Why are Chelsea worth so much?

Why did Chelsea go for the price it did when football finance guru Kieran Maguire calculates its real worth at £2.3 billion? (Although this is based on a comparison with Manchester United which would some would argue is invalid given their recent poor performance).

One answer is scarcity. Chelsea ranked eighth in revenue in last year’s Deloitte Money League. None of the rest of the clubs in the top 10 have changed ownership or even been publicly for sale in the last 10 years (the most recent is seventh-ranked Paris Saint-Germain, acquired by Qatar Sports Investments in 2011).

The top three ranked clubs — Barcelona, Real Madrid and Bayern Munich — are all governed by fan or member models that prevent a private takeover. Opportunities to buy European football clubs of Chelsea’s size, with a huge international profile and a recent track record of success at the elite level, are extremely rare.

European football clubs are cheap

In comparison to US sports franchises, European football clubs are relatively cheap to buy. That even goes for Chelsea who, at £2.5 billion, sold for approximately five times their revenue; in recent years it has been common for NFL or NBA franchises to command prices of between seven and 10 times their revenues in order to change hands.

In the specific case of Clearlake — who The Athletic understands will own approximately 62 per cent of Chelsea and joint-control rights with Boehly’s group — it also helps that European football is a significantly less regulated environment. Private equity firms are not allowed to own majority stakes in NBA, MLB or NHL teams, and the NFL does not allow private equity investment at all.

But the primary reason why a sale price of £2.5bn was considered reasonable by all of the most serious Chelsea bidders is because they believe football’s financial pie is going to get a lot bigger.

The Athletic has been told that Chelsea’s new owners believe this growth can be achieved by smart investments in the club’s infrastructure — namely, modernising and expanding Stamford Bridge — as well as placing greater emphasis on the academy to help ensure the men and women’s first teams continue to succeed. This continued success is expected to power increases in commercial revenue, while positioning the club to earn a greater share of the benefits from more lucrative broadcast and digital streaming agreements.

Virtual reality attendance?

Maguire says, “What they’re hoping is that someone is going to shell out for a virtual reality headset and that they’ll be willing to pay extra to have the matchday experience of effectively sitting in a seat at Stamford Bridge. They are convinced there are lots of people out there willing to do that, and the technology is almost there. That could be one of the additional revenue streams.

In the short term, there is some low-hanging financial fruit for Boehly and Clearlake to get their teeth into. Chelsea’s bloated wage bill — £333 million according to the accounts published in December — contains plenty of fat to trim, while the £120 million that Abramovich paid out to compensate sacked managers and their various backroom staffs over 19 years of ownership is a powerful reminder to the new regime of the financial benefit of stability.

Threat of financial calamity removed from Baggies

West Bromwich Albion had effectively been in decline ever since the club was sold to a Chinese consortium in August 2016, paying a figure north of £200m to buy former owner Jeremy Peace’s stake. Controlling shareholder Guochuan Lai’s ownership was fairly disastrous for the club, but his unloved tenure finally came to an end after Bilkul Football WBA, a company ultimately owned by Florida-based entrepreneur Shilen Patel and his father Dr Kiran Patel, acquired an 87.8% shareholding in West Bromwich Albion Group Limited, the parent company of West Bromwich Albion Football Club. This change in ownership was urgently required, due to the numerous financial problems facing West Brom, including growing high-interest debt and serious cash flow concerns, following years of no investment from the former owner. Indeed, West Brom’s auditors had already rung the alarm bell in the 2021/22 accounts when they cast doubt on the club’s ability to continue as a going concern without making player s

Gold standard ground boosts Tottenham's income

The gold standard in European football grounds is the Tottenham Hotspur stadium in north London, a £1bn construction project completed in 2019. Its impact on the club’s finances has become increasingly clear as the effects of the pandemic have faded. Previously, the average fan would spend less than £2 inside the ground on a typical match day, but now that figure is about £16, thanks to new facilities including the longest bar in Europe and an on-site microbrewery. Capacity has gone up from 36,000 at the club’s previous home of White Hart Lane to 62,000. The new stadium — built on land adjacent to White Hart Lane — has opened the door to a broad range of other events that have helped to push commercial income up from €117mn in 2018 to €215mn in 2022. Last year, Tottenham hosted US singer Beyoncé for five nights on her global Renaissance tour, two NFL matches, as well as rugby games and heavyweight boxing bouts. Money brought in from football has gone up too. Match day income is

Spurs to sell minority stake

Tottenham Hotspur is in talks to sell a minority stake in a deal that could value it at up to £3.75 billion and pave the way for Joe Lewis and his family to sever ties with the Premier League football club. Tottenham chairman Daniel Levy is seeking an investment that values the club at between £3.5 billion and £3.75 billion, including debt. While the terms of any deal have not been finalised, City sources expect Spurs to sell about 10 per cent. The club is being advised by bankers from Rothschild on the sale. Tottenham wants to raise fresh capital for new player signings and to help fund the development of an academy for its women’s team, as well as a 30-storey hotel next to its north London stadium. The financier Amanda Staveley, who brokered the deal for Saudi Arabia’s Public Investment Fund to take over Newcastle United, is understood to be among the parties to have expressed an interest in Tottenham. Staveley’s fund, PCP Capital Partners, has raised about £500 million to depl

The Political Economy of Football V2

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