The Political Economy of Football V2

Farhad Moshiri is in advanced talks to sell Everton to a little-known US businessman for £400m. Talks between Moshiri and Maciek Kaminski, a Minnesota-based investor, have progressed in recent days.  Talks with Moshiri earlier in the year faltered and stalled beyond an exclusivity period. Talks have been complicated by the recent financial instability in the UK.   The final sum also depends on financing for Everton's £500m new stadium. Kaminski was previously bidding with former Chelsea and Manchester United chief executive Peter Kenyon, investment banker Michael Klein and John Thornton, chairman of US miner Barrick Gol.  However, the trio have now split up. Kaminski emigrated to the US from Poland in the late 1960s and was an investment adviser at brokerages before entering property investment. A successful sale would mean that half of the Premier League clubs would have US shareholders.

I am old enough to remember when floodlights were an innovative novelty and games in midwinter finished in near darkness.   These days we take them for granted, but energy price rises have focused attention on their cost. Exeter City chairman Julian Tagg, like many executives in football, knows that hard times could be on the horizon amid the cost of living crisis this winter. As energy bills soar for clubs and fans, the margins will get even tighter for EFL and non-League clubs. “Every club has a huge dependence on bums on seats,” Tagg says, with Exeter having made an impressive start to life in League One after promotion last season. “Lots do great work but you’re only as good as the number of bums on seats at our level. Everyone is going to feel that. Cashflow is king and many football clubs have to walk a tightrope on that front.” League Two Mansfield Town have announced that their upcoming home match against Walsall on October 15 will be moved to an earlie...

AC Milan went bust, failing both on the pitch and financially.  After years of practically non-existent management it was spraying money on players and losing €150m a year despite turning over €200m.  Tycoon politician Silvio Berlusconi treated it like a toy. Berlusconi sold the club to a Chinese investment group which financed the purchase with a loan from US investment group Elliott.  But the Chinese group soon went bust and Elliott took over.  Last month Elliott sold it to US sports club owner RedBird Capital Partners for $1.2 billion, representing a tidy if undisclosed profit. Chief executive Ivan Gazidis, formerly of Arsenal, completely changed the business operation.  He prioritised partnerships and sponsorships - 'low hanging fruit' that had been neglected.   He invested in better support for the sales teams and software for clients to measure the return on their sponsorship money. Partnership revenues have increased from €50m when Elliott arriv...

With the tanking of the pound, Manchester United's debt pile has grown in sterling.   Football finance guru Kieran Maguire comments: ' Manchester United have borrowed $650,000,000 from US banks. When United published their accounts on Friday this was shown using the 30 June exchange rate at £530 million. Using the exchange rate this morning it is now £612 million, an increase of £82 million.' The authoritative Swiss Ramble has noted: 'O perational decline was exacerbated by the impact of the weakening of Sterling on non-cash finance costs, as unrealised forex losses on unhedged USD borrowings meant that net interest experienced an adverse swing of £75m from £13m recoverable prior year to £62m payable.' There is a risk of a perfect storm of increased interest rates plus debt repayments in US dollar equivalents. The collapse of the pound will make British clubs more attractive to dollar buyers, notably existing sports franchises in the US.

Manchester United recorded a record £115.5m net loss, saw their net debt rise £95.4m to a total of £514.9m, paid £33.6m to the Glazer family and now boast the Premier League’s biggest wage bill while finishing last season as the sixth-best team. This was all revealed when United released their financial results for the year ending June 2022. Although United’s overall revenue increased by 18 per cent to £583.2million (£494.1m 2021), largely down to fans returning to Old Trafford for the entire 2021-22 season, they still lost over £2m a week. United said the £115.5million net loss — the biggest in the club’s history — is, in part, down to the British pound tanking against the US dollar. Another consequence of the British pound’s weakness against the US dollar was seen in the interest payments on their debt, costing £62.2million. United’s accounts revealed the Glazer family received £33.6million in dividends throughout the financial year, which is notably more than the normal £22m...

The Premier League has published details of the TV payments to clubs for the 2021/22 season, reports the authoritative Swiss Ramble from Zurich. These amounted to £2.5 bln, ranging from £153m for champions Manchester City to £101m for 20th placed Norwich City (the first time the bottom club got more than £100m). The TV money distribution method in the Premier League remains the most equitable of Europe’s major football leagues with the ratio from top to bottom earning club being only 1.5. This is much better than other leagues: Serie A 2.7, Bundesliga 3.1, Ligue 1 3.1 and La Liga 3.5. Each of the 20 Premier League clubs received £87.5m as an equal share, coming from domestic rights £31.8m, overseas rights £48.9m and commercial revenue £6.8m. The largest increases compared to the previous season came at Brighton, up £16m, and Arsenal, up £11m. In contrast, three clubs received over £10m less than 2020/21: Leeds £17m, Everton £13m and Leicester City £11m. A club that is frequentl...

After 11 years of Maxim Demin, Bournemouth are on course for a new era of ownership.  American billionaire Bill Foley, the majority owner of the National Hockey League’s (NHL) Vegas Golden Knights, is heading a consortium now in exclusive talks to buy the Premier League club. Foley is known to be a fiercely ambitious owner. In the NHL, the annual salary cap is $81.5million (£71.4m), which means teams are only allowed to spend money on player wages within that limit. But Foley has spent the absolute maximum amount the league permits, acquiring high-price players on big contracts in a bid to make the fledgling Golden Knights as competitive as possible immediately against teams who had already existed for decades. But there are some downsides to Foley’s aggressive methods as his patience levels do not seem very high. The Golden Knights have fired two promising head coaches, Gerard Gallant and Peter DeBoer, in their five seasons of existence. Few, though, can ...

Early season postponements after pitch problems at the CBS Arena have cost Coventry City £1m in cash flow.   The money may not all be recovered when the potentially lucrative fixtures are replayed as this will happen midweek when attendances are usually lower:  https://www.coventrytelegraph.net/sport/football/football-news/coventry-city-dave-boddy-postponements-25028759

The private equity group Silver Lake has increased its stake in Manchester City's parent company.  It is now the second largest shareholder. It acquired a 4.1 per cent share in City Football Group from China Media Capital, taking its total holding to 14.5 per cent. Silver Lake's growing sports portfolio shows how the balance of power in football is changing as billionaires and private equity groups acquire clubs and leagues. China Media Capital still owns a 8.2 per cent stake in CFG.

Chelsea's new owners are keen to build a multi-club ownership group, emulating the example set by Manchester City's City Football Group. They would like to buy clubs in other European football leagues, highlighting Belgium and Portugal as targets.  They see it as a better arrangement than loaning developing young stars out to other clubs where they have less control.   Outsourcing player development to unaffiliated clubs created too much stagnation and wastage. New FIFA loan restrictions also mean this approach is no longer feasible on such a large scale. Why Portugal? It would carry the cultural benefit of being the ideal place to store any talented Brazilians the club might buy who are not quite ready to shine at Stamford Bridge. It’s already a well-established entry point for young Brazilians looking to make careers in Europe, and Benfica, Porto and Sporting Lisbon have all done well financially by facilitating their journeys. However, some of new owner Tod...

Brighton are an example of how a club can be run successfully without regular splurges, but money talks and their momentum has been checked:  https://www.theguardian.com/football/blog/2022/sep/08/graham-potter-chelsea-money-trumps-cleverness-in-football-brighton?CMP=Share_iOSApp_Other

Chelsea were supposed to have changed.   Now Thomas Tuchel will get a reported £13m payout after his sacking.   Football finance guru Kieran Maguire asked: ‘ In what other industry would you give an asset manager £250 million to invest and an overall portfolio of £1bn and then sack him a few weeks later once he has invested it?’ The ruthlessness that typified the Roman Abramovich regime, when a stodgy stretch of results would render even the most decorated of head coaches a dead man walking, was meant to be a thing of the past. The club had moved on under new ownership and, the bold suggestion went, would be doing things differently now. Instead, just over three months after the completion of a horribly complicated takeover forced through in unique and distinctly fraught political conditions, we find ourselves here again.   The club’s new owners have reacted to a perceived drop in standards, just as their predecessor always did. Boehly and his fe...

This week RedBird Capital closed on its €1.2bn acquisition of AC Milan, placing the American investment group in control of the Serie A champions. In doing so, founder Gerry Cardinale brought in some long-time associates as minority shareholders, none other than the New York Yankees and a Los Angeles-based investment fund backed by LeBron James and the rapper Drake. Cardinale, the former Goldman Sachs banker, is seeking to leverage his longtime relationships with celebrity athletes and the Yankees in particular to guide his vision for the Rossoneri. During his time at the investment bank, Cardinale helped start the Major League Baseball team’s regional sports channel, the YES Network, starting a two-decade relationship with the owning Steinbrenner family. Their closeness informed the Yankees organisation’s decision to take a minority interest in AC Milan, according to people familiar with the matter. But the view from New York, where the 27-time World Series champions remain one ...

Chelsea have spent the most in the transfer window and the most of any club in a single window.  This was in the context of a record Premier League spend of over £1.9bn, far more than the other leading European leagues. The new owners think that the club and the league it plays in are yet to reach their true economic potential. They consider that the global fan base for football, and for Chelsea in particular, is untapped enough to yield even bigger revenues. The owners see scope to generate more revenue from selling the rights to screen live matches to broadcasters.  The Premier League expects its broadcast deals to generate more than £10bn in the next three seasons. Some analysts think that Chelsea and other top clubs could be worth over $10bn in five years.