Foreign Owners in Football
Globalization, consumerism and the mass media are the starting point of foreign capital revolution in clubs across Europe and around the world. From an economic standpoint, this has created a developing revenue and profit opportunity for many wealthy venture seekers that like to diversify their ownership portfolio.
Except for success-based revenues, transfers, deregulated TV revenues for teams in top leagues and promotion of lower-division teams, investors can also use the club to promote other businesses. Ownership structures are regulated by football federations’ and governments’ laws and regulations. Just as with any industry and it’s laws, powerful businessmen keep looking for loopholes that will allow them to maximize their earnings.
Club’s administration of foreign origin has a drastically harder challenge to create a positive relationship with a local community. Some fans accept the globalization while others don’t. Using public relations the right way has never been as important as it is now as we see that supporter base often sees on-pitch performance and results as a secondary variable for their happiness with the club. The mixture of historical local tradition that serves as foundation and global capital that helps “build the house and equip it with the modern tools” will then allow greater success and fans’ satisfaction.
This article analyzes the top 5 leagues in Europe (BPL, La Liga, Bundesliga, Serie A, Ligue 1) and their ownership structures with focus on foreign owners.
“At a football club, there’s a holy trinity – the players, the manager and the supporters. Directors don’t come into it. They are only there to sign the cheques.” – Sir Bill Shankly
Google result shows fans impression of foreign owners. First association is “ruining football”.
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Perhaps politically insensitive but the point of this ad was to show once again what fans think about foreign owners.
Manchester United, along with other examples from England (Coventry City, Portsmouth) and other parts of the world (Newcastle Jets – Australia, Varteks – Croatia, …) show us how both active and passive supporters turned against their own club and created a separate Supporters’ Club. A so called fan alienation comes from club’s board that doesn’t recognize the long-term value of fans.
It is very important to bear in mind that this happens to teams at all levels of competition, regardless of their wealth and success. When Glazer took over Manchester United in 2005, many fans opposed the takeover due to huge amounts of debt that were used for financing.
Fans’ community project – FC United of Manchester is a successful and positive project mostly due to its work in the community and including volunteers for its everyday operating.
However, both FCUofM, Exeter City FC and other fan owned teams do show limitations that often come as a product of lack of national federations’ support for fans. Regardless of those, FC United proved their sustainability through several promotions and have built a new $8.5M stadium that was opened last year.
Profit maximizing operations at all levels of top football along with recent corruption issues have separated these governing bodies from the most loyal fans and that is why we see more and more community-owned teams.
After a rapid rise in Chinese football recently, their wealthy investors continue their expansion across the world. On June 27th, a Shanghai businessman Jiang became a first Chinese minority owner in NBA by purchasing 5% of Minnesota Timberwolves. Earlier in June he purchased Granada – a Spanish football team in La Liga.
It is hard to believe that Chinese are now owners or co-owners of 16 out of 20 clubs in Spain. We are seeing the increasing trend that was started by Russian and Arabic projects of investing in sports during gas and oil blooming period and is now further continued by Chinese thanks to their financial wellbeing.
Since their nations don’t have strong football leagues, they make smaller investments there but largely expand in top leagues that have the greatest consumer reach. This strategy is expensive but has proved to be effective.
French Ligue 1 showed too much competitive disparity in the previous season. PSG which is ran by a Qatar government-related group was no match for rest of the league and this is only a reflection of excessive differences in capital invested. Even Olympique de Marseille that is owned by Louis-Dreyfus and has won their last title in 2010, has finished the previous season as 14th and the owner is now looking to sell the club.
Considering the fact that a billionaire businesswoman is saying that she can’t match organized groups with deeper pockets, it forces me to think that such league might have a continuing negative trend for most of the teams except for PSG. Financial fair play was introduced to regulate this but we are still to see how the whole situation is going to reflect from the fans perspective. If Paris stays untouchable in the years coming up, we might see more individual owners leaving and adapting to a more sustainable model.
Out of all possible models, I believe German 50+1 rule is the best long-term option. Club members – fans own over 50% of the club which leaves plenty of room for private investments while at the same time preventing a complete control that many owners use for their private interests.
Democracy at its finest allows members to vote who will be on their club board, and elections allow them replacing those mismanaging the team. Even though this model does the best job in keeping football to its roots and helps fans for their voice to be heard, there is obviously no such a thing as a perfect model.
RB Leipzig is another franchise club of Red Bull which has their teams in Austria, US and Brazil. They had to change their approach when entering German football market as they are not allowed to incorporate their brand into club’s name.
Both they and Hoffenheim have been operating successfully in recent years with positive sport performances. The issue existing makes us realize that neither of those would achieve what they did without support from private parties.
However, as long as an average team in Bundesliga continues to make profit, have highest attendance in Europe, and very low ticket prices – fans will continue to support their work actively and their engagement will ensure clubs’ and league’s future success.
Socios model is another ownership structure in which fans have majority ownership and control over board of directors through elections. Two-way communication that is enforced in socios and 50+1 models is the pinpoint for club to engage fans and report on what’s going on off the pitch.
It helps clubs exclude their dependability on wealthy investors and sponsors and instead focuses on fulfilling the business and marketing potential. The best and most famous clubs in the world are the ones that have had the greatest continuity of results throughout the history and teams like that accumulate huge fan bases.
Having a fan army behind you, while using the most recent engagement approaches mentioned in my last article here, creates the most sustainable model possible that will attract foreign investors to sponsor the club but allow the club to have the power to keep the individuals with private interests as minority owners.
Luka Pauk
Overtime Sports Marketing
If you have any questions about sports marketing, feel free to contact me at pauch012@gmail.com .
