Mergers – GAME OF THE PEOPLE

FOOTBALL’s polarisation over the past decade has prompted league administrators and business people to discuss solutions that can prevent their clubs from being marginalised. The game has become corporatized, meaning money talks louder than ever before in football. Size really does matter, both for a club and a league.

The top five leagues in Europe represent the largest commercial markets. People talk about a football nation as a market these days when they discuss the growth of a club’s franchise. You only need listen to anyone from the rapidly growing football finance industry to hear phrases like “financing”, “expansion”, “global reach” and “facilities”. In the case of the latter, it isn’t stadium facilities, it is a term to describe borrowed money.

There’s another financial term that may soon become commonplace in big-time football: mergers and acquisitions. More specifically, we may be on the precipice of an era where leagues start to merge to achieve critical mass. How about a low country competition involving the cream of Belgium’s Pro League and the Netherlands’ Eredivisie?

Markets

Forty years ago, football’s top clubs came from a much broader geographic spread. Most European countries had a club that could compete, some more sustainably than others. In the Netherlands and Belgium, clubs like Ajax, Feyenoord, PSV Eindhoven, Anderlecht and Bruges could hold their own and give anyone a tough, two-legged tie.

Given these two countries were relatively small football “markets”, their clubs could not produce the resources needed to be continually successful on the international stage. Periodic moments of glory was really the best they could hope for. But it worked for a long time. The Netherlands, for example, produced three European champions who have won the top prize six times between them: Ajax (1971, 1972, 1973, 1995); Feyenoord (1970); and PSV Eindhoven (1988). Only England has had more different winners of the European Cup/UEFA Champions League (five).

Belgium have not had much success in the competition, having produced one finalist, Bruges in 1978, but Anderlecht became something of an expert in the now defunct European Cup-Winners’ Cup, lifting the trophy twice and losing in two finals. At various times, both countries have developed decent national teams, but as Belgium proved in the 2018 World Cup, most of their players are now employed abroad. Belgium may have finished third in the Russian World Cup, but only once has a Belgian team won through to the round of 16 in the UEFA Champions League.

Given the domination of the big five leagues and the strength of their domestic football, it has become clear Belgium and the Netherlands are in danger of going the same way as other parts of Europe, if they have not already. True, Ajax Amsterdam are a huge club, with impressive support and heritage, but they have to work very hard to compete even when they have a strong side. In 2019, they reached the last four of the UEFA Champions League and then sold their top players, benefitting from huge fees but dismantling their latest exciting team. This is the model that clubs from outside the very top leagues exist on, developing talent and selling it to the likes of Manchester United, Juventus and Barcelona. Ajax, along with Benfica and Porto of Portugal are particularly proficient at this strategy.

Concessions

The combination of Belgium and the Netherlands could create a compelling league, one that would be more attractive to sponsors, broadcasters and media. The big issue will be the fans, who will undoubtedly be opposed to the breaking-up a traditional structure. There would also have to be some concession made to lower level football in both countries. But the union of the ninth and 11^th strongest European leagues (according to the International Federation of Football History & Statistics) could create the sixth best across the continent, one that Deloitte believes could be worth € 400 million in broadcasting rights alone, compared to the € 80 million that both leagues each receive.

Both Belgium and the Netherlands, because of their size and history, have always been traders and merchants who have welcomed foreign involvement in society. Belgium’s capital, Brussels, is the home of the European Union and a gastronomic centre. The Dutch are a very mobile people who speak the best English in continental Europe. There are a lot of multinational companies across the Benelux region, including Anheuser Busch, KLM, Ahold, Heineken, Airbus and DSM.

The top clubs need to grow their revenue bases substantially if they are to become more competitive on the international stage. Average total income for Belgium’s top division is € 22 million, while the Netherlands totals € 33 million. Compared to the big five leagues, they both have a very long way to go: the Premier League average is € 293 million and the lowest, France, is € 95 million. The total revenues for the Eredivisie as a league amount to

€ 594 million and for Belgium’s Pro League only € 344 million.

By wage bills, Belgian and Dutch clubs are also trailing behind the elite group. Ajax and Anderlecht both pay around € 35 million per season, lower than the less wealthy Premier League clubs (Sheffield United’s wage bill in 2020-21 is reputed to be £ 30 million). Consider also that Ajax’s salaries are a fraction of the teams they try to compete against in European competition. A more prosperous, more high-profile league could mean higher wages.

Upside

Could it also result in higher attendances? Belgium’s average gate for the Pro League is, in normal circumstances, 10,600 , which is around 1,300 lower than the highest ever average. The figures have been quite consistent, but the highest club ground capacity is just 30,000 at Standard Liège’s Stade Maurice Dufrasne. Clubs like Bruges, Liège and Anderlecht can draw 20,000-plus crowds quite easily, but further down, half of the Pro League struggles to get above 10,000. The overall stadium utilisation rate is 64%, so there is some upside.

The Netherlands has a stadium utilisation rate of 88%, thanks to an average Eredivisie crowd of around 18,000. Attendances are actually higher than they were in the golden age of Dutch football. Ajax remain one of Europe’s top draws in Europe with an average of 53,000. The Netherlands’ big three, Ajax, Feyenoord and PSV, are all extremely well supported, but their crowds cannot go much higher without stadium development. The gap between the top and bottom in terms of gates is huge, but across the Eredivisie, all clubs are attracting healthy crowds.

The concept of a Belgium-Netherlands league – the BeNeLiga – has been discussed before, but increasingly, football people are concerned time is running out. Former Manchester City captain Vincent Kompany, for instance, said it was a matter of survival as the elite clubs are moving towards isolation by establishing their own league.

Belgium’s top clubs have agreed in principle but the Eredivisie has yet to vote on a merger. There are obvious benefits, both financial and technical, but plans to start such a competition may take longer than some advocates believe. At the moment, they are looking at 2025. It’s not just a question of taking 10 Dutch and eight Belgian and shaking it like a cocktail. It may take time, but if it does emerge, it could be very interesting.

Photo: Flickr James Gridland CC-BY-2.0

@GameofthePeople

HOW confusing is the relationship between the US and Mexico? On one hand you have the US president calling for a wall to be built that would keep out the “criminals” and on the other hand, the three amigos, US, Canada and Mexico are co-hosting the 2026 World Cup.

Given the US will host 60 of the 80 games, it would seem the Canadians and Mexicans are partners of convenience.

Mexico is hugely reliant on the US, hence people like Trump seem to say what they like to antagonise their neighbours. Around 76% of all Mexican exports find their way to the US and 37 million people of Mexican descent reside across the country.

Bizarre

Most recently, President Trump announced that relationships between the two countries are “outstanding” after discussions with his Mexican counterpart, Lopez Obrador. It’s a bizarre world – it wasn’t that long ago when Trump said he wanted to fill the river that divides the two countries with snakes and alligators to deter would-be illegal immigrants.

Now we hear there’s some muscle behind the project to merge Liga MX and Major League Soccer, creating a North American super league that can compete with Europe’s top competitions. American sport has a history of mergers and consolidation and Mexico’s decision to create a closed top league for five years has a hint of Americanisation about it. Liga MX is the most popular football league in the US, largely due to the huge Hispanic population.

Mexico is a football-crazy nation but their clubs often lack the polish of US clubs who are not only soundly organised, but structurally well financed and invariably have good infrastructure to support their teams. In terms of playing resources, Mexican clubs are ahead of US clubs, so if there should be a merger, you would assume that there will be some benefits for both sides.

However, the gulf between MLS and Liga MX teams could mean any super league would be somewhat unbalanced. While the US has made great progress domestically, just look at the CONCACAF Champions League which has been dominated by Mexican teams for a decade and a half. The last team other than a Mexican side to win the competition was Saprissa of Costa Rica in 2005. DC United and LA Galaxy, in 1998 and 2000 respectively, represent the only US successes so far.

It’s clear, though, that the people behind the concept have dollar symbols in their eyes, particularly broadcasting and commercial revenues. Businessman Alejandro Irarragorri, the head of the Orlegi Sports Group which has a stake in both Atlas FC and Santos Laguna, is a fierce advocate of the merger, claiming there was a certain logic in combining forces given a high percentage of Mexican football’s income comes from the US.

Irarragorri, who was linked with Newcastle United in 2019, wants to see more international investment in Mexican football. At present, around 47% of companies on the Mexican Stock Exchange invest in football in some shape or form, with firms like FEMSA, Cemex, Televisa, Calienta and Omnilife all holding stakes in clubs. There is a strong feeling that creating a dual market league could access overseas investment and make the Liga MX more marketable.

It could just stop a talent drain in the Mexican game. Mexico’s top clubs have long been accustomed to losing their best players to Europe – half of the country’s World Cup 2018 squad was registered with clubs from Germany, England, Netherlands, Portugal, Spain and Belgium – but the US and Canada are now hunting down promising young players from Liga MX. At the same time, Mexico is the biggest importer of foreign talent in Latin America.

Crowd appeal

Would the merger make a difference to attendances? If the partnership’s latest venture, the Leagues Cup, was a litmus test, it may have been deemed a failure. The eight-team competition drew average crowds of less than 18,000 and just 20,000 to the all-Mexican final in Las Vegas.

Attendances at MLS and Liga MX games are more or less equitable, the average in the MLS in 2019 was 21,300 which suggests the league may have plateaued for the time being. However, MLS has a couple of seriously big hitters, with Atlanta United drawing almost 53,000 per game and Seattle Sounders averaging over 40,000. Conversely, 15 of the 24 MLS franchises have sub-20,000 crowds.

Mexican crowds have been falling for the past few years and the 2018-19 average was 22,896 with Tigres UANL the highest at 40,995. Cruz Azul and Monterrey both exceeded 35,000 and América over 30,000. América, who play at Mexico City’s iconic Azteca stadium, are followed by more than 30% of the population in Mexico, but they are also the most unpopular club – a scenario typical of many European countries.

Declining gates, along with lower TV revenues – the clubs have the power to negotiate their own rights deals – and less sponsorship mean that Mexican football’s financial power is waning a little. The pandemic has exposed some of the economic shortcomings of a league that had ambitions to be the Premier League of Latin America.

The wealthiest club in Mexico is Guadalajara with a value of around US$ 300 million with Monterrey just behind them. These two clubs, along with América, were the only Mexican entities featured in Soccerex’s FF100 (Game of the People was engaged to provide the editorial content for the third consecutive year). Conversely, there were 15 US teams in that same report, underlining the solid foundations that typify so much of American top level sport.

But there are hurdles for a combined league to overcome. Travelling is a massive concern – Toluca to Los Angeles, for example, are more than 1,500 miles apart, and that’s just one of many long-hauls.

Removing the dream

Major League Soccer is run on a closed league basis, but Mexico has initiated that no promotion and relegation structure for the next five years. The US has restrictions on salaries and transfers in order to maintain competitiveness. The players who have moved from Mexico to the US have been bought through the Designated Player Rule (also known as the Beckham Rule) or Targetted Allocation Money, which allow clubs to sign up to three players outside their salary cap. The average MLS wage in 2019 was less than US$ 350,000 which was around 25% lower than the average in Liga MX where there are no salary caps.

While many folk like Irarragorri claim Mexico is a very competitive league with no class divide, clubs such as UNAL, Monterrey, Cruz Azul, América and Guadalajara are pulling away from the rest of the league. Moreover, the league has started to become a free-for-all mfor players out of contract.

Will the marriage of MLS and Liga MX materialise? Closed leagues actually go against the spirit of football in that the “dare to dream” aspect of the sport is compromised by a competition with no real losers. Promotion is all that some clubs can play for, they may never be league champions, but they can achieve their own “little victory” by securing a place in a higher division. The comfort of knowing you will always be safe also breeds stagnation and complacency. There is also the danger of such a league being a fad rather than something people want to exist indefinitely. From a commercial perspective, it may work for a while, but whether it improves the US teams remains to be seen. If it goes ahead, of course…

@GameofthePeople

Photos: PA Images