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.

A new, less cavalier era beckons for Chelsea

SOME have called it a scattergun approach, others have described it as merely careless, but Chelsea’s transfer market activity since 2003 has been characterised by mass purchases, bold statements and knee-jerk decisions. No matter how many top players Chelsea acquired during the Roman Abramovich era – and there have been many that have worked well –  there have been many mistakes and tales of big-money signings failing to live up to expectations.

The list seems quite endless and includes Mutu, Crespo, Shevchenko, Deco, Torres, Remy, Ba, Rahman, Batshuayi, Morata, Drinkwater, Kepa and, dare we say, Lukaku. Chelsea have sometimes acted like a greedy kid in a sweetshop: “I want, I want, I want.” Perhaps there have been occasions where a big name has been signed to deprive others and there have been cases of downright poor judgement. If further evidence has to be provided as to. Chelsea’s carelessness, let’s just list three players: Mo Salah (Roma and Liverpool), Kevin De Bruyne (Wolfsburg and Manchester City) and Romelu Lukaku (WBA, Everton, Man.Utd and Inter Milan).

But this approach has undoubtedly been consigned to the past with the club on the brink of being taken over by the consortium led by American businessman Todd Boehly. Chelsea will be US-owned and that means a very different attitude to sports investment from the one taken by Abramovich and his entourage. Abramovich appeared to ask for little in return for his consistently committed patronage, thereby making him popular with the Chelsea faithful, but the US ownership team will surely demand a return and a more measured strategy around cash outlay and squad building.

It may have been Chelsea had seen the best of the Abramovich years, despite winning the Champions League for the second time in 2011. They had become a cup team over the past five years and since Pep Guardiola and Jürgen Klopp moved into Manchester and Liverpool respectively, Chelsea’s position had been on the decline. Their last title challenge was in 2017 and the past six seasons have delivered four trophies (it may be five if they win the FA Cup on May 14). Compared to the six seasons starting with José Mourinho’s appointment, when they won eight, and the second six-year period when they won five, it is clear Chelsea’s ability to win silverware has declined or rather, has been challenged by smart competition. Furthermore, their league placings have also fallen away and given they are likely to finish third or fourth in the Premier in 2021-22, their last top two position was in 2017.  

Given Chelsea have a reputation for being a hire and fire club with respect to managers, it is no coincidence the two most successful clubs at present have had their managers for some time. In six years, Chelsea have had Antonio Conte, Maurizio Sarri, Frank Lampard and Thomas Tuchel. In that same timeframe, Manchester City and Liverpool have had Guardiola and Klopp. At some point, the new owners may well question this strategy for its short-termism. It has worked to a point – witness the number of trophies – but less so recently.

Chelsea may have seen the best of the Abramovich era and had become a cup team while Manchester City and Liverpool slugged it out for the title.

Another aspect of Chelsea’s last 19 years has to be the number of young players being loaned out in the market. At present, there are almost 30 players on loan at clubs like AC Milan, Besiktas, Venezia, Rapid Vienna, Lokomotiv Moscow and Flamengo. Some, such as Michy Batshuayi and Baba Rahman, seem to have been at the club for years, but have little hope of making it at Chelsea. This is really inefficient player management and can destroy their careers, even if Chelsea might get a return on the continual lending of their services. Often, it is a way of off-loading a player who has been bought (Batshuayi cost £ 33 million) who hasn’t worked out. According to football finance professionals, the buy and loan model is very unsatisfying for the players.

As much as Chelsea supporters love Stamford Bridge, the harsh reality is the club needs to rebuild or move to remain competitive. The capacity is barely 40,000, capable of hosting 20,000 fewer people than Arsenal, Tottenham and West Ham. Abramovich tried to launch plans to build a new super stadium designed by prestigious architects Herzog & de Meuron, but the £ 500 million project was abandoned in July 2018 after he ran into problems with the UK government over his immigration status. In hindsight, this may have been the beginning of the end for Abramovich and Chelsea and he rarely saw the team in action from that point. It was probably unreasonable to expect him to continue his ownership when he couldn’t even enter the country. With regards to the stadium, it will be interesting to see if the consortium will revisit the possibility of a completely new home or will completely rebuild on the existing site. The club’s matchday income is generally way behind their chief rivals in England, so this revenues stream offers plenty of upside.

So Chelsea will, like some of their peer group, Arsenal, Liverpool and Manchester United, become influenced by US sports investor mentality. This may actually strengthen Manchester City’s hold on the English game but it will certainly mean success will become more irregular and Chelsea will have to adjust to a new type of ownership model. It is fairly certain that when the new management rolls into town, they will use many of the tools that are currently being adopted by the most successful  and intelligent clubs in world football. Data will be key, intelligent use of assets will be a prerequisite. It’s not bad news, because Chelsea’s previous model was the equivalent of a “sugar daddy” with cash to spend and few questions asked, at least that what it seemed to resemble. It was never going to last forever, because it couldn’t – football finance expert Kieran Maguire commented that Chelsea were losing £ 900,000 per week, a situation that was completely unsustainable. Nevertheless, Stamford Bridge regulars will forever consider Roman Abramovich a “good owner”, but it is possible Chelsea will be more sensibly run going forward.