Depending on the location, football can have two completely separate meanings. Just like their geographical locations, the two sports are a world apart when it comes to their similarities. Not only does the word differ in sports, but in the sport’s business as well. The American’s have been known for their love and following to “their” football, and haven’t really caught on to the rest of the world’s craze for European football until now.
In the past decade European soccer has experienced an American invasion never before seen. It wasn’t until 2005 the English Premier League welcomed its first American owner. Even though the owners are new to the Premier League, sports are something they are very familiar with. The American owners have experience in either business or ownership of American sport franchises. This then becomes a matter of question of previous American sports ownership being good enough versus knowledge of European football.
Year of Takeover
CEO of First Allied Corp, Owner of Tampa Bay Buccaneers (National Football League)
Chairman of MBNA Corp, Owner of Cleveland Browns (National Football League)
Owner of Kroenke Sports Enterprises, owner of St. Louis Rams (National Football League), Co-owns Dick’s Sporting Goods Park in Commerce City
President of Lone Star Funds
John W. Henry (Fenway Sports Group)
Founder of John W. Henry & Company, Owner of Bosten Red Sox (Major League Baseball), Co-owns Roush Fenway Racing
As of now, Americans account for 25 percent of the ownership in the Premier League. American’s aren’t known for their knowledge of football, but they do have a good understanding of sports business. Just how well are the teams benefiting financially from the foreign approach? Depending on the team the answer to that question can be very different.
The first takeover, and probably the most controversial one was Malcolm Glazer’s. The Glazers bought the club for £777 million pounds sharing the debt between the family and the club. The total amount of debt added up to £660 million pounds with interest payments equaling £62 million pounds a year. Needless to say, this appeared to be the most extreme financial takeover. The next year was a much more subtle takeover. In August of 2006, Randy Lerner reached an agreement to a takeover of the club spending £62.6 million pounds. By September Lerner increased his shares to 85.5% and became chairman of the club. The next and most recent team to jump into ownership was the Fenway Sports Group (John W. Henry) that bought Liverpool in 2010 for £300 million pounds. Upon takeover of the club, FSG paid back £200million pounds of debt owed to the Royal Bank of Scotland from previous owners.
The next two clubs took a much more settled approach to taking over the clubs. Stan Kroenke started buying shares of Arsenal in 2007 totaling 9.9%. It wasn’t until 2007 that Kroenke increased his share holding to 62.89% and made an offer for the rest of the club this past year. Similar to Kroenke, Ellis Short gradually invested in Sunderland Football Club. 2008 Short bought a 30 percent stake in the Sunderland F.C, until 2009 when Ellis gained 100% control of the club.
For some of the clubs, the approach to ownership has been very helpful to the clubs. However, to some teams the approach was perceived very badly. Manchester United has had probably the biggest impact from the American owner. Manchester United fans didn’t agree to the club’s takeover approach due to the massive debt and the cost of interest paid annually. In fact, there have been many protests to Glazer’s takeover. Along with a new club formed FC United of Manchester, many United fans refused to renew their season tickets. Fans also created anti-glazer songs and chants that they sang at games. Fans including former United star David Beckham started wearing the previous colours of the club, green and gold. The protests are still going on today.
Manchester United statics show that the club is financially profitable today, but fans are upset of the approach to the takeover. Yes, today Man United is the most valuable team in the world; however it is not due all to the ownership. The whole time the club spent money on paying back the debt, they could have been paying it on players and the team. The more a team can afford salaries, the more competitive a club is. Of course, the more successful a team is the more money they’ll get.
Besides club competitiveness, a clubs sponsorship is a large portion to its revenue. Again, the team with the biggest impact of profit with its American owner is Manchester United. Today, Manchester United is ranked the most valuable team in the world valued at $2.3 billion dollars. So how did the club get so profitable with a daunting amount of debt to pay off? The answer is sponsorships. From deals and sponsors the club has become the world’s sport team leader of profits with a global fan base of 330 million.
The approach to gaining sponsorship deals has made Manchester United what it is today. In 2006, Man United agreed to a shirt sponsorship with AIG worth £56.5 million for four years. This deal alone is the biggest in British history. The other large deal for Manchester United was their 13-year £303 million pound deal with Nike. This deal is essential to the team for two big reasons. The deal allows Nike to pay the team a fixed priced for merchandise rights to its kits (shorts, shirts, cleats, etc). Also, the team is now associated with a market leader in a corresponding industry. In just the first 22 months of the agreement Nike had sold 3.8 million replica jerseys. This builds fan support and encourages industries to sell the teams merchandise.
The business opportunities don’t stop there. In 2004, the team invested millions of pounds in digital advertising boards around three sides of the pitch. Manchester United keeps revenue coming even beyond the game; fans can finance their cars or homes through United loans or mortgages. Fans can also purchase a Man United credit card, United insurance, invest in United bonds, gamble in United Super Pool lotteries, or even catch a movie in the Red Cinema in Salford. All of these business transactions help to promote the team building the brand while creating a profit at the same time.
The American influence has proved many positive influences to the League. The first and most obvious is the American following that the owners have created. Since the American owners took over, the popularity of the league has risen and created more profit for the league. Recently ESPN broadcasted the chance for a record setting amount of viewers to watch the Manchester City vs. Manchester United match reaching more then one million viewers. The April 30th live match was viewed on cable television and doubled the previous viewers record set in 2010 of Arsenal versus Chelsea. The English Premier League has became the richest football league with help from its three-year television deal, which incurred $5.4 billion dollars. It is shown that the league acquires 2.3 billion dollars just through overseas television rights.
Although Manchester United has dominated the example of a profitable business strategy takeover (with ownership fees not included of course), Liverpool has shown some strong examples of club revenue efficiency. The owner is planning on ways to maximize profits especially on game day. After many obstacles the owner received access to expand the stadium to fit almost double the amount of fans on game day. By increasing fans on match day, revenues will grow and the team’s profits will rise. In a short time as owner, John W. Henry has proposed many ideas such as this to help the teams financial strategy for the long run.
When it comes to how to run a sports franchise, there is a lot the Premier League can learn from the Americans. However, the learning isn’t a one-way street. As 5 American’s have already caught on, there is a lot to be learned from the Premier League. The Premier League offers global brands that Americans don’t have the chance to jeopardize on. American football is very popular, in America. Although there is gaining interest, including London hosting two NFL games at Wembley stadium next year, the interest/market is still very restricted. Football (American soccer) is the most popular sport on the planet with over 3.5 billion fans worldwide.
Having the world as a potential market is something that American sports owners have not had the chance to be a part of. 6 of the 11 teams are playing in the States next year which increases global interest. The growing interest isn’t just in America; the English Premier League has started to become a global brand. Having a global brand is the best thing for a business looking to expand profits. The Glazer family is cashing in on the expanded market looking to sell shares on a U.S. stock exchange of Man U, as well as offering 30 percent to the Singapore Exchange. Deloitte stated, “Even if the Premier League clubs are only able to maintain the current wages-to-turnover ratio of 62%, we predict operating profits will almost double”. That means with this revenue increase it would put the revenue at an overall turnover of about $3.5 billion. The rise in fans around the world will create profit potential that no other sport could reach, and that’s a business worth investing in.