Non-league and the stakeholder concept

THE NON-LEAGUE football world often lives within a false economy that does little to dissuade clubs from flirting dangerously with financial ruin. Some clubs live way beyond their means, paying out everything they accrue and agreeing players’ wages that are totally unrealistic when one considers the earning power of the clubs.

It’s a questionable  business model – often a club is propped up by a few individuals ploughing-in money to keeping the club afloat. Mostly, clubs that live beyond their means are not successful – the number of clubs that are actually successful is very small. Of course, it does depend on how success is quantified, but mostly, fewer than 10% of clubs in a 22-team division can experience true success each season. It begs the question, is money being well wisely in the non-league game?

The precarious nature of non-league football is best illustrated by a crude calculation revealing that football alone will struggle to support a club. Take, for example, a club that generates £2,000 per match from an average crowd of 350. On the other side of the balance sheet, that club might pay out around £ 2,000 per week over a 40-week season. That generates a significant gap, to be met from sponsorship and social income. And that does not take into account any infrastructure costs, bills, rates or expenses.

The seductive charm of the benefactor

"One day, you will all be stakeholders"
“One day, you will all be stakeholders”

 

 

 

 

 

Organic growth is near-impossible for many non-league football clubs. Gates fluctuate, but there is only so much upside a club can extract from the local community. In a town of 40,000 people, 1% of the population is 400, a reasonable expectation. Taking it above 2% is probably unrealistic in an age when there are so many distractions for people. Likewise, economics and demography also play their part in making organic growth difficult, although not impossible. A service-led economy in small-town Britain means lots of small retail outlets and no large employers. Therefore, sponsorship is restricted and those organisations that are “global” or “national” gain very little from sponsoring the local football club. The most loyal and long-term patrons are the firms and outlets that identify with the local community. Sponsorship from this segment may also be relatively limited and it can be a slow and ultimately fruitless courtship for clubs looking for substantial backing.

The alternative for some clubs is to seek “an investor”, which translated into football speak is “sugar daddy”, who basically bankrolls the club and asks for little in return. It is the quick route to inflating the wage bill, but is only ever short-term. This has long proved to be an unsustainable model that is tantamount to introducing an addictive substance into the finances of the club. Given these relationships are invariably two to five years, weening a club off football’s own version of quantitative easing can often be catastrophic.

The money injected into a club is rarely put to long-term use. The aim is instant success and this is interpreted as directing the cash injection towards players’ wages. There is little, if any, intention in using the cash more practically, such as new facilities, dressing rooms or even transport. So when the cash is withdrawn, the club invariably has nothing to show for the benefactor’s “investment”.

What the real world needs, a benign dictator that empowers

There is no doubt that many benefactors are generous and gain little in return for their “Investment”. For some it is about tax efficiency, for others the love of the club. And, in extreme and more sinister circumstances, you cannot rule-out money laundering or criminal activity. The club takes the chance, not the supporters, but it should examine potential investors and be aware of reputational risk.

A genuine benefactor’s cash can be put to good use, such as improving infrastructure, and in doing so, take the pressure off other fund-raising efforts. By doing that, benefactors leave a legacy when they have – inevitably – departed a club. The benefactor can act as the catalyst for empowerment, allowing the club to move forward and develop a strategy of true ownership. The concept of “stakeholders” is not a new word, but there are very few clubs that “walk the talk” and genuinely empower the people for whom the club is an important part of their life. Without volunteer labour, youth football, supporters and sponsors, the club does not have true stakeholders.

A stakeholder-driven approach to governance

The management of a football should not just comprise people filling key roles at a club. That gives the club’s committee a very “operational” feel. To run a club as a business with a strategy, objectives and long-term view, the influence at the top has to be diverse and focused. Club officials are invariably concerned with “running the club” – they are part-time, after all –  and have little time to “change the club”. This is not a criticism, it is an observation based on the increasing  demands placed upon part-time clubs.

A club’s executive should be structured around stakeholders with representation from: the Board (if applicable); stakeholder groups (Supporters, Sponsors, local youth organisations); representation from, but not all, of the management committee (those responsible for the operational side of the club). To ensure motivation and creativity remains at a peak, executive positions should be for a defined period and certain positions should come up for annual or bi-annual election. This ensures that personal thiefdoms do not develop and accountability prevails. It will also enable succession to be accounted for, something which few clubs are able to achieve satisfactorily.

Making fans into stakeholders

Sports teams at an amateur level, such as some football, rugby, hockey and cricket, are run for the players. At the next level up, sport becomes a spectator event. Non-league clubs at a certain standard are run for the supporters more so than the players, whose relationship with a club is very short-term. While supporters tend to remain with the club for a lifetime, or at least a considerable amount of their lifetime, players lead a transient existence.

Rarely, though, aside from supporters’ clubs, do the fans become stakeholders in a club. Supporters groups rarely have a stake in the club, often only used as a glorified “sponsor”. Supporter ownership, such as that pioneered by Ebbsfleet, has had mixed results, but has rarely been any more successful than the regimes that preceded them. Consensus management is almost impossible in a sport that demands immediacy and spontaneity.

German football has taught us, in an age of oligarch and Middle Eastern influence, that supporter ownership – albeit on a partial basis – can be successful. Given the importance of the fanbase in non-league football, supporter bodies should have a significant share in the club, ideally between 30 and 50%. The shares could be distributed among an elected body that represents the supporters.

There is, however, something of a trend emerging where clubs are being driven by the fans – for example, Lewes and FC United of Manchester. Every week there seems to be news of another club exploring the “community ownership” route. This will surely grow in the coming years as non-league attracts more and more fans marginalised by the cost of big-time football.

Making sponsors into stakeholders 

What, many people ask, do sponsors get out of donating money to a football club? One thing they should perhaps get is a say in how the money is spent. Why not? Would this not encourage financial sensibility and greater transparency? This could introduce a new dynamic to the relationship between the local community and the club. An advisory board, if you like.

Introducing sponsors into the equation would also bring fresh thinking to the table and demonstrate to the community that the club is spending the money it receives wisely and with due respect to the people who have donated it. A supervisory board could comprise three or four representatives from the local business community, those with a connection and relationship with the club. This idea could also act as a “back-stop” for the club in ensuring that the club is behaving appropriately.

Making youth into stakeholders

There is a growing trend among corporate bodies and indeed, sports clubs, to portray themselves as philanthropic organisations. This is laudable, but is often greeted with some scepticism. At the highest level, there is a feeling that the club is merely doing this to ease its own conscience, or even benefit from grants and public sector hand-outs. Ultimately, the product that a football club offers is football itself.

Youth football is often detached from senior football to such an extent that the youngsters who play in youth structures rarely feel part of the so-called “parent” club. There are various reasons for this, but it can mean that young players graduate from the under-8 level to under-18 level and then disappear from view. Some of these players may end up with other clubs or eventually return to the parent club when they have gained experience elsewhere.

Youth development should be a priority for a non-league club and should be the breeding ground for young talent. If there is a level of football that should demand a certain percentage of homegrown players, it should be non-league.

In order for youth football to be a part of a parent club, the latter has to ensure its brand is compelling and strong enough to build a franchise where the creation and running of youth clubs adheres to its rules and conditions.

Commitment has to be two-way, but the parent club has to ensure it creates a structure that facilitates progression and nurturing – and belonging. This is a challenge, given that youth football is often disparate and reliant on parents who wish to be connected with their offspring’s out-of-school activities.

Making the community into stakeholders

If a club wants to claim it is “part of the community”, it has be represented on bodies other than those created by itself. It should also link-up with other sports organisations in its town to help form a strong “sport-oriented” body. Clubs can learn from each other. Although other sports do not attract the spectator interest of football, rugby and cricket clubs are generally better organised than football and have a greater level of player and youth engagement.

The way forward

Football is an emotional sport and old habits die hard. There is a real danger of too much “living for the moment” and not enough awareness of the consequences of ill-conceived decision-making. The heart, as they say, often rules the head. In addition, the blanket coverage of big-time football that dominates the media, presents non-league with tough competition.

All is not lost, though. When supporters of the top clubs claim “the club is ours”, they could not be more removed from reality. The club owns the supporters, not the other way around. The club drip-feeds the opium of top level football and all its commercial trimmings. The fans pay a high price to watch their teams, part with their money for souvenirs, shirts, food and drink and even pay membership for the privilege of paying even more cash for tickets. It is a bubble that, at some stage, may start to lose air.

Non-league football has the opportunity to engage with its audience and really introduce the concept of stakeholder ownership. In the past, there has been too much “capital and labour” division among those that sit in the directors’ box and those that follow the clubs. This is not to say that non-league clubs should become a myriad of “people’s republics”, but they should certainly be less like the old DDR! All factions, working together for the good of a common cause, should be the aim, with an underlying philosophy that recognises the value of gratitude.

“This really is your club,” should be the message that every ambitious club tells its supporters, its backers, its youngsters and the local community. Don’t just say it. Live it. Make it a reality, for the sake of the future of the game.

Main photo: Peter Else

www.gameofthepeople.com

twitter: @gameofthepeople