The Political Economy of Football V2

Over the past decade American financing has reshaped global football in its image, with billions of dollars of investment, a fast-growing domestic audience and a generation of new players. While US owners of European football teams have faced protests from fans for years, friction is rising. Some fear the sport is losing its way in pursuit of profit and that outside money is distorting the game’s balance of power. And yet the arrival of professional investors has so far done little to fix the game’s parlous finances. Americans now own 117 European clubs, according to data from CIES Sports Intelligence, including more than half the teams in the English Premier League, more than a third of Italy’s Serie A and over a quarter of Ligue 1 in France.  The effects are being felt both on and off the pitch. Clubs are increasingly run with commercial success front of mind, aping the US sports model, where team ownership has proved lucrative. This has led to a push to tighten football’s fi...

Does Milan’s San Siro need to be demolished?   Edwin Heathcote reviews the evidence from an architectural perspective in the Financial Times. Milan’s San Siro stadium is one of football’s great spectacles. Part of it is the atmosphere during a game, especially one of the Madonnina matches, the fierce derbies between the two teams that call the stadium home, AC Milan and Inter. But it is also the incredible sight of the architecture after a match, when the fans descending the huge concrete circulation cylinders create the dizzying impression of a building swirling around them, as if the whole structure is spinning in response.  The Madonnina is named after the gilded statue of the Virgin that stands atop Milan’s Duomo. The San Siro is far bigger than even that huge gothic cathedral and, together with La Scala opera house, the three constitute a kind of trinity of revered Milanese monuments. Unlike the other two, however, the San Siro looks likely to be demolished....

Italian financial police raided Milan city council’s offices on Tuesday as part of an investigation into the sale of the San Siro stadium to private equity-backed Serie A clubs AC Milan and Inter Milan. Computers and mobile phones were seized during the raids and more than 10 people have been placed under investigation on suspicion of bid-rigging, according to people with knowledge of the details of the case.  A press conference scheduled for Tuesday morning at Palazzo Marino, the council’s headquarters, to unveil the venue’s renovation was cancelled at the last minute.  The football clubs are not under investigation. Milan’s city council agreed to sell the 100-year-old arena to AC Milan and Inter Milan, which share the venue, for close to €200 mn last year. RedBird acquired AC Milan in a €1.2bn deal in 2022, while Oaktree Capital took control of Inter Milan two years later after the club’s Chinese owners failed to repay a €400 mn loan in time. After a years-long tussle ...

The founder of RedBird Capital Partners, Gerry Cadinale, bought AC Milan in 2022. A year ago, when the team was trailing in the Italian league and ultimately failed to qualify for European competitions, many of the 75,000 fans at San Siro regularly chanted “Cardinale devi vendere” — Cardinale must sell. Off the pitch, plans for a new stadium kept being stalled by Italy’s notorious bureaucracy. In the media, reporters speculated that Elliott Investment Management was the real power behind the throne at the club since the US hedge fund sold AC Milan to RedBird while also lending Cardinale’s firm money to finance the purchase. He quickly notes in a lunch interview with the Financial Times that he’s already made progress. Since he took charge, AC Milan has posted three consecutive years of record profits after decades of losses — though, as in politics, fiscal responsibility rarely wins applause from fans. He thinks, everybody expects him to come in with a ton of money to buy top players...

The death of globalisation as an economic principle has been widely proclaimed given the reintroduction of tariffs as a political and economic weapon.   However, it is alive and well in footall as is illustrated by the extensive involvement of US-based private equity firms in European football clubs.   Europe may be finished in some American eyes, but its ‘soccer ball’ clubs remain world class. The ultimate test of globalisation in football would be the staging of a regular league match in another country, but so far all attempts have failed in the face of exist ing rules.   Court challenges have been only partially successful. Plans to stage a Serie A game between Milan and Como in Perth, Australia have been abandoned, the league’s president and the government of Western Australia said in a joint statement on Monday.   Many fans will no doubt be pleased, but those pushing this concept are not going to give up - and they have plenty of money to spe...

Milan’s 2024/25 accounts were the third set of accounts reported under the ownership of Gerry Cardinale’s RedBird Capital Partners, who purchased the club from Elliott Management in August 2022 in a €1.2bln deal, with Elliot reportedly providing a €560m loan to help RedBird complete the acquisition. Chief executive Giorgio Furlani told the Harvard Business School, “Our goal became to stop losses, to live within our means. As important as sporting success is, we realised we shouldn’t go into a success-at-all-costs mode: the extra costs incurred in pursuing success can kill you financially.” In the previous ten years, Milan had lost around €900m, with Giorgio Furlani admitting, “Milan was not sustainable the way it is today, the club was on the verge of bankruptcy.” Milan posted a pre-tax profit for the third year in a row, though this reduced slightly from €12m to €10, reports the authoritative Swiss Ramble. This was especially impressive, given the indifferent sporting results. ...

A replica of Mbappé’s Adidas-branded shirt, with his name on the back, retails for as much as £185 — or £200 for one with long sleeves and Champions League badges.  The advent of the £200 shirt is seen by some industry executives as a byproduct of prevailing trends reshaping football finance. Merchandise is an increasingly important growth driver for clubs, as the media rights market slows significantly — and with onerous new regulations linking transfer spending limits with revenues, generating growth off the pitch is crucial to stay competitive on it. Revenues at the retail and licensing division of FC Barcelona — which charges fans £320 for a shirt with teenage star Lamine Yamal’s name in a limited edition font on the back — rose 55 per cent to €170mn last year. Manchester United’s retail sales grew 16 per cent to £145mn last year, despite flat revenue overall. Meanwhile, Liverpool FC has built a retail network across Asia and the Middle East, opening its 22nd store las...

Milan City Council passed a vote approving the sale of San Siro to Inter and Milan on Tuesday, which clears the path for the construction of a new stadium on the site.  The sale is expected to be ratified once due diligence has been completed at the beginning of November. Plans for a new stadium would see San Siro, which the two rival clubs share as their home ground, mostly demolished, with only 10 per cent of the existing structure of the stadium expected to remain. There is currently no indication of where the two sides will play while the new site is being worked on. Milan have played at San Siro since 1926 and it has been shared with Inter since 1947. In 2019, both clubs announced plans to build a new 60,000-seat stadium, though the project stalled due to political opposition and Italy’s heritage regulations, which safeguard historic structures. In September 2023, Milan announced plans to construct a new 70,000-capacity stadium in the south-eastern area of the city in an...

Everyone is piling into football clubs, even small and obscure ones.  However, they are high risk investments.   Lex in the Financial Times makes an interesting comparison with small cap investments in general. Small football clubs used to be seen as money pits for local business owners, but now everyone from hedge funds to tech billionaires wants a piece.   With top teams out of reach for all but the richest, Deloitte has described the English Football League — the 72 clubs in three divisions below the Premier League — as a “more accessible asset class”.  As the second-tier Championship kicks off this weekend, these potential diamonds in the rough will get to prove their worth. Investors, though, ought to think about them like another market full of deceptive “bargains” — small-cap stocks. The appeal is similar: big names might be safer, but find a future winner among the also-rans and the potential gains are enormous. Manchester United’s revenue grew 2 per...

Milan fans staged a remarkable protest against the club’s ownership ahead of their Serie A match against Monza on Saturday. Protests were held ahead of the game outside the club’s Casa Milan headquarters, where around 5,000 ultras gathered before marching to the club’s San Siro stadium. There were nostalgic chants for the club’s iconic former captain Paolo Maldini, who made a record 902 appearances for Milan and who was sacked from his directorial role by the current ownership, and for the late Italian prime minister and media tycoon Silvio Berlusconi, the club’s most successful owner. Milan ultras lined-up ahead of Saturday’s match to spell out the message ‘Go Home’ in the Curva Sud, with chants demanding RedBird Capital’s Gerry Cardinale sell his stake in the club and leave.

2023/24 was the second set of accounts reported for Milan under the ownership of US investment company RedBird Capital Partners, who purchased the club from Elliott Management in August 2022 in a €1.2bln deal that included a minority stake for Major League Baseball club, the New York Yankees. RedBird already had some experience in the world of football via their controlling interest in French club Toulouse and an 11% stake in Fenway Sports Group, Liverpool’s owners. Before and after the change in ownership, Milan have done pretty well on the pitch finishing in the top four in each of the last four seasons, including a league title in 2021/22. Revenue growth Milan posted a pre-tax profit for the second year in a row, though this fell slightly from €14m to €12m. Despite a poorer performance in the Champions League, revenue rose €9m (2%) from €400m to a new club record €409m. Milan have set new club records for operating revenue four years in a row, so this has shot up by €180m ...

When the European Super League launched (briefly) in 2021, one of the main arguments for tearing down football’s status quo was that fans were being deprived of exciting matches between elite teams.  Evidence this week suggests that argument was built on sand. When Liverpool visited AC Milan in the opening game of this season’s Champions League, one of the main talking points was of empty seats inside the San Siro. While the Italian club had an average home attendance for league matches last season of just under 72,000, local estimates put Tuesday’s turnout at around 60,000. So what’s going on? Milan have started the season slowly — and lost the game against Liverpool 3-1. But more than 71,000 showed up a few days earlier to see the  Rossoneri  host Venezia in an Italian league match.  The main culprit for Tuesday night’s empty seats appears to be rising ticket prices — seats in the lower tier of the San Siro began at more than €120. The issue of rising costs f...

The Chinese owner of Inter Milan is racing to refinance an almost €400mn loan by next week, as Pimco and Oaktree Capital battle for influence over the future of the newly crowned Italian football champions. Chinese retailer Suning Holdings, which has owned a majority stake in Inter Milan since 2016, needs to refinance a loan by Monday from Oaktree, one of the world’s biggest distressed debt investors. Suning is attempting to refinance the loan with US bond giant Pimco at an interest rate in the high teens. But the talks are being complicated by Oaktree, according to several people involved. Oaktree provided a €275mn emergency bridge loan in 2021 to Suning, secured against the retailer’s stake in Inter. This allowed its owners to inject more capital into the club, whose finances had been ravaged by the pandemic. The amount outstanding has since ballooned to about €395mn, due to the loan’s annual interest rate of more than 12 per cent. Oaktree anticipated that Suning would sell the c...

 AC Milan’s record-breaking sale by Elliott Management in 2022 was proof the football club had completed a remarkable turnaround under the US hedge fund’s stewardship. The Italian team was sold to private equity group RedBird Capital Partners for €1.2bn, the highest price paid for a club outside the English Premier League. It was once again winning Serie A titles and competing in the lucrative European Champions League.  L ast year, it made its first profits in more than two decades. But police raids earlier this month have dragged AC Milan back into a messy battle of wills pitting Elliott, the notoriously combative $65bn fund manager, against Blue Skye, a investment firm run by two longtime former partners of the hedge fund and which owned a small stake in the club before the sale. The two Italian financiers behind Blue Skye have claimed the hedge fund violated their minority shareholder rights by signing the RedBird deal, and have raised questions over whether Elliott st...

Italy’s finance police raided the headquarters of Serie A football club AC Milan on Tuesday as part of an investigation into potential irregularities over its 2022 sale by US hedge fund Elliott Management to private equity group RedBird. Prosecutors launched their probe following allegations that Elliott still controls AC Milan despite the sale to RedBird, according to a search warrant seen by the Financial Times that authorised the raids at the Casa Milan complex in the city’s district of Portello. The search warrant alleges the club’s current chief executive Giorgio Furlani and his predecessor Ivan Gazidis fraudulently concealed information that should have been communicated to the Italian football federation concerning the ownership structure of the club. “It seems that the majority of the funds used to buy the club originate from an investment vehicle that does not belong to RedBird. The suspicion is that Elliott currently maintains effective control of the company,” according...

Gerry Cardinale, founder of AC Milan owner RedBird Capital Partners, told the FT Business and Football summit that professional investors should be ashamed of the financial state of play in European football. Speaking alongside legendary Swedish forward and new RedBird partner Zlatan Ibrahimović, Cardinale said clubs needed to break the cycle and that AC Milan would be a “change agent”. “We have to be more self-sufficient, we have to be able to run these things more professionally,” he said. Calls for new competitions, such as the European Super League, were a “distraction” from years of mismanagement across the game, he added. “Let’s own ourselves better. The fact that these things trade on a multiple of revenue is pure laziness. Shame on all of us. These things should trade on a multiple of cash flow. Deficit financing yourself, and blowing your brains out in the transfer market, all this stuff has to change.” Like many on stage, Cardinale warned that football needs to be wary ...

Milan’s 22/23 accounts were the first accounts reported under the ownership of US investment company RedBird Capital Partners, who purchased the club from Elliott Management in August 2022 in a €1.2bln deal that included a minority stake for Major League Baseball club, the New York Yankees. RedBird already had some experience in the world of football via their controlling interest in French club Toulouse and an 11% stake in Fenway Sports Group, Liverpool’s owners. Milan’s success on the pitch helped them return to profit for the first time in 17 years, as they swung from a €60m pre-tax loss to a €14m profit, which chairman Paolo Scaroni described as an “important step”. Revenue rose €126m (46%) from €274m to a club record €400m, slightly offset by profit from player sales falling from €3m to almost nothing.    All of Milan’s revenue streams experienced significant growth under the new ownership with each of them setting new club highs. Match day more than doubled from €...

With most TV deals negotiated at league level and new regulations that link spending to income, top clubs across European football are raising billions of euros, dollars and pounds for stadium redevelopment with the aim of creating a more diverse pool of cash flow. In Italy, the problems with infrastructure are acute. Serie A was the top league in the world in the 1990s, but has since seen its position slip, in large part due to a lack of investment. It now generates less broadcast income than top leagues in England, Spain and Germany, and recently concluded a domestic TV deal at a lower price than its last contract. Club executives and owners, including a growing band of professional investors, see new stadiums as key to getting the league back on track.  “Italy is super interesting because the infrastructure has held back huge clubs with massive fanbases and international appeal, which is why we’re seeing international capital move in,” says Christopher Lee, managing director...

The authoritative Swiss Ramble reviews the accounts of AC Milan:  https://swissramble.substack.com/p/milan-202122-finances Milan have lost an amazing €900m in the last 10 years (pre-tax), but the situation has been improving with the club reducing losses in each of the last two years. Although not one club in Serie A managed to post a profit at the operating level, Milan’s €68m was firmly in the bottom half of the table, albeit considerably better than Juventus €243m and Inter €168m. Based on the most recent accounts, no fewer than 10 clubs reported an operating loss over €50m. The importance of European money to Milan’s business model is very clear. The Swiss Ramble reckons they have earned €61m to date this season with another €11m available if they beat Tottenham Hotspur to reach the quarter-finals. Milan have been very reliant on increases in capital from their owners with over a billion Euros provided since 2010 to cover the club’s substantial losses. That includes €545m...

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...