Football's Magic Money Tree

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Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Mon Apr 12, 2021 4:57 pm

That podcast from Unofficial Partner was previewed by the Unofficial Partner Newsletter - specifically this

Reframing football valuations
Football clubs feel undervalued by the financial markets, and are trying to reposition themselves as an asset class.

Riddle me this:

(HT to The Fat Gladiator Investment Club for this comparison)

Pinterest has 458m users - Market Cap $52.8bn approx

TikTok has 689m users - Market Cap $100bn+

Man Utd has 1.1billion followers/fans - Market Cap $2.8bn

Five possible conclusions:
  • 1. The market doesn't believe Utd’s fan numbers.
  • 2. And/or they don’t believe Utd will be able to turn those fans in to users, in the Silicon Valley sense of that term, measured by ARPU (Average Revenue Per User).
  • 3. The market’s wrong, and Pinterest/TikTok are massively overvalued
  • 4. The market’s wrong, and Man Utd is massively undervalued.
  • 5. Both 3. and 4. are true.
It’s not just football. We’re using Man Utd as a proxy for all sports teams.

According to Sportico, the average price of an #NBA franchise is $2billion, with the spread running from $1.35bn for the New Orleans Pelicans to the New York Knicks at $5.42bn. The LA Lakers are third in the list at $4.4bn. The valuation data for NFL and MLB teams tells a similar story.

All the pieces matter

If 4) above is the answer, it explains all the other parts of the sports business conversation: the rush to buy elite sports teams; the SPAC boom; the private equity interest; the obsession with first party fan data; and more broadly, the shift in the world view of team investors away from traditional football club ownership and toward defining clubs as digital content publishers and e-commerce vehicles.

Low ceilings and rusty frames

The financial markets still largely frame football clubs as a media and advertising product.

So the basis of valuations are metrics such as media rights income predictions, stadium capacities, merchandise sales, sponsorship income.

And each of these has a natural ceiling.

Whereas, to extend the comparison made above, the market’s valuation of Pinterest and TikTok have no such ceiling.


They are limited only by what they can extract from each user over the course of their relationship - ARPU.

Lucas von Cranach gives a brilliant analysis:
There are two ways to look at it. One is to have a user base of engaged customers. And that's how you value companies like Spotify, Twitter, YouTube, TikTok, Instagram, et cetera. And the value of the company in the first period doesn't lay in the typical financial model, with discounted cashflow, revenue multiple or EBITDAR multiple. The value lays in the number of engaged customers. And then you put a user multiple behind it.

That is a platform business. That’s what we’re doing at OneFootball. And that's why, our investors are for example Union Square Ventures, who were the first investors in Twitter, Foursquare and Tumblr, and in other companies which have a user-multiple focus.
The value of the company is the user base times monthly active user value.

Then, later.
TikTok has 500 million users, owned and operated, direct access, and is now valued at a hundred billion.

Manchester United claims to have between 400 and 600 million fans - but disclaimer, they don’t know who they are - and is valued at less than 3 billion.

Institutional investors understand the value of direct access to customers is higher than revenue, because if you have a customer and there's a natural fit to do business with that customer who comes back every day, then that is massively valuable in digital.

The ones who will win from what Apple and Google do are the ones who have first party data.
This leads to another question.

What are football clubs becoming? Buzzfeed or Amazon?

What’s the model being followed here? And has that changed?

For the last few years, it’s become common for sports team owners and execs to refer to their clubs as media companies.

The can often imply a publishing business model, which assumes the role of content is to sell advertising and sponsorship, either directly or via broadcast rights. See the ceiling caveats above.

Again, the steer from the money markets has not helped.

Go back a few years and the market valuations of the big dogs of digital publishing were stratospheric. That was then however, and the last few years haven’t been kind to Vice, Buzzfeed, HuffPo et al.

Meanwhile, football clubs have spent fortunes tooling up to be media businesses.

Lucas von Cranach says Buzzfeed is the wrong model.
Cranach: There were loads of businesses like Buzzfeed, Huffington Post, Vice, Copa 90, who from my perspective, were more content production and creation companies with social media reach than they were platforms, because they didn't have access to customers.

They had channels on social media and then they went out and said, ‘We reached 500 million people, but actually with this disclaimer, we don't know them. And we don't know if we reached them’.

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Re: Football's Magic Money Tree

Post by Chester Perry » Mon Apr 12, 2021 6:51 pm

UEFA's Executive Council Meetings could be about to get a bit more fiery - The European Leagues have elected Javier Tebas as their representative - this from the Washington Post

Outspoken La Liga official Tebas set to get UEFA position
By Associated Press

April 12, 2021 at 3:00 p.m. GMT+1

NYON, Switzerland — The outspoken head of Spain’s La Liga is set to join UEFA’s executive committee next week, working alongside the Spanish soccer federation president he has often clashed with.

Spanish league president Javier Tebas was picked by European Leagues, the 30-nation group said Monday, as its delegate to sit on the decision-making committee.

If Tebas is confirmed on April 20 at the annual meeting of 55 UEFA member federations, he will take his place alongside Luis Rubiales, the Spanish federation boss who is a vice president of the European soccer body.

Tebas and Rubiales have often publicly criticized each other, including over La Liga’s wish to play games in the United States.

Tebas has also been critical of UEFA rules to monitor the spending of wealthy clubs like Paris Saint-Germain, whose president Nasser al-Khelaifi is also a UEFA executive committee member.

The European Leagues group has been represented at UEFA by Swedish official Lars-Christer Olsson. The former UEFA chief executive steps down next week after turning 70 and passing the age limit for re-election.

Tebas is set to get a four-year mandate to 2025. His tenure is likely to see increased pressure on 20-team leagues like La Liga and England’s Premier League to reduce to 16 or 18 to ease a congested fixture calendar.

The Champions League is set to expand to 36 teams playing 100 extra matches from 2024 in a format expected to be agreed next Monday by the UEFA executive committee.

Spain is also expected to team up with Portugal to be UEFA’s preferred single bidder to host the 2030 World Cup.

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Re: Football's Magic Money Tree

Post by Chester Perry » Mon Apr 12, 2021 6:56 pm

This Opinion piece from SportsProMedia sits well alongside that Unofficial Partner Podcast with Lucas von Cranach I posted earlier today

Opinion | Can rights holders really afford to leave millions on the table in missed digital revenue?
Ryan Skeggs, Greenroom Digital's general manager, on how rights holders are overlooking new commercial opportunities right under their nose.

By Ryan SkeggsPosted: April 12 2021

Sporting rights holders have overwhelmingly undervalued their number one asset, the fans.

Fans are the absolute heartbeat and driving force to every property no matter what tier of sport. These fans play a role in building the culture of a club and lifting the spirits of the players, and let’s not forget they are consumers. Most rights holders are doing an underwhelming job in translating this passion into profitability.

The primary source of revenue is from broadcast rights, ticketing, merchandise and sponsorship deals. However, there is a large slice of commercial pie being left on the table.

Through Greenroom Digital's work on more than 2,000 global fan engagement digital activations, we see an opportunity for significant return on investment. Returns on digital range from 127 per cent to 324 per cent, depending on what brand sector and sports vertical we are working on. This presents opportunities not only for rights holders to merchandise their own products, but also reflects the potential value of this fanbase for their partners.

With such increases in performance possible, should the industry back itself to cross the frontiers of revenue and ask for more? More from sponsorship budgets, more from digital media budgets and more from ecommerce budgets. Should it realise its digital potential, the sports industry can be a more sustainable ecosystem and can go further than it ever has done before. By being bold, the industry can offer more hope, more pathways to success, equal opportunities, life experiences, jobs, education and overall positive change to society.

However, in order to better answer the question, we must understand disruptive macro forces which rights holders are well-positioned to take advantage of.

Of course, we have seen an economic downturn with the IMF predicting the global economy to contract by a further US$3.8 trillion in 2021. That means there is more pressure on brands to demonstrate ROI across all marketing channels. However, there are reasons for rights holders to be excited and optimistic, with money still being pumped into digital where most of their fans live. For the first time, digital will account for more than half of all global advertising expenditure, US$579 billion in 2021 according to Global Ad Spend Forecast released by Dentsu in January.

Brands have an increased focus on direct-to-consumer relationships and are utilising more sophisticated first party data strategies to achieve business objectives. This is in part due to increased consumer touchpoints and the global growth of ecommerce, a rise in smarter marketing technology and the demise of the third party data market due to restrictions on tracking.

Technology has enabled a wider and ever-growing list of products and services which can be bought online. Look at the rise of two new brands in the sport partnership world, Cazoo and Cinch, the digital native second hand car sales marketplaces.

The above point leads us into the four most common business outcomes brands now want and expect from any marketing channel:
  • Greater fan connectivity - Create new, personalised experiences for fans in their digital world to bring brands closer to them
  • ROI - New sources of value to partners and sponsors
  • Tracking - Tangible and greater measurability of engagement and conversion
  • Convenience – Make it easy for them to buy from you
What are you waiting for?
Sport has an amazing ability to create that feeling of eustress for fans. If I ask you to recall your first live sporting experience or game on TV, I guarantee you can vividly take yourself back to that memory and furthermore remember the headline sponsorship partner. Mine was Lee Dixon banging in a last-minute penalty for Arsenal to win 4-3 against Norwich City at Highbury. Headline sponsor was JVC, kit supplier Adidas. My feelings as a ten-year-old were sheer hysteria.

Sport has always been unbelievably powerful and will continue to be if we can expand the experience into the digital realm and ensure profitability. Rights holders have everything at their fingertips to harness that passion to drive greater commercial returns for themselves and their partners at the same time offering an enhanced fan experience.

From the work Greenroom has conducted over the last 12 months there are four trends that rights holders need to consider in order to reach commercial nirvana.
  • Audience – Rights holders have significantly undervalued their audiences, by only thinking about linear commercial opportunities and overlooking the true commercial value of that audience for them or their partners.
    a) For example, in 2019 Manchester United had a reported one billion followers globally, mighty impressive numbers, but 'only' sold US$142 million worth of merchandise. That’s US$0.14 per ‘fan’.
    b) Facebook has 1.6 billion users and made US$86 billion in 2020. They know how to monetise your audience for themselves as they own the ecosystem.
  • Data-rich knowledge poor – You need data, data is the new oil, data is the number one commodity, we hear and read lots of this. Rights holders have no issue acquiring data and insights, but it is worth nothing unless you know how to activate it and create new commercial opportunities from enhanced engagement.
  • Technology – Choose technology which is going to drive your desired business outcomes. Do not pick a technology vendor just because another organisation has it. They will have different resources, skill sets, budgets, and commercial models to you.
  • Diversity in mindset – Rights holders need to have a diverse and agile approach to partnerships. Brands have varying business models and are at different stages in their maturity however what we tend to see is a one size fits all approach. A smarter, flexible and more sophisticated approach will attract partners from a wider spectrum of industry sectors.
Look to the future as this is where we will be spending our time
There has been lots written over the last year on the bleak financial outlook facing sports globally. Rights holders have an opportunity to course correct, unlock new significant revenue and create sustainable business models which will benefit everyone involved in sport. From the five-year-old girl playing her first game of soccer to the unsung heroes at every grassroots team globally who without fail put the yards in so others can benefit. The industry owes it to them to explore the opportunities right under their nose and start taking those millions off the table to create a new, smarter, more fruitful future for everybody involved in what we all love…. SPORTS.

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Re: Football's Magic Money Tree

Post by Chester Perry » Mon Apr 12, 2021 7:28 pm

Chester Perry wrote:
Tue Mar 30, 2021 12:04 am
There are suggestions that Red Bull are looking to acquire a team in LigaMX

https://twitter.com/herculezg/status/13 ... 6859012096

not sure how that would work in a combined MLS/LigaMX
It is interesting how focus has narrowed on the commercial opportunities in the Mexican League since Gianni Infantino talked up the opportunities created by a combined MLS/LigaMX - I still do not see it operating beyond the shared cup competitions that are already in place. Though I do see huge untapped commercial opportunities in Mexican club football, it turns out so do some American investors - from Sportico.com

LIGAMX DRAWS FIRST MAJOR U.S. INVESTORS TO ‘NFL OF MEXICO’
BY SCOTT SOSHNICK, EBEN NOVY-WILLIAMS APRIL 12, 2021 2:03PM

For the past few years, American investors have poured money into soccer clubs in England, France and Italy, sensing untapped commercial opportunities. Now for the first time, they’re turning their attention to Mexico.

Real estate investor Al Tylis and Sam Porter, an executive at MLS club D.C. United, have an agreement in place to buy about half of Liga MX franchise Club Necaxa, according to people familiar with the matter. Their group includes Mexican-American actress Eva Longoria, German soccer star Mesut Ozil, model Kate Upton and her husband, MLB pitcher Justin Verlander.

The deal values the club, currently owned by the Tinajero family, in the low-nine figures, according to the people, who were granted anonymity because the Mexican soccer federation hasn’t yet approved the transaction. Both Porter and Tylis declined to comment, and a representative for the club didn’t immediately respond to an inquiry.

If approved, it would be the first significant U.S. investment into America’s most-watched soccer league. Led by clubs like Chivas and Club America, the 18-team Liga MX is extremely popular among the nearly 40 million Mexican-Americans living in the U.S., and structural changes are making the league more attractive to investors. Those include the temporary suspension of relegation to lower leagues, a higher commitment to financial transparency, increased cooperation with MLS, and optimism around the possibility of selling the league’s commercial rights as a group.

“Liga MX is the NFL of Mexico,” said Dan Cohen, senior vice president of global media rights consulting at Octagon. “Its fan base, viewership, sponsorship sales, merchandise are all unmatched in Mexico, but it’s also a juggernaut in the U.S.”

Mexico has a population of about 128 million, and there are 37 million people of Mexican descent in the U.S. That group has grown more than 76% in the past two decades, and is evident in the league’s U.S. television audience.

Liga MX games on Univision have drawn 845,000 viewers in the U.S. this year, an average that dwarfs those for English Premier League games on NBC in the same timeframe (475,000), and MLS English-language matches with Fox and ESPN in 2019 (355,000). It achieved that despite significant demographic disadvantages—the Spanish-language Univision serves about 26% fewer households than NBC.

The strong viewership numbers, however, mask an imbalance between the league’s top clubs and everyone else. Liga MX commercial rights are sold on a team-by-team basis, both domestically and internationally, unlike major U.S. sports, which all have league-wide sponsorship and TV deals.

That creates an added layer of complexity for small-city teams like Necaxa, said Walter Franco of Victus Advisors, a firm that works in both U.S. and Mexican soccer. While big corporations are increasingly turning to soccer to reach America’s growing Hispanic population, the decentralized nature means most smaller Mexican clubs do little commercial business in the U.S. outside of their TV deals.

“The challenge in the U.S., for teams that are not Chivas or Club America, is that you have to be able to target people from that team’s specific region, who are fans of that club, and it’s difficult to do,” Franco said. “Think about Los Angeles. What percentage of Mexican-Americans in L.A. are from Sonora? Or from Chihuahua? It’s hard to find that.”

That club-first business model, and the lack of guaranteed centralized revenue, has long deterred foreign investment in the league. Alejandro Irarragorri, owner of Liga MX clubs Santos Laguna and Atlas, said as much in an open letter last April. But there’s some evidence that the structure may change. The league recently hired IMG to help sell some league-wide sponsorships, with Mexican beer brand Tecate coming on board in January.

Navigating that ambiguity will be top of mind for the new Necaxa investors. Founded in 1923, the club is based in Aguascalientes, a provincial capital with a population of about 860,000 that’s about 300 miles northwest of Mexico City. It has three Liga MX titles, and was most recently promoted back to the top tier in 2016.

Tylis, a former CEO of NorthStar Asset Management, is an investor across a number of sports and entertainment properties, including soccer clubs D.C. United and Swansea City in the U.K. (which share an ownership group), and gaming entities G2 Esports and Epic Games. Porter is chief strategy officer for D.C. United and is on the Swansea City board.

They’ll become the latest U.S. investors to acquire soccer assets abroad. Other EPL investors include Stan Kroenke, John Henry, Shad Khan, the San Francisco 49ers and the Glazer Family. French club owners include RedBird Capital and former Dodgers owner Frank McCourt.

In the early stages of the pandemic last year, Liga MX froze promotion and relegation for at least five years, meaning investors don’t run the risk of buying a top-flight team that is playing the following year in a lower division. That change came amid increased cooperation between MLS and Liga MX, as the two countries prepare to co-host (with Canada) the 2026 World Cup. The two leagues have also long discussed a possible merger, which received strong support from FIFA president Gianni Infantino last month.

Asked about that cooperation on Monday, MLS commissioner Don Garber told reporters that the two leagues plan to expand their relationship in time, so that North American soccer “can stand toe to toe with the rest of the world.”

“That’s really what our objective is,” Garber said. “There’s no reason why this region, North America and CONCACAF overall, shouldn’t be as strong and as valuable.”

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Re: Football's Magic Money Tree

Post by Chester Perry » Mon Apr 12, 2021 8:36 pm

Chester Perry wrote:
Thu Apr 08, 2021 12:40 pm
From what I have seen/read about Erik Alonso one can only fear the worst for the club, it is a shame the EFL Owners and Directors test isn't as robust as the Premier League's

As for the Newcastle United Supporters Trust - it sounds good, but I cannot see any Private Equity group wanting to share ownership with fans to a level of significant input or indeed fans being able to raise the necessary £80m - £100m to have that input, particularly when they want a sugar-daddy Sir John Hall type who will chuck money at the club. The share-holding they want to maintain influence will also be required to carry a significant liability and that is why it is doomed and I haven't bothered posting about it, until prompted.
Just where does a 29 year old occasional boxer, with a penchant for posting topless images of himself get his hands on this kind of money - Erik Alonso's takeover of Derby includes buying Pride Park (you know that place Mel Morris chucked £81m at to relieve the club of FFP difficulties - from the Mirror

Erik Alonso takeover of Derby will include purchase of Pride Park Stadium
No Limits Sports Limited poised to tie up Rams deal as soon as EFL give the green light

ByTom Hopkinson
19:04, 10 APR 2021 UPDATED19:38, 10 APR 2021

Derby's Pride Park Stadium will be included in the sale of the club to Spanish businessman Erik Alonso if the deal gets the green light from the EFL.

The sale of the football club and ground were being treated as two separate deals when Rams owner Mel Morris was in talks with Sheikh Khaled bin Zayed Al Nehayan and his Derventio Holdings group last year.

And while an agreement was reached for the £60million sale of the football side of the business, the stadium looked set to remain under Morris’s ownership.

Despite getting the nod to proceed from the EFL, however, Sheikh Khaled’s bid to buy Derby collapsed in January, with confirmation that was the case the following month.

And that paved the way for 29-year-old Spanish businessman Alonso to reignite the interest he had shown in buying the Championship outfit before Sheikh Khaled and Morris had agreed their deal.

While the bid from Alonso’s No Limits Sports Limited for the club includes both parts of the business they will not take ownership of the impressive Moor Farm training complex, which the club leases from Locko Estates.

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Re: Football's Magic Money Tree

Post by Chester Perry » Tue Apr 13, 2021 2:06 am

Australian news outlets are reporting that Manchester United are in talks to by The Central Coast Mariners and are also looking to relocate then in Sidney - from the Sidney Morning Herald

Manchester United in talks to buy Central Coast Mariners, and move them

By Dominic Bossi
April 13, 2021 — 6.00am

One of the most popular teams in world football is looking to establish a franchise club in the A-League with Manchester United having entered into talks to purchase the licence of Central Coast Mariners and relocate the club to Sydney.

The 20-time English champions have held lengthy discussions with Mariners owner Mike Charlesworth in the UK about buying the licence of Central Coast and turning the club into a sister club of the Red Devils.

A deal is yet to be done but sources with knowledge of the discussions suggest Manchester United are willing to come to the rescue of the cash-strapped Mariners. That could come at the expense of the club’s affiliation with the Central Coast region and be rebranded.

The proposed takeover could see the Mariners uprooted from their spiritual home on the Central Coast and relocated to Sydney’s northern suburbs, with games likely to be at North Sydney or Brookvale.

Any transfer of club licence, rebranding and relocation of teams must be signed off by Football Australia after gaining the approval of the majority of A-League clubs, but it’s understood several are already supportive of the prospect of the Red Devils entering the competition hoping it will increase the interest and investment in the league.

United’s discussions with the Mariners flags their intentions to follow in the footsteps of their cross-town rivals, Manchester City, and build a global network of affiliated clubs, particularly within range of the lucrative Asian football market.

City expanded their network of feeder and sister clubs with the purchase of Melbourne Heart in 2014, rebranding the A-League club as Melbourne City and incorporating it into the City Football Group global network.

City paid more than $11 million for an 80 per-cent stake in Melbourne Heart in 2014 before buying the remaining 20 per-cent for $2.25 million. A price tag for the licence of the Mariners is yet to be agreed upon with United but any fee would be but a drop in the ocean for one of the wealthiest sporting brands in the world.

Owned by the wealthy American Glazer family, Manchester United’s revenue was $905 million last year and the club was listed as the tenth most valuable sporting team in the world by Forbes in 2020, said to be worth more than $5 billion. In the last summer transfer window, the club’s net expenditure on players was $101 million. Of all football clubs, they have the third largest social media following with just shy of 150 million.

Despite the gulf in stature between the two clubs, the Mariners have a longstanding close tie with Manchester United's inner sanctum. The Red Devils' assistant coach, Mike Phelan, was appointed sporting director of Central Coast in late 2018.

United is arguably the most well-supported overseas team among Australian football fans. They attracted a sell-out crowd of more than 83,000 when they came to Sydney in 2013 to play the A-League All Stars at ANZ Stadium. Fourteen years earlier, the Red Devils drew a combined attendance of 148,000 when they played Australia in two exhibition games at the MCG and Stadium Australia.

The cash-strapped Mariners have consistently struggled financially and have been in a desperate hunt for investment in recent years. That search was accelerated in August when Charlesworth announced his intention to cut all ties with the club by selling his entire stake, and did not rule out enticing investors with commercial property and a training base in Tuggerah that is affiliated with the Mariners but privately owned by him.

The Herald and Age sought comment from Charlesworth and Football Australia on Monday.

Charlesworth has previously held sale talks with Singapore-based consortium First11 Capital, which included former young Socceroos Zac Anderson and Kaz Patafta, as well as Sydney businessman Abdul Helou. Neither parties managed to strike a deal with Charlesworth.

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Re: Football's Magic Money Tree

Post by Chester Perry » Tue Apr 13, 2021 8:00 pm

China back in the news for a few football related articles today, particularly taken with this piece of diplomacy by a country wanting to host the 2030 World Cup (for which it is supposedly ineligible)

https://twitter.com/tariqpanja/status/1 ... 1483855875

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Re: Football's Magic Money Tree

Post by Chester Perry » Tue Apr 13, 2021 8:15 pm

ADO Den Haag look set to become the latest Chinese owned european club to be sold as the "Chexit" from the european game continues - from Netherlandsnewslive

ADO almost sold: football club will soon be owned by Hagenaar | Dutch football
tommcadams3 weeks ago

United Vansen, the Chinese owner of ADO Den Haag, has agreed with Cosinus Group Capital Partners on the acquisition of the club. The investment company of, among others, Anthony Rothengatter from Hagen, is currently working on finalizing the financing.

Marijn Abbenhuijs & Michiel van Gruijthuijsen

03/24/21, 14:49 Latest update: 3:07 PM

ADO Den Haag will most likely announce in the foreseeable future that the majority of the shares will be transferred from the Chinese company United Vansen to investment company Cosinus Group Capital Partners. With the two sides agreeing on the amount for which the club will be sold, Switzerland-based Cosinus Group is trying to smooth out the last few folds when it comes to payment.

The company has allowed the first term to come to terms with the purchase amount, but the agreement has not been canceled as a result. Cosinus Group is a company that invests the money of other wealthy people. With the say it thus gains in the organizations in which it invests, a return must be made on the money. Anthony Rothengatter, who was born in The Hague, must therefore, as the future new owner of ADO, help ensure that the investment in the Hague club is a good one.

Checks by KNVB
This week it came out that United Vansen would also be in talks with the American Otium Group. However, talks with that party had already been ongoing for six months, but so far an acquisition has never become very concrete.

That was what it became with Cosinus Group. The amount for which ADO will be transferred is not yet known. If Rothengatter has completed the financing, the club from The Hague will not immediately be in his hands. The Cosinus Group will then first have to undergo several checks by the KNVB. Fortuna Sittard shows how long that process can take. The Turkish media mogul Acun Ilicali has wanted to become co-owner of the Limburgers since May 2020, but that share transfer has still not been approved by the KNVB.

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Re: Football's Magic Money Tree

Post by Chester Perry » Tue Apr 13, 2021 8:18 pm

If you need reminding why "Chexit" is happening in european football, German news outlet DW.com has a timely article

China's Communist Party forcing investors to pull money out of European football
A few years ago, China was aiming to become a major player in world football. International stars were lured to the domestic Super League and investors bought up European clubs. This is all over.

Imagine the following scenario: Borussia Dortmund win the Bundesliga and then a few months later are banished by the German Football League (DFL). Sounds unthinkable, right?

Not so in China. There, Jiangsu Suning were still celebrating winning the championship in November when the eastern Chinese club had their license revoked. The Chinese Football Association was out to make an example of the club.

As recently as 2014, the powers-that-be in Beijing issued an agenda aimed to make China a football superpower by 2050 — and wealthy investors quickly set out to invest in football both in China and abroad.

"The problem is, it became clear to the Chinese government that there weren't going to be the financial returns, or the playing returns associated with making such an investment," British sports economist Simon Chadwick, who teaches at Emlyon Business School, told DW.

Aging European and South American stars such as Marek Hamsík, Carlos Tevez and Hulk were attracted to the Chinese Super League by high salaries.

Impact in Europe
In the meantime, Beijing has made a U-turn and initiated a major decommercialization of the game there. Among other things, the professional clubs have had to remove the names of owners from club names, which is how Jiangsu Suning was unceremoniously renamed Jiangsu FC. Not surprisingly, this did not please the financier, the Suning Holding Group, one bit. It was not long after that that the license of the reigning champions was revoked. Five other clubs have also been excluded from the professional leagues.

The issue could also have a major impact on the game in Europe. One example is Inter Milan, which is owned by the Suning Holding group, operated by the billionaire Zhang family. The Renhe Group, whose Beijing club also lost its license, owns a majority stake in English second tier club Reading.

There are also other investors who wanted to focus primarily on Europe, such as Gao Jisheng with Premier League club Southampton, Guo Guangchang at Wolverhampton Wanderers and Zhong Naixiong at Sochaux in France.

"There was a group that was being opportunistic," Chadwick said. "Think about someone like Tony Xia at Aston Villa. Essentially, what he was trying to do was to create favor with the government by engaging in what he thought was an acceptable overseas investment." Xia resold his majority stake in Aston Villa in 2018 after the club failed to win promotion to the Premier League.

Some have already left
In 2017, there were 20 European clubs owned by major Chinese investors, today there are just 10. The first domino to fall was Wang Jianlin, who resold his shares in Atletico Madrid. A little later, Ye Jianming, the founder of CEFC China Energy, was driven to sell off Slavia Prague. Ye is now in prison for his economic activities.

"As you know, Jack Ma [co-founder of the Ali Baba Group] also disappeared for a while. This is a very common pattern," Chadwick explained. "If the state doesn't like something, they will step in. And very often, (the) individual involved will disappear for a short while. They will come back later, and they will say: 'I made a mistake and now I understand what it is I am supposed to be doing.'"

China's Communist Party has a clear vision of where it wants to take the country economically. In its new five-year plan, Xi Jinping's leadership called for investment to return to China and for the focus to be placed on the domestic market.

"If you can document an investment case that would benefit the development of the Chinese football industry, it would still be allowed," said China expert Christina Boutrup, who advises the Danish government, among others.

Rumored Inter Milan sale
The Communist Party, however, has made it known that it believes the Europeans have taken advantage of the willingness of the Chinese investors to finance their football clubs without offering anything in return.

"What China is trying to do is flex its muscles and trying to change the balance of power in the relationship between, let's say, the Premier League and China, because up until now, China for the Premier League is something like a cash cow," Chadwick said.

There are also rumors that the remaining Chinese investors that remain either want or need to get out of European football. The Italian daily La Repubblica reported in mid-January that Suning was in talks with London-based investment firm BC Partners in search of backers for Inter Milan. Inter president Steven Zhang, who heads the Suning Holding Group, has not commented on the report and did not respond to a DW query.

Fan frustration
There is no question that European football will carry on despite the departure of Suning and others. However, things look a lot bleaker when it comes to football in China, where many active fans are visibly frustrated by the government's interference. Because the football culture is still so young, they are not bothered by the fact that their clubs are backed by large corporations. They have simply grown up with these clubs, which are now being targeted.

"We've had the five biggest ultras groups standing together to oppose (the) FA's decisions," said Joe, a fan from northern China.

Supporters in Henan Province and elsewhere marched outside Henan Jianye Stadium to voice their displeasure.

"The fans were triggered, burning their shirts; they were rallying up in their stadiums. And some of their angriest fans went even to Beijing. They were trying to catch the president of the FA," Joe said.

The government may have underestimated the anger the decision to divest from football would cause among some fans. Meanwhile, the organizers of the protests have been visited by local police authorities to warn them not to cause public trouble. After all, in China, whether you are a billionaire club owner or an average citizen and football fan, everyone without exception is meant to bow to the will of China's state leadership.

This article was translated from German.

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 2:33 pm

Chester Perry wrote:
Tue Apr 13, 2021 2:06 am
Australian news outlets are reporting that Manchester United are in talks to by The Central Coast Mariners and are also looking to relocate then in Sidney - from the Sidney Morning Herald

Manchester United in talks to buy Central Coast Mariners, and move them

By Dominic Bossi
April 13, 2021 — 6.00am

One of the most popular teams in world football is looking to establish a franchise club in the A-League with Manchester United having entered into talks to purchase the licence of Central Coast Mariners and relocate the club to Sydney.

The 20-time English champions have held lengthy discussions with Mariners owner Mike Charlesworth in the UK about buying the licence of Central Coast and turning the club into a sister club of the Red Devils.

A deal is yet to be done but sources with knowledge of the discussions suggest Manchester United are willing to come to the rescue of the cash-strapped Mariners. That could come at the expense of the club’s affiliation with the Central Coast region and be rebranded.

The proposed takeover could see the Mariners uprooted from their spiritual home on the Central Coast and relocated to Sydney’s northern suburbs, with games likely to be at North Sydney or Brookvale.

Any transfer of club licence, rebranding and relocation of teams must be signed off by Football Australia after gaining the approval of the majority of A-League clubs, but it’s understood several are already supportive of the prospect of the Red Devils entering the competition hoping it will increase the interest and investment in the league.

United’s discussions with the Mariners flags their intentions to follow in the footsteps of their cross-town rivals, Manchester City, and build a global network of affiliated clubs, particularly within range of the lucrative Asian football market.

City expanded their network of feeder and sister clubs with the purchase of Melbourne Heart in 2014, rebranding the A-League club as Melbourne City and incorporating it into the City Football Group global network.

City paid more than $11 million for an 80 per-cent stake in Melbourne Heart in 2014 before buying the remaining 20 per-cent for $2.25 million. A price tag for the licence of the Mariners is yet to be agreed upon with United but any fee would be but a drop in the ocean for one of the wealthiest sporting brands in the world.

Owned by the wealthy American Glazer family, Manchester United’s revenue was $905 million last year and the club was listed as the tenth most valuable sporting team in the world by Forbes in 2020, said to be worth more than $5 billion. In the last summer transfer window, the club’s net expenditure on players was $101 million. Of all football clubs, they have the third largest social media following with just shy of 150 million.

Despite the gulf in stature between the two clubs, the Mariners have a longstanding close tie with Manchester United's inner sanctum. The Red Devils' assistant coach, Mike Phelan, was appointed sporting director of Central Coast in late 2018.

United is arguably the most well-supported overseas team among Australian football fans. They attracted a sell-out crowd of more than 83,000 when they came to Sydney in 2013 to play the A-League All Stars at ANZ Stadium. Fourteen years earlier, the Red Devils drew a combined attendance of 148,000 when they played Australia in two exhibition games at the MCG and Stadium Australia.

The cash-strapped Mariners have consistently struggled financially and have been in a desperate hunt for investment in recent years. That search was accelerated in August when Charlesworth announced his intention to cut all ties with the club by selling his entire stake, and did not rule out enticing investors with commercial property and a training base in Tuggerah that is affiliated with the Mariners but privately owned by him.

The Herald and Age sought comment from Charlesworth and Football Australia on Monday.

Charlesworth has previously held sale talks with Singapore-based consortium First11 Capital, which included former young Socceroos Zac Anderson and Kaz Patafta, as well as Sydney businessman Abdul Helou. Neither parties managed to strike a deal with Charlesworth.
The news of Manchester United's prospective purchase of Central Coast Mariners appears wide of the mark - there is real intent from an American Investor though and he is familiar to this thread - from SportsProMedia

US investors sign letter of intent in move to acquire Central Coast Mariners stake
Jordan Gardner and Brett Johnson want to move A-league club to Gold Coast.

Posted: April 14 2021 By: Tom King

- Mariners dismissed Manchester United takeover talks
- Mariners and United have previous ties

While Manchester United have dampened speculation around their interest in buying the Australian soccer club, a second party is in negotiations about buying the Central Coast Mariners' licence and relocating it to the Gold Coast.

US-based investors Jordan Gardner and Brett Johnson, are said to have signed a letter of intent with Mariners owner Mike Charlesworth, and have been in talks for almost a year.

Johnson is one of three investors who recently purchased English third-tier outfit Ipswich Town and is also a part-owner in second-tier US side Phoenix Rising.

Gardner, who penned an editorial series for SportsPro earlier this year, is an investor in several football clubs across Europe including Swansea City in the UK and Dundalk FC in the Republic of Ireland.

He is currently the chairman, co-owner and managing partner at FC Helsingør, an American-owned football club in Denmark, and was previously vice president, investment and business strategy for the digital media company JugoTv before it was acquired by Relevent Sports Group. He was also the owner and chief executive of a live event ticketing and technology company based in San Francisco.

Pending approval from the Australian Premier Leagues and Football Australia (FA), it is thought Gardner and Johnson want to relocate the A-League club to the Gold Coast. Investors have previously avoided the region due to its lack of population and infrastructure.

While English giants United have a recent tangible link with the Mariners, it was not a commercial one. Mike Phelan, United assistant manager, worked remotely as the sporting director at the Central Coast Mariners in 2018 before joining Ole Gunnar Solskjaer’s management team in 2019.

The Brisbane Herald also reported that Mariners sources claimed they have not yet shared their recent financials with the Premier League club.

The ideal scenario for incumbent owner Charlesworth is to sell the Mariners licence or secure the management rights to Central Coast Stadium, which would be a significant shift in the long-term sustainability of the A-League outfit.

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 2:38 pm

A thought piece at Sportspromedia that rubs up nicely with my posts from Monday on football being a platform not a publisher

Opinion | Why the digital age demands a revised fan-centric approach for sporting brands
Jung von Matt SPORTS chief executive Robert Zitzmann and Soeren Jessen, the creative agency's head of strategy, explain why building an authentic and relevant brand identity starts with a fan-centric, emotion-led approach.

By Robert Zitzmann and Soeren JessenPosted: April 13 2021

The digitisation of sports is nothing but overwhelming. Following the rise of social media, we have been gifted with loads of new tech and gold mines of big data. And we’re currently experiencing the breakthrough of crypto, blockchain, NFTs and more. In theory – and yet partly in practice – all these trends and topics symbolise the commercial growth potential for sport organisations.

What started once as a collaborative ecosystem between media, sponsors and rights holders has now become a battle of many more and all for one: the direct access to consumers, their digital journeys, their fingerprints and wallets.

While evolving its business from B2B to D2C, the commercial future for sports requires more than 5G or OTT. Clubs, leagues, associations, athletes: they all face a new business battle of increasing complexity. To make smart and sustainable decisions, we have to remember the original value proposition and root of revenue for the supply and value chains in sports: the reason why humans become audiences, why advertisers become sponsors, and why logos become licences. This 'reason why' starts with identity and emotionality, shared in unique relationships between brands and fans.

From valuation to values: brand love is built on emotions, not transactions
The need for rights holders to remember their root of revenue – identity and emotionality – stems from the basic psychological theories of self-concept and self-perception. People are drawn to brands when they perceive a brand as part of their own identity and are thus emotionally attached to it.

But the regularly proclaimed fan-centric approach of rights holders is too often based on a transaction-driven and platform-driven logic: trying to drive the digital journeys of people rather than understanding their attitudes and motivations as part of their self-concept and buying decisions. Data alone won't do the job. Brands need to understand the zeitgeist to build and grow human connections, for example by creating value-driven communities and cultures that people want to belong to.

To shift from push to pull and create a certain level of magnetism, rights holders need to invest resources in defining fundamental values and principles for their organisations, services, products and contents – the starting point for the creation of communities and cultures – especially since the highly desired Generation Z seeks orientation and inspiration beyond a digital overload.

As an example of best practice, Fifa has launched a new vertical to cover all of its esports and gaming assets. The goal: growing efootball not just as a competitive sport and traditional tournament-based marketing platform, but to foster and grow a global gaming culture. The outcome is the brand IP of FIFAe – an ecosystem for a new generation that puts the emotional value creation for fans first.

In essence, by regarding customer-centricity in sports as an emotional relationship-building rather than a transactional approach, rights holders open more doors to long-term and scalable business viability.

From brand to business: why image still is the commercial GOAT
Taking the brand-to-fan logic forward, sports can seed commercial yield beyond B2C. Putting a spotlight on B2B, the numbers prove that sponsorship remains a leading revenue stream for many organisations in sports. And with the projection that media revenue will disrupt from a publisher-paid and a platform-owned approach, sponsorship will naturally remain a mighty force in sports business.

But what makes sponsorship so valuable compared to traditional advertising, digital or programmatic media? The simple truth is that it is more than just an efficient media buy.

For brands, the USP of sponsorship is to boost brand image and, through shared identities, leverage access to audiences and communities through a common passion point. Outside of any digital consumption data, the shared interest and enthusiasm for a sporting event such as the Super Bowl or a club such as Liverpool is the most relevant data point for brands to make partnerships a success. And that's why the concept of brand identity for sports properties is not a commodity. It’s a competitive advantage when pitching for advertisers and commercial partners, or when innovating with new digital products.

Another fascinating benchmark is Jürgen Klopp, a soccer manager and popular ambassador for a wide range of brands. While the 'Normal One' doesn't even have a Twitter account (or any other public social profile), sponsors grasp for his face and voice due to his unique and authentic character – his personal identity.

As the latest brand on the block, Adidas has signed with Klopp stating that both partners aim to "do more together" – for football, sports and society. This case also confirms that social values will become mandatory for the brand identity of rights holders when advertisers choose to invest in them. Or we could predict: 'purposeship' will change sponsorship due to its value-driven nature.

But the brands-first approach is not just the root for traditional consumer or partner-related revenue streams - it's also the best source of inspiration for innovation.

Just like NBA Top Shot, a new beta platform to collect special moments from players as digital trading cards and exclusively tagged contents. NFTs – non-fungible tokens built on the principles of blockchain – are much more than a merch-tech innovation. The early success of NBA Top Shot as a branded digital product dates back to the original phenomenon of fandom: the inexplicable desire to belong and represent.

Data alone won't do the job. Brands need to understand the zeitgeist to build and grow human connections.

Obviously, some users are in it to profit from the rising monetary values of their cards as if it was the New York Stock Exchange, but the obvious licensing value and long-game commercial potential is built on the magnetism of the NBA brand and its associated partners, such as the LA Lakers or LeBron James.

Looking ahead, commercial excellence is not just a matter of quantity and trending opportunity. What matters most in sport are relatable and desireable identities that cater to direct relationships and communities beyond purchase.

The brands-first mindset will help rights holders to unleash their full potential, embracing the digital age as part of an evolving entertainment and participation culture in sports, where tech is a tool and brands are the reason.

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 3:36 pm

Chester Perry wrote:
Mon Apr 12, 2021 8:36 pm
Just where does a 29 year old occasional boxer, with a penchant for posting topless images of himself get his hands on this kind of money - Erik Alonso's takeover of Derby includes buying Pride Park (you know that place Mel Morris chucked £81m at to relieve the club of FFP difficulties - from the Mirror

Erik Alonso takeover of Derby will include purchase of Pride Park Stadium
No Limits Sports Limited poised to tie up Rams deal as soon as EFL give the green light

ByTom Hopkinson
19:04, 10 APR 2021 UPDATED19:38, 10 APR 2021

Derby's Pride Park Stadium will be included in the sale of the club to Spanish businessman Erik Alonso if the deal gets the green light from the EFL.

The sale of the football club and ground were being treated as two separate deals when Rams owner Mel Morris was in talks with Sheikh Khaled bin Zayed Al Nehayan and his Derventio Holdings group last year.

And while an agreement was reached for the £60million sale of the football side of the business, the stadium looked set to remain under Morris’s ownership.

Despite getting the nod to proceed from the EFL, however, Sheikh Khaled’s bid to buy Derby collapsed in January, with confirmation that was the case the following month.

And that paved the way for 29-year-old Spanish businessman Alonso to reignite the interest he had shown in buying the Championship outfit before Sheikh Khaled and Morris had agreed their deal.

While the bid from Alonso’s No Limits Sports Limited for the club includes both parts of the business they will not take ownership of the impressive Moor Farm training complex, which the club leases from Locko Estates.
The Daily Mail thinks it has found out who the money is in the prospective Derby County takeover, with Eril Alson touting himself as football agent and being in control of the club once the takeover is complete - I mean what could possibly go wrong. Money from a foreign country from sources who have no real football knowledge and having it all managed by an agent - I can think of only one case in this country where such influence has helped rather than hinder a club.

https://www.dailymail.co.uk/sport/sport ... eover.html

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 5:06 pm

Not for the first time, the Newcastle Chronicle has managed to get it's hands on some great material surrounding the proposed Saudi takeover and comes to the conclusion that fans want to hear (a conspiracy) and not what is claimed to have happened by the Premier League - whose proposition that an Independent arbitrator should decide if the PiF was ultimately controlled by the Saudi government was turned down by the PiF. You do wonder who is the source of the documents and if they are giving a steer on the interpretation. Of course we are still awaiting the outcome of the clubs arbitration proceedings against the Premier League for their handling of the test.

here is what the Chronicle has to say

Government documents show how close a decision on the Newcastle United takeover really was
Exclusive: Documents released to Chronicle Live show Whitehall believed a decision on the NUFC takeover was close

By Andrew Musgrove - Football Multimedia & Engagement Editor
12:00, 14 APR 2021UPDATED15:23, 14 APR 2021

The British government believed a decision on the Saudi funded Newcastle United takeover was just hours away in June 2020 - and had organised a top-level Whitehall meeting in anticipation.

In emails sent to the Premier League, officials from the Department for Culture, Media and Sport (DCMS) stated several times that sources believed a decision was 'imminent.'

Within the emails, the Premier League stated that the takeover had left them in 'new territory' when it came to making a decision.

After a six-month battle to have the emails released to the public, Chronicle Live can finally reveal that on the:

21st April 2020 - the Premier League confirmed the beginning of the owners and directors test - stating that they will go through all of the 'rigorous processes looking at the PIF and the individuals named as directors.'
In the same email chain, of which some details have been redacted, the Premier League say they have spoken to the Saudi desk of the Foreign Office.

Interestingly, this part of the email has been blanked out.

The DCMS told Chronicle Live this is because they are 'continuing to use the information at issue here to inform the development of our ongoing policy and we, therefore, contend that to release the information would put undue pressure on the foreign policy-making process by opening it up to intense public scrutiny and speculation.

'This would result in decisions being continuously questioned. This intense scrutiny may result in decisions being taken, that are made simply to avoid adverse public backlash rather than to further the quality of the policy. This is clearly not in the public interest, nor would it represent an efficient use of public money.'

In the chain, the DCMS are seen to be drawing up a statement on the matter AND ask the Premier League if there is anything they'd 'suggest' or 'be comfortable with' in terms of a 'public line if raised by the select committee.'

That select committee took place the following the day in which the secretary of state Oliver Dowden was quizzed on the takeover - and seemingly shared a view that the PIF and Crown Prince Mohammed Bin Salman are separate entities.

12th June 2020 - The DCMS ask the Premier League to confirm or deny a decision on the takeover is imminent. The Premier League respond that day, telling the DCMS that they are 'on a call' regarding the matter, and that 'confidentially, we are not expecting a decision today nor imminently.'
The Premier League confirmed it had also kept the Foreign Office up to date with proceedings and would provide an update late that day - if that update occurred, it is not included in the documents given to Chronicle Live.

19th June 2020 - The DCMS send an email sighting departmental sources who believed a decision could be made that day. The email notes that the secretary of state is set to feature on BBC Radio 4's Any Questions later in the day and 'so it would obviously be good to have a heads up.'
The Premier League responds to the email, writing: "There is not going to be any decision today - so not sure where that is coming from."

It reiterates its intention to give the DCMS, FCO and Department for International Trade 'good notice' of any decision.

21st June 2020 - 4.35 pm - The DCMS writes to the Premier League with the understanding that a decision is 'imminent now.'
It notes that there is a 'senior cross Whitehall' meeting on June 22nd on the topic of Saudi Arabia and asks for an update from the Premier League in advance.

An email sent an hour later notes that the meeting taking place will be attended by only those at 'deputy director level' for the FCO, DIT, DCMS and the Cabinet Office.

21st June 2020 - 9.01pm - The Premier League confirms that a decision on the takeover is 'possible' the following day, so it is 'worth letting people know that a meeting may be needed.'
But it does state that 'not for the first time, it is also possible that some further time will be deemed necessary should the board feel that the information they have received is still incomplete or needs more time to examine.'

It adds that there 'is no set time in which a decision will be made' and that it 'would like' to let all the relevant government departments know what the decision is as soon as it is taken.

The email then states 'inevitably, that means a bit of the Grand Old Duke of York routing is likely, but we are in new territory with this case and the timings remain uncertain.'

That is where the email chain - other than a reference to the letters from Newcastle Central MP Chi Onwurah and the subsequent response from the Premier League - ends.

We asked the Premier League to clarify
  • Why a decision was said to be possible and then not.
  • What is meant by the Old Grand Duke of York reference
  • Why the Premier League wanted to keep the DMCS in the loop - and if this was normal practice for all Premier League takeovers.
  • The Premier League refused to comment.
We asked the DCMS the following questions:
  • What was or what was expected to be discussed in the high-level meeting
  • What concerns, if any it had over a potential Saudi Arabia takeover of the club
  • What its overall view on the takeover was
  • And whether the secretary of state believes the PIF and Crown Prince are separate entities
The DCMS told Chronicle Live that it would have to put in a further FOI for the first two questions, and for question three and four referred us back to a statement made in July 2020 in which Sports Minister Nigel Huddleston said he was 'very uncomfortable with the level of expectation of involvement on government with things that are very clearly decisions for football.'

The consortium trying to takeover Newcastle was also adamant that a decision was close - and while there is no suggestion in the email chain seen by Chronicle Live which way the decision was to fall, it is clear that Amanda Staveley's confidence, at least in a decision being imminent, was not as unfounded as some believed it to be.

It is also interesting to note the high level of meeting set up to deal with a potential decision and the fact those who would take part in such a meeting were spread across several different government departments.

Despite the government's constant line that the takeover was a matter for the Premier League, Newcastle United and the consortium, the documents show yet again that Whitehall was not silent in the process.

Furthermore, the reference by the Premier League that the takeover has left them in 'new territory' could be viewed as an admission by the top flight that their own owners and directors test is no fit for purpose.

The consortium pulled the deal on July 30th 2020 but remain interesting in completing the deal. Mike Ashley has taken the Premier League to arbitration over the matter.

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 10:44 pm

More of that failed takeover at Newcastle - this time from the Mail, such a friendly lot - please get the correct decision, and should they ever own the club, will it be please change it to the correct result, please change it to the correct qualification

REVEALED: Saudi Arabia's Crown Prince Mohammed bin Salman urged Prime Minister Boris Johnson to intervene in £300m Newcastle United takeover after it was blocked by the Premier League
- Saudi Arabia's Crown Prince Mohammed bin Salman was desperate for takeover
- He warned Boris Johnson that Anglo-Saudi relations would be damaged
- Crown Prince wanted Prime Minister to intervene in £300million bid
- Premier League had concerns over alleged state-backed broadcast piracy
- Mike Ashley feels Newcastle fans 'won the lottery but were denied the payout'
By CRAIG HOPE FOR THE DAILY MAIL

PUBLISHED: 22:00, 14 April 2021 | UPDATED: 22:20, 14 April 2021

Saudi Arabia’s Crown Prince Mohammed bin Salman urged Boris Johnson to intervene in the takeover of Newcastle United by telling the Premier League to ‘correct’ its decision to block the deal.

In an extraordinary exchange revealed by the Daily Mail, Bin Salman warned the Prime Minister on June 27 last year that Anglo-Saudi relations would be damaged unless the £300million buyout was approved. His message to Mr Johnson read: ‘We expect the English Premier League to reconsider and correct its wrong conclusion.’

Mr Johnson asked one of his senior aides, Lord Eddie Lister, to investigate the matter but the Saudis withdrew from the process at the end of July after the Premier League failed to approve them as the club’s new owners.

The Prime Minister backed calls later for the Premier League to reveal why the takeover had not been passed.

The Crown Prince was enraged after the Premier League demanded to know if the Saudi state — in effect, Bin Salman himself — would be the owners of Newcastle.

The Premier League had concerns over alleged state-backed broadcast piracy in the country, but the buying consortium insisted that the Public Investment Fund leading the deal was separate from the state.

The PIF, along with financier Amanda Staveley and the Reuben brothers, agreed a deal with Newcastle owner Mike Ashley for the sale of the club exactly a year ago.

That agreement remains in place and Ashley is awaiting an arbitration hearing against the Premier League in a bid to have the takeover approved.

A source, referring to Ashley, said on Wednesday night: ‘In Mike’s eyes the club is sold. He feels Newcastle fans won the lottery but were denied a payout by the Premier League.

‘He wants to know why that happened and is determined for the deal to be signed off.’

Interestingly, a redundancy letter sent to staff at Newcastle’s club store this week referenced the ‘anticipated transfer of ownership of the club’ and ‘new owners of Newcastle Football Club’.

There is optimism that the deal will be revived but that is subject to the outcome of the private arbitration hearing, which is yet to begin.

The revelations about Government involvement at the highest level will be of interest to Newcastle supporters, who blame the Premier League for denying them new owners. Sportsmail reported on June 21 last year that a decision on the takeover was close and it was expected to go ahead given an increased level of Government involvement.

It was said then that the Government were keen to preserve ties with Saudi Arabia.

Documents released this week have revealed that, on June 21, the Department for Digital, Culture, Media and Sport wrote to the Premier League regarding an ‘imminent’ takeover decision. A Whitehall meeting to discuss Saudi Arabia was scheduled for the following day.

But that announcement never arrived and within a week Bin Salman was lobbying the Prime Minister to intervene.

In August, Mr Johnson took the unusual step of sending an email to members of the Newcastle United Supporters Trust.

‘I appreciate many Newcastle fans were hoping this takeover bid would go ahead and can understand their sense of disappointment,’ he said.

‘I have seen the recent email sent to Newcastle fans from the Independent Football Ombudsman and agree with their conclusion that the Premier League should make a statement on this case.

’Lord Lister said on Wednesday night: ‘The Saudis were getting upset. We were not lobbying for them to buy it or not to buy it. We wanted them (Premier League) to be straightforward and say yes or no, don’t leave (the Saudis) dangling.’

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 10:52 pm

It is not something we tend to think about so much in the public consciousness, collecting autographs - at one time in the past almost everyone had an autograph book, but now it appears that people are making a living from it. Personally I consider it a kind of parasitic theft, it is one thing to collect for yourself, quite another to collect with the certainty that you are doing it for immediate profit and at the expense of the person giving the autograph (especially when it is given for free). The Mail has a report on some of the worrying extremes such individuals are going to, in an effort to make money.

The dark side of the autograph hunters: Professional 'eBayers' follow stars' cars or wait outside homes to cash in on lucrative market - SPECIAL REPORT
- Liverpool have reported autograph hunters skulking outside players' homes
- Manchester United boss Ole Gunnar Solskjaer was followed from team hotel
- Leeds reported to police that two players have recently been followed home
By MIKE KEEGAN FOR THE DAILY MAIL

PUBLISHED: 22:30, 14 April 2021 | UPDATED: 22:34, 14 April 2021

The footballer looked in his rear-view mirror. It was still there. The Range Rover, which he had noticed when he left his club’s training ground, remained behind him. He had driven for around 10 miles but the 4x4, with two adults in it, continued to tail him.

The South American player, not long in the country, was alarmed. In a panic, he called his club’s operations director, fearing he was about to be attacked.

The advice was to stay calm, carry on as normal and avoid any interaction. He arrived at home, hurriedly got inside and locked the door. When he emerged hours later, the car had gone.

Others have not been so fortunate. Last week, Sportsmail’s Sports Agenda revealed that Manchester United manager Ole Gunnar Solskjaer had been followed after leaving the city centre Lowry Hotel, where the club are based ahead of home matches. At the first set of traffic lights, a man got out of the car that had pursued him and started banging on his window.

He did not wish to harm the Norwegian. He did, however, want his signature.

Professional autograph hunters are thought to have been behind both incidents. Selling signed memorabilia is a surprisingly lucrative business with growing numbers — including those driving the Range Rover — making a living from it. A quick look at eBay confirms as much.

A Manchester United shirt, signed by Marcus Rashford and neatly presented in a gift box, will cost you £355.99.

A Kevin De Bruyne shirt, without any trimmings other than the Manchester City star’s signature, is up for £175.

It is, in essence, simple. Buy a shirt for around £50, get a player to sign it and within hours you can make triple — or even more — what you paid.

Traditionally, ‘eBayers’ have been the scourge of training grounds, hotels and stadiums. But now Covid is triggering some brazen, worrying behaviour that has put Premier League clubs on alert.

Owing to the pandemic, many of the traditional stomping grounds are off-limits. With biosecure bubbles part of the game, access has been hampered. It has led to alarming incidents.

Liverpool have had multiple reports of autograph hunters skulking outside players’ homes. In some cases they have waited for players to get into their cars, followed them and then pounced when they stopped at the first traffic light.

At Leeds United, two players have recently been followed home from the club’s training ground. The matter was raised with police.

As Sportsmail revealed in March, Everton goalkeeper Robin Olsen and his family were subjected to an horrendous ordeal when masked raiders, armed with machetes, smashed their way into their home, and demanded jewellery. The home of Carlo Ancelotti, Olsen’s club manager, has also been targeted.

It is little wonder that players have panicked when they see strangers loitering outside their homes or following them.

The problem is widespread. Close to Stamford Bridge, there are two sets of traffic lights near Fulham Broadway station where ‘eBayers’ gather. They know that players will never make it through both lights and will have to stop at one — or even both.

On a number of occasions during the pandemic, autograph hunters have put their heads in players’ cars. It is a similar story elsewhere. ‘We spend all this money on keeping a secure bubble,’ explained one official dealing with the same issue at another top-six club.

‘All week the players adhere to the rules to keep everyone safe. Then they get pounced on and a stranger sticks their head inside their car. We have no idea who they are, where they have been, who they have been exposed to.’

Back at Chelsea, on one occasion a parent thrust his young child, of around seven or eight, into the middle of Fulham Road to ensure a player stopped.

And at the club’s training ground, signs have gone up warning that players cannot pull up in the lane as they make their exit. Some clubs, including Wolves, have told players that if they are giving autographs they should ask to whom they should address their message.

Some players now recognise ‘eBayers’ by their voices and are reluctant to stop.

‘This guy again,’ one star recently told team-mates. ‘He called me a d***head last time because I didn’t stop.’

Clubs are aware that genuine supporters are often mixed in with the professionals and can miss out as a result of a growing reluctance among players to stop.

The experts are skilled operators and force their way to the front of the queue.

Many carry embroidery discs to which they attach shirts, making it easier for the player to sign. Others have books with sections marked off for each player.

Their persistence and aggression often leave genuine autograph hunters crestfallen.

On a number of occasions, managers have later gone out on their own and signed only for youngsters.

The reality, however, is that clubs are limited in what they can do to tackle a growing problem.

United reviewed Solskjaer’s travel arrangements. Leeds and Liverpool are offering advice to players. Meanwhile, the shirts continue to pop up online.

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Re: Football's Magic Money Tree

Post by Chester Perry » Wed Apr 14, 2021 11:42 pm

Chester Perry wrote:
Wed Apr 07, 2021 9:16 pm
SWINDON TOWN FC, LEE POWER, FIRST TOUCH PRO MANAGEMENT AND MICHAEL STANDING are all CHARGED by the FA

Swindon Town FC, its Owner and Chairman, Lee Power, First Touch Pro Management and its Company Director, Michael Standing, have been charged in relation to breaches of The FA’s Regulations on Working with Intermediaries.

It is alleged that Swindon Town FC, Lee Power, First Touch Pro Management and Michael Standing breached Intermediary Regulations in relation to the ownership and/or funding of Swindon Town FC.

Swindon Town FC, Lee Power, First Touch Pro Management and Michael Standing have until 22 April 2021 to provide responses to their respective charges.
--------------------------------------------------------------------------------------------------------------------------------

The supporters trust have put together this response

Wednesday 7th April 2021 for Immediate Release

TrustSTFC were disappointed to learn today of FA charges being issued to Swindon Town FC, Lee Power, First Touch Management and Michael Standing .

TrustSTFC assume that these FA Charges are linked to the ongoing legal proceedings and upcoming court case on the formal ownership of Swindon Town Football Club. TrustSTFC would like to go on record and state that if the FA do find any wrongdoing has occurred in their investigation and associated charges , that they deal with the individuals appropriately but do not take action that will penalise the football club specifically as it will be largely the loyal fan base of STFC that will suffer in this scenario which would be unjustly unfair.

TrustSTFC will be making further enquiries to establish exactly what the situation is and also to understand any potential actions which may manifest from this investigation / charges should it be proven that rules have been broken. The matter will also be discussed further at our Board meeting on Thursday 8th April and any further updates will be issued via further press releases in due course on our website.

Should the FA wish to speak to TrustSTFC on this matter we would be more than happy to discuss this with the FA teams to explain our rationale for the above statement.

TrustSTFC Board.
More woe for Swindon Town Supporters Trust after they provided a witness statement for the legal proceedings against the club's owner - this statement from them gives us the detail

NEW ARTICLE April 14, 2021 James Spencer
PRESS RELEASE FROM TRUSTSTFC – Swindon Town FC Cease all Communications with TrustSTFC

SWINDON TOWN CEASE ALL COMMUNICATIONS WITH TRUSTSTFC

TrustSTFC were today informed by Steve Anderson, CEO of Swindon Town FC, that the football club are to stop all formal communications with the Trust.

On being made aware of current chairman Lee Power preparing an application to enable placing the club into administration, the Trust decided to put on record for the courts that there is a viable alternative to the current ownership of Lee Power and that it is supportive of Clem Morfuni’s response to our open letter and his commitment to provide the plans, vision and commitment to openness and transparency that the Trust has been asking for.  The Trust provided a witness statement via the Axis legal team regarding the viable alternative to the current regime running STFC.

Following our positive support for Clem Morfuni at today’s hearing in respect of Lee Power’s application to put the club into administration or sell to “Able” (a company we still know nothing about or have not heard anything from) we have been informed by the current management of STFC that they will no longer have any communication with TrustSTFC.

After weeks of public silence from the club, punctuated by multiple futile private communications between Mr Anderson and the Trust, we are now left with no official comment re the critical issues the club is facing, both in terms of its financial viability and its future prosperity. It also leaves the community at a loss regarding more day-to-day issues that impact fans, such as the situation regarding season tickets for this season and next.

We have regularly encouraged the current management of STFC to respond to our open letter and provide financial transparency to the Trust and the wider supporter base but to date this has been ignored. 

The Trust are obviously extremely disappointed but not surprised that all formal channels of communication with the current ownership of Swindon Town are now closed to us.

TrustSTFC has always been and remains owner-agnostic provided that the owners are working for the long-term best interests of STFC, its supporters and the local community. 

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 12:27 am

Chester Perry wrote:
Tue Apr 13, 2021 8:00 pm
China back in the news for a few football related articles today, particularly taken with this piece of diplomacy by a country wanting to host the 2030 World Cup (for which it is supposedly ineligible)

https://twitter.com/tariqpanja/status/1 ... 1483855875
The Guardian are reporting that Lionel Messi had a hand in getting those 50,000 vaccines for South American footballers ahead of this summers Copa America

https://www.theguardian.com/football/20 ... an-players

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 2:48 am

This is interesting, not least because Zlatan Ibrahimovic returned to international football recently - from the Mail

Zlatan Ibrahimovic 'is facing a three-year ban which could END his career due to investment in Malta-based betting company', claims bombshell report in Sweden... as it's alleged country's FA had to stop him playing at the 2018 World Cup
- Zlatan Ibrahimovic is in hot water over his reported association with Bethard
- Swedish newspaper Aftonbladet say that Ibrahimovic's company Unknown AB own 10 per cent of the shares of Bethard
- The report adds that the Swedish Football Association have been aware of this case for three years
- FIFA and UEFA regulations do not allow players participating in their competitions to have financial interests in gambling companies
By KIERAN JACKSON FOR MAILONLINE and ALVISE CAGNAZZO FOR MAILONLINE

PUBLISHED: 00:08, 15 April 2021 | UPDATED: 00:43, 15 April 2021

Zlatan Ibrahimovic could face a three-year ban - and perhaps an early end to his football career - because of his partnership with a Malta-based betting company, according to reports coming out of his native Sweden.

The Swedish newspaper Aftonbladet state that through his company Unknown AB, Sweden and AC Milan striker Ibrahimovic owns 10 per cent of the shares of Bethard, a gambling site with offices registered in Malta.

The report also details that the Swedish Football Association have been aware of the problem for three years and it is the reason the talismanic forward wasn't called up for the 2018 World Cup, though he did retire from international football in 2016 until returning last month.

His participation in the company could reportedly land him with a three-year ban or a hefty fine, in an affair which is being closely followed by both FIFA and UEFA.

FIFA and UEFA do not allow players participating in their competitions to have financial interests in gambling companies.

The report adds that Ibrahimovic's company is the fourth largest owner in Bethard, which according to the latest available annual report in 2019 made a profit after tax of £25.79m.

It details that Ibrahimovic may have violated FIFA's rules during March's World Cup qualifier against Georgia and in the Europa League qualifier against Shamrock Rovers in September 2020.

Ibrahimovic was announced as an ambassador and co-owner of Bethard in 2018, and said: 'I have obviously been intensively courted by betting companies throughout my career, but up until now I have not been presented to anything that has triggered me.

'With Bethard, there was something different. It's a company with Swedish roots, the founders are from my home town and they are true challengers who really wants to do things differently'.

FIFA's ethical regulations state that anyone who violates their rules will be punished by a fine and a possible suspension from all football-related activities for a maximum of three years, while UEFA's regulations are less clear when it comes to punishment.

Ibrahimovic turns 40 in October and would almost certainly be forced to retire if he was handed the maximum ban of three years.

When the story originally came to light in March 2018, general secretary of the Swedish Football Association Hakan Sjjstrand said: 'According to FIFA's regulations and code of ethics, no player may directly or indirectly own shares in betting companies.

'I stick to the facts and can only account for what applies to all nations and players who will participate in the World Cup.'

When approached this week about Ibrahimovic's return to the national team and therefore possible punishment in this case, Sjostrand said: 'I do not speculate on possible sanctions.

'But of course continue to push for clarity in Fifa's regulations as there is frankly a lot of ambiguity in how it should be interpreted.'

In an email, Bethard CEO Erik Sharp said: 'These are questions that should be asked to FIFA.

'We have an agreement with Zlatan that we follow and if problems arise, we will handle it together with him.'

FIFA and UEFA refused to comment to Aftonbladet, who have also approached Ibrahimovic's representatives for comment. Sportsmail has contacted Ibrahimovic's agent, Mino Raiola, for comment.

The news story comes as the 39-year-old is set to extend his career by another year, with a new contract at AC Milan until June 2022 likely to be signed in the coming days.

Ibrahimovic was also in hot water this week after images of an alleged Covid-19 breach in a restaurant in Lombardy emerged, though his entourage say it was a 'work meeting.'

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 1:43 pm

Not for the first time it seems, the ECA is at loggerheads with it's own membership over the future of the Champions League. ahead of what UEFA President Aleksander Ceferin believed would be a ratification of his proposals on Monday, though it does seem to be about a few clubs (mainly with American owners) wanting more control rather than many clubs wanting to block/water down the proposals - The Financial Times has details of a last minute meeting tomorrow at the ECA on the matter

Crunch talks loom in battle for control of Champions League
MURAD AHMED APRIL 15, 2021

Chelsea and Porto in action in the second leg of their Champions League quarter-final clash on Tuesday evening © Quality Sport Images/Getty
Europe’s leading football teams are set to hold a crunch meeting on Friday over the future of the Champions League, seeking to settle a battle for control over the sport’s most prestigious and lucrative annual club competition.

The European Club Association, a body that represents the interests of more than 200 leading teams, will gather to discuss proposed reforms to the continent’s club tournaments, such as the Champions League and the lesser Europa League.

Uefa, European football’s governing body, distributes about €3.25bn in prize money and television broadcasting deals to clubs participating in these competitions each year. It is pressing the ECA to approve plans for a dramatic revamp of the format of the Champions League from 2024, changes that would represent the biggest transformation of the European game in decades.

Aleksander Ceferin, Uefa’s president, wants his plan to be approved urgently, seeing it as a way to kill momentum behind an alternative $6bn JPMorgan-backed plan to launch a breakaway European “Super League” promoted by some leading clubs such as Spain’s Real Madrid.

The ECA held a board meeting last month in which it had been expected to approve Uefa’s proposals, which would create about 100 more Champions League matches each season, including more fixtures between top teams.

But no agreement was reached after executives from a number of leading clubs, including Ed Woodward, executive vice-chair at England’s Manchester United, and Ivan Gazidis, chief executive of Italy’s AC Milan, raised objections, according to people familiar with the discussions.

Some clubs believed that Uefa had reneged on agreeing more concrete measures over the governance of European competitions in future, said those with knowledge of the talks.

For months, Uefa and the ECA have been in secret negotiations over creating a new joint venture that would control all media and sponsorship rights for European club competitions.

This venture would be 51 per cent owned by Uefa with the rest controlled by the ECA, according to people with knowledge of the plan. But some top clubs want Uefa to agree key details, from how TV contracts are sold or the circumstances in which investment from private equity companies could be sought in future.

The clubs want these governance measures, which would give them an effective veto over all commercial matters relating to the Champions League, included in an official “memorandum of understanding” with Uefa before granting approval to the competition format changes.

That stance infuriated Ceferin as he had been assured privately by Andrea Agnelli, Juventus chair and head of the ECA, that a quicker deal would be reached, according to people familiar with the talks.

Meanwhile, Uefa is resistant to offering further concessions that could mean it loses a grip on the club competitions it runs. “[The elite teams] have gone from participating in this competition, to being the part owner,” said a person close to Uefa’s leadership. “How much more will they ask for in the next five years?”

When the ECA’s board meets again on Friday, clubs will seek a unified position ahead of Uefa’s annual congress next week, in which any changes to European competitions would be ratified. But the failure to approve the competition format changes could see the negotiations drag on for many more weeks.

Uefa wants to transform the Champions League by altering the group stage, in which teams are at present placed in groups of four, playing each other at home and away.

That would be replaced with the “Swiss system”, a model used in chess competitions. Each side plays 10 matches against entirely different opponents. The best ranked teams then qualify for the knockout rounds. Every club would be guaranteed at least four more money-spinning European games each season.

Uefa, ECA, Manchester United, Juventus and AC Milan declined to comment.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 1:57 pm

The Football Today Podcast has been a firm favourite of mine since it started about 18 months ago with it's twice weekly detailed output on single subject matter - it is about to change dramatically to once a fortnight. today's podcast is the last of the original format and looks at the prospect of Gianni Infantino's touted African Super League and the issue of cross border leagues in general

https://www.footballtodaypodcast.com/po ... ompetition

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 2:19 pm

I have a lot of admiration for today's Good Morning Post from @AndyhHolt describing in very simple terms the fundamental plan in making his club sustainable

https://twitter.com/AndyhHolt/status/13 ... 8094253057

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 2:46 pm

There has been a separate thread running on the Reading 2019/20 financial results

viewtopic.php?f=2&t=54326

but I think that this thread from @UglyGame pairs so well with my previous post of @AndyhHolt's strategy for his club that I had to it post here

https://twitter.com/uglygame/status/1382610234410205186

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 3:02 pm

I have been trying to get access to this for a week and now it has just appeared in front of the paywall having tried a different link from one of the authors from OffthePitch.com

Column: Time for a financial reset - What next for UEFA, FFP and the power battle of governance versus self-regulation in European football?
8 April 2021 8:23 PM
  • Due to a number of reasons – the Covid-19 pandemic being one of them – the current FFP-regulations are looking increasingly outdated being too focused on the past, measuring historic performance.
  • Everyone in the industry need to accept that all regulatory systems need to undergo change, reflecting on history and providing solutions for the economic climate, key with what might come next, the authors argue.
  • A way forward could be via cost reduction targets - incentivised with broadcasting rights redistribution - to improve financial stability and promote some competition at all levels.
  • Indications that we are about to see a shift in power towards the so called big European clubs.
  • UEFA could find itself in a position where its original aim for transparent financial administration and catharsis among clubs is self-defeated.
DR. ROB WILSON, DR. DAN PLUMLEY AND DR. GREGORY IOANNIDIS, SHEFFIELD HALLAM UNIVERSITY contact@offthepitch.com

UEFA’s Financial Fair Play (FFP) regulations have never been without controversy. Since implementation in 2011 FFP has received criticism from a number of quarters; the legality of the regulations, the impact on playing standards and player wages, and the fact that FFP prevents the industry (and clubs) benefitting from substantial injections of external financing. The latter proving a key consideration in the competitive balance in Europe’s top football leagues.

In some ways, FFP has only served to maintain (and strengthen) the status quo and the stranglehold the so-called ‘big’ teams have on European competition. Yet it is forever this when we unpick regulatory systems.

But let’s not be misguided when considering the rationale for FFP. The stated intention was always to provide financial stability in the club game. Limiting insolvency and forcing clubs only to spend what they earn.

For many, this was a good equation to balance. Perhaps though, it was the unintended consequences of FFP that cause such consternation with fans and (some) club officials.

Protecting hitherto successful teams from new challenges, cementing the competitive order, creating foreclosure and entry barriers, and serving the vested interests of powerful parties.

Challenges like this might even render the regulations anticompetitive. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers – rather like the outcome of a match itself, ultimately in the winner-takes-all scenario, someone wins, and someone loses.

All regulatory systems need to undergo change, reflecting on history and providing solutions for the economic climate, key with what might come next. Perhaps now, in response to a global pandemic, is the time to review and revise FFP?

Why now?

There is no getting away from the fact that Covid-19 has laid bare the fragile nature of football club finances. With most clubs in Europe having played behind closed doors for the best part of 12 months, matchday revenues have been decimated. Issues with broadcasting deals, rebates and deferred payments and the curtailing of commercial operations have pressurised income streams.

Yet clubs are expected to sustain the high running costs of playing (and paying players). This distorts the FFP equation even further.

Against a basic premise of break-even, clubs are attempting to balance costs against non-existent income. Put simply, many will fail UEFA’s current version of FFP in the coming years if the regulations remain as they are.

More widely, there has also been some acceptance from UEFA themselves as the European football landscape has evolved since 2011, the regulations are looking increasingly outdated.

Too focused on the past, measuring historic performance with little weight applied to current or predicted performance in the coming years. They don’t focus closely enough on the internal aspects of club finance, including budgeted performance for the coming season, changes to ownership structure or changes to the external market in respect of broadcasting and commercial arrangements at league level.

The legal case between UEFA and Manchester City, has exposed the legal side of FFP. Indeed, a recent article at Off The Pitch by James Corbett stated that the Slovenian judge, Petra Stanonik Bosnjak, who ran UEFA's failed case against Manchester City for FFP breaches last year, said that football finances and ownership structures had become far more complex than when the FFP rules were designed a decade ago.

She said that UEFA's "main shortcoming" was that it did not possess "the investigative powers similar to state bodies” and that “club structures have become more and more complex, with subsidiaries and holding companies based in different territories, not only in Europe.

What next?

Of course, regulations have to evolve over time but the next move is a critical one that will shape the European football landscape for years to come. UEFA could choose to tighten the restrictions further or blow it wide open again if FFP is scrapped completely and not replaced.

The middle ground would be a temporary scrapping to focus on the survival of clubs in the short term with a viewpoint taken on changing the regulations to promote greater financial sustainability in the future.

There is once again talk of a salary cap or suggestions of capping transfer spend at club level based on individual budgets. The latter is an approach currently used by La Liga. Spanish club finances are reviewed by analysts who then establish a squad cost limit.

These funds can then be split between transfer fees and wages however the club decides as La Liga does not employ a wage limit. The rules are always evolving in line with changes in club operations and the participation of the clubs is key for this evolution.

The transparency and co-creation of any new rules between UEFA and clubs is of course of vital importance but there is little doubt that salary caps and transfer spend caps will still benefit the bigger clubs.

In Spain, for example, the squad cost limit of Barcelona and Real Madrid is nearly twice as much as the next biggest limit for Atletico Madrid and the ratio between the biggest limit in 19/20 (FC Barcelona at €656.4m) and the lowest (RCD Mallorca at €33.5m) is still 19.58:1 – hardly a ratio that is going to promote more equal competition.

No control of individual league governance

A salary cap poses similar problems. Should it be set at a percentage of turnover? Or should it be a hard and fixed cap that equates to a certain figure per club. The former still benefits the bigger clubs and the latter may force some of the smaller clubs in the league to overstretch themselves financially which could actually harm financial sustainability in the long run.

We would argue that a hard cap is the better option of the two. Salary caps can work, as evidenced in American team sports but there are other structural factors within those sports that contribute to promoting competition such as equal revenue sharing, closed leagues (with no financial risk of relegation) and the draft system for redistributing playing talent.

Any salary cap needs to be considered against wider structural factors of the leagues/competitions it pertains too. This is important in the context of UEFA as they do not have control of individual league governance but they have overall control over the pan-European tournament of the UEFA Champions League. Any regulatory framework that UEFA impose on clubs will impact the domestic leagues as a result.

Perhaps a better way might be via cost reduction targets - incentivised with broadcasting rights redistribution - to improve financial stability and promote some competition at all levels. Here, clubs could be given more of the broadcasting prize money if they show improved financial performance.

This would benefit those clubs that are being more prudent with their finances but it wouldn’t stop other clubs investing through their ownership models in an attempt to improve and bridge the gap between the top clubs and the rest.

What about the legal ramifications?

As noted earlier, the financial landscape of European football during the FFP era has led to a distinct cross-over between the disciplines of finance and law. Issues of governance and regulation have always given rise to friction between the different stakeholders in football and the commodification of the game has created enormous and conflicting dynamics where finances are concerned.

The unique discipline of football law has never been so entertaining and challenging.

With relation to collective buy-in, the conflict between UEFA and the so-called big European clubs has always been at the forefront of discussion between the different stakeholders in this area. It appears that such conflict is reaching a climax as UEFA is moving towards cataclysmic developments in relation to self-regulation.

Should the FFP regulations be scrapped, UEFA will find itself in a position where its original aim for transparent financial administration and catharsis among clubs is self-defeated.

Moreover, talks about the creation of a joint venture between UEFA and ECA on sponsorship rights and media rights, appears to be a compromise suggested by UEFA, although a closer critical analysis may suggest that this is a compelling capitulation.

In addition to such development, further changes in governance and control, where ECA (‘big guns’) will have a say in commercial contracts agreed and a demand for the creation of more matches between the clubs, indicates an unparallel shift in power towards the so called big European clubs.

Other changes may include the ability of clubs to offer to their sponsors more prominent positions within stadia, the development of internet streaming services, match replays to be broadcast immediately after the end of a live game and quite possibly, the introduction of private equity firms in the development of investment opportunities in the relevant European competitions.

In conclusion, it is submitted that all such developments would considerably affect football finances and self-regulation within the wider sphere of the European football industry.

If UEFA hand more regulatory power to European clubs then this would only serve to increase the financial gap between clubs in general. The reform of the UEFA Champions to a Swiss Model style competition is also hiding in plain sight. In truth, this is a break away European super league in all but name and suggests UEFA may have already conceded some ground here to the bigger clubs to maintain the commercial power of the Champions League.

Whatever happens next, one thing is certain. The next steps that UEFA take with FFP and wider governance issues will shape the landscape of European football. It will also keep sports lawyers and football finance analysts very busy in the coming years.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 3:27 pm

There appears quite a bit in front of the paywall at OffthePitch at the moment so expect a few posts

this one is interesting - it has been a while since we have heard about the proposed Private Equity (yes the vultures are at the door) deal for Serie A, here the lead negotiator talks about the difficulties in turning the deal into reality

Lead Serie A negotiator concedes €1.7 billion private equity deal is "difficult to imagine" without support from top clubs
14 April 2021 1:50 PM
  • CVC, Advent and FSI's offer to acquire ten per cent of the Serie A for €1.7 billion is looking increasingly likely to fall through.
  • Udinese vice president Stefano Campoccia says negotiations have been put on hold during the league's media rights tender.
  • Part of a committee of five to negotiate the offer, he fears clubs such as Juventus and Inter Milan have had their heads turned by the "Super League" proposal - which seems like it is still being worked on.
  • An increased financial outlook means clubs are no longer reliant on committing to the offer.
EMIL GJERDING NIELSON nielson@offthepitch.com

What could have been a consequential, unprecedented investment into a football league now appears likely to be earmarked for the history books as a pipe dream.

The agreement for a consortium of CVC Capital Partners, Advent International and FSI to take on a ten per cent stake in the Serie A's new media company that would manage its commercial and broadcasting rights for a total investment of €1.7 billion lacks the backing of seven primarily top clubs who seem unwilling to return to negotiations that were put on hold during the league's TV rights tender.

"It's difficult to imagine the Serie A voting in favour of the project without Juventus and Inter Milan," says Udinese vice president Stefano Campoccia, who is part of a committee of five that also includes representatives from Juventus, Napoli, AS Roma, and Bologna that has been negotiating the offer.

Massive investment interest

Many feared the worst when the coronavirus pandemic started taking its toll on football. Widespread layoffs, bankruptcies and worse were among the expectations when leagues across Europe were pulled to a halt.

But as the situation improved over the spring and summer there was an influx of investment proposals as investors looked to capitalise on the depressed valuations. And for the Serie A it was no different.

The league was approached with a series of different proposals for investment, securitisation and debt-like instruments by firms such as TPG, Bain Capital, Silver Lake, Cinven, BC Partners, Fortress, Apollo and Blackstone.

US financial advisory firm Lazard was brought in to aid the process in July last year and launched a due diligence process. But the league received only limited binding offers and in September requested the consortia of CVC and Advent International, and Bain Capital and Neuberger Berman to submit their final offers at the beginning of October.

Ultimately, clubs decided to grant exclusivity to the CVC consortium. The firm had initially proposed acquiring 20 per cent of the league by itself at an €11 billion valuation. That was since negotiated up, while Advent and FSI was brought in, to acquiring a ten per cent stake that valued the league at €17 billion.

That deal included a lock-up until 2026, meaning it would be unable to exit its investment before that.

The negotiation committee of five then reached an agreement on the economics of the deal, and the league on 19th December approved the financial terms, thereby mandating the committee to finalise the governance negotiations and propose a transaction term sheet for final approval.

The transaction was expected to be closed by June 2021.

"Super League" threat

But as the financial outlook improved, some began expressing concerns over the conditions that would entitle the consortium to ten per cent of the league's annual net cash flow from commercial activities – with an earn out of maximum €525 million based on the EBITDA of the media company at exit.

Meanwhile, as talks of top European clubs forming a breakaway "Super League" intensified, it became clear that not all were willing to commit to a project binding teams to the Serie A.

Ultimately, doubts culminated in February when seven clubs in a letter to Serie A president Paolo Dal Pino wrote the opportunity was no longer "viable" as it had failed to reach a "qualified consensus."

"The big clubs are exploring the opportunity of the 'Super League.' The CVC consortium of course obligates all clubs to conduct the negotiations in bona fide," Campoccia says.

Surprisingly, his comments seem to reignite fears by some that a series of top clubs are still working on establishing a "Super League" – contrary to reports that the reforms of UEFA's club competitions from 2024, which are likely to be agreed later this month, have served to shelve the proposal.

"If the big clubs leave the league it's not a good investment for the consortium. Then the equilibrium is very difficult," Campoccia says.

Dramatic situation

Separate negotiations over the league's TV rights have also affected the process. Campoccia says talks with the consortium were put on hold as the Serie A launched its media rights tender which in March secured Dazn as the main domestic broadcaster for the 2021-24 period.

The streaming platform's €840 million a year deal for seven out of ten games per match week could, in combination with the yet undecided offer for the remaining three matches, see the Serie A collect just over €900 million in domestic broadcasting rights fees – compared to the current €973 million annually.

Though a slight decrease in value, Campoccia signals pride in being able to almost secure a similar fee with expectations having been lowered because of the pandemic. This contributes to clubs feeling increasingly confident of the future financial outlook.

"When the first non-binding offer from CVC arrived, the situation was dramatic. Covid was exploding, all clubs were indebted and without cash, and the situation was getting worse. In that period, it was an interesting preposition, and the Serie A seriously looked at the opportunity," Campoccia says.

According to Off The Pitch information, a total of €1.7 billion would have been distributed to clubs in seven tranches until 30th June 2026. Upon closing of the transaction, €300 million would be paid, then €350 million the first three years, dropping to €117 million the remaining seasons.

"In the end, one month ago, we finally found a good equilibrium, but in between the situation was changing because Dazn put more money on the table, and the situation is getting better. So, some clubs changed their minds," Campoccia says.

Improving governance

Though Campoccia says the situations is still "in progress," what's clear is that he faces an almost insurmountable task of convincing rival clubs to return to the negotiation table. He reiterates that the deal is "a good option," pointing to improved management of the league as a key aspect.

"Above all a new governance model is important. That is the first goal – not material or economical," he says.

Accordingly, under the league's new media company, seven directors including the CEO would be elected by the consortium, with eight, including the chairman of the board, selected by the Serie A.

This, coupled with it being a separate entity away from other league matters, would streamline commercial negotiations and likely remove at least some of the usual disagreement between the 20 clubs with many different, conflicting interests.

"The Serie A is the house of the 20 clubs and each year it changes. It is difficult to find a correct way to calibrate anything," Campoccia says.

Some also believe, however, that this format would give the consortium power unequal in proportion to its investment and potentially undermine the league's wishes. Though a majority of the media company's board would be able to reject a CEO appointment it can only do so twice.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 3:34 pm

I am glad I can access this from OffthePitch in front of the paywall - it is timely reminder ahead of that ECA meeting tomorrow and the UEFA ratification on Monday

Special Report: What do the ECA actually want?
30 March 2021 7:33 PM
  • Hunt for settlement on Champions League reforms, previously promised by late March, goes on without resolution.
  • Numerous sources across European game express concern about ECA, alleging that the body wants to ultimately take over the running of European club competition and is positioning itself to do so.
  • Champions League reform talks broke down at the twelfth hour after clubs demanded majority control over commercial joint venture with UEFA.
  • “They are set up as a lobby group, but you can see from the people they are hiring that their ambitions lie beyond that.”
JAMES CORBETT corbett@offthepitch.com

Deadlines come and go in all walks of life, but three weeks after the European Club Association (ECA) President Andrea Agnelli said that a resolution over the future of European club competition was “a couple of weeks” away, a resolution seems no closer than ever.

A UEFA Executive Committee meeting on Wednesday set up to rubber stamp what Agnelli terms a “beautiful” new format, is now not going to deliver that decision, having already been postponed three times since the start of the month.

“Speculation has been going on for 20 years – let’s hope they are closed in a few weeks,” Agnelli said on 8 March.

But instead of a rush to get a deal over the line, there has been delay after delay with renewed scrutiny on the ECA and its role in European football.

First, a special assembly of the European Leagues, the representative body of 36 leagues across Europe, 48 hours after Agnelli’s comments, saw a furious backlash.

A bombshell

Leading clubs and league representatives lined up to warn of the “devastating effect” on football’s financial and competitive ecosystem if UEFA and the ECA proceeded with its current plans to overhaul its club competitions. Club representatives also spoke out at a lack consultation from UEFA and the ECA and accused the two organisations of “huge conflicts of interest.”

Next, a bombshell: the Financial Times reported that the ECA and UEFA were engaged in talks to create a joint venture to sell TV and commercial rights. Was this just another step to handing over the keys to European football’s engine to the richest clubs?

A week later on 26 March came a renewed attack from the European Leagues, at which its president Lars-Christer Olsson said that he received “guarantees that no clubs are taking over the club competitions from UEFA.”

UEFA, he said, “will always have the final say… That is not handed over to any other body for decision making.”

Then, just as agreement seemed likely, on 30 March UEFA postponed its decision by at least another three weeks. This time renegade clubs ambushed the final round of talks with increased demands. It is not clear whether they were acting of their own volition or at the request of the ECA.

Paranoia

Increasingly, the ECA is whispered about by those not represented at its top table, as a kind of bogey man, or conspiracy. Executives within the game are conspicuously aware of it – they mutter their fears and concerns – but its name is seldom uttered publicly.

But what is the ECA, and why does it cause so much paranoia?

It was formed in 2008 to replace the G-14, which comprised a small number of elite clubs that agitated for greater control over the Champions League – talk of a super league has been omnipresent for decades – and was unrecognised by UEFA. The ECA was created to be more widely representative of European football clubs and take the sting out of the idea that the agenda was pushed by a cartel of super clubs. Its mission statement is "to create a new, more democratic governance model that truly reflects the key role of the clubs".

At one level it does just that. Instead of representing 14 elite clubs, it has 109 ordinary members comprised from 55 leagues, as well as 123 associated members. But a peek beneath the bonnet shows that some clubs are more equal than others and that power still rests with the elite.

Full membership to Gibraltar club

Ordinary members are selected each cycle according to a country co-efficient and the club co-efficient within that ranking. Thus the top three UEFA members get five ECA members each, the next three get four members, rank 7-15 three members; 16-28 two; and the rest of UEFA’s members get one ordinary member each. Those members are then selected according to UEFA’s club co-efficients.

Yet because co-efficients give precedence to historical pedigree, it has a habit of ensuring elite clubs have full member status, even when they are doing less well. Of Europe’s ‘Big 5 Leagues’, five clubs currently in Champions League positions (Lille, Leicester, Atalanta, Leipzig and Eintracht Frankfurt) only have associate member status – essentially observer rank. This imbalance is heightened by the fact that the likes of Arsenal and AC Milan, which haven’t qualified for the Champions League for several years, not only have full membership, but board representation too.

The ECA will counter this by pointing out that as well as granting full membership to clubs like Gibraltar’s Lincoln Red Imps and La Fiorita of San Marino, but that its board also includes members from clubs like HJK, Malmo and Macabbi Haifa.

Scraps from the table

Yet the perception of such apparent inequalities cuts deep. “We all know that the ECA represents only a few. It is the alibi or the excuse that the big European clubs use to achieve their objectives,” said the ECA’s arch-critic, the La Liga President Javier Tebas in 2019.

“With the ECA there is no debate, there is a kitchen with the access limited to 12 or 13 diners, and when they’ve finished cooking and eating, they invite the rest for a coffee. In the eyes of the world, it seems like the banquet is a celebration for all. It’s a lie.”

Yet some of if its work has had a discernible benefits for all clubs. Soon after its inception it negotiated agreements with UEFA and FIFA for clubs to be compensated for the use of their players in the European Championships and World Cup. These payments now equate to hundreds of millions every cycle. Its work instigated FIFA Club Protection Programme (CPP), an insurance policy covering the injury risk of national team players – which had traditionally been the responsibility of clubs. It works closely with the European Union on the specificity of sport, which ensures the game’s eco-system is preserved.

It has representation on the UEFA Exco committee and is recognised by FIFA. An anomaly of football’s world governing body is that clubs have never had a voice until the past five years. This voice has been felt again and again. At previous negotiations on European club competition it gained a rake of separate payments to clubs based on their UEFA co-efficient. The rich got a bit richer.

Authentic disaster

Tebas has persistently warned against the encroachment of the ECA and says that its pressure on UEFA is ultimately to create a version of the Champions League that cements the hegemony of Europe’s current elite.

UEFA and the ECA are building a competition, he alleged in 2019, “which in the medium to long term will be an authentic disaster and goes straight to the heart of the national competitions because – let’s be clear about this – aside from just a few, this is a coalition dividing rich and poor in which only 32 of them [clubs] will have a VIP pass.”

Yet some critics believe that its ambitions lie even further. One official at a major European league speaks of how its end game is to wrest outright control of club competition from UEFA.

“They think they can do a better job, for less money than UEFA currently levies to organise the Champions League,” says the source. “But ultimately it’s about ensuring the competition’s riches end up in the hands of a small elite of clubs. It would be a super league by default.”

Asked to go on the record, the official says the majority of its league members are concerned about this, but that their league can’t speak out because several members are among that very elite vying for power. “This is a problem a number of leagues face,” the source concedes.

Off The Pitch reached out to a number of club owners, league officials as well as the ECA itself, but no one would speak openly.

Wresting control

Another figure in European football with direct experience of negotiating with the ECA claims “this is not a conspiracy.”

“They are set up as a lobby group, but you can see from the people they are hiring that their ambitions lie beyond that. The appointment of Charlie Marshall – who has a strong sports marketing background – as CEO is one example. He seems to have assumed many of the responsibilities of Michele Centenaro [ECA’s long-serving secretary-general], whose career – by contrast – is more heavily wedded to sports administration.”

The source also pointed to the 2017 creation of a company called UCC SA that was set up to allow the ECA to advise UEFA on selling broadcast and commercial rights, albeit that UEFA retains final say on any such decisions.

“I think long term they see themselves taking over the responsibilities of Team SA [the full service international marketing agency that has been UEFA’s exclusive partner since the early-1990s] and controlling rights. But there are good reasons why they shouldn’t have that power. Serie A’s recent struggles to sell its own rights is a good example; if you have too many powerful interests at an operational level nothing gets achieved.

“But ultimately you’ve got to understand this is about power and control, and it’s not just the ECA that are at it. Sometimes the big clubs go off on their own.

“Threats are made in the media – such as over the super league – and the debate jumps forward. There’s a howl of outrage and they’ll inch back, but the marginal gains remain.

“There’s a constant creep towards their strategic goal, which is more power and more money for the big clubs.”

Creep creep

On Friday 19 March, a report in the Financial Times claimed that UEFA and the ECA were in “advanced talks” over the creation of what it termed was “a joint venture that would control all media and sponsorship rights for contests such as the Champions League and the lesser Europa League.”

According to the report the talks envisaged either an expanded role for UCC SA or an entirely new company, but that either way ECA would have an “equal say” on the terms of future commercial contracts. It would give clubs bigger influence over key commercial decisions, such as display of stadium ads. UEFA would retain control over “all sporting questions”, including, intriguingly “the rules and format of competitions.”

Is this then, the price that UEFA is willing to pay in order for the biggest clubs to take their tanks off the lawn? Or is it merely part of the “creep creep” towards their “strategic goal”?

We asked both the ECA and UEFA for comment on the FT story, but neither would do so on the record.

Red lines

If these are the red lines, UEFA has at least stuck by them – for now.

When UEFA’s Club Committee convened on Tuesday it had been expected to discuss final sticking points on Champions League reform, including entry criteria for the four additional teams plus how the calendar will accommodate four additional match weeks.

However, the meeting broke down abruptly after club representatives from three teams made demands about who controlled the new commercial and broadcast joint venture.

UEFA is understood to have offered 50/50 ownership with the ECA on the venture, but the clubs demanded majority control. It is not clear whether they were acting of their own volition or at the request of the ECA, whose board are understood to have met 24 hours earlier.

And so a stasis has again taken hold of talks that have gone on for some 30 months.

Deeply troubling

A league representative who spoke on condition of anonymity said that they found reports about the joint UEFA-ECA venture “deeply troubling from both a financial and governance perspective” and that it was “a much more significant story than anyone had given credit for.”

“You’re essentially handing over control of the crown jewels of European football to a body unaccountable to anyone but a small number of already very wealthy clubs. Why would any organisation do that?

“UEFA need to remember its mission statement and who they actually represent. And European football needs to wake up to what’s actually happening.”

Nb. UEFA’s mission statement opens: UEFA’s core mission is to promote, protect and develop European football at every level of the game, to promote the principles of unity and solidarity, and to deal with all questions relating to European football.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 3:45 pm

The next few posts (again from this sudden opening of articles from Offthepitch) look at at Private Equity (and debt) from a couple of different angles - yes the vultures are at the door)

first up

Column: Football offers unrivalled brand loyalty, no chance of defection, predictable and recurring revenues and new ways to leverage value - Private Equities lust for European football is here to stay
24 February 2021 4:46 PM
  • You have got it all wrong if you think that Private Equity showing up in European Football is a matter of potential bargain deals and replacing cash with cheap debt on the balance-sheets of clubs.
  • According to Dr. Dan Plumley and Dr. Rob Wilson from Sheffield Hallam University the private equity industry have spotted quite a few of the key elements in the football industry essential to how and where they invest.
  • ”Clubs are essentially recession proof assets. Sport is an inelastic product, not a luxury but a necessity for many...This provides private equity and its supporting cast with a longer game to play in the sporting investment stakes,” they write.
  • Private Equity might take a different approach going into the industry, where “…the appeal of leagues over clubs is a longer-term approach to growth as they are less volatile performance wise.”
  • One thing could cool down private equity’s future interest in the industry: regulatory bodies that will lay down commercial frameworks that will govern the future of their sports.
DR. DAN PLUMLEY AND DR. ROB WILSON, SHEFFIELD HALLAM UNIVERSITY contact@offthepitch.com

Private equity is the new kid on the block in the football investment market. Recent private equity success has been high profile in several sports including Formula 1, rugby union and tennis but some of the more recent ripples have been felt in European football.

American outfit Silver Lake acquired a 10 per cent stake in the City Football Group for €500 million in November 2019 alongside Elliot Management’s €400 million loan-to-own acquisition of AC Milan in 2018. That’s not to mention the increase in private equity lending to clubs short on cash, due to the Covid-19 pandemic.

MSD Partners for instance have lent £80 million to Premier League team Southampton, provided funding for the £200 million takeover of rival Burnley and made a loan to Derby County, a historic English club.

Such loans don’t come cheap. Southampton’s interest bill is a healthy 9.14 per cent showing that short term cash fixes are only slightly cheaper than pay-day loans. For the clubs, the incentive is clear. They need cash. And MSD and co have lots of cash to deploy to return value to investors.

Commercial banks see football clubs as risky creditors and many owners have exhausted their financial limit. If you have a cash flow problem in professional sport, private equity might be your only avenue.

Yet despite Covid-19 unmasking the frailties of club finances it might still be a little unorthodox for us to be talking about clubs being attractive to outside investment – most make a loss – and many use emotional decision making to drive their businesses. Yet these are some of the conditions that make football so enticing to investors, particularly private equity firms looking to maximise returns.

Much like the boom-and-bust period of the late 1980’s, where clubs sold a ‘bummer’ to the stock market, private equity has a model that seeks to leverage future growth potential in a time of economic distress. But why football? And maybe before that, what is Private Equity?

Defining Private Equity

Private equity is an alternative form of private financing, away from public markets, where funds and investors directly invest in companies or engage in buyouts. Private equity firms make money by charging management and performance fees from investors in a fund much like other fund platforms such as Vanguard, Fidelity, or Hargreaves-Lansdown – known to many a private investor.

Private equity can take on various forms, from complex leveraged buyouts to venture capital. The investment comes mostly from institutional investors or accredited investors, who can dedicate substantial sums of money for extended time periods.

And there are advantages to engaging with private equity. It is favoured by companies because it allows them access to liquidity as an alternative to conventional financial mechanisms, such as high interest bank loans or listing on public markets.

Certain forms of private equity, such as venture capital, also finance ideas for early-stage companies. In the case of companies that are de-listed, private equity financing can help attempt unorthodox growth strategies away from the spotlight of public markets.

Yet on the other hand, private equity has unique challenges. First, it can be difficult to liquidate holdings in private equity because, unlike public markets, a ready-made order book that matches buyers with sellers is not available. A firm must undertake a search for a buyer to make a sale of its investment or company.

Second, the pricing of shares for a company in private equity is determined through negotiations between buyers and sellers and not by market forces, as is generally the case for publicly listed companies.

And finally, the rights of private equity shareholders are generally decided on a case-by-case basis through negotiations instead of a broad governance framework that typically dictates rights for their counterparts in public markets.

The rise of private equity in football

Let’s make no mistake, the opportunity for football and private equity investment is not simply related to Covid-19. Private equity firms have been involved in football for a while. Covid-19 might exacerbate further investment, but it is not the sole driver. So, what is?

Simply put the football market is attractive to investment firms. An attractive market offering revenue generation often leads to a rise in private equity investment. Football provides just that. It provides the opportunity to drive structural change and an opportunity to maximise return on investment.

The industry has matured and so too has the way we consume sport. New investment opportunities have emerged as individuals and groups have sought to capitalise on earning potential.

Private equity has traditionally been skewed towards entrepreneurial business, often a catalyst for professionalisation, business transformation and rapid growth. What we are seeing in football is an emerging trend in being a ‘partner’ in the properties rather than simple investment opportunity. This is important in the context of MSD.

Too good to miss

They have been keen to stress that their involvement at Southampton and Derby is from a partnership perspective rather than any form of takeover. They played a similar role in helping secure the funding for American investment firm ALK Capital’s recent purchase of Burnley which earned them the high praise of being described as a ‘brilliant partner’.

As the rise of private equity in football looks set to continue that reputation will be tested, of course, especially when such lending requires clubs to put up their most prized assets (their stadium) as collateral for the loan – the case with MSD, Derby County and Southampton.

As the saying goes though, you don’t get something for nothing.

More generally, a key focus of private equity recently has been on ‘transformative growth’. Their investment goals might be to limit risk exposure but in some ways football provides private equity firms with an opportunity that is too good to miss.

Football offers unrivalled brand loyalty and no chance of defection. It has predictable and recurring revenues through media rights, sponsorships and global partnerships. There are new opportunities in existing sports providing teams with new ways to leverage value (e.g. women’s teams, esports, content creation).

These are essentially recession proof assets. Sport is an inelastic product, not a luxury but a necessity for many viewers. This provides private equity and its supporting cast with a longer game to play in the sporting investment stakes.

The long game

Sports properties are increasingly focussed on the long-term game, tied to sporting success. An abundance of competition supports the potential for future financial returns through new media rights, new competition structures and governance and regulatory reform. Indeed, it has been noted in some circles that the next bet from private equity firms might just be to buy the league(s) itself.

The appeal of leagues over clubs is a longer-term approach to growth as they are less volatile performance wise than individual clubs, and the league has a greater reach into the international market than individual teams.

What is clear is that the maturity of the football market will lead to investment increase, including joint-ventures and minority share investments. This spreads risk and limits exposure to loss – a critical formula in the mind of an investor.

As consumption of sport becomes increasingly digital, sports-related media and technology companies will attract broader investment attention. This will ultimately lead to new products and the expansion of markets which itself will see new investment.

A key consideration will be focussed on how commercial frameworks begin to govern the future of their sports and the impact that organising bodies will seek to have. Ultimately, the investment opportunities across the sector will be dependent on the commercial directions and legal decisions of competition organisers, regulatory bodies and clubs as they continue to grow in sophistication and lay down commercial frameworks that will govern the future of their sports.

Potential investors must be attuned to these developments and their potential impact. What is clear, however, is that the private equity machine is mobilising and it’s here to stay.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 3:55 pm

Next is a look at the Burnley takeover and whether or not it will prove or end the interest of Private Equity - OffthePitch.com

Analysis: New Burnley owners could lead the way for future private equity takeovers – or effectively scare everyone off
28 January 2021 5:21 PM
  • The Burnley takeover looks fragile. The financial commitment from the new owners seems rather small and problems could occur due to the lack of financial power and secured backing from banks.
  • At the same time Alan Pace and the ALK team have started a very interesting journey with Burnley FC. They want to turn a small Premier League team into a commercial success on the global scene. That’s a brilliantly ambitious plan – but also a tricky one.
  • So far Alan Pace and ALK are saying all the right things – but we can’t judge them until we have seen how they react when things go wrong. It is then that they will show everyone whether they have properly understood the kind of asset they have acquired.
  • One major question is the power of Sean Dyche at Burnley. What is the fit like between Dyche and the new American owners? And not least - what is left at Burnley if Dyche departs? How strong is the infrastructure and the strategy at the club?
KASPER KRONENBERG kk@offthepitch.com

If you're busy and reluctant to spend time reading about the issues surrounding the recent takeover in English football - ALK Capital buying the majority of Burnley FC’s shares from Mike Garlick and John Banaszkiewicz - then just cast your eyes over the following sentence:

It looks as if the new Burnley owners are on thin ice financially, and things could go very wrong very quickly, but if they manage to avoid relegation in the next couple of years they may have started a journey to becoming the masterpiece of ownership in modern football.

If you ask ALK Capital, and its leading figure Alan Pace, he would probably be frustrated that his new adventure is deemed to be “on thin ice financially." Pace might be right, maybe the financial power could be secured at Burnley in no time, but the structure of the deal looks fragile - and its financing rather expensive.

Cash to buy competitors

Normally that is what private equity funds excel at; securing very low-cost loans to make the daily operations as cheap as possible. And then they can take the “expensive” cash out of the balance, leaving the financial masterminds already a step or two ahead of their competitors.

That is what private equity funds do: They find assets where the balance sheets are either too fragile or too conservative, and then they either provide the management team with cash to buy competitors, or if the balance is loaded with cash, they replace that cash with cheap debt. Then basically – to put it very simply – the takeover is financed partly through the funds already in place within the asset they just bought.

This is where the Burnley case is different, and where stakeholders around Burnley FC have every right to raise their eyebrows: Is this leveraged takeover too risky? Should Pace and his partners have put up more cash than the supposedly £15 million they invested in the club?

Expensive loans

The other part of the £170 million transaction paid so far was primarily financed through debt from MSD Capital and cash from the club itself.

According to Bloomberg the full takeover has not been completed yet with ALK Capital still to pay another £100 million in three separate payments.

According to The Athletic, Burnley would have to pay interest rates of between 9.5 and 12 per cent for the loans from MSD Capital. ALK has said several times that that information is wrong and labelled the loans from MSD Capital as “… absolutely reasonable and absolutely in line with what can be supported by this club and will not take away from the ability to operate on a daily basis”.

Obviously, whether a loan should be labelled “expensive” or “reasonable” is up for discussion – but at the end of the day, several sources in the financial industry confirm that the interest rates at MSD Capital, when they loan money to football clubs, are around 9 per cent. It is also beyond question an expensive loan when you compare those interest rates to the rates that private equity funds normally secure.

No other options

What makes insiders from both the football industry and the financial industry a bit nervous is the fact that ALK Capital chose to borrow the money from MSD Capital. They read it as the Americans having no other options; only MSD Capital would finance the takeover.

Part of this nervousness is related to the fact that if MSD Capital were the only financial institution wanting to go into this transaction, then how would ALK Capital finance the rest of the takeover? Is that financing in place or does ALK Capital need to go out and secure that in a capital market ravaged by the Covid-19 pandemic?

Secondly, it is potentially a problem that the executives behind ALK Capital, including Pace, only invested £15 million of their own money in the takeover. From a financial point of view, buying a Premier League club and only injecting £15 million of your own money into the deal is smart, but what if things go wrong?

What if Burnley are relegated this year or next season? And what if they fail to be promoted after one year in the Championship. Then the owners of the club, ALK Capital, would have to address revenues going down significantly, despite parachute payments, and many, many millions of pounds would have to be injected into the club.

And would the ALK Capital partners do that? Would they invest more of their own money into such a troublesome rescue mission where they can’t even be certain that the securing of daily operations at the club is enough to guarantee promotion? Would Pace and his business partners bring that cash to the table – or would they leave the club and be relieved that they “only” lost £15 million of their own money?

Safety net installed

Bloomberg writes that there is a safety net installed in the takeover deal meaning that if ALk Capital fail to meet the final payments to Garlick and Banaszkiewicz then Burnley would fall back into the hands of the previous owners.

Finally – what makes Burnley stakeholders nervous – is that no one really knows how wealthy Pace and his partners are. If they were all billionaires, then they would have the financial strength to turn things around at Burnley FC even if they did face a very expensive relegation, but it is unclear if Pace and the other executives at ALK Capital can – and will – provide the cash to the club’s accounts if things go wrong.

Bloomberg writes that Mike Garlick has made sure he can repurchase the club if the new owners fail to make those payments in due time.

Before writing this analysis, we tried everything to clarify the precise financing of this deal. We sent ALK Capital 26 questions about the debt structure, the financing of the takeover and the strategy, but they were reluctant to disclose too much information about the deal, which could be understandable, but the lack of transparency is nothing but fuel for the speculation that the new owners are financially under financial limitations from day one.

Funding in place?

These are the questions we sent ALK Capital:

According to Bloomberg at this point you have paid £102 million for the shares – how will you fund the remaining fee?

When will you pay the remaining fee?

Is that funding in place/agreed with financial institutions – and with what bank/lender?

Is the funding guaranteed also if Burnley should be relegated?

How much cash did you inject to the club when you bought it?

And if you did not inject any cash – how much cash was “left” in the asset/on the books of the asset (the club) that you bought?

These questions were met with this comment:

“A spokesperson for ALK Capital declined to comment.”

Remove all the insecurity

Some could argue that if ALK Capital were to cast some light on these questions then they could remove all the insecurity that is now surrounding the new ownership. The Americans would probably argue that it is not common practice to give details about funding and financial commitments – and the terms related to this – but a football club is a special type of asset. They have hundreds of thousands of stakeholders, most of them fans, who care about the club, and therefore it could be advantageous for owners to be more transparent.

For obvious reasons it is impossible at this stage to assess whether ALK Capital are financially in a good place

At a press conference after the Aston Villa game on Wednesday evening, Dyche did comment on the transfer window:

“I’ll share the view I’ve always shared – January is a very difficult time in the market, every time is difficult for us full stop. With the money and the resources you need to put in, Aston Villa are a good show of that, they’re up to £220m [in transfer spending] or whatever in the last 18 months or two years maybe and we’re still at a bag of chips.

The heart and brain of the club

“It’s one of those risk and reward situations. I don’t think there’s going to be radical change, the new ownership will look at the finances, look how they’ve been delivered and look for slow change.But if something becomes available that we can affect and will either better us immediately or from development then we’ll of course be looking into things as we are,” Dyche said to Sky Sports after the 3-2 win.

Staying with Dyche, he is one of the club’s most valuable assets, delivering excellent results year after year on a very limited budget, but at the same time he could be a liability for the new ownership.
What if Dyche decided to leave and move to a bigger club? What if he can’t work with the new owners?

Obviously it would be a big loss, a tremendous manager would be moving on, but Burnley FC may have a structure and a strategy in place allowing them easily to move forward and continue to punch above their weight.

But could the opposite be the case? That Dyche, after many years of success at The Clarets, is involved in everything in the sporting department of the club. That he is almost the heart and brain of the club, and therefore if he leaves, there is nothing left. From the outside, it is impossible to understand how solid the club’s foundations and governance are.

It could be that the highly-experienced Technical Director Mike Rigg is the person to make sure that when Dyche one day leaves the club, Burnley FC has a style of playing, assistant coaches, an academy and a scouting network that can move on and continue to deliver results under the leadership of a new manager too. Only time will tell how strong the structures at Burnley FC are, and how much rests at Dyche’s feet.

Not our style

Turning to all the positive aspects of the new ownership, one has to recognise the enthusiasm, hands-on ownership and leadership that Pace and his partners have shown at the beginning of their tenure at the club.

"Initially I will be split between London, New York and here but probably 80 per cent of my time here. I am very hands-on with the strategic vision and the ability to help people to achieve that vision. Not that I am going to be the guy who is going to re-wire the WifI.

"I will be hands-on, I have already experienced a few things early on that need to change and you don't do that unless you are living in it every day. If you come and visit once in a while you think everything is great and you just leave it to other folks. That is not our style or my style. I will be very hands-on but that is not taking away from those that are doing the significant job that they have been doing and will continue to do,” Pace said to a local newspaper shortly after the change of ownership was announced.

That definitely looks like proper leadership and a willingness to work extremely hard towards the changes that the new ownership group intends to carry out.

Humbleness

Furthermore, it seems as if ALK Capital has invested heavily in bringing in the right people to execute and develop the strategy. Looking at the names involved, it is hard not to be impressed with the background of those individuals. They are experienced professionals with proven track records from the world of business, so if they are all as committed to the job as Pace, the executives at the club appear to be a very solid team.

Also speaking in favour of the club continuing to deliver solid results on and off the pitch, is the fact that the culture at Burnley seems so strong. Arguably, the club have been one of the most well-run in the UK, actually being able to make profits year after year. That is only possible because the staff are very talented and focused, while at the same time there is a humbleness around the place with people always making sure that the cost base remains as low as possible.

Such an attitude and proven track-record is hard to find anywhere else in the English football industry.

Looking at the strategy that ALK Capital wants to pursue, it gets really interesting. Pace has explained in several interviews that ALK Capital want to brand Burnley on the global scene as “Britain’s favourite underdog”.

Too much vision

“Every club in the Premier League can benefit from the international scope of this league. It is hard for people to realise that vision when you are spending most of your time just staying (in the Premier League). When you are just staying afloat in an ocean, you don’t get time to see what is around you and what you can do,” he said to local newspaper the Lancashire Telegraph just after New Year.

The reporter also asked him how he would capture the attention of fans worldwide.

“You have got to give them a reason to connect with things that are happening here – that may be a player, that may be a style of play, maybe a manager or the atmosphere (in the stadium). There are a number of different things that can absolutely have that level of impact, it is about how do you not artificially create it but make it genuine, real and long-lasting.”

Critics might say that it is too much vision and too little strategy. In other words, such things can easily be said, but how do you as a club actually do this and turn these great ambitions into substantial revenue within the next 5-10 years?

Well, it seems as if Pace is surrounded by bright and hard-working people, both the new arrivals from the US but also the management team at Burnley. So the talent should be in place to turn this vision into reality. Definitely not an easy task – but at least the new American owner is trying to do something different from his competitors.

Convert that love into revenue

On the other hand, obviously it takes a lot of patience combined with excellent digital and marketing skills to make Burnley a much-loved club outside the UK. And once that first step is accomplished, then ALK Capital Partners will have to convert that love – or that sympathy – into buying customers who are willing to spend money on Burnley FC. It could be the purchase of merchandise, the purchase of digital content or maybe even the purchase of travel packages so they can go to Turf Moor and watch their new favourite team.

Bottom line: Burnley FC have got themselves a new owner who wants to do things differently, and one can only hope that the whole ALK Capital team, via the new strategy, manages to substantially grow commercial income at Burnley.

Having said that, Pace and ALK Partners would give themselves a better start and encounter less turbulence from the stakeholders if they were transparent about the financing of these new dreams that have arrived at Turf Moor.
Last edited by Chester Perry on Thu Apr 15, 2021 7:52 pm, edited 1 time in total.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:03 pm

The next article looks at Debt and asks if it should be considered a dirty word in a football context - as always the answer is context based##from Offthepitch.com

https://offthepitch.com/a/analysis-debt ... ould-it-be

Analysis: Debt is football’s dirty word – should it be?
22 February 2021 4:17 PM
  • FC Barcelona’s financial woes have again raised the spectre of debt in football. The debt of Tottenham Hotspur is bigger – but differs significantly in nature.
  • Lending by clubs is not necessarily an evil: many do so to fund important ventures.
  • Looking at Burnley, their debt could be a troubling burden if they should face relegation. On the contrary, the greater debt at Manchester United is likely to remain more than manageable.
  • Bigger clubs can generally carry big debts without much worry; smaller clubs are at a greater risk of failure if on-field performance drops.
CHRIS WEATHERSPOON contact@offthepitch.com

When Covid-19 first announced its arrival in football, a moment that feels an age ago but is, inexplicably, yet to celebrate its first anniversary, financial worries were not directed at the top of the game.

Facing months of empty stadia and no guarantee the 2019/20 season would even come to a resolution, plenty feared clubs lower down their respective footballing pyramids, already living hand-to-mouth in many cases, were in danger of stumbling off a financial cliff.

Recent events have thrown the fates of larger clubs into sharp focus. Most pointedly, the release of FC Barcelona’s latest financial figures drew the wider public’s attention to the outsize impact the pandemic is having on the finances of the world’s grandest clubs. How, many have wondered, can the oft-proclaimed "world’s richest club" – an honour once again bestowed upon Los Cules in Deloitte’s latest Football Money League report – be simultaneously on the verge of bankruptcy’?

The easy answer, and the object of much media focus, is the club’s level of debt. The frequently reported sum of €1.2 billion is a tad misleading, being a broader definition of debt than is usual, but the trouble the Spanish giants find themselves in is decidedly real: gross debt of €480 million, €268 million of which is or was due in the current financial year, alongside €323 million in transfer payables, with €126 million of that short-term too.

Barca’s astronomical liabilities, and the mismanagement that has driven them so high, set the club apart from all others in football, but the reaction to their debt level has been unerringly similar to responses seen elsewhere.

Frequently, when a club sinks into debt, observers react with shock and dismay. Almost inherently, debt at a football club is seen as a bad thing. Should it be?

Debt seen as a bad thing

Taking financial debt as the defining metric (i.e. ignoring clubs’ transfer debts), the most indebted club in world football is now Tottenham Hotspur. As at the end of June 2020, Spurs showed gross debt of £831 million.

It would be easy to compare that to the club’s debt level of just £31 million as recently as 2015 and baulk – especially when the club has added no silverware to its trophy cabinet in the intervening period.

Yet such a narrow reading of things scarcely tells the full story. Spurs may well boast more debt than any other club right now but, in exchange, they have built and own arguably the best new stadium in football. That increase in borrowings facilitated the building of the £1.3 billion Tottenham Hotspur Stadium, an investment which, even allowing for the disruption caused by the pandemic, should ultimately see the club repaid many times over.

Strong financial position

Spurs, who refinanced their stadium loans in late 2019, owe banks £655 million, yet through the refinancing brought interest costs down to an average of 2.66 per cent and increased the debt’s average maturity to 23 years.

Total interest costs are expected to reach around £223 million by the time the loans expire in 2049, and the club will (at least initially) pay out more interest than anyone else in the EPL, yet the benefits brought by the new stadium when the pandemic subsides are expected to far outweigh average finance costs of roughly £8 million per year over the next three decades.

Spurs’ other loan comes in the form of £175 million loaned from the Bank of England through the UK government’s Covid Corporate Financing Facility (CCFF). That facility matures next month, but that Spurs were even able to access it is indicative of their strong financial position; only entities that are ‘investment grade rated’ are eligible to borrow from the fund.

Just up the road, Arsenal have also tapped the CCFF, this time for £120 million. Again, that they were able to is indicative not of a club in strife but one whereby the risk of default is deemed minimal by the UK government. Arsenal’s latest published debt figure in 2019 was £209 million, bringing with it interest costs of £11 million per year.

They too have refinanced their debts, with supporter and twitter football finance expert Swiss Ramble estimating the move will halve the club’s debt-related outgoings. Though the indebtedness of the club has risen, primarily in response to the pandemic, the costs incurred on servicing it are unlikely to be at a level which imperils the football club.

Nothing but hope to show

Spurs and Arsenal are examples of clubs with debt levels that dwarf those of teams below them in the football pyramid, yet the debt itself has served a beneficial purpose: the building of state-of-the-art homes which will reap benefits for many a year. On the contrary, there are plenty of clubs whose liabilities look much smaller at first glance, yet could have huge ramifications if unable to be paid back.

Take Burnley. Almost overnight, following their sale to ALK Capital, The Clarets went from holding no external debt whatsoever to potentially owing somewhere in the region of £80 million as a result of the nature of the deal.

ALK’s takeover appears to have been heavily funded by MSD UK Holdings, a growing player in the sport who are known to charge hefty interest rates; Southampton have taken their own loan out from MSD to try and manage their way through the pandemic, borrowing £78.8 million at a whopping 9.14 per cent.

Where Spurs and Arsenal can enjoy tangible benefits from their indebtedness, it is far harder to argue the case for Burnley. It may be that new owners propel Sean Dyche’s men higher than they have managed or envisaged previously, but in the immediate term the club has nothing but hope to show for what will become a very troubling burden should relegation ever occur. At the time of writing, The Clarets are six points above the drop zone.

Unsurprisingly, Burnley’s takeover has drawn comparisons with one of the most infamous debt-raising exercises in English football history: the Glazer family’s 2005 buy-out of Manchester United.

Just like at Burnley, in one swoop United went from zero debt to sums fans had never envisaged, with that takeover loading £525 million in loans onto the club’s books.

For some it is a necessary means

United’s level of debt is almost unfailingly the headline figure every time new financial results are released, and the over £800 million in interest paid out in the last 15 years is a source of much supporter chagrin.

Yet while the debt is perhaps rightly seen by many as a travesty, such is United’s stature that it has never come close to putting them out of business. It has affected the club’s abilities in the transfer market, but it does not come with the existential threat that may subsume others.

Debt in football is as it is in the wider world. For some it is a necessary means, a burden taken on strategically in order to maximise the potential of the club. For others, it is undertaken irresponsibly.

By their standards, Barcelona have little to show for their gargantuan debt other than a litany of overpriced, underperforming transfers, and there are plenty of clubs across the world who’ve committed similar errors.

Where debt becomes dangerous for clubs, and where it earns its antipathy from supporters and media, is when it balloons out of control.

Lost his appetite

At Sunderland, under former owner Ellis Short, the club wound up in the third tier of English football and mired in some £150 million of borrowings. Around £70 million of that incurred annual interest of 8.5 per cent, a high rate reflecting the lender’s confidence in Sunderland’s finances, and Short was widely known to have lost his appetite for pouring more funds in unless absolutely necessary.

All Sunderland had to show for such mammoth lending was successive relegations and a swathe of overpaid, disinterested players.

The Championship is often referred to as the financial wild west, with good reason. Almost all clubs in the division in recent years have spent in excess of 100 per cent of revenues on staff costs alone. The exceptions to the rule are generally relegated clubs who benefit from EPL parachute payments.

Such high costs have, naturally, resulted in huge debts accumulating across the division. For the last season a full set of club accounts is available, 2018/19, gross club debts totalled over £1 billion. Given that only three clubs can be promoted each season, most clubs will struggle to repay their lenders any time soon.

That hefty gross debt figure does not explain how clubs manage to maintain their borrowings. Chasing the dream of the Premier League, most clubs are funded not by interest-claiming external lenders but instead by apparently benevolent owners. In 2018/19, Blackburn Rovers, Stoke City and Middlesbrough combined for a near £400 million in gross debts, yet paid out just £1.5 million in interest. Stoke paid no interest at all.

The risk, quite clearly, is how long owners are willing to stomach such lending. The pandemic has seen an already perilous state of affairs worsen further, to the extent there was once talk of all 24 Championship clubs embarking upon joint administration were a financial bailout not forthcoming. Owners’ pockets are only so deep; if the lure of Premier League football fades, there is little to stop them pulling up the drawbridge.

In essence, big clubs are fairly well insured against financial catastrophe, while smaller clubs with high debts are unlikely to feel the pinch unless they fail to meet targets on the pitch

The lending seen in the Championship is hardly desirable but, again, it is clear there is significant nuance between ‘good debt’ and ‘bad debt’. Most owners will not wish to have a failed football club on their record. It is unlikely many of those clubs will fail through an owner calling in their debts.

More likely is the owners themselves running out of the funds necessary to keep the ball rolling. Issues would then be compounded by clubs only having access to external lending at extortionate rates of borrowing.

Fairly well insured against financial catastrophe

A paper published in December 2019 agrees that debt in and of itself is unlikely to torpedo a club. David Alaminos and Manuel Angel Fernandez, two professors in economics from Spanish universities, tackled a fairly wide-ranging question: "Why do football clubs fail financially?"

Their conclusion was indicative of the role debt can play in a club’s downfall as well as the need for other factors to be present. The model Alaminos and Fernandez developed found that the best predictor of distress in football clubs was a combination of ‘low liquidity, high leverage, poor sports performance and small size of the club market’.

Barcelona could become a significant exception to the rule, but it looks unlikely. Their tale of indebtedness is shocking, the story of a club which has dramatically overspent in the last five years with little in return. Yet it has still taken a global pandemic for them to wind up in such trouble.

The likelihood is they will find a way through (though the club’s rule by members may be in jeopardy), and post-Covid they will return to turning over enormous sums of cash.

The level of debt in football today is by no means healthy. But nor is debt in and of itself a bad thing. For many clubs, particularly those further up the food chain, it takes on the form of an investment in their own future.

As football continues its meander into the world of big business, so do the principles of big business increasingly apply. Debt can be either good or bad for football clubs – what really matters is the end it serves.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:13 pm

Of course not all leagues treat (or allow debt in the same way) This article looks at how different La Liga (in the main) thinks about debt

https://offthepitch.com/a/laligas-debt- ... t-use-them

LaLiga's debt is a quarter of the English top flight's: "We admire the Premier League for many reasons, but we do not use them as a reference in terms of financial management"
4 March 2020 2:20 PM
  • The combined debt of clubs in LaLiga stood at £1.4 billion in the 2017/18 season, roughly a quarter of the Premier League's £6.3 billion.
  • LaLiga claims to have the strongest economic controls of any football league, but according to its corporate operations director, the league is not limiting investment either.
  • Under the league's regulations, SD Eibar have become one of the fastest growing companies in Europe.
  • A lack of industry-wide standards makes it difficult to determine the critical debt threshold.
EMIL GJERDING NIELSON nielson@offthepitch.com

In the 2017/18 season, the combined debt of clubs in LaLiga stood at around £1.4 billion. While that amount may seem substantial, it pales in comparison to that of clubs in the Premier League, who shared liabilities of £6.3 billion in the same period - 4.5 times that of their Spanish rivals.

The difference is staggering, yet not all that surprising. With rising revenue comes rising debt, as clubs invest in both players and infrastructure - but the combined revenue of the English top flight is not 4.5 times that of LaLiga's (£3.5 billion to £4.8 billion). So, why the huge difference?

Stricter limits mean clubs are saving money year on year, which can then be invested in other projects

In 2013, with more than half of the clubs in its two leagues (LaLiga Santander and LaLiga SmartBank) on the verge of bankruptcy - with debt three times their turnover, LaLiga introduced a series of economic controls aimed at ensuring responsible spending.

"We wanted to harness the ambition of Spanish clubs to compete for the best players and compete on the world stage while ensuring that they did not threaten their long-term future. There was no other system in football that would help us to do this, so we created it," LaLiga's corporate operations director, José Guerra, tells offthepitch.com.

Spending limits

Before each transfer window, clubs in LaLiga have squad cost limits imposed upon them, restricting the amount they can spend on players and coaches - whether it be on wages or transfer fees. The limit is established by a simple equation: club income minus structural costs minus debt repayments (if applicable).

Compared to the Premier League, where a club in theory can spend whatever they want as long as they do not lose a certain amount of money on their bottom line, LaLiga's approach is considered much more proactive.

"The Premier League rules suggest a maximum acceptable loss for clubs and do not impose an upper limit on spending. We wanted to be much more controlled," Guerra says.

Instead of clubs counting on big transfers to deliver sporting results, the stricter limits mean clubs are saving money year on year, which can then be invested in other projects to support more sustainable growth for the clubs, according to Guerra.

"We admire the Premier League for many reasons, but we do not use them as a reference in terms of financial management."

Is debt a bad thing?

Many would argue that debt is not necessarily a bad thing. If a company takes on loans to fund growth and is then able to achieve that growth, taking on the debt becomes similar to any other investment.

While the total debt of clubs in LaLiga has increased by around £180 million since the league adopted its own economic controls, the level of debt in the Premier League has increased from £3.6 billion to £6.3 billion over the same period.

However, according to Dr Dan Plumley, a senior lecturer in sport finance at Sheffield Hallam University, the development is a natural consequence of the rise in revenue - brought on mainly by better TV rights agreements.

"We have seen revenues increase exponentially and with that comes increasing costs and a naturally increasing debt as a fallout because you have to borrow that money from somewhere," he says.

Plumley points to Tottenham: by building a new stadium, the club will be able to increase their revenue and thereby further advance their goal of catching up with the league's other big clubs.

"Clubs are trying to compete with each other and the nature of that means that you have to borrow, you have to invest and take the kind of long-term view that that investment will have an impact on the net debt for some years, but then you play the bigger game and look at return on investment in those circumstances."

Sustainable debt

One way to measure whether debt is sustainable is by comparing it to EBITDA. Financial analysts typically prefer a lower ratio - with a ratio of above four or five being considered high, signalling a high level of debt.

The Premier League's clubs have since 2014 seen a rise in their EBITDA-to-debt ratio from five to six, while in LaLiga the figure has declined by 0.4 to 1.8. Thus, according to this method of assessment, the Premier League's debt must be more unsustainable than that of LaLiga. However, according to Plumley, comparisons of this kind are problematic - and not just in the football industry.

"The issue is that there is no set ratio in the industry, in any industry, that we can say hand on heart is 100 per cent fool proof. It often comes down to individual circumstances."
On the other hand, there are certain factors Plumley points to which could help interpret the sustainability of debt.

"If you look at this from a basic financial analysis point of view, if liabilities are higher than assets, that is your first red flag. Then what you would do is work off that and look at the position of the club and how the loans are structured, how the liabilities are structured, and over what time period.

"It can link to on-pitch performance, relegation for example, and the financial cost of relegation - the loss in revenue, players who are on contracts with no relegation release clauses, meaning you have to keep sustaining the wage bill. So, it is often intertwined with on-pitch performance because you then have to reposition the business model."

Financial disparity

Plumley, however, remains sceptical of financial regulation in general, pointing to the introduction of Financial Fair Play (FFP), which he says has "changed the environment financially" but also limits the growth potential for smaller clubs by restricting how much they can spend.

"The issue with regulation, and we have seen this with Financial Fair Play (FFP), is that it's okay trying to put measures on clubs to manage debt and manage costs, but the flipside is this: how much leeway do you give them to invest and to grow?

"You have to get the balance right between limiting losses and stifling investment. We have seen periods of dominance by a select number of clubs because UEFA's principle of 'spend within your means' results in the big clubs that earn more also getting to spend more."

One of the fastest growing companies in Europe

Eibar, one of the smallest clubs in LaLiga, are an example of a club who have overseen significant growth in recent years. The club had a revenue of €58.7 million in the 2016/17 season - not a huge amount, but that was following a three-year annual growth rate of 44.1 per cent, showing that clubs can grow despite the strict regulations.

"For a lot of years in Spain, small clubs have been spending a lot of money and they have great debts that have made them unsustainable. We have no debt due to our culture. This has allowed us to be more competitive behind the great clubs," the club's chief executive, Jon Ander Ulazia, told the Financial Times last year, after the newspaper included the club in its list of Europe's 1,000 fastest growing companies for the second year in a row.

For Guerra, LaLiga's strict financial measures do not create an unequal playing field - and that's partly due to the substantial increase in broadcast income over the same period.

"We have worked hard to secure improved TV rights deals year on year, which is income that we pass on to the clubs. Because of our controls, we know that clubs are investing money into areas like academies, stadium projects and women's football," he says and highlights that before the introduction of the league's economic controls, the ratio between the highest and lowest earners in LaLiga could be as great as 12:1. Now, however, it is 3:1 and the league has ambitions to reduce the gap further.

"The best way for smaller clubs to grow is to maximise their commercial opportunities and re-invest their income across all areas of the club. That has been improved by our economic controls."

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:26 pm

Chester Perry wrote:
Wed Apr 14, 2021 10:44 pm
More of that failed takeover at Newcastle - this time from the Mail, such a friendly lot - please get the correct decision, and should they ever own the club, will it be please change it to the correct result, please change it to the correct qualification

REVEALED: Saudi Arabia's Crown Prince Mohammed bin Salman urged Prime Minister Boris Johnson to intervene in £300m Newcastle United takeover after it was blocked by the Premier League
- Saudi Arabia's Crown Prince Mohammed bin Salman was desperate for takeover
- He warned Boris Johnson that Anglo-Saudi relations would be damaged
- Crown Prince wanted Prime Minister to intervene in £300million bid
- Premier League had concerns over alleged state-backed broadcast piracy
- Mike Ashley feels Newcastle fans 'won the lottery but were denied the payout'
By CRAIG HOPE FOR THE DAILY MAIL

PUBLISHED: 22:00, 14 April 2021 | UPDATED: 22:20, 14 April 2021

Saudi Arabia’s Crown Prince Mohammed bin Salman urged Boris Johnson to intervene in the takeover of Newcastle United by telling the Premier League to ‘correct’ its decision to block the deal.

In an extraordinary exchange revealed by the Daily Mail, Bin Salman warned the Prime Minister on June 27 last year that Anglo-Saudi relations would be damaged unless the £300million buyout was approved. His message to Mr Johnson read: ‘We expect the English Premier League to reconsider and correct its wrong conclusion.’

Mr Johnson asked one of his senior aides, Lord Eddie Lister, to investigate the matter but the Saudis withdrew from the process at the end of July after the Premier League failed to approve them as the club’s new owners.

The Prime Minister backed calls later for the Premier League to reveal why the takeover had not been passed.

The Crown Prince was enraged after the Premier League demanded to know if the Saudi state — in effect, Bin Salman himself — would be the owners of Newcastle.

The Premier League had concerns over alleged state-backed broadcast piracy in the country, but the buying consortium insisted that the Public Investment Fund leading the deal was separate from the state.

The PIF, along with financier Amanda Staveley and the Reuben brothers, agreed a deal with Newcastle owner Mike Ashley for the sale of the club exactly a year ago.

That agreement remains in place and Ashley is awaiting an arbitration hearing against the Premier League in a bid to have the takeover approved.

A source, referring to Ashley, said on Wednesday night: ‘In Mike’s eyes the club is sold. He feels Newcastle fans won the lottery but were denied a payout by the Premier League.

‘He wants to know why that happened and is determined for the deal to be signed off.’

Interestingly, a redundancy letter sent to staff at Newcastle’s club store this week referenced the ‘anticipated transfer of ownership of the club’ and ‘new owners of Newcastle Football Club’.

There is optimism that the deal will be revived but that is subject to the outcome of the private arbitration hearing, which is yet to begin.

The revelations about Government involvement at the highest level will be of interest to Newcastle supporters, who blame the Premier League for denying them new owners. Sportsmail reported on June 21 last year that a decision on the takeover was close and it was expected to go ahead given an increased level of Government involvement.

It was said then that the Government were keen to preserve ties with Saudi Arabia.

Documents released this week have revealed that, on June 21, the Department for Digital, Culture, Media and Sport wrote to the Premier League regarding an ‘imminent’ takeover decision. A Whitehall meeting to discuss Saudi Arabia was scheduled for the following day.

But that announcement never arrived and within a week Bin Salman was lobbying the Prime Minister to intervene.

In August, Mr Johnson took the unusual step of sending an email to members of the Newcastle United Supporters Trust.

‘I appreciate many Newcastle fans were hoping this takeover bid would go ahead and can understand their sense of disappointment,’ he said.

‘I have seen the recent email sent to Newcastle fans from the Independent Football Ombudsman and agree with their conclusion that the Premier League should make a statement on this case.

’Lord Lister said on Wednesday night: ‘The Saudis were getting upset. We were not lobbying for them to buy it or not to buy it. We wanted them (Premier League) to be straightforward and say yes or no, don’t leave (the Saudis) dangling.’
It should come as no surprise that the government are denying any involvement in the background of the failed Saudi PiF bid for Newcastle United last year

https://www.bbc.co.uk/news/uk-england-tyne-56757906

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:29 pm

Chester Perry wrote:
Thu Apr 15, 2021 4:26 pm
It should come as no surprise that the government are denying any involvement in the background of the failed Saudi PiF bid for Newcastle United last year

https://www.bbc.co.uk/news/uk-england-tyne-56757906
Meanwhile the Telegraph are running a piece on what has already happened and what may still happen in regards to that Saudi PiF takeover of Newcastle United

Why did the Premier League delay the Newcastle takeover, what's changed and will a second bid land on the table?
JASON BURT APRIL 15, 2021

The proposed £305 million takeover of Premier League Newcastle United by a Saudi Arabian-backed consortium collapsed last year after the group declined to take up the Premier League's offer of independent arbitration to decide who would own the club.

It has now emerged that Boris Johnson reportedly acted on a personal plea from Saudi Crown Prince Mohammed bin Salman, with the Prime Minister urged to "correct and reconsider" a "wrong" decision by the Premier League, which was accused of blocking the takeover of the club. But where does this all leave the takeover, Newcastle United and the future of the club?

What does the latest news means?
Beyond the political row, and legitimate questions as to why the Prime Minister reportedly involved himself, nothing has changed in terms of the potential takeover of Newcastle United. It can still be revived and the club’s owner Mike Ashley is not speaking to any other bidder. The Sports Direct owner, who was paid a £15million deposit, is determined to sell to the consortium led by financier Amanda Staveley and involving her firm, PCP Capital Partners, the Reuben Brothers and the Public Investment Fund of Saudi Arabia which would take an 80 per cent stake.

It was known that Boris Johnson had taken an interest – that was clear from the email he sent the Newcastle United Supporters Trust last August when he said there should be “clarity” on why there was such a delay by the Premier League on the decision over whether the Owners and Directors Test had been passed. What was not known is the level of that involvement with Johnson reportedly being lobbied by the Saudi crown prince Mohammed Bin Salman and also allegedly asking a senior No10 aid, Lord Eddie Lister – who is a Middle East expert – to take up the complaint.

It is clear from the persistence of the Government and the tone of their emails how sensitive they regarded the whole issue and the potential ramifications for Middle East trade and relations. There was also the on going concern over human rights, the geo-politics of the region – with the proxy war against Qatar – and the complication as to whether the piracy of Premier League broadcast rights was state-sponsored by the Saudis. They denied this but a World Trade Organisation report concluded otherwise. There had also been murmurings of complaints from other Premier League clubs.

We also already know that there was a high-level meeting after the Saudis withdrew the £305million bid in frustration between the various parties, including the Premier League, and that this also ended without resolution. It is unclear who brokered the meeting but it may have involved the Foreign Office at some level.

Whether the latest news hampers or hinders the bid remains to be seen. It will be argued it, again, shows that it is state-backed while PIF continue to argue it remains a separate investment vehicle making independent decisions.

In short this is a fiendishly complicated saga.

Why did the Premier League drag their heels so long?
It depends who you believe on this one. The Premier League will argue they did not drag their heels but the fact is taking more than 17 weeks to decide whether the nominated directors from the new owners passed the organisation’s owners and directors test is unusual. The Premier League will claim otherwise but while there may have been some delay because of the pandemic – remember the bid was formally submitted while football was shutdown last year and no-one knew when it would re-start and at what cost – that does not explain how incredibly long it took not to make a decision.

It is evident from the emails sent by the Department for Digital, Culture Media and Sport that government officials felt a decision was “imminent” on more than one occasion (and The Daily Telegraph understands this to be the case) and the Premier League also appeared to indicate that it was close – although it then qualified that by adding there could be yet more delays.

Certainly the bidders thought it was close and also, despite the controversy, despite the accusations of broadcast piracy, believed the bid would be approved. Time and again the argument was put forward that the UK government did business with Saudi Arabia and so the Saudis should be allowed to be part of buying a Premier League football club.

The Daily Telegraph eventually revealed that there was an “impasse” with concerns over the ownership structure and who will have the final say in the decision-making process. It transpired that the buyers were struggling to satisfy the Premier League which wanted greater clarity regarding the link between the PIF and the Saudi state.

The Premier League was reportedly unconvinced by the argument that the PIF is independent despite the crown prince being the fund’s chairman. Three-fifths of the Newcastle board was to be made up of Saudi representatives led by Yasir Al-Rumayyan who is the governor of the PIF.

Once that story was published the bid was quickly withdrawn despite Amanda Staveley insisting they had answered all the questions from the Premier League which wrote to Newcastle and said it had provisionally decided that the PIF is “controlled” by the Saudi state meaning it “would become a director of the club”. This caused a great deal of anger and confusion.

What are the chances of it being back on the table?
High. Very high. In fact it can be argued it was never really ‘off the table’ despite the Saudis formally withdrawing in anger. The key now is not the row over political lobbying but the forthcoming Premier League arbitration hearing which has been instigated by Newcastle and the club’s owner Mike Ashley. At the height of the deadlock arbitration, available through the Premier League’s rulebook, it was offered to the bidders but they were worried about the independence of the process. Since then it has been formally asked for by Newcastle to query the Premier League’s decision-making but – as yet – the private hearing has not taken place.

It was due to happen in February but we are now into April and it remains shrouded in secrecy. In saying that we do know who will be on the three-man panel after Newcastle revealed the club had been unsuccessful in a High Court bid to remove Michael Beloff QC as chairman alleging that he could be “biased” as he had previously advised the Premier League in relation to a potential change to its owners and directors test.

The ruling was made public and revealed former Supreme Court Judge Lord David Neuberger – who was chosen by Newcastle - and former Master of the Rolls Lord John Dyson – who was selected by the Premier League - have also been selected to sit on the panel. It was also revealed by Newcastle that it was “considering whether or not to pursue an appeal” which may further delay the arbitration hearing.

The Newcastle legal team is led by Nick de Marco QC who has a strong track record in winning legal cases in football. If he is successful with this one it will be a significant embarrassment to the Premier League and will pile pressure on its chief executive Richard Masters. It is also expected to lead to the bid being re-submitted and, given Newcastle appear to have escaped relegation, on similar terms to the £305million offer that was accepted. There may be some re-negotiated given the delay and the continued financial effects of the pandemic but Mike Ashley remains committed to the deal and the buyers have not walked away.

If they lose the arbitration hearing then it gets more complicated. It is understood that part of the agreement to undertake the process is to accept its ruling but such is Ashley’s determination to win he may pursue other legal routes if he loses. There is also the possibility of legal action being taken by Newcastle fans who, through the Newcastle Consortium Supporters Ltd, have already submitted a Letter Before Action to the Premier League.

The saga may continue.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:44 pm

Next from the Offthepitch.com treasure trove (I still cannot believe my luck that I am accessing these in front of the paywall) is a series of columns (11 in all) looking at the pitfalls in buying a football club) they ran across last summer

https://offthepitch.com/a/column-so-you ... n-pitfalls

Column: So, you want to buy a professional football team? Beware of these ten common pitfalls
29 May 2020 9:44 PM
  • In this column, Alexander Janssen reflects on - and gives a unique insight to - all the strategic problems you face when you suddenly find yourself the owner of a club.
  • Alexander Janssen, who was involved in running two football clubs in Belgium and Spain, reflects on some of the difficulties he experienced while trying to turn things around. The stadium pictured is not related to the clubs Janssen was involved with.
  • In this column, Alexander Janssen reflects on - and gives a unique insight to - all the strategic problems you face when you suddenly find yourself the owner of a club.
  • Janssen was involved on the ownership side of clubs in Belgium and Spain, and there he learned that the football industry is not only extremely competitive but very, very different to the business environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • However, as time marched on and his involvement with clubs grew, his experiences matured into a profound insightfulness. And those hard-won insights might be helpful to other experienced leaders with a dream of owning their own club.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

According to Harvard Business Review, in the normal business world some 65 per cent of acquisitions fail. Football is not an average industry though; even the most rigorous business leaders get carried away. Whereas in their lives outside of football they would manage their businesses strictly based on facts and figures, in football they often ignore economic basics and alarm bells.

Moreover, football is a rapidly evolving sport, from both a competitive as well as a business perspective. Former business practices have become obsolete. In my opinion, it is highly likely that the success rate for takeovers of football clubs is even lower.

The main reasons are:
  • Short-termism prevails - there is often a lack of vision.
  • Profitable clubs are the exception rather than the standard. The coronavirus crisis has revealed the financial vulnerability in all European competitions.
  • Dodgy owners are over-represented in football. Money laundering and off-balance financing are widespread (although controls and regulations are gradually being put in place).
  • Potential investors (with varying intentions, mandates and reputations) relentlessly scour the European football competitions aiming to identify interesting target clubs matching their needs.
  • Football clubs are generally managed by people with passion but few capabilities. Management styles are top-down, not participative.
  • Football clubs are like Harrods - financial success depends on the last week of the season. Whereas Harrods depends on Christmas, football teams' survival often depends on the success of the last week of the transfer period.
One of my childhood dreams was to take over a football club one day. Many years later, I had been intimately involved in 40-50 takeovers, both as a consultant and as a sports entrepreneur. A close friend is a prominent football manager and an agent with a global network. It seemed a promising combination to me, but not fool-proof by any means. This friend and I held negotiations with many clubs. We ended up buying two professional clubs in different European competitions.

I won't go into detail about our journey here and now, but despite our extensive experience, we made a lot of mistakes. Here are ten common pitfalls to be avoided when buying an existing elite football club.

1. INCOMPLETE DUE DILIGENCE

The aim of due diligence is to uncover problems that could impact the positive outcome of a club purchase. Take the time needed; time pressure is due diligence's worst enemy. Know your seller. Make sure independent experts are carrying out both financial and legal assessments. Sure, you tried to ask all the right questions, but even the best advisors and lawyers may miss something that can come back to bite you.

Not to mention that a seller is trying to sell and, unfortunately, financial window dressing often pays off. In football, more than in other industries, you need proper seller representations and warranties documented in your share purchase agreement to protect you.

2. NON-COMPETITIVE TEAM

In football, winning and business success go hand in hand. Make sure you sign up the right players and coaches; only a winning team enables business success. This is by far the most critical challenge. If you make the wrong decisions in this area, you are set up for a costly failure. You cannot be thorough enough. Perform due diligence on targeted players, base decisions on data and facts, not on opinions.

Check each player's injury history and carry out the strictest medical and physical preparedness tests. Do not trust anyone else other than your own medical team. As stated above, even the most seasoned business leaders get carried away by their passion. They have a tendency to ignore the economic basics and overspend when they recruit players for the new season. They will do anything when they really want a player. It is imperative to agree on your budget early on in the process and stick to it - no compromise.

3. LACK OF VISION

Develop a post-acquisition vision document and initial 30-, 60- and 90-day plans defining strategic imperatives, along with a two- or three-year business plan. This will avoid problems, create direction, and improve the probability of success. Furthermore, many future business partners (strategic partners, shareholders, sponsors, staff, etc.) will require this document for decision-making.

A football season is hectic - there is no time to sit back, rethink and/or diligently carry out root cause analyses to subsequently repair faulty processes. As such, a clear vision and strategic plan will provide guidance during the day-to-day jobs of all employees and other stakeholders.

4. OBSOLETE CAPABILITIES

Football is a rapidly evolving sport, both from a technical and a business point of view. Over the last ten years the game has changed dramatically. Therefore, continuous self-development has become a prerequisite for coaches and sports managers. Player monitoring and physical optimisation have become science-driven fields. Data is paramount, not opinions - coaches need to be savvy when it comes to modern tools and techniques. Marketing has become more targeted and individualised through digitalised stadium and seating management, fan engagement, boarding, community engagement, etc.

Catering has evolved into a digitalised business process - from planning to manning, ordering, delivery, selling and reordering. A future-proof management team demonstrates best practices in these areas. Old-school managers are no longer fit for purpose.

5. WRONG POST-SALE MANAGEMENT TEAM

Football clubs often have locals managing the club, who have sometimes been there forever. New owners tend to bring in their own trusted management team. Many acquirers say that achieving cultural fit is the highest priority. After all, businesses are made effective by having employees aligned, engaged, and committed to a common purpose. Cultural incompatibility can cause business disruption, cost escalation and lower efficiency. Leaving a newly acquired club to stand alone, at least in the short to medium term, can work much better than integrating quickly without a well-considered plan.

A buyer can benefit from taking some time to really understand how the club functions and what works well - instead of blindly making significant changes that may fall flat. Should the locals be eager, open and competent, it is recommendable to keep the existing employees. Why change a winning team? They already know the local stakeholders (sponsors, supporters, town hall, suppliers, volunteers, bankers, politicians, etc).

Whether an acquisition succeeds or fails has a lot to do with the egos involved in the organisation. A manager who resists change or power sharing can poison other members of staff. Egocentric personalities usually end up leaving but not without first doing damage, such as causing others to leave. So, get to know the characters and weed out those who might work against moving forward once the acquisition is done. The key is to be realistic about who shares your vision (if you have one) and wants to be part of the future - and who doesn't. In case of the latter, separate.

6. NO PROCESS TO MERGE TEAMS & CULTURES

When bringing in a new leadership team, you merge people, personalities and cultures. Make sure the new senior management has clear roles and can grow together as a new team so that the employees will aspire towards a shared collaborative culture of "we" - instead of "us" versus "them." New club ownership brings change. This affects people, systems, processes… in fact, every corner of an organisation, across all functions and levels of employees.

A clear and demonstrated plan of how all this will work must be developed beforehand and communicated immediately. The CEO should quarterback the execution of the plan and changes. Make sure the CEO has an undivided mandate from the president.

7. INAPPROPRIATE FUNDING & STRUCTURING

When evaluating the club purchase, it is critical that the buyer understands the projected cash flows of the targeted entity, movements in working capital and capital expenditure attributes in considering the funding structure of the transaction.

The club management's failure to understand the projected future cash flows may result in the business being over-leveraged, having a repayment term that is not aligned with the cash requirements of the club, and future operations being constrained by insufficient cash. The diversion of management's attention from operating the club to managing its cash flow is often the beginning of the end. Banks will not finance football teams, therefore self-financing is a must. These days, quite a few banks even refuse to let clubs open a bank account.

8. NO RETENTION PLAN FOR SPONSORS & SUPPORTERS

Without supporters and sponsors there is simply no business. Sponsors and supporters of the acquired club often become disaffected by poor communication, deteriorating relationships, or a different club experience than they were used to. This is a real danger zone that acquirers need to address - one needs to have a pre-acquisition plan and a plan to over-communicate to the entire base of sponsors and supporters post-acquisition. It can take years to secure a sponsor - yet it can take only a few minutes to lose one. A loyal fan base can be your biggest asset but also your worst nightmare.

9. MISSING FINANCIAL TARGETS

There are two crucial financial features inherent to football. Firstly, the income of a club shows a seasonal pattern. Secondly, when the team does not perform, the income will plunge in the second half of the season.

Cash game. Managing a football team is a (sometimes nerve-racking) cash balancing act! Both the income and costs patterns of a football club have a seasonal character. Income is high at the beginning of the season (last season's transfer fees have been received, TV rights have not been spent yet, sponsors have paid, fans buy merchandise, season tickets and come to the stadium, youth academies have collected contributions, etc.). Costs can be spread over the season.

When it comes to operating costs, 80 to 90 per cent are related to the players. The main cost drivers are players' agents, players' social security, insurance contributions, sign-on fees, and salaries. Since costs and income have different patterns, the need for thorough cash flow planning augments. Thus, one needs to develop and understand the team's budget prior to the recruitment (and the associated terms and conditions) of new players!

Russian roulette - either all or nothing.

During the season, the team's success on the pitch will drive financials. A poor season will gradually and cumulatively work as a swamp draining cash, energy, team spirit, cheers and beers, supporters' behaviour, sponsors income, support from town hall, etc. The chances of being able to compensate for the shortcomings at the end of the season through successful transfers will be minimised too. On the contrary, when the team is doing well, it paints a very different picture.

Clubs go into bankruptcy because they are spending more than the amount of money they are earning. The tipping point is when debtors demand to be paid the money they are owed (whether it is the taxman, football federation, creditors, etc.) and the club simply does not have the money to pay up. In football, many clubs budget for a certain level of income, which is not always reached (based on assumptions such as that stadiums will be full, they will remain in the same league, or they will perform to a certain level throughout the season). When this happens, it is difficult for clubs to reduce their spending quickly as a large amount of money is spent on players' wages, which cannot be changed. Budgeting requires multi-scenario assessments. Due to the euphoria of the acquisition, a worst-case scenario is typically ignored prior to a takeover.

10. MEDIA MAKE AND BREAK

Everyone likes football. Of all non-important things in this world, football is the most important. The media is keen to know everything about their local team. All football news sells - good, bad and fake. The media is omnipresent and ruthless. Daily pressure can take its toll - usually to the detriment of objective decision-making.

It cannot be stressed enough how important it is to agree on a media policy prior to the takeover. Use the media to your advantage, pro-actively when you need them to work for you. Be the master of the process, otherwise you will be toyed with to their advantage. Bring news when you have something to say. Avoid falling into the trap of giving news when they ask for it. Sooner or later this will do you harm.

When things start to go astray, you pay a heavy price. You lose tons of money and the journalists and critical supporters will line up to decimate you in the various media. You need a thick skin. And, sooner or later, they will need a scapegoat - which is when you will be declared persona non grata in the city and beyond. What's worse, it will haunt you into the future - what gets on the internet stays on the internet.

Both our takeovers can be labelled failures. I think we have learned a few lessons. Admittedly, the journey has been less enjoyable than the ultimate goal - the running of the clubs, the winning of the competitions, and cheering for our own squad.

Still want to buy an elite football team?

If you can't stand the heat, you'd better stay out of this kitchen.


W. Alexander Janssen is an economist holding a master's degree from Tilburg University and an MBA from ESCP Europe. For 17 years he was the CEO and head of oil and gas at JURAN Inc (USA), the global market leader in asset performance benchmarking across 32 countries. In 2012, Alexander took a stake in TopSportsLab (Belgium) and assumed the role of CEO for six years, working with elite football teams, UEFA and FIFA. In 2018 and 2019 he was involved in the acquisition of two professional football teams, one in Spain (league 2B) and the other in Belgium (league 1). Throughout his career, both as a consultant and an entrepreneur, he has been involved in more than 30 acquisitions.

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:50 pm

https://offthepitch.com/a/column-buying ... -diligence

Column: Buying a professional football team? Ten lessons learned: #1 - Don't underestimate the due diligence process
1 July 2020 9:40 PM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very different to the business environment that he used to work in.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the first.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • In this column the Dutchman reflects on the due diligence process when buying a club. Janssen learned the hard way that there are quite a few pitfalls when it comes to structuring such a process.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

This is my first post of a series of ten on the lessons learned when taking over a professional football club. The lessons that follow are all based on real-life experiences.

The moment to buy a club will most likely be during the summer break, in between seasons. The entire takeover process has to be completed within a very short time window of four to six weeks. From an operational perspective, the summer break is a hectic time for the management and the technical staff, as the organisation needs to prepare for the next season.

Players are being sold and new recruits are being contracted, commercial plans and partners revisited, support staff re-assessed, etc. The organisational and financial structures of a football club are not always straightforward. Some examples:
  • Most clubs have at least two legal entities, i.e. the elite team, usually structured as a limited company, and the youth academy, structured as a non-profit association working with hundreds of volunteers (though these structures may vary by country).
  • The most important "fixed assets" of the professional team are its players (yes, elite sports is the only industry that values its human capital to a point where it is included on the balance sheet). The value of a player is being written off over the length of his contract (straight-line depreciation), and revaluations of players are not allowed. In particular, the historic financing of player transfers (and of the stadium) requires in-depth scrutiny.
  • In some countries, income tax and social security regimes are unique and tailor-made for football players.
  • The majority of the clubs are chronically loss-making (and the coronavirus crisis is certainly not helping the situation, especially if poor habits don't change). Controversial stadium sale-and-leaseback agreements aside, it is likely that recent years have seen multiple "creative financing" techniques being applied.
  • The principles of good governance are often unknown or ignored.
In conclusion: there is extreme time pressure and yet it is essential to perform rigorous due diligence. The aim of due diligence is to uncover problems that could impact the positive outcome of a club purchase.

Why an external auditor?

Should you have an accountant on your acquisition team, do not have him carry out the due diligence. He would be emotionally involved, and therefore biased. At this phase in the process, your own man is keen to move forward with the takeover. Tunnel vision. He will not challenge the transaction - but will unintentionally look for justification in favour of the takeover. Neutrality is key. Diligence (carefulness) is due, thus "due diligence."

Professional due diligence

Due diligence (DD) is done by professionals - it requires highly specialised, multi-disciplined expertise. As a minimum, a DD process should include a legal, a taxation, and a financial chapter. Throughout my career, every single DD process has revealed surprises. In one of our club takeovers, millions of euros could have been saved had we outsourced the DD process. It would undoubtedly have been a game-changer - and possibly the buyer would have shied away from the transaction. A seller wants to sell. His information pack will only include what he wants to share. The skeletons remain in the closet - to be discovered and unravelled by the auditor.

Be persistent, insist on appropriate safeguards - you are doing yourself a favour!

Mitigate risks

More so than other industries, football is a high-risk environment. You need to contractually protect yourself against unforeseen problems down the line. In the final share purchase agreement, you need to document proper seller representations and warranties. Should the seller object to fair warranties, you should reconsider the entire endeavour. Be persistent, insist on appropriate safeguards - you are doing yourself a favour!

Next week, in the second instalment of this ten-part series, I will elaborate on the takeover process and the importance of recruiting the right team.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 4:55 pm

https://offthepitch.com/a/column-buying ... t-takeover

Column: Buying a professional football team? Ten lessons learned: #2 - This is by far the most critical post-takeover challenge
9 July 2020 7:14 PM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the second.
  • In this column the Dutchman reflects on the simple fact that it is fairly important to have the right manager and the right players on board. It might be an obvious fact, but it's nonetheless really hard to control in real life.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

In football, winning and business success go hand in hand, so make sure you sign up the right players and coaches - only a winning team can deliver long-term business success. This is by far the most critical post-takeover challenge.

If you make the wrong decisions in this area, you are setting yourself up for a costly failure. This is even more critical after a takeover, as you need to - in parallel - settle in and turn around a club in despair. It speaks for itself that this is easier said than done.

So, when it comes to one core business area, the high-cost, high-impact area of player selection, make sure you have demonstrated, up-to-date in-house expertise available.

Players:

After the takeover you will have to rebuild a team. The first step should be the in-depth assessment of the legacy in place, i.e. players on the payroll as well as talented players in the youth academy. The club will be approached by numerous people from all over the globe offering new players. Here are some controllable key aspects of player management:
  • Player budget. It is imperative to agree on a player budget early on in the process and, more importantly, you need to stick to it - no compromises. As stated earlier, even the most seasoned club owners have a tendency to ignore the economic basics and overspend when they recruit desired players for the new season. At one of our clubs a former youth player, then in his mid-30s, wanted to finish his career at our club. He was a celebrity with a stellar CV, interesting life story, and good "marketing" looks. In short, a great gift to the fans of this newly acquired club - the local son came home. The problem, however, was that we could not afford him, and yet, we took him. Even more players followed thereafter - the floodgates were open.
  • Testing players. Perform due diligence on targeted players. Base decisions on data, statistics, and facts. When the facts are positive, only then opinions come into play. Make sure you have access to modern, specialised platforms and experts. Scrutinise players' injury histories and carry out the strictest medical and physical preparedness tests. Do not trust anyone other than your own medical and technical teams and your scouts. You cannot be thorough enough. Players coming from lower competitions and/or players who have not been in competition for a longer period of time require enhanced pre-recruitment scrutiny. You want to carry out a vast series of physical tests (speed, agility and coordination, aerobic and anaerobic endurance, recovery, power, strength, flexibility, stability, and proprioception, etc.), combined with injury-prevention tests as well as extensive on-the-pitch try-outs. We signed too many players based on "expert" recommendations and incomplete testing, resulting in high injury rates.
  • Player strategy. It is imperative to agree on both short- and long-term player strategies and to stick to them. In the short term, the team needs to meet the competitive objectives set for the coming season (promotion, top-five placement, survival, and things like game plan, playing styles, key roles, etc.) and you need to be able to make money on transfers. As to the long term, you decide on your business model (youth development strategy, satellite clubs, professional academy, international cooperation, etc.) and the relations with other stakeholders (e.g. the town hall, sponsors, fan base, media, etc.). Structure follows strategy. Therefore, the long- and short-term objectives should be defined prior to player recruitment.
  • Player performance tracking. Player optimisation can be accomplished through the recruitment of modern, data-driven performance coaches. All players need to be continually monitored with respect to their physical preparedness, injury records, mental health, sleep, hydration levels, food, etc. Workload monitoring, together with injury prevention and prediction, can reduce non-contact injuries by up to 40 per cent. This helps clubs to save money (fewer players needed; the typical squad averages 29 players but best practices demonstrate that 20 to 22 players is feasible and realistic) and maximise income through transfers (players are less prone to injury with extreme fitness). Some providers in this field (e.g. TopSportsLab.com) can perform miracles. It is not enough to simply buy all the software and hardware and provide education. Management should follow up, the coach should demonstrate a real interest, accept the value added by the performance coach, and use the findings for decision making. Daily workloads should be monitored and adapted to each individual player's work tolerance. This requires a new mindset with new work protocols!
  • Recruit the right coach. Make sure you recruit a coach who fits in with, and buys in to, your vision, culture, and strategy. Make sure he (in combination with his assistants) has the knowledge and up-to-date skill set required to excel in today's football landscape.
Conclusion: The players are your club's key assets, representing 60 to 80 per cent of your total operating costs. Their results define the club's sustainability, and long-term success. Their optimisation requires professional asset management embracing modern people, tools, and techniques.'

In a later post there will also be a discussion of lessons learned regarding other team members, i.e. the business staff in the office. Next time, in the third instalment of this ten-part series on the takeover process of a football club, I will write about what it takes to develop, communicate, and deploy a clear vision and objectives.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:01 pm

https://offthepitch.com/a/column-buying ... l-kill-you

Column: Buying a professional football team? Ten lessons learned: #3 - Match-to-match planning will kill you - develop a vision and long-term objectives
16 July 2020 3:34 PM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very different to the business environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the third.
  • In this column the Dutchman argues that an owner must develop - and share - a long-term vision functioning as an anchor for the hectic operations of a football club.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

A football season is hectic. You operate from match day to match day. There is no time to sit back, rethink and/or meticulously carry out root-cause analyses to subsequently correct mistakes. As such, a clear vision and strategic plan will provide guidance to employees and other stakeholders as they carry out their day-to-day jobs.

What is a vision? A vision statement is your club's roadmap - a declaration of what the club want to become. It defines the club's future in terms of objectives and growth. And it is meant to stretch the imagination, to align and inspire, and to give direction to the club's employees.

Long-term planning is a systematic approach to setting long-term business goals and agreeing on the means to achieve them. Once a club have established their long-term goals, the business planning process enables them to create an annual plan with simple, measurable, achievable, realistic, time-based (SMART) goals. It also allows them to define the actions needed to move towards those goals and create an annual budget in which resources are allocated efficiently.

Develop a vision statement. After the takeover of the club, it is recommended to have a vision statement in place, including initial 30-, 60-, and 90-day action plans with clear milestones.

This will enhance a sense of common purpose for everyone involved and therefore the probability of success. Furthermore, at times it may be useful as a communication tool for other business partners (strategic partners, creditors, city hall, banks, shareholders, sponsors, staff, etc). This document facilitates their buy-in and/or decision-making.

An example of a vision statement for "MyClub FC":
  • MyClub aspire to become a sustainable first-league club.
  • MyClub will ensure best practice in youth development.
  • MyClub will instil a future-proof football culture embracing state-of-the-art management principles in sustainability, integrity, fair play, corporate governance, and information technology.
  • MyClub will be a brand providing an identity, social cohesion, and a platform for the city, its businesses, and satellite clubs in the region.
Advantages of the vision and strategic plan:
  • Accountability. Each and every long-term aspiration mentioned in the example above can ultimately be broken down into individual tasks and projects - with timelines, budgets, project owners, key performance indicators, etc. As a result, it can then also contribute to implementation of the concept of "accountability" and management by objectives. Every project needs a "project owner" - a person responsible for the outcome.
  • Productivity. More engaged employees are often more productive, and as such they will be more effective club ambassadors in the larger community.
  • Transparency. Another advantage linked to the vision statement is transparency. And with that the job of leadership becomes even easier.
Conclusion: A clear vision statement with a long-term planning document is a useful communication tool serving multiple purposes, including providing answers to these fundamental questions:
  • Where are we all going? Both internal (staff) and external (business partners) stakeholders now have a sense of direction and purpose.
  • What activity is planned and by when should it be ready? The plan cascades long-term business issues (aspirations) down into medium- and short-term projects and tasks. One also understands the link between specific ongoing projects and predefined longer-term objectives.
Example of an aspiration cascading down from the vision statement to the mission statement, long-term goals, and short-term goals: The example is drawn from our vision statement: "MyClub will instil a future-proof football culture embracing state-of-the-art management principles…"

In our mission statement, this aspiration is transformed to provide more precise direction: "MyClub will become an R&D hub for technology providers with the aim of revolutionising the game using modern data-driven techniques."

Based on this mission, the long-term (e.g. five years) objectives could then include elements such as:
  • Implement innovative high-tech techniques in the first team and academy - e.g. player tracking using GPS and heart rate monitoring.
  • Implement latest techniques to enhance fan base - e.g. social media, TV, seating technology, electronic ticketing.
  • Implement top-end sports business practices - e.g. maximise subscription-based ticketing, business seats, VIP launch, boarding, shirt sponsoring.


As to the first five-year objective, i.e. "Implement innovative high-tech techniques in the first team and academy - e.g. player tracking using GPS and heart rate monitoring," for the next season the following short-term objectives could then be set forth: "Acquire hardware and player-tracking software. Engage with systems vendors, select systems and expert staff. Hire a sports scientist. Implement systems and reporting."

Your final strategic plan will take on a hierarchical structure (think of a tree diagram) starting with all the elements of your vision and following them as they cascade down to concrete short-term tasks. Each task will have an owner, timeline, target, and budget.

Some argue that having a vision and a long-term plan will not bring success, and rightfully so - it is the execution thereof!

That is an undeniable truth. However, from what I have experienced in football, without a plan in place, any attempt to execute a vision is doomed to be chaotic. The next match day will always take priority.

Next time, in the fourth instalment of this ten-part series on the takeover process of a football club, I will write about the importance of hiring competent managerial staff.

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:09 pm

https://offthepitch.com/a/buying-profes ... r-are-they

Column: Buying a professional football team? Ten lessons learned: #4 - Is your management team up to the job? Or are they stuck in an old-world mindset?
24 July 2020 2:43 PM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the fourth.
  • The football industry is changing extremely fast - but what about your management team? Do they have the mindset to develop themselves and explore new technologies and new strategies? Or are they stuck in the past?
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

Today, as we dive into my fourth lesson learned while part of the ownershp team, I'll elaborate on the importance of hiring competent managerial staff.

Football is a fast-evolving sport, from both technical (game) and business perspectives.

Rapid evolution of the game - one example:
  • In the Premier League, for a period of eight consecutive years, researchers Mascio and Bradley have monitored the average time between two high-intensity sprints for individual players during games. They discovered that the average recovery time went down from 55 to 33 seconds. In other words, in eight years' time the game accelerated by 40 per cent. The physical demands placed on footballers have intensified - and continue to do so.
Rapid change of the business - examples:
  • Ten years of growing player costs, then Covid-19. Between 2010 and 2019, the big-five teams in UEFA's top competitions quadrupled their expenses on incoming transfers, whilst their income (only) doubled. The coronavirus will abruptly bring an end to this worrisome trend; KPMG's research indicated that player values are bound to drop by 20 per cent in 2020.
  • Globalisation of football. In Belgium, for example, 13 of the 23 clubs have been taken over by foreigners. This trend is global and unstoppable. Manchester City are building their own global brand - they now own nine clubs on five continents. City's owners originate from the Middle East, China and the USA.
  • Technology. Five years ago the use of monitoring systems for players was exceptional (and focussed on cardiovascular workload). Now it is the standard, but it also includes the continuous monitoring of the biomechanical workload, sleep, food, mental health, hydration, etc. Video analysis was conducted using video recorders. Now it is done with specialised high tech that is very affordable, even used in the lower leagues, and there are over 50 vendors offering different systems. In line with other areas of the entertainment industry, high tech has taken over stadiums, payment systems, security, ticketing, player tracking, scouting, etc.
What does all this mean in terms of managerial capabilities? As the owner of a football club, you need to make sure that your managers are at the top of their careers as past performance is no guarantee for future returns. Let's do a quick recap of capability requirements.
  • Continuous learning. In line with other rapidly changing industries and the influx of high tech, continuous self-development has become a prerequisite for coaches and sports managers.
  • Player monitoring. Player monitoring and physical optimisation have become science-driven domains. Data is paramount, opinions are secondary, and physical coaches and sports managers need to be savvy when it comes to modern tools and techniques. They need to be open and keen to go the extra mile to keep themselves updated. The head coach now also needs to manage other disciplines that formerly were not part of the technical staff - for example, the video analyst, performance coach, etc.
  • Innovation in marketing. Marketing has become more targeted, digitalised, and individualised. Fan engagement requires modern CRM approaches that enable the club to diversify their content (right time and place). As a club owner, you need to engage (and find ways to monetise) both the fan in the stadium and the connected fan outside of the stadium, for example, by setting up your own media and/or TV channel - Covid-19 will accelerate developments in this field. Professional sponsors are forcing clubs to move from in-stadium visibility towards co-branding. And the current use of LED boards is mostly old fashioned - alternative possibilities will expand exponentially in the near future. E-sports is not only a growing industry but also provides great marketing potential; it will become commonplace sooner rather than later. The coronavirus pandemic will accelerate the implementation of these techniques by the football industry. As a matter of fact, should you wish to stand out as a club, this is the moment to hire the right resources to make it happen.
  • Merchandising. The online fan shop should be totally integrated in your marketing/CRM approach. A physical club shop is a nice-to-have (on match days) but no longer a necessity. With an online shop, you can make your merchandise available to your fans 24/7 and in the comfort of their own homes.
  • Enrich the fan experience. The stadium has become a digital marketplace that offers a continuous flow of data for seating, boarding, community engagement, security, etc. There are plenty of professional, integrated platforms available. Reach out to them. You'll find they are very innovative and that the football experience your club offers can be so much more. But make sure you recruit the right IT people to implement your platforms flawlessly.
  • Pre- and post-match experience. Catering has evolved into a digitalised business process from planning to manning, ordering, delivering, selling, and reordering. Catering, too, can be integrated in your CRM approach.
A future-proof management team demonstrates best practices in the above areas. Old-school managers are no longer fit for purpose. Hiring is strategic:
  • Management team. New owners tend to bring in their own trusted management team. Trust is an important building block, but trust should be based on loyalty and, more importantly, capabilities.
  • Best man or woman. Football is a business - it is the leadership's role to recruit the best people for the situation at hand. The picture painted above asks one critical question: What (capabilities) must be in place to win?
  • Football equals business. Football is about joy and sharing emotions, but it is a business too. Having friends in your management team is great when things go well. However, when things go astray, you need competent staff to prevail!
  • Cultural fit. Many acquirers say that achieving cultural fit is the highest priority. After all, businesses are made effective by having employees aligned, engaged, and committed to a common purpose.
Conclusion: The owner and/or president of the club will have to select his core team. He should take the time and seek professional advice to make sure he does "the right things and does the things right" in order to win!

In a later post there will also be a lesson learned about other team members, i.e. the business staff in the office.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:18 pm

https://offthepitch.com/a/column-buying ... -skillfull

Column: Buying a Professional Football Team? 10 Lessons Learned: #5 – cash is king. And it takes a skillfull CFO to make sure you always have cash
1 August 2020 10:08 AM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the fifth.
  • As boring as it might sound cash flow management is absolute core in football. As an owner or chief executive you will never find the time to develop a sustainable model and strategy if you spend your time on cash flow problems week after week.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

I will start this column with a few overall thoughts about the football industry.

The success rate of takeovers of football clubs is very poor, because:
  • Profitable clubs are the exception rather than the standard. The Corona crisis has revealed the financial vulnerability in all European competitions.
  • Short termism prevails, there is often a lack of vision.
  • Dodgy owners are over-represented in football. Money laundering and off-balance financing are wide-spread.
  • Potential investors (with varying intentions, mandates and reputations) relentlessly scour the European football competitions aiming to identify interesting target clubs matching their needs.
  • Football clubs are generally managed by people with passion but few capabilities.
  • Football clubs are like Harrods. The financial success depends on the last week of the season. Whereas Harrods depends on Christmas, football teams’ survival often depends on the success of the last week of the transfer period.
Failure to understand the projected cash-flow

In this column I will elaborate on LESSON #5: Ensure appropriate funding and structuring.

When evaluating the club purchase, it is critical that the buyer understands the projected cash flows of the targeted entity. Movements and seasonality in working capital and capital expenditure are crucial attributes in considering the funding structure of the transaction. The club management’s failure to understand the projected cash flows may result in the business being over-leveraged, having a repayment term that is not aligned with the cash requirements of the club, and future operation being constrained by insufficient cash.

What is a cash-flow problem? Cash flow gaps arise when your club's expenses (temporarily) outstrip earnings. This may be caused by day-to-day operations, or due to poor cash flow management.

The main Causes of Cash Flow Problems are:
  • Temporary economic headwind causing low profits or losses due to e.g. dipping sales, undisciplined spending, cost peaks, claims, loan reimbursements etc.
  • Skeletons tumbling out of the closets after the takeover. In one of the clubs we were involved with, we had expensive skeletons tumbling from many closets, one after the other, they were professionally hidden. We were already in trouble before the season had started! Hence, my Lesson Learned 1: Hire an external auditor to carry out a professional due diligence analysis. I herewith throw examples of potential, smelly skeletons at you:
  • Dodgy (former) players agents send you invoices (instalments) related to former transfers that you are not aware of.
  • Outstanding receivables from key sponsors that appear to be non-collectable.
  • Local construction companies invoicing for old projects claiming that they had been offered ownership which they never got.
  • Claims from former players and coaches for non-paid salaries and/or payoff indemnifications.
  • Seasonality of income and/or expenses (yes we have seasonality in football clubs!) and/or unexpected changes (e.g. corona, penalties, incidents etc).
  • Over-investment in players. Some enthusiastic leaders may argue that signing on players equals "building capital". That may be true, but this argument is built on 2 crucial assumptions: you have a winning team on the pitch (so that players can be sold at a premium thereafter) and you have enough cash to pay the price (and associated costs) at the agreed upon transfer fee payment schedules.
  • Bad debt collection or allowing customers too much credit. Collecting outstanding bills from loyal VIP fans having booked pre-match arrangements (meals, lounge, drinks etc) is always painful as you treasure them. You don’t want to upset anyone. Your debt collection is not successful and the outstanding amounts have not been paid (and they accumulate over time). They are now turning their backs on you.


How to Improve your Cash Flow:
  • Win games... everything is easier thereafter!
  • Better safe than sorry. Create cash flow forecast model and prevent problems from happening, if you can.
  • Send invoices out asap and accurately. Push or incentivise customers, sponsors, federation to pay quickly (or even pre-pay for future services). In case of hiccups, stay close on the ball. Don’t wait, resolve issues directly.
  • Sell assets (e.g. players) and/or inventory. If you sell a player to generate quick cash, you better make sure you agree on a prompt payment!
  • We had a situation whereby a Turkish club had bought one of our players. They owed us a fortune, but only paid the first of 5 instalments. Thereafter, our club filed the case with FIFA, who ordered them to pay within 3 months. They did not pay. Subsequently, FIFA issued a last warning to pay (only the next instalment) within 3 months. The Turks knew the system well and managed to stall the payment terms process by 10 months, without penalties. Successful cash flow management on their part?
  • We disposed of the existing led-boards as the monthly rental costs were sky high. In good concertation with the sponsors they were replaced with old-fashioned banners.
  • Pay suppliers less or slower and renegotiate payables. Offer them services or visibility instead of money.
Cash-flow management is core business in football. The majority of the professional clubs is structurally loss-making, for them managing cash flows is core business, albeit that the diversion of the CEO & CFO's attention from operating the club to managing its cash flow is often the beginning of the end. Exception: An increasing number of clubs is in the hands of billionaires. For these clubs cash flow is a lesser or a non-issue. Solving cash shortages is a phone call away to their sugar daddy (although we know that even sugar daddies have their limits and temper, see Fulham, Lommel SK, ADO Den Haag, Roeselaere, Vitesse, to name a few).

Banks refuse football clubs as a customer!

For all other clubs cash flow management is a struggle, as many banks will no longer finance football teams (which is the result of incidents and bad habits in the past). Quite a few banks even refuse clubs to open a regular account.

Self-financing is a must. If you can not knock on the door of a bank to bridge cash gaps, you will have to rely on auto-financing. The owner of a club himself will have to transfer money every time a cash-flow hiccup occurs. This cash trap can go really fast down hill, especially when your team is fighting against relegation and your budget was already tight from the outset of the season. Once you are in trouble (on and/or off the pitch), the loyalty of business partners, suppliers, sponsors etc vaporises rapidly. Bankruptcy is looming.

When you prepare a club takeover, and you are not a billionaire, you should at least have enough cash at hand to deal with smaller acute cashflow needs. You don't want to beg for money too quick, too often, as you will have lost all credibility before you even started!

Temporary versus structural cash-flow problems

Should you feel that the cash-flow problem is temporary, you should find a short term fix, e.g. receivables financing or factoring, private loan, convertible loans, commercial deals, crowdfunding etc. Corona has prompted clubs to reduce players' salaries and/or claim unemployment contributions. Should the problem be structural, then you will have to find a permanent fix, e.g. accept co-shareholders and sell (part of) the shares, sell real estate to third party, sell a player, seek co-financiers for capital projects etc.

It is highly recommended to be as pro-active as you can, as these solutions take time. And in case of trouble time is not on your side.

Conclusion:

Cash flow problems are, not only in football, the single most important reason for bankruptcy. Football has such as bad reputation (primarily because of sketchy money) that banks no longer are allowed to accept clubs as a customer. The majority of the professional clubs accumulate operating losses during the season, even in the Premier League. The survival of clubs relies on their success "after" the season i.e. the transferring of players. This concept is too risky.

It is a non-prudent model, which sooner or later fails. Club's need to develop a model that allows them to break even with stable recurring revenue streams in order to keep afloat during the season. A profitable transfer period is then the icing on the cake instead of "the last resort". Be a frontrunner in rebooting your business model.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:28 pm

https://offthepitch.com/a/column-buying ... -team-dont

Column: Buying a professional football team? Ten lessons learned: #6 - What if the new management team don't have any fresh ideas and fail to bring people together?
11 August 2020 4:13 PM
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the sixth.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

This post elaborates on lesson #6: LEAD MERGE BETWEEN CULTURES

New leadership. When bringing in a new leadership team, you merge people, personalities, and cultures. Many acquirers say that achieving cultural fit is the highest priority. After all, businesses are made effective by having employees aligned, engaged, and committed to a common purpose. Cultural incompatibility can cause business disruption, cost escalation and reduced efficiency. In this column, we zoom in on the club's support staff and management.

Office versus pitch. It needs to be repeated here: By far the most important focus area post-takeover is the squad on the pitch (see lesson learned #2). If they mess up, then the support staff basically don't stand a chance. There is an obvious fundamental difference between the two groups: whereas the staff in the office are basically there to stay, the players and the coach of the first team are "passengers" for one or - at best - a few seasons (that's no disqualification!).

Scope. In a medium-sized football club, few people - perhaps 20 to 40 - do a lot of work, keeping several balls in the air and combining different responsibilities. As such, we are not integrating two large production plants with various departments and hundreds of workers and staff.

No, we are integrating two groups consisting of a relatively small number of people. After the takeover, a new management team will come in, taking over "existing" responsibilities. It is therefore no wonder that people feel insecure. Make sure the new senior management have clear roles and can grow as a new team together so that the staff will aspire towards a shared collaborative culture of "we," instead of "us" versus "them."

Ease initial frictions

With the vast differences in scope, disciplines, personalities, cultures, and skillsets, one of the greatest challenges in any club is achieving effective collaboration between all those involved.

Here are five steps that can serve as helpful guidelines for a successful post-takeover integration:
  • 1. The president presides. The president should "walk the talk" and lead this integration process - he has to be visible, visionary, and accessible to all staff during the first couple of weeks. At this stage, the president will also formally introduce the CEO and the sports director. Their joint responsibilities include making things happen and ensuring that the club structure is being communicated and agreed upon. The sports director will focus on the technical staff of both the first team and the academy. The CEO will, among much else, ease initial frictions between new and existing staff in the office.
  • 2. Start integration as soon as the deal is announced. Clubs often fail to clearly define the deal's primary rationale and consequently they don't set clear priorities for integration. Some acquirers even seem to expect the existing staff to integrate themselves. Highly unlikely. The rationale includes an objective explanation of the reasons behind the deal and the opportunities to be seized together going forward. In this phase, you want your vision and strategy in place, which will facilitate communication substantially. Lesson #3 comes into play here: "Develop a shared vision and long-term objectives."
  • 3. Communicate the new organisational structure ("organigram"). Make sure it includes job descriptions and reporting lines. And shake hands with everyone to ensure acceptance - this is always a sensitive matter
.
  • 4. Select an integration team. In this limited-scope context, it is a good idea to have four people forming an integration team (two newcomers and two existing staff members). They should have daily meetings during the first two weeks to discuss integration matters with the objective of removing roadblocks. The team set their own agenda. Another good idea is organising a series of informal get-togethers with all staff to (a) get to know and appreciate one another, and (b) share the findings and proposed solutions of the integration team.
  • 5. Win hearts and minds. The new situation makes people nervous. They're uncertain what the deal will mean. They wonder whether - and how - they will fit into the new organisation. All of this means that you have to "sell" the deal, not just to the press, sponsors and fans, but internally as well. Again, at this stage the president should be omnipresent.
You could hold on to them

Radical versus marginal change: Is an entirely new management team the only answer?

Should one not assess the existing staff first? And then act on the capability gaps? What if the existing staff are competent? You could hold on to them instead of replacing them - then there is no integration required (only adaptation). It would save costs and time.

Football clubs often have locals managing the club, and sometimes they have been there forever. They already know the club's stakeholders - sponsors, supporters, town hall, suppliers, volunteers, law enforcement, bankers, politicians, etc. And they can be incredibly valuable to a club. New owners, however, tend to bring in their own management team. The lesson learned? Leaving a newly acquired club alone, at least in the short to medium term, can work much better than replacing staff without properly assessing their value and then attempting to integrate quickly without a well-considered plan.

A buyer can benefit from taking some time to really understand how the club functions and what works well instead of blindly making significant changes that may fall flat. For those among the existing staff who are eager, open and competent, it is an option to keep them, and use them as integration champions. Why change a well-functioning team?

Examples of integration roadblocks experienced in one takeover:
  • Your academy is your future. When you take over a club, you naturally focus on the first team. However, you also take over the youth academy. With football's current economic reality what it is, there should be much greater focus on homegrown players, and therefore an integrated approach (and strategic exchange) between the first team and the best youth teams is a must. Despite the lack of time, especially in the year after takeover, ample time should be dedicated to the academy. Therein lies the heart of the club and it is the basis for a sustainable future. Most of the time academies have excellent, highly motivated staff - working with passion (for peanuts) while holding down their full-time jobs
.
  • Age groups. In one takeover, the incoming new team consisted of five managers, averaging ±60 years of age. The sitting management team consisted of younger people, averaging ±35 years of age. Was this a setup for failure? An "us" versus "them" situation by design? The latter group felt intimidated and overthrown, resulting in a series of incidents and bad vibes. With hindsight, we can only come to one conclusion: the new management team did not bring in the added value required to make a difference. In lesson learned #4 it was explained how quickly football has evolved over the last couple of years and that best practices have shifted substantially.
  • Origin. Football enhances social cohesion and helps to create a local identity. When new management are brought in, they will be closely scrutinised by the local folks. If, God forbid, they come from - and have the accent of - a nearby big city with a team in the same league... they are the worst enemy! Of course, with a winning squad, the fans will conveniently forget this meaningless geographic detail. However, with a losing squad, that detail will see your management become the scapegoat. Then there was a situation in 2018 with a Spanish club owned by a Russian. The owner's office staff consisted of Russians only. They had been in the club for five years and had never even tried to integrate with the other (Spanish) staff. When we came in, we had no option but to ask all of them to leave.
  • Egos and testosterone. Whether an acquisition succeeds or fails has a lot to do with the egos involved in the organisation. A manager who resists change or sharing power can poison other members of staff. Egocentric personalities usually end up leaving, however, not without first causing damage and driving others to leave. So, get to know the characters and weed out those who might work against you or resist moving forward. The key is to be realistic about who shares your vision and wants to be part of the future - and who doesn't. In case of the latter, separate! In one case, we had to let a smart and talented young man go - an asset one would cherish under normal circumstances. He simply could not deal with the new reality in which he was no longer in charge. Unfortunately, we could not keep him.
Cultural battles

Conclusion: The cultural fit between those who run your club is the second highest priority - the squad always come first. The squad, by the way, have their own cultural battles, especially in today's multi-cultural teams. Your leadership team have a crucial role to play in the integration process. Increased attention is needed to address the uncertainty of the existing staff and to obtain their buy-in into the new project (your vision). Address roadblocks early on in the process. Another area that requires attention is the staff at the academy. It is in everyone's interest to have them play a key role in the process of building the future.

The upcoming seventh instalment of this ten-part series on the takeover process of a football club will deal with the importance of developing a retention plan for sponsors and supporters.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:36 pm

https://offthepitch.com/a/buying-profes ... feel-clubs

Buying a professional football team? Ten lessons learned: #7 - Sponsors and fans could feel that the club's identity, is in the hands of a stranger; that is an enormous responsibility
19 August 2020 9:22 PM
  • As a new club owner, you immediately need to connect with fans and sponsors. When it comes to the sponsors, you need to deliver concrete value. The fan group is complex and targeting the young fans requires a diversified "new-school" skillset.
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the seventh.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

Today we elaborate on lesson #7: ROLL OUT A SPONSORS AND SUPPORTERS RETENTION PLAN

When you are taking over a professional team, all stakeholders will be in limbo.

On the one hand, the new blood is exciting and they will hope that your leadership will be an invigorating force. On the other hand, they have a history - sometimes going back generations - and their team is their identity. Their identity is now in the hands of a stranger. That is an enormous responsibility.

Football is about tradition, emotion, unity, that sense of belonging, but, as pointed out in a couple of earlier posts in this series, you also need to look at football as a business, otherwise your club's future will be bleak and short-lived. An increasing number of football clubs are chronically loss-making.

There are plenty professional leagues in Europe with no profitable clubs in them at all. No doubt, the coronavirus pandemic will only make things worse.

Address the aspect of retention

Without supporters and sponsors, there is simply no business. Sponsors and fans of the acquired club often become disaffected by a structurally non-performing team, poor communication, deteriorating relationships, or a different club experience from that which they were used to.

Therefore, new acquirers definitely need to address the aspect of retention. One needs to have a plan to extensively and repeatedly communicate to the entire base of sponsors and supporters post-acquisition. (Needless to say, your vision and long-term plan will come in handy here - see lesson learned #3.)

Nice-to-know facts and stats from the world of sales:
  • It is six/seven times more expensive and time-consuming to acquire a new fan or a new sponsor than it is to keep a current one.
  • The success rate of selling to a new fan or sponsor ranges from five to 20 per cent.
  • The success rate of selling to an existing fan or sponsor ranges from 60 to 70 per cent.
  • Seventy per cent of buying experiences are based on how the fans/sponsors feel they are being treated.
RETAIN SUPPORTERS. The lion's share of the fans are normal people; families, men, a few women (perhaps too few), elderly people, kids, players from youth teams, etc. Basically, they are all average, everyday people looking for a good time. They are your mirror, your thermostat, your customer. They are there because they wish the team - and thus by extension, you - the very best. If you do a good job and/or you win, they will all be thrilled! A loyal fan base can be your biggest asset but also your worst nightmare.

First season was a disaster

At our last club, our first season was a disaster. There were seven fan clubs, and some of them were pretty tough. Not only did they misbehave during games (and the club incurred penalties for fireworks, violence, etc.), but they would also wait for the management at the gate on Monday mornings after a lost game. Not nice!

A stadium needs to be filled. If you buy a club that has left fans in the throes of depression, the stadium will not be full - and there is a huge goodwill job to be done. Not only do you want current fans to continue to come to the stadium, but you want to reignite the enthusiasm of all potential fans, i.e. those who have given up coming to games, and those out there who like the game but are not yet fans of the club.

In addition, you want sponsors, businesspeople, politicians, youth players, school kids, women, former players, local VIPs, the handicapped, the elderly - the community as a whole - to come. You need to win hearts and minds with a new project, a project that they can all relate to and actively support. A makeover. A renewed identity.

Visibility is still number one

Thanks to Covid-19, we can now add a new prospect to our fan base: the phantom fan. This could be a fan calling in to attend the game via Zoom (a successful and inspiring trial took place last month at Denmark's AGF Aarhus), a cardboard picture of a fan displayed on the seat, or an inflatable doll (mind you, not all dolls are welcome). Clubs will have to find earning models to monetise fans that are not in the stadium. LED boards will remain unavoidable as they have the ability to catch the eye of the TV viewer - visibility is still the number one prerequisite for sponsors.

Your retention plan includes three target groups:
  • The EXISTING loyal fans - you want them to keep coming to the game (and you want to expand this group.
  • FORMER fans - finding and reaching out to former fans who have lost interest (you need to find them and sell the project to them).
  • NEW fans - finding and converting new fans.
Each of the above groups requires a different marketing approach. You will need to install a CRM (customer relationship management) system, allowing you to diversify and follow up on every type of (potential) customer. Embrace social media networks as points of retention. Use a CRM system to keep visibility high and invite customers and their friends to come back to your club. You need to track their behaviour in order to improve and further personalise your offering going forward.

Let's take the first group as an example.

EXISTING FANS. The objectives are to retain them, to bring more of them in, and to get them to spend more. This requires active interaction using good old one-on-one techniques and events as well as modern technology (social media and digital campaigns). The aim is to cross-sell (encourage them to buy additional things, e.g. not only a regular game ticket but also a shirt), up-sell (promote a higher-end product, e.g. convert a regular seat into a season ticket), and next-sell (concentrate on the next order, e.g. for the coming game, invite the season ticket holder to take his wife or friends along and have a meal).

In addition, the existing fan base can be further leveraged by offering them non-football-related consumer goods and services. Let's coin the term "side-selling" here. Examples: telecom traffic (offer your fans calls and data traffic under your team's private label, with free traffic amongst your team's fan base), e-commerce club shop selling beer and wine at a discount (physical point of collection could be a regular supermarket, or a shop of one of the sponsors).

You have to start from scratch

Let's look at one more example: the third group.

NEW FANS. This group requires a completely different approach as you have to start from scratch. You need to find these people, then start a sales process based on the AIDA (awareness, interest, desire, action) model: First, create awareness of your club among prospective fans, then stimulate their interest before presenting them with a proposition that ignites their desire to participate, which will ultimately drive them to take action by coming to the games.

The tools to be used range from so-called earned media (such as PR-generated media publicity, great reviews from existing fans on trusted review sites, etc.) to online tools (your website, email marketing, blog articles, social media posts, all of which should be supported by organic SEO or search engine optimisation).

As you have no connection to these people and you have no idea where a prospective fan will start his/her search, you should start with an approach that is as broad as possible. Make your information as rich, inviting, and widely available as you can in order to cast the widest possible net. Other tools to think of include pay-per-click (PPC) search advertising on Google, which drives targeted traffic to your club's website, and simple lead generation via email lists. Advertising in the local traditional media will work for a football club too.

Customers can be lost in just a very few minutes

Some clubs use a low-cost, highly advanced media tool that aims to systematically bring new fans to the stadium, retain existing ones, and bring back fans that used to come. The data-driven tool relies on fan profiling and targeted communication - mainly via email and Facebook.

RETAIN SPONSORS. It can take years to secure a sponsor, yet only a few minutes to lose one.

Renewals/retention is everything in sponsorship. Therefore, you need to remain close to your sponsors all year round. What can you do this season to secure next season's sponsor renewal? This season's sponsors should provide the financial foundation for next season. In normal circumstances, if you are not renewing at least 80 per cent of your sponsors after any given season, something is wrong!

But after a takeover and/or a relegation, 80 per cent retention is likely an illusion. You truly need to build a relationship with each sponsor. You need to care! Do not only call in when you want something from them - a common mistake in football. Take them to coffee or lunch, offer them tickets or invitations to other games, drop them an email when their company is in the press, send a personal note or card to mark important dates, etc. Listen, show interest.

Sponsors are businesses

"You have only got one shot to do it right." Why do sponsors leave? Different sponsors leave for different reasons. Some of those reasons are beyond your control, others you can have an impact on. Uncontrollables are "goal-post changes" such as a pandemic or a change in the economy, management, marketing objectives and/or tactics, marketing budget, etc. However, you can control things like poor service, poor communications, poor response to problems, and poor results.

Cross-selling, up-selling and next-selling also apply to sponsors. But sponsors are businesses. Some may see sponsoring as an act of appreciation and sympathy. But the larger, professional sponsors want some bang for their buck, i.e. value for money, a return on investment.

The simple "visibility" request has evolved into more sophisticated packages like co-branding. Co-branding is a strategic marketing partnership between two separate companies or brands which come together to generate unique value for their respective consumers wherein the success of one brand brings success to its partner brand. In terms of football sponsorships, the sponsor seeks an alliance with the club whereby the two are portrayed as being in tandem.

Offers the kind of functionality that European football looks for

The football industry is in desperate need of alternative sources of income. How can we move away from the matchday earnings model to a monetisable, interactive, lifestyle-based everyday relationship with fans and sponsors? Please allow me to digress here to take you on an inspirational journey!

Interactive TV and fan engagement. In football we all acknowledge that new and additional income streams are required to guarantee the long-term viability of the elite football leagues. Many experts agree that the future of TV is interactive and social. Football clubs and elite players have to find ways to engage with their fans (and a wider audience). A few leagues have therefore launched esports tournaments as an additional offer to their fans. Many players went live, either on their personal social media channels (Facebook, Instagram, YouTube) or their club's channels.

And it proved to be a great success because of interactions with fans. Front-running post-graduate football business institutes even started offering full-fledged academic esports curricula (e.g. the International Football Business Institute in Brussels). What follows is the example of Twitch, which is huge in the USA and offers the kind of functionality that European football looks for. In the sports world, Twitch may be an option to complete fan engagement strategies.

Today they also want to participate
  • It is one of the most popular forms of online entertainment in the USA. Every day, Twitch logs more than 15 million visitors with some 750 million live hours watched. The time spent by viewers is significant too - with 544 minutes watched per viewer per month, Twitch is right behind Netflix and already surpasses both YouTube and Facebook.
  • Twitch is a form of social TV based on live streaming, strong communities and multiplayer entertainment. And, of course, entertainment has changed. People want to be entertained, but they also want to participate in their entertainment. Twitch is not only about gaming and esports, music and sport, for example, are growing verticals. Twitch is also about creating relevant live sport content - talk shows, live sports events, etc. And streamers converse live with their community.
  • Some sports organisations and athletes turned to Twitch during their leagues' timeouts. Some examples: Kun Agüero from Manchester City, Luka Doncic and Meyers Leonard from the NBA, Phoenix Suns and Dallas Mavericks (to play NBA2K), Minnesota Twins pitcher Trevor May, Formula 1 driver Leclerc, Antoine Griezmann…

  • Twitch has the digital rights to the NBA G-League, Formula 1 Mexico, and more, and tested broadcasting where fans can choose with which streamer he/she watches the game and interacts. It's more than watching - it is a fully interactive experience.
  • What's more, the content can be monetised, and sponsor integration is simple. Revenue-sharing business models exist as well. It is also a great opportunity for brands to reach a young and engaged audience with their own communication codes.
  • Still very flexible, Twitch seems to offer untapped potential for football clubs (and players) wishing to become streamers in order to grow and engage their fan base, and to monetise their content at a time when all need to generate new revenue streams.
Their needs have changed dramatically

When it comes to the above innovations, the average football manager is not savvy at all. On the contrary, he is ill at ease, ignorant even, and therefore not overly enthusiastic. Good managers realise that they should be receptive to new developments. Now that these tools have become cutting-edge evidence-based practices, it is time to wake up and catch up.

These are opportunities to lead and stand out. Go out and find the right youngsters to adopt these tools early on. These trends are unavoidable, and it is better to be ahead of the curve today than behind it tomorrow.

Conclusion: Within just one generation, fans and sponsors alike have changed dramatically, and so have their needs. Clubs must go to great lengths to come up with a menu of offerings that can meet the wide variety of needs that today's fans have, all the while taking into account not only the different types of fans, but the myriad sponsor types too.

Sponsors can tap into these fans

Individualisation is key. And individualisation requires continual behavioural tracking. In addition, we need to expand the definition of a fan - there's the fan in the stadium, and the one connected electronically to the stadium, there's the fan on match days, and the same fan on any other day, the fair-weather fans and the die-hards. Sponsors can tap into these fans with different messages using different channels.

New-school marketeers and content creators are required to mobilise and monetise the untapped fan potential out there using cutting-edge technology. They have to locate the prospective fans, attract their interest, and persuade them to join the football party on their (the fans') terms - on or off the pitch, on match day or any other day.

The upcoming lesson - the eighth of this ten-part series on the takeover process of a football club - will deal with optimising the chain of command.

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:45 pm

https://offthepitch.com/a/column-buying ... nd-respect

Column: Buying a professional football team? Ten lessons learned: #8 - The president needs to back off and respect the chain of command, otherwise only lame ducks will stay onboard
25 August 2020 10:48 PM
  • The bond between a football club's top management trio - the president, the CEO and the sporting director - needs to be extremely strong. Their relationship must be based on trust, and it needs to be crystal clear exactly who is responsible for what.
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the eighth.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

Today we elaborate on lesson #8: STRENGTHEN THE CHAIN OF COMMAND

At most football clubs, the management committee (or leadership team) consists of three parties: the president, CEO and sporting director (or football manager). Each will have his own areas of responsibility, but all strategic decisions and high-cost supplies and/or investments (e.g. player transfers, capital expenditures related to the stadium, leasing contracts, staff hires, IT systems, etc.) are to be approved by the group.

A president's focus is on the macro perspective (the big picture) of the club's performance and the CEO's focus is on the business aspects. The focus of the sporting director is, as the title suggests, on all sporting aspects of the club, including both the first team and the academy. In order for these three to be efficient, their tasks should be clearly defined. In general, the following roles and responsibilities can be assigned to each member of the leadership team:

PRESIDENT. The president is a strategist and a top decision-maker of a club, with a focus on the big picture - vision and strategy - and sets the tone and positions for the club's brand image and operations. Should he also be the owner, he should proactively seek funding if and when necessary.

Highest ethical standards
  • 1. He is the chairman of the board and presides over the management committee. Other optional responsibilities include: club correspondent for the federation, external affairs, head of business club, stadium and shirt sponsors, cooperation and/or M&A activity.
  • 2. He sets an operational philosophy that is performance-driven, maintains a high level of employee morale and motivation, is sensitive to and driven by fans' needs, and meets the highest ethical standards. The president must also ensure that all operations are conducted in full compliance with applicable laws and regulations.
CHIEF EXECUTIVE OFFICER (CEO). The CEO focusses on the execution, turning the vision and strategy of the president into results that ensure the day-to-day business operations of the club. The CEO delegates most of the tactical and operational aspects of the strategy's implementation to senior management team members.
  • 1. The CEO is a member of the management committee, heads up the business side of the club (both B2B and B2C) and the infrastructure, including stadium and academy. He is the "housefather" when it comes to issues such as day-to-day integrity, adherence to the club's code of conduct, etc.

  • 2. He works with the board, keeping it informed to the extent that it can fulfil its oversight role.
  • 3. In addition to overseeing financial performance, the CEO also develops, implements and monitors the business strategies, plans, organisational structure, policies and controls, as approved by the board and president.
  • 4. He supervises staff and develops key senior managers.
  • 5. And finally, the CEO will seek out business opportunities for the club, drive top-line growth, accelerate fan-centric strategies, and improve efficiency.
He is the link

SPORTING DIRECTOR. The sporting director focusses on the execution, turning the vision and strategy of the president into results that ensure the day-to-day sporting operations of the club.
  • 1. The sporting director manages the first team and oversees the youth academy.
  • 2. He develops long-term plans, policies, and values for the team and its integration with the academy. He also develops the strategy and objectives for youth development, and he is responsible for its rollout.
  • 3. He manages and executes transfers and contracts and is responsible for players and players' on-boarding. He is the link between the leadership team and the head coach.
  • 4. The sporting director also develops and rolls out scouting policies and oversees their execution.
At the beginning of a season, right after a takeover and after a relegation, a club is in shock, and people are disoriented. A complete reset - a new order - is required, yet there is no time.
MANDATE. A mandate is the sum of expectations placed on the CEO and sporting director by stakeholders in terms of what will be accomplished, by when, and to what standards. It is the licence given by the board and president to the CEO and sporting director to deliver on these expectations.

Lack of time

CASE STUDY: In one of our transactions, the president was also the 100 per cent shareholder. In addition, being a former player and a club manager, he knew the sporting needs of an elite team. It goes without saying then that this president was entitled to have things executed his way. Whereas the organigram - and no doubt the leadership's initial intentions - may indicate that all big decisions would be taken as a group by the management committee (i.e. the president, CEO and sporting director), the pressure, lack of time, and individual tempers/emotions will often compromise the integrity of decision-making processes.

At the beginning of a season, right after a takeover and after a relegation, a club is in shock, and people are disoriented. A complete reset - a new order - is required, yet there is no time. In our case, the first games started; we lost. The call for strong leadership could be heard before the season had even started, and it only got louder over time. All eyes were on the president...

Frustration and confusion

PITFALLS:

Mr President, stop running the club and my staff. The danger is that the president takes the place of and/or overrules his CEO and/or sporting director. This is detrimental, not just to himself, but even more so to the efficiency and credibility of the other two. Should this happen too often, the latter two become "lame ducks" - they won't feel trusted and empowered. Second-level managers will start reporting directly to the president. This causes frustration and confusion to all parties involved. Indirectly, the entire organisation suffers as the chain of command is broken. Proper delegation includes the assignment of responsibility, granting of authority, and the creation of accountability. Some argue (I don't always agree) that the president's most important job is "to employ a great CEO and sporting director - then to get out of their way." Should the president be a more capable candidate for the job than, for example, the sporting director, and he has the time and energy, then he should save the associated pay cheque and add the job to his own scope of responsibilities.

No feedback loops. In order to continually improve, people will have to be given - and ask for - feedback. Management meetings should take place weekly and should always include feedback loops to recheck the alignment with the vision and objectives, reset consensus, and potentially repair that which is broken.

Compliance issues

Shifting the goal posts. It is surprising how often presidents will delegate authority to CEOs and then intrude upon that authority at random as and when they feel the need. Of course, a president's intervention is justified if there are serious compliance issues or some other crisis. However, few things are more frustrating to a CEO and a sporting director than a president constantly overruling or bypassing his authority. The possibility that the president will shift the goal posts in the middle of the game creates great uncertainty for the CEO and/or the sporting director.

The two most common reasons for a CEO or a sporting director to quit:
  • Disagreement on the general direction and results of the club (and/or the president's performance or decision-making).
  • Intruding upon the role of the CEO/sporting director. It is essential to a senior officer that he receives an undivided mandate from the board and the president. The breach of such a mandate will be considered a lack of trust and it will prevent him from delivering upon the expectations. Sooner or later this will lead to friction and ultimately to separation.
CONCLUSION: A well-functioning management team is based on trust, structure, accountability, and transparency. The leadership team should therefore delegate, set goals and communicate wisely to the rest of the organisation, but also within the team! Despite mounting pressure and a lack of time, the team should continue to have frequent feedback meetings (there are no higher priorities!) and prepare cohesive actions and group decisions. Subsequently, major decisions, plans, policies, etc., should be communicated by this team as a unified group. For all business-related issues, the responsibility for internal follow-up and ultimate accountability lies with the CEO, whereas for sports-related topics, the buck stops with the sporting director.

The upcoming lesson learned - the ninth of this ten-part series on the takeover process of a football club - will deal with the timely anticipation of missing targets.

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 5:53 pm

https://offthepitch.com/a/buying-profes ... -be-deeply

Column: Buying a Professional Football Team? 10 Lessons Learned: #9 – there is a seasonal pattern that needs to be deeply understood if solvency problems are to be avoided
15 September 2020 1:39 PM
  • Every industry has its own rhythm – the football industry is no different. But in football - if you don’t get the beat from day one, serious cash-flow problems may emerge. A rescue is always possible though – but instant access to capital is required.
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the ninth.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

This post elaborates on LESSON #9: TIMELY ANTICIPATION OF MISSED TARGETS

There are two crucial financial phenomena inherent to football. Firstly, the income of a club shows a seasonal pattern. Secondly, when the team does not perform, in the second half of the season, income will plunge.

This lesson complements lesson 5 (Ensure Appropriate Funding and Structuring).

Cash game. Managing a football team is a (sometimes nerve-racking) cash balancing act! Both the income and cost patterns of a football club have a seasonal character.

INCOME. Income is high at the beginning of the season, because:
  • Transfer fees have been received
  • TV rights have not been spent yet
  • Outstanding receivables of last season have been collected during the summer
  • Pre-season events, tournaments and/or games in the region have generated cash
  • Sponsors have paid
  • Fans buy merchandise, season tickets, come to the game and catch up afterwards
  • The youth academy has collected contributions etc.
Daunting financial state of numerous clubs

EXPENSES. 70-80 per cent of operating costs are related to the players (applies to plenty of 1st leagues and nearly all 2nd leagues in the EU), including agents, social security, insurance contributions, sign on fees, salaries and perks. Costs can be spread over the season in order to avoid cash-flow problems, this requires careful scrutiny though. Pay-outs for player-related expenses need to be planned meticulously, and must be matched with high-cash moments. It is therefore strongly recommended to develop and deeply understand the team’s budget prior to the recruitment (and the associated terms and conditions) of new players so that payables to players can be spread throughout the season in accordance with incoming money streams.

*The 2020 KPMG Elite Football Report shows an increasing number of clubs in Western Europe with wage/revenue ratios exceeding 100 per cent, which is obviously the main contributor for the daunting financial state of numerous professional clubs around the globe. KPMG considers 70 per cent wage/revenue ratio as the upper limit.

Russian roulette. All or nothing. Clubs go bankrupt because they spend more than they earn. The tipping point is when debtors demand to be paid the money they are owed (whether it is the taxman, football federation or creditors etc) and the club simply does not have the money to pay up (timely). In football, many clubs budget for a certain level of income, which is not always reached (based on assumptions that stadiums will be full, they will remain in the same league or will perform to a certain level throughout the season etc).

When this happens it is difficult for clubs to reduce their spending quickly as a large amount of money is spent on players' wages, which have been contractually agreed upon and cannot be changed. Budgeting requires detailed planning with multi-scenario assessments. Due to euphoria and rose-tinted spectacles, typically, a worst-case scenario is ignored prior to a takeover.

During the season the team’s success on the pitch will drive financials... and short-termism prevails.

Work as a swamp

BEST CASE SCENARIO. When the team is doing well, hopes are high. Positive vibes are omnipresent. The fans, local politicians and VIPs love the team and attend the games in big numbers, local morale and self-confidence are up, social media traffic reaches all-time highs, the press speaks highly of you and your team, your players are sought after by other teams and the press, the sponsors are happy. Investors express an interest in participating in your project. Should you run out of cash, lenders can be found relatively easily, etc.

WORST CASE SCENARIO. A dramatic season will gradually and cumulatively work as a swamp draining cash, energy, team spirit, cheers and beers, supporters’ behaviour, injuries, sponsors income, support from town hall, etc. The fan-owned communication platform gradually becomes a negative space. You run out of cash during the second half of the season. The likelihood of finding fresh money diminishes by the week. Any chances to compensate shortcomings at the end of the season through successful transfers will be slashed too.

WHEN IN TROUBLE, NEVER GIVE UP. For an average company, in a "normal" industry, once you get into a negative insolvency spiral, lacking in future prospects, you come to a point where chances to recover are minimal. Football is a sexy trade, especially in Western Europe. It is also a relatively cheap and effective marketing outlet with global TV exposure. At the start of a new season you can start from scratch. There are lots of interested parties trying to buy a club. Including those from China, Russia, America as well as private equity and venture capital firms, etc. For league one clubs, especially in the top-seven football countries in Western Europe, even with a daunting post-corona economic outlook, you would be surprised about the level of interest (and associated valuations) out there.

NEVER GIVE UP. ESPECIALLY IN FOOTBALL, "IT AIN'T OVER UNTIL IT'S OVER". But again, you have to anticipate and proactively reach out to, in a timely manner, potential buyers, brokers or the football-related financial community.

Dream Chinese shareholder

OUR EXPERIENCE: WORST CASE SCENARIO "PLUS". Our latest club takeover did not go well, we missed all targets. Too many and overly expensive players were recruited at the beginning of the season, an imbalance between in and outgoing transfers. In addition, the team lost the first games. The above described "worst case" unfolded. Despite the fact that many of the 10 managerial pitfalls elaborated on in this series on Offthepitch.com were indeed encountered, over the last seven weeks and despite the disappointing on-pitch performance, a new dream Chinese shareholder was found just in time.

Moreover, they were prepared to pay a premium price. They signed an LOI right after the New Year. An announcement went out to the press proudly unveiling that the club's future was secured. A week later, corona hit China... All activity in China stopped abruptly. The country "disappeared" in a paralysing, complete and lengthy lockdown. The final signature of the president of the Chinese Federation was required, but, being quarantined, could not be obtained and the money could not be released in time. But the deadline was too close. Our club could not be saved! FORCE MAJEURE? or MURPHY’S LAW?

Conclusion: TIMING IS EVERYTHING. As a result, prudent financial planning is of paramount importance. With trouble ahead, it allows for timely anticipation and targeted action. Should you subcontract your financial administration to an outside accountancy firm, it is unlikely to be monitoring your cash flow closely. He/she works on closing the books on a monthly basis for financial reporting and timely VAT filing. He/she will not be on the ball enough to proactively sound the alarm. Therefore, for clubs tight on money and with reduced resilience, cash-flow management needs to be done in-house.

The upcoming Lesson Learned #10 of the takeover process of a football club will deal with the following topic: USE THE MEDIA TO YOUR ADVANTAGE.

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 6:01 pm

https://offthepitch.com/a/buying-profes ... thless-you

Buying a professional football team? Ten lessons learned: #10 - The media are omnipresent and ruthless; you need a thorough media policy
5 October 2020 3:10 PM
  • Use the media to your advantage. Be proactive - you need them to work for you. Master the process, otherwise you will be at the mercy of their every whim.
  • Alexander Janssen was involved on the ownership side of two clubs, one in Belgium and the other in Spain, where he learned that the football industry is not only extremely competitive but very, very different to the environment that he used to work in.
  • As a successful consultant with deep knowledge of turnarounds, he inexplicably experienced a sudden disregard of the discipline and long-term mindset that normally characterised his every move.
  • Janssen has written ten columns about the insights he gained from being involved with those two clubs. This is the tenth.
ALEXANDER JANSSEN, SPORTS INVESTOR contact@offthepitch.com

Today's lesson pertains to the media. Lesson #10: USE THE MEDIA TO YOUR ADVANTAGE

Everyone likes football. Of all the unimportant things in this world, football is the most important. And the media are keen to know everything about their local team. All football news sells - good, bad, and fake.

In modern society, sports and the media have an inseparable relationship. Each exerts unrelenting influence over the other. The media generate profit through the broadcasting of sports, while sports generate profit through the selling of broadcasting rights to the media. It is clear that sports (football being the frontrunner) and the media are developing in, and expanding through, this symbiotic relationship.

Despite the many benefits, the media remain a double-edged sword when it comes to sports. With social media, for example, bad news and fake content can be spread more quickly than ever before. Players and other sport leaders have become "influencers" - but may have no idea how to use social media appropriately. Fans have their own communication platforms and their negative comments can be detrimental to the performance, image and transfer value of the individual players and/or the team as a whole.

"Madvocates"

As our primary source of news, the media influence virtually every aspect of our lives, so much so that they have the power to influence our thoughts. This influence is sometimes positive and sometimes negative.

As an introduction, here are some "nice to knows" to help you understand how the news media work:
  • Bad news gets more attention than good news. It also spreads faster than good news. Meaning more people are likely to read a story if the headline implies something bad rather than something wonderful.
  • A third of people are so-called "madvocates" - people who actively spread bad news by word of mouth and social media
  • Negative news and stories involving prominent personalities accelerate diffusion processes - in other words, they spread fast. Hence, disastrous football news - which scores high on both emotional investment and prominent personalties for large portions of society - is guaranteed peak spreadability.
  • "Do you want the good news or the bad news first?" When asked this question, research shows that 78 per cent of people want the bad news first.
  • A Harvard study found that 87 per cent of the coverage of the fitness for office of both candidates in the 2016 US presidential election was negative.
  • The American academic Kalev Leetaru is active in the field of sentiment mining. He tracks the number of positive versus negative words in the media using tracking software - and found "a steady, near linear march towards negativity" since 1980.
Now you will understand why "bad news is good news" is the media's motto. Negative stories attract the attention of the reader. If your team is not doing well, the media attention will grow for the above-mentioned reasons... and it won't contribute to the club's improvement.

KISS principle

The media are omnipresent and ruthless. Daily pressure can take its toll - to the detriment of objective decision-making. It cannot be stressed enough: agree on a media policy prior to the takeover.

Be the master of your news. Here are some recommendations:
  • Offer news when you have something to say. Avoid falling into the trap of giving news when the media ask for it. Sooner or later this will do you harm. Don't just answer their questions, respond with your key message.
  • Quality trumps quantity. When you talk to the media, get your message out, and apply the KISS principle: keep it short and simple.
  • Add value, not clutter. Come with useful content that gets people talking, laughing or otherwise having an emotional reaction.
  • Image is 90 per cent of the message. How you present the news is even more important than what the news entails. Therefore, should you not be great at it, avoid live press conferences. There are plenty other online news options today.
  • Rather invite the press to a real event, not a press event. In other words, instead of feeding journalists a speech about an upcoming event,
    • invite them to it - let them enjoy the ride. They will appreciate the authenticity. Look for new-school relationships with the press.
    If you call a press conference, make sure the conference is warranted. A simple press release may do the trick.
  • Timing is everything! If there are several pieces to a story, make sure they are all in place before pitching it. If anything is in doubt, or you do not feel right about something, follow your instinct - resist the urge to pitch the story until everything falls into place. Please note that your credibility and reputation are on the line. We had several situations where - under time pressure - we prematurely announced ground-breaking news, which then subsequently did not materialise. The media became very cynical thereafter, regardless of whether or not the outcome was beyond our control, and the critical fanbase called our president a fantasist.
  • Honesty prevails. Getting caught by a reporter in a lie may be lethal.
  • Don't react to rumours. Your answer: "It would be inappropriate to respond to rumours. We will deal with it if and when it arises."
Conclusion

When things start to go astray, you pay a heavy price. You lose tonnes of money and the journalists and critical fans will line up to decimate you in the various media. You need a thick skin - because they need a scapegoat. Expect to be declared persona non grata in the city and beyond. It will also haunt you in the future; what is on the internet stays on the internet.

Use the media to your advantage. Be proactive - you need them to work for you. Master the process, otherwise you will be at the mercy of their every whim. Within the leadership team, agree on a media policy and assign a spokesman shortly after the takeover.

So, do you still want to buy an elite football team?

If you can't stand the heat, you'd better stay out of this kitchen.

Thank you everyone for reading my stories and providing me with feedback in numerous messages and calls. Hopefully, it has been an insightful ride for all of us. Whereas you may have learned something, I got rid of a few post-traumatic demons. I also made some new friends along the way. Failure is a temporary detour, not a dead end! It is a set-up for something better.

Feel free to get in touch - alexander@alexanderjanssen.com

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 9:02 pm

The Financial Times with a bit more info on the Serie A/Private Equity deal that I posted from OffthePitch.com this afternoon

Italian football at war over €1.6bn private equity deal
JAMES FONTANELLA-KHAN APRIL 15, 2021

A group of elite Italian football clubs has demanded the resignation of the president of the country’s top league over his handling of a radical €1.6bn deal to bring outside investors into one of the world’s best-known competitions.

Paolo Dal Pino has been instrumental in directing a proposed transaction to sell 10 per cent of a new company that will manage Serie A’s broadcasting and commercial rights to a consortium including private equity groups CVC Capital Partners and Advent International and Italian investment group Fondo FSI.

The call for his resignation signals the level of opposition to the deal among elite Italian teams, which are concerned about losing control of the contest. Several club executives said there was no longer enough support for it to pass.

According to correspondence seen by the Financial Times, seven clubs including Juventus, Inter Milan, Napoli, Lazio, Atalanta, Fiorentina and Hellas Verona wrote to the Serie A president this week demanding his resignation.

The letter from the clubs states that the group had made “previous objections to your conduct as president of the Lega Serie A” and that Dal Pino’s actions had “led to the need to represent to you our irrevocable no confidence with regards to your role, conduct and management as president of the League”.

Dal Pino, who is also chief executive of telecoms group Telit Communications, has led the negotiations with the investment consortium over selling a stake in a new company that would manage Serie A’s broadcasting rights, international trademark and commercial development.

The deal would be the first of its kind in European football, offering the opportunity to buy into one of the top competitions in the world’s favourite sport. Germany’s Bundesliga and Spain’s La Liga have all begun exploring similar auctions.

However CVC and Advent’s latest offer lapsed in early February and the private equity groups have not been actively working on the deal since then, one person close to the process said.

People with knowledge of their views said private equity groups had hoped to secure agreement on the stake sale after the Serie A clubs had approved a hotly debated €2.5bn media rights sale to sports streaming service DAZN last month.

An executive at one of Serie A’s top clubs said that Dal Pino had mismanaged the stake sale, saying the decision appeared to be driven primarily by the financial problems caused by the pandemic rather than the long-term interests of the sport.

Serie A, Juventus and Inter Milan declined to comment. CVC and Advent did not immediately comment.

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 11:30 pm

In a follow up to it's article this afternoon asking if the Saudi's would bid again for Newcastle, the Telegraph appears to answer it's own question

Saudis will bid again for Newcastle despite takeover setback
JASON BURT APRIL 15, 2021

The £305million Saudi Arabia-backed bid to buy Newcastle United will be re-submitted if the club wins its arbitration case against the Premier League.

The revelation that Saudi Crown Prince Mohammed bin Salman personally lobbied the Prime Minister is not believed to have forced the would-be buyers to reconsider. The Crown Prince urged Boris Johnson to “correct and reconsider” the “wrong” conclusion that he would be in charge of the club.

This led to the government denying it was involved “at any point” over the failed bid and the attempts to revive it. However officials acknowledged that meetings had taken place between the Foreign Office and the Premier League and Johnson asked a senior No10 aide, Lord Eddie Lister — who is a Middle East expert — to take up the Crown Prince’s complaint.

Despite the controversy, the buyers have not altered their stance and believe the issue remains a legal one with Newcastle having taken the Premier League to arbitration. The offer was withdrawn last July after the Saudis grew frustrated as the Premier League continued to deliberate whether the bid passed its owners and directors test.

Throughout the past year, the bidders have continued to remain interested. The situation may have become more complicated had Newcastle been relegated, but that possibility now looks less likely, while there might be some re-negotiation of the final price due to the delay and the continued financial ramifications of the coronavirus pandemic.

Newcastle takeover Q&A: Everything you need to know about £305m deal
The Premier League maintained that it had not made a final decision on the takeover, despite 17 weeks of deliberation, although the issue has now gone to private arbitration which is permitted through the organisation’s rule book.

The case has been brought by Newcastle, rather than the consortium which also includes Amanda Staveley’s PCP Capital Partners and the Reuben Brothers who, with PIF, had finally agreed a deal to buy the club from Sports Direct owner Mike Ashley last April as revealed by Telegraph Sport at the time. Ashley remains committed to selling to the consortium and is not believed to have held talks with any other bidders.

However even the arbitration process is taking far longer than expected. It had been hoped it would be finalised in February but now into the middle of April it is understood the three-man panel has still not sat although none of the parties will confirm what is happening because it is deemed a confidential process.

The delay is partly because Newcastle’s legal team, led by QC Nick de Marco, had unsuccessfully gone to the High Court to ask for the removal of Michael Beloff QC as chairman because he could be “biased” as he had previously advised the Premier League in relation to a potential change to its owners and directors test.

The Premier League was placed under severe pressure because of the alleged Saudi involvement in the piracy of sports broadcasting — which they deny but which was detailed in a World Trade Organisation report — and the state’s human rights record.

The row over the takeover centred on whether PIF is independent — as it claims — or an arm of the Saudi state. The Crown Prince, who is the de facto head of the country, is chairman but argues that it is a separate entity although his lobbying of the UK government has raised further questions. However he can argue that his actions are similar to Johnson intervening on behalf of a UK buyer wanting to acquire an overseas asset.

The Premier League wrote to Newcastle after PIF pulled out, saying it had provisionally determined the investment vehicle was under the control of the Saudi state and could not be separated from the Crown Prince.

They also argued that they had repeatedly asked the buyers to provide the necessary information for them to proceed. This is disputed — the buyers claim they answered every question asked of them — while Ashley will want to determine at the very least why it all took so long.

The buyers have continued to follow the situation closely and accept it is now a legal issue that firstly has to be resolved through the Premier League’s arbitration process. If it finds in favour of the Premier League it remains to be seen whether further court action will be pursued.

Should the Premier League lose the case then it would be a severe blow as to how it has conducted its business and, in particular, for chief executive Richard Masters. If Newcastle wins then Ashley, who is determined to complete the deal and has already been paid a deposit, will expect the takeover to go through.

Neither Newcastle nor the Premier League were commenting on the issue but Kate Allen, Director of Amnesty International UK, said: “The bid to buy Newcastle United was a blatant example of Saudi sports-washing, so it’s worrying that the prime minister would accede in any way to pressure from the Crown Prince over the deal.

“This whole tangled affair only underlines how there needs to be a proper overhaul of the Premier League’s Owners’ and Directors’ test to provide proper human rights scrutiny of who is trying to buy into the glamour and prestige of English football.”

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Re: Football's Magic Money Tree

Post by Chester Perry » Thu Apr 15, 2021 11:54 pm

Chester Perry wrote:
Thu Apr 15, 2021 1:57 pm
The Football Today Podcast has been a firm favourite of mine since it started about 18 months ago with it's twice weekly detailed output on single subject matter - it is about to change dramatically to once a fortnight. today's podcast is the last of the original format and looks at the prospect of Gianni Infantino's touted African Super League and the issue of cross border leagues in general

https://www.footballtodaypodcast.com/po ... ompetition
Some of that cross border league talk in today's Football Today Podcast focused on the recent speculation of an MLS/Liga MX merger, this article in the Athletic offers even more info on the subject, it certainly appears that the Mexicans are keen on the idea

https://theathletic.com/2514664/2021/04 ... rtnership/

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Re: Football's Magic Money Tree

Post by Chester Perry » Fri Apr 16, 2021 12:46 am

My final offerings from OffthePitch.com focus on the proposed bank from FIFA through which all international transfers will have to be paid - the levy is ridiculous - why not have a transaction fee - or stop the ridiculous fees paid to FIFA ExCo members

https://offthepitch.com/a/bank-fifa-ope ... nsfer-fees

Bank of FIFA to open in 2022, with algorithms being considered to fix transfer fees
23 March 2021 8:40 PM
  • FIFA considering algorithms to determine player values in shake up of transfer market.
  • Football clearing house begin handling all training rewards from next year, with its work facilitated by the creation of digital player passports.
  • New 1 per cent levy on transfer fees could generate more than $50 million per year year for world football’s governing body, which will be redistributed by the world football’s governing body which it says it will redistribute among clubs.
  • Agent reforms to be in place for Summer 2022 transfer window.
JAMES CORBETT corbett@offthepitch.com

FIFA has confirmed that its football ‘clearing house’ will begin handling transfer related payments from 2022, with algorithms under active consideration as a means of determining player’s market value.

It has also said that reforms to the way agents can operate and be renumerated will be in place by July 2022.

Speaking at FIFA’s annual football law review, Ornella Desirée Bellia, FIFA’s Head of Professional Football, laid out an extensive overview of FIFA’s ongoing review into the football transfer system, which will have seismic implications in the way transfers are handled and fees dispersed.

“As soon as the clearing house starts its operation, all training rewards payment will be made through it,” she said.

“This is a huge a huge development for the football industry and community.”

Electronic player passport

Long term FIFA plans to handle all transfer payments, but for now will use the clearing house to ensure transfer fees are distributed accurately to intermediaries and clubs who were involved in a player’s development or where sell on fees have been agreed with previous clubs.

She suggested there may be a “transition period” but said the system should be in place by next year.

To facilitate the new system all professional players will be allocated digital passports, which details their career moves and training paths.

"Once we have the final electronic player passport, then we can see the distribution of training rewards through the clearing house,” she said.

“The new club pays the clearing house and the clearing house pays to all the training clubs.

“What is very important is to stress is that the clearing house is going to make a compliance assessment of all the clubs that are involved in these payments.

One per cent levy

“The clearing house will make sure that clubs also comply with international and national law concerning money laundering, anti bribery, corruption and so on. And I think this is a very important step also in general for the governance of football and transparency and so on.”

Ms Bellia added that the system for apportioning ‘training costs’ from a players development were being reappraised, having not been revised since 2001.

She said there will be a new 1 per cent levy added on top of all transfer fees, some of which will be redistributed by the world football’s governing body to clubs investing in youth development.

In 2020 there was a global total of $5.36 billion in global transfer fees across 17,077 player transfers, down from a pre-pandemic peak of $7.35 billion.

Further reviews

Ms Bellia said that FIFA’s transfer task force had been delayed by the Covid pandemic, but added that its work had benefited from the longer duration as it had enabled them to expand their work. She said that one of the four main topics were still under consideration were the transfer window, squad size limits, minors and financial regulations.

“The transfer window closing after the competition starts may cause squad instability and can cause integrity issues, and so on,” she said.

FIFA was also still looking at the issue of squad sizes and said one of its “objectives” was to avoid what she termed “hoarding”.

Speaking about the issue of squad sizes she said:

“Clubs need to avoid the hoarding of players and make sure that clubs acquire new players not just to have a mere financial profit, but because they want to use them,” she said.

She also said that the Task Force Transfer System was looking at more ways to safeguard minors and work better for the interests of players.

Why not create an algorithm

Finally, she said they were looking at ways of regulating football’s financial flows, in order to promote financial stability, club long-term planning, and ultimately a more competitive system. Speaking about player transfer fees she presented potential measures that could be used to curb the inflation and added “Why not create an algorithm to determine player market value,” she said, but did not offer further detail. She stressed that any new regulations must be agreed by all football stakeholders.

The FIFA Task Force, which is made up of representatives of the European Club Association (ECA), clubs not represented by the ECA, the World Leagues Forum, FIFPRo, plus representatives of national associations and confederations, is to report its findings to FIFA’s Football Stakeholders Committee. It then adopts recommendations for the FIFA Council.

Ms Bellia said that she anticipated the majority of reforms to be in place in time for the summer 2022 transfer window.

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Re: Football's Magic Money Tree

Post by Chester Perry » Fri Apr 16, 2021 12:53 am

https://offthepitch.com/a/interview-fif ... nsfer-bank

Interview with FIFA’s chief legal officer: This is how we will operate the new transfer bank
9 April 2021 4:22 PM
  • FIFA's chief legal and compliance officer, Emilio Garcia Silvero, explains that FIFA will fund the new transfer bank, which will be located in the Netherlands, and run operations with a dedicated team.
  • Garcia Silvero expects the clearing house to become operational this year.
  • “The Training Compensation 2.0 system will take a global approach, and ensure a more equitable distribution of funds to clubs that produce professionals,” he says.
  • The legal chief recognize that in the beginning the new system will create some inconvenience for clubs adapted to the old system “…but for sure it will increase transparency and good governance all around the world,” he says.
SAMINDRA KUNTI contact@offthepitch.com

FIFA will fund the clearing house, which will handle all training rewards, agents fees and, in future, transfer fees, with ‘a global solidarity mechanism’ set as well to replace the current system of training compensation and solidarity, the world federation’s legal director Emilio Garcia Silvero said.

Speaking in an exclusive interview with Off The Pitch, Garcia Silvero confirmed that the global governing body will finance the clearing house, which will serve as a bank in FIFA’s reforms of the football transfer system. Those new regulations will alter the way transfers are handled and fees dispersed.

“FIFA will be funding the so called clearing house.” says Garcia Silvero. “We are going to pay for everything because this is part of our social responsibility. We are not going to deduct 0,03 per cent of each transfer.”

“So, the cost of running the foundation, the cost of the employees, the banking fees, and also the company operating the whole clearing house. We have never considered the possibility of charging a fee for using the clearing house. The clearing house will bring transparency, compliance, accountability and good governance to the transfer system so no way we are going to transmit this amount of money to the clubs.”

Wants to handle all transfers

Based in the Netherlands, the clearing house will be a full FIFA company structured as a foundation under Dutch law, subject to the supervision of the local central bank and EU laws.

Garcia Silvero expects the clearing house to still become operational this year subject to “some administrative clauses and compliance aspects”.
Payment and receipt of training compensation and solidarity mechanism will be made through the FIFA clearing house, which ensures that training clubs will rightfully receive what they are owed, and streamlines the processes for clubs that are required to pay training rewards
In the long run, FIFA wants to handle all transfer fees, a market of $5.36 billion in 2020, via the clearing house, but at first the global governing body will bring training rewards, both the training compensation and solidarity mechanism in articles 20 and 21 of FIFA Regulations on the Status and Transfer of Players (RSTP), as well as the agents fees under the umbrella of the clearing house.

The phased process will incorporate training rewards first, with intermediary payments to follow “in 1,2,3 years”.

FIFA’s RSTP require clubs that acquire professionals in certain circumstances to pay training rewards, in the form of solidarity mechanism or training compensation, to the training clubs that produced those professionals.

The arrival of the clearing house, coinciding with the introduction of a new 1 per cent levy on transfer compensation, will ensure that such payment is properly made to training clubs.

A more equitable distribution of funds

“The idea is that all components of a player transfer involving compensation will be clearly defined, and that training clubs will receive the amounts owed to them under FIFA regulations,” explains Garcia Silvero.

“The one per cent levy (on top of the five per cent solidarity mechanism and the agreed transfer compensation) will be collected by the FIFA clearing house and used to fund part of the new Training Compensation 2.0 system agreed by the football stakeholders. In this way, the original objective of solidarity in the football transfer system is being re-recognised and respected.”

“The Training Compensation 2.0 system will take a global approach, and ensure a more equitable distribution of funds to clubs that produce professionals. Payment and receipt of training compensation and solidarity mechanism will be made through the FIFA clearing house, which ensures that training clubs will rightfully receive what they are owed, and streamlines the processes for clubs that are required to pay training rewards.”

“FIFA and all stakeholders agreed to start the clearing house with the solidarity and training compensation.

"Clubs are losing a lot of money every day because of the legal framework and due to the fact that a lot of clubs around the world don't pay training compensation and solidarity mechanism to the clubs or other clubs can’t trace the life of the respective players, so the thing we need to solve is the amount of money clubs are losing all around the world. And there is a consensus on this point.”

Need to guarantee that money flows

To facilitate the new system and ensure clubs respect the rules, FIFA will task the clearing house to execute and run all the compliance exercises through a team of dedicated professionals.

“The compliance screening will be highly, highly relevant in the context of the clearing house,” says Garcia Silvero.

“We need to guarantee that the money flows from the official bank account of the club to the official bank account of club; that the bank accounts are located in the same country as the clubs; and some other compliance matters. It will be challenging but we will be subject to EU banking legislation and that’s obviously important and highly relevant for us. In the beginning it will create some inconvenience for clubs adapted to the old system but for sure it will increase transparency and good governance all around the world.

"A dedicated team of compliance experts will sit at the FIFA clearing house to deal with these transactions all around the world.”

The clearing house is but a part of global ruling body’s long planned overhaul of the transfer system that has met resistance in some quarters.

Yesterday FIFA’s transfer task force met again informally as work picks up steam after delays due to the Covid-19 pandemic in a year that could well prove to be pivotal for Zurich’s reforms.

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Re: Football's Magic Money Tree

Post by Chester Perry » Fri Apr 16, 2021 1:04 am

Sorry I just cannot stop finding articles of interest at OffthePitch - this one on the way rights deals are going to morph

Interview: Leagues and federations try to cut out the middlemen – the broadcasters – and Sportradar want to help
13 April 2021 8:15 PM
  • Sports data behemoth investing heavily in innovative video production to “help rights holders understand the fans, fans’ behaviour and also how to monetise the fans in a smart way.”
  • Innovations include adapting pitch perimeter advertising to target individual markets.
  • Football will continue with a hybrid model with broadcasters combining clubs and leagues selling to fans until mid-decade, but there has been a “real rethinking about alternative monetisation models.”
  • Sportradar’s value has quadrupled in just three years to $10-12 billion, with IPO in the offing.
JAMES CORBETT corbett@offthepitch.com

Sportradar is a peculiar company. Omnipresent in the sports industry, its array of services – which extend into data provision, OTT, sports integrity and even technological solutions into online abuse – seems at times so bewilderingly extensive, that it’s hard to pinpoint to its raison d’etre.

Established in 2001, Sportradar currently employs around 2,000 people in more than 30 locations and has in excess of 1,000 partners in more than 80 countries. It provides data and operational support on some 400,000 live sporting events each year.

Data and operations, says its chief product officer of its sport entertainment division, Rainer Geier, remain its core business, but it is rapidly expanding into new areas. Anything that falls outside the core business, Geier has oversight over technological developments.

As the sports industry moves away from traditional broadcast models, towards a digitally led future or what has been termed “the third age of sport”, such a role is hugely important and at the forefront of change across the sports industry.

Rethinking the broadcast model

In a wide ranging interview last month, Geier reflected on 22 years in the rights industry as a time of unprecedented growth. For most that time, he says, “It was always believed that the top tier rights holders can generate more money within the next rights cycle. And the reality was, of course, that over years the rights and the earnings increased.”

While there were lots of examples of broadcasters preparing different ways and “hybrid models” of cashing in on broadcast rights “there wasn't really need to think about alternative monetisation models in a sustainable way because they had the broadcast earnings.”

Yet the past two years have seen unprecedented change to this way of thinking. The collapse of French football’s broadcast deal, the struggles of Italian football to get its deal over the line, the stagnation of Bundesliga rights has seen a “real rethinking about alternative monetisation models.”

Geier points to UEFA and Bundesliga as previously leading the way in this area. They had created OTT platforms to enable them to go “direct to consumer in certain international markets” if they didn’t reach their desired revenue target, but he says that the rethinking now goes much further than that.

“And that's exactly also where we want to fit in with all of the products and services we are preparing specifically for top tier rights holders.”

Video expansion

While Sportradar’s principal business remains, what he terms, “data collection and monetisation of data” the company is rapidly expanding in the direction of video and OTT platforms.

Aren’t they just another player in an already crowded market?

He gives me the example of video production, an area where, he says, SportRadar are “really investigating and also investing a lot of money.”

This is about more than putting cameras in stadiums, it is “ the full end to end technology platform not only to provide the service, but really also help the rights holders to understand the fans, the fans behaviour and also how to monetise the fans in a smart way.”

“Our offerings are very customised. So if somebody wants to set up some kind of subscription model, it's possible. If other ones want to go with advertising models, that's possible. But then also going the next step in order to monetise the fans in the direction of merchandising, ticketing and, of course, betting - in case it's allowed and also the rightsholder wants to go in this direction.”

Role for broadcasters

The logical consequence of this is for leagues and federations to cut out the middlemen – namely traditional broadcasters – and seek a greater cut of revenues themselves by selling matches direct to customers.

“I think until 2026, it still will be a hybrid model where of course there's still a place for the traditional broadcast model. But for sure rightsholders will prepare themselves in order to also set up their own relationship to the fans.”
And then last Sunday, for the first time he consumed a Formula One race. For two hours! He never did it before, but he was teased via his mobile and via social media
Nor does this need to involve leagues “competing against their biggest clients.” There are examples, he says, of leagues setting up their own OTT platforms and then selling their service on to fans via traditional broadcast partners. This middle ground also allows the league bodies to better understand their consumer base.

Reach a specific target audience

Geier says that OTT technologies also provide a better provision of what sponsors want. He tells me about a technology Sportradar has developed that allows them to “really easily” replace the advertising perimeter around pitches to reach a specific target audience.

For example, they can replace a local bookmaker displaying on the perimeter at an EPL match and make targeted advertising for specific betting portals aimed at, say, the Asian market, depending on where the game is being shown. Equally, if betting advertising is restricted in a particular market – such as Spain – they can replace that advertising with something else.

“Technology will definitely help new ways of monetising,” he says, while OTT provides the sort of data that traditional broadcast methods never could, enabling them to “understand the fans and definitely accelerate these trends.”

Too much data?

I ask if there is a danger of sport approaching market saturation in terms of data providers, but Geier says to the contrary, there is not enough data.

Sportradar provides sports data from 400,000 live events each year, and he says they collect and refine the raw material and “package it into a range of innovative products and services” that help drive fan engagement.

The user data they collect, he suggests, is only at the start of a journey of technological development. There has traditionally been a “lack of experience” at leagues and federations when they have considered why they should collect data about their fanbases or what data they should collect, but now that OTT technology allows them to collect information about their fanbases “this is the sweet spot every rights holder should think about.”

User data acquired from OTT, he says, is “the key for the alternative monetisation models.”

Need for change

Traditional broadcasters, he says, are going to have to change. A younger, more digitally savvy generation is emerging, who are interested in sport but not according to the current subscription model.

He gives the example of his own 17-year-old son “who will never need a [Pay TV] subscription”, but who has become interested in F1, having been hooked by “cool promotional videos on Tik-Tok and Instagram”. This interest developed by Netflix’s Drive to Survive series, “And then last Sunday, for the first time he consumed a Formula One race. For two hours! He never did it before, but he was teased via his mobile and via social media.”

These new customers, he says, won’t cannibalise existing subscription packages, rather they are a new audience that the rights owners – F1 in his son’s case – can acquire by talking direct to customers. “This is definitely a trend which will exist going forward.”

Towards an IPO

Being on the cusp of a rapidly evolving industry has made Sportsradar an attractive option for investors, which include Michael Jordan.

In February Sportico reported that it was in talks about going public, with a valuation of $10-12 billion. Just three years ago the company was valued at $2.4 billion when the Canada Pension Plan Investment Board and private equity firm TCV bought a minority stake. Understandably Geier is not able to discuss or speculate on any IPO.

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Re: Football's Magic Money Tree

Post by Chester Perry » Fri Apr 16, 2021 1:14 am

That last post ties up really well with this (again from Offthe Pitch.com) about Gen Z switching off (it is an echoing refrain on this thread)

https://offthepitch.com/a/special-repor ... -switching

Special report: Generation Z – the young fans who are switching off
15 April 2021 9:01 PM
  • 42 per cent of 13-23 year olds have no interest in sport, versus 25 per cent in other age groups.
  • Formula 1 has gained nearly 60 million new 16-25 year old fans during lockdown due to digital media and streaming strategies.
  • Leading football executives and broadcasters express concerns at switch off among young people.
  • “We have a real concern about how football is losing its grip and losing its salience a little bit. We need to do all we can, all we can to address that and put it back at the centre of attention for the younger generation.”
  • Generation Z frustrated that traditional sports are overloaded with marketing messages: 55 per cent said they watched highlights to avoid ads.
JAMES CORBETT corbett@offthepitch.com

Is football facing a silent but looming threat that threatens the long-term future of its financial ecosystem? A ticking timebomb that the game complacently lingers towards? Could the past year be a harbinger of an even direr future for the game: not just empty stadiums, but games broadcast to ever-diminishing audiences?

The Covid-19 crisis has understandably dominated most discourse around the game’s future the past 15 months, but a secondary debate has also been developing among the game’s leaders and key stakeholders. This is about an entire generation of supporters that are so disengaged with the game that they are not only not physically attending matches, but they aren’t even tuning in to broadcasts any more.

Speaking at the FT’s Business of Football Summit in February, Eurosport’s head of sport, Andrew Georgiou revealed the extent of the crisis football may be sleepwalking towards: significantly higher numbers of young people entirely disengaged from sport, compared to those in older age demographics. It is, he says, “a young demographic that is saying they're not interested in sport at all.”

They are not interested

“I start to get a little bit worried at a fundamental level when I look at the audience data that we review about the level of interest of young audiences to sport as a general proposition and football in particular,” he said.

“Our research shows 42 percent of people between 13 and 23 are saying that they're not interested in sport at all, which is an increase from twenty five percent of those over 18.”

Georgiou suggested that sport in general needed to take a fundamental look at itself and suggested that the “value proposition” of live sport and the way broadcasters showed it was even helping feed piracy. Broadcasters and rights owners had a duty, he suggested “to make sure we get it to them in a way that they're happy to pay for.”

Does football need to worry?

Ever rising TV rights have fuelled thirty years of continual economic growth for the game, but recent rights deals have suggested a plateauing of value across the sport. Recent European football rights growth – where it has existed at all – has been driven by overseas rights deals. The collapse of several of these contracts when foreign broadcasters have been unable to monetise them have demonstrated the growing fragility of the traditional broadcast model.

Indeed, the cries of “cut the cord” have resonated across North America and into Europe. Younger, increasingly digital savvy and cost conscious fans are not interested in traditional Pay TV subscriptions, or even viewing someone else’s. 2018 research by Whistle Sports on the North American market found Generation Z men - aged 13 to 21 – being frustrated that traditional sports were overloaded with marketing messages: 55 per cent said they watched highlights to avoid ads, compared to 45 per cent who watch full games. Tellingly it found fifty-two percent of Gen Z males spent more time following non-traditional sports than traditional sports, such as football.

Data from the Nielsen Fan Insights 2019 study across eight different markets (China, France, Germany, Italy, Japan, Spain, the UK and the US) built on this research and revealed that those aged 16-24 prefer shorter, “snackable” content and, from a sporting standpoint, were less inclined to watch entire games.

Neilsen’s research also showed shows Gen Z consumers are not averse to paying for premium content, but increasingly expecting a tailored value proposition – “that is, they want to be able to pay purely for what they want, where and when, and without any long-term contractual commitment.”

Many years left

Despite this, Claire Enders, founder of the eponymous market analysts, Enders Analysis, told the same panel as Georgiou that the end was not nigh for the traditional Pay-TV model. The average age of Pay-TV subscribers is 50, meaning those consumers “have a lot of years ahead of them [to] really enjoy the product in the exact way that it is served today.” In other words, broadcasters – and rights owners - have a long time of revenue collection left.

On the other hand, she said, young customers “will not commit to something that they know will show up in a pirated form somewhere else or that is in a different small form.”

“Dare I say it, sports is gone the way of golf, as I predicted it would because of this inflation. It has gone much, much older in terms of long term commitment.”

Losing its salience

Charlie Marshall, the CEO of the European Club Association, took up the same theme at the FT summit. He said that the younger generation were “a particular concern”.

“We have a real concern about how football is losing its grip and losing its salience a little bit,” he said.

“We need to do all we can, all we can to address that and put it back at the centre of attention for the younger generation.”

Marshall is at the forefront of changing the nature of European club competition, with the likelihood that there will be a significant number of additional Champions League games from 2024 after ECA backed reforms kick in. UEFA and the ECA seem set on creating more blockbuster games between the continent’s bigger teams to, in the words of Marshall, bring the Champions League to “higher and higher and places within not just world sport, but in world entertainment.”

“We talk about the products. We do talk about the product meeting the competition, how it looks, how it engages with fans, how it's distributed, how it's commercialised,” he said.

“And we see a bigger picture: we see that football itself, shouldn't be focussing too inward at this point in time. We really should be thinking about what kind of a world we're going into, what does define of the future look like?”

15 minute subscriptions?

Speaking to reporters last month, the Juventus and ECA chairman Andrea Agnelli also took up Marshall’s theme, describing the “changing nature of supporters” as a “concern”, but he suggested that the malaise went deeper.

“I have the privilege of having five kids, but I don't think either one of them has ever sat next to me for 90 minutes when I was watching the game,” he admitted.

“So it is something that needs to be addressed. NBA is doing that quite well. You can just have a subscription for highlights. You just get a highlight as soon as something happened. At the moment, the NBA is offering us a subscription for the last quarter. We could imagine a subscription for the last 15 minutes of a specific game and is something that evidently will have to try and address, because the attention span of today's kids and tomorrow's spenders, it's completely different than the one I have had when I was their age.”

Agnelli pointed to golf and downhill skiing as examples where the conclusion of the events were the only real moments of interest, unless you were in the “hardcore” – in which case you’d probably be there in person.

“I think we will need to find new ways of engaging with the younger generations going forward, provided that games, as far as I can see at the moment… They will be of 90 minutes.”

Cool promotional videos

Sportradar’s digital chief Reiner Geier says advances in technology, particularly OTT, can help leagues and governing bodies adopt and personalise their content in ways that traditional broadcasters cannot.

“The younger generation has a completely [different] behaviour in consuming sports, meaning it happens most likely on the mobile devices, much shorter content is needed there. And also personalisation is needed, especially for the younger generation,” he told offthepitch.com.

“I think also the traditional broadcasters have to adapt their models. And that's also what currently happens. For instance, in Germany, Austria, where we have Sky, they have already adapted the products and said, "OK,four years ago you only were able to acquire a two or three year package, but today you can even just buy a subscription for one match".

Geier told me about his teenage son, who had embraced Formula 1 having been hooked by “cool promotional videos on Tik-Tok and Instagram”. This interest developed by Netflix’s Drive to Survive series. The end result was that he has started watching F1 races in full this season, despite his father acknowledging that he would probably never buy a subscription package himself.

F1 had gained his son as a consumer by talking direct to him via mediums he used. “This is definitely a trend which will exist going forward,” he said.

Drive to succeed

It is salient that Geier mentioned Formula 1 for that is the sport many working in digital are scrutinising closely at the moment.

When private equity group, Liberty Media, took the wheel of F1 in January 2017 after completing an $8 billion purchase, one of its missions was to attract new fans to a sporting asset whose demographic was predominantly ageing and white and male. To do so it would tap into its underutilised digital assets.

F1 had become enclosed behind pay tv paywalls, naturally shrinking its audience; but the new strategy transcended going back to free-to-air broadcasting. There was a significant overhaul of its social media output, and the sport harnessed streaming platforms like Netflix, on which it shows its wildly popular Drive to Survive series. In tandem with this it set up an F1 Esports series, which it complimented with driver and celebrity led virtual Grand Prix’s at the height of the pandemic.

Four years after the takeover research by Nielsen Sport shows 73 million new fans showed interest in F1 in the past year, despite the lockdown. Strikingly, most were young: 77 per cent of new fans were aged 16-35, an age bracket that now represents 46 per cent of F1’s fanbase.

The F1 example is one that football club executives are taking keen interest in. But there is an acknowledgement too that digital or a documentary on its own won’t be enough.

“Football needs to re-establish its connection”

The counterpoint to all this is that while TV money drives the game’s engine, it is match-going fans – along with the footballers of course – that drive the experience.

“Young people and families have already been ‘put off’ from attending games by ticket prices,” Ronan Evain, Fans Europe (FSE) told European Leagues Forum last month.

“That's the generational divide which needs to be addressed, not the attention span of the generation Z or other nonsense we’ve heard these last few days.”

“Football needs to re-establish its connection with the fans & wider society, not antagonise or replace them.”

“Football is not a product. It shouldn’t become a pale imitation of e-sport or US franchises. It should focus on its core values. But if some people continue to treat it like a product it will inevitably become one. Replaceable. Overthrown by a new, better product.”

Old and new

When offthepitch.com interviewed the former Football League CEO Shaun Harvey last month about his advisory new role at Wrexham, he spoke of a body of potential fans in North Wales for his club that would traditionally have gravitated towards the Premier League giants of Merseyside or Manchester, but had been priced out of attending or put off by constantly shifting kick off times.

There was nothing wrong, he said, with being “everybody’s favourite club” and providing a home for fans who sought the traditional experience of a 3pm Saturday kick off and all its attendant pleasures – pre- and post-match pints, a programme, the halftime pie, catching up with friends; Saturday afternoons’ age old routines.

“What we need to be able to do is give them some reason to want to come and watch live football,” he said.

In tandem with this, of course, was a documentary the club are producing based around the ownership adventure of its high profile owners, the Hollywood duo Ryan Reynolds and Rob McIlhenney. Tradition would marry the digital age.

“We have two owners who have got a really, really significant personal back story, big social media presence. So it actually changes the narrative a little bit about what Wrexham football club is about and can actually make it more engaging to a younger audience, who have got more social aspects and social outlook than probably a traditional football model,” he said.

“The newness of what we're doing always helps. Success only enhances this. But doing it in a way where you're appealing to a different audience who might not have been a hardened football fan all the time, gives you another element to be able to work with to increase the size of the supporter base.

“The next generation of fans will be absolutely key to Wrexham's long term success because you only ever get new owners from Hollywood once. It doesn't happen twice. So if we don't capitalise on it now for the future, you know, we'll be actually doing this club a disservice going forward."

Chester Perry
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Re: Football's Magic Money Tree

Post by Chester Perry » Fri Apr 16, 2021 1:30 am

This is an interesting one, and no doubt it will cause a negative instant reaction but there is a logic here for clubs to chase revenues from people where they are the 2nd or even third team that is followed by an individual and as much as people will argue they don't like it, it is already a fact of life for many, and seems to fall naturally to a lot of football tourists. For those who don't think it is possible for our club just look at the relationship our supporters have with Dutch club Helmond - and given the number of Scandinavian, US, Australian clarets why couldn't we set up relationships in those countries too.

From offthepitch.com

Column: Ever considered polygamy? Taken a second spouse? Or a third?
3 April 2019 8:02 AM
  • Bayern Munich are leading the way with an innovative partnership driven by fans and fan culture.
  • Inter Milan redoubled their efforts with social media and were rewarded with huge growth in followers.
BRIAN BØDKER kildebjerg27@gmail.com

Do your club have enough supporters or fans? Or could you use a few more? Here´s a cheeky thought: Why not go in for a bit of polygamy? Or just swap partners?

Every football fan has a favourite club - their One And Only. Fans stay loyal to their club, often from the moment they first fall in love until the day they die. But nowadays, fans tend to look at other clubs in other leagues with affection too.

Today, football fans have the opportunity to watch football not just in their home town, but to see games from all the big leagues too. Television, social media and streaming provide a rich supply of diverse football events from around the world.

This fosters passionate feelings for clubs other than a fan’s local or national darling.

Who doesn’t like watching Messi doing his magic, or see the Curva Sud and Curva Nord unveiling their tifos at San Siro?

But we are talking here about a new kind of love affair, and one which could be a financial win for those clubs that make an effort to be unique.

It could also mean that fans around the globe might follow your club as their second or third choice. More and more, this trend is increasing clubs’ market reach.

These second or third level followers might even come to your stadium for the experience, but they will definitely be watching your games on television or via streaming, which could boost television and commercial revenues for your club.

100,000 spectators attending the games

Don’t worry, there’s no need to be ashamed of this polygamous relationship. And if you’re starting to get rather intrigued by this idea of supporter polygamy, why not go for the next big thing: Partner swapping!

As long as you're not blushing too much, take a look at FC Bayern München’s fan initiative. The Bavarians - as known for their loyal fans as they are for a sold-out Allianz Arena - have started an exchange of fans with Texas A&M, the American University famed for its dedicated support (100,000 spectators attending the games at Kyle Field) for its American football team known as The Aggies.

The brilliant aspect of this exchange is the great similarities that there are between the two groups of fans. And it is through the fan experience that they connect rather than the game itself. Both fan groups want to be the event instead of watching an event.

Mia San Mia

Another connection is that both club and fan groups have a strong and distinctive identity, which is expressed in their credos - Bayern’s “Mia San Mia” and Texas A&M’s “We are the Aggies – The Aggies are we.”

Two different fan groups from two different countries, coming from two different cultures and sports, yet they are connecting through the event.

There is no money in this initiative - yet. But it could boost the interest in Bayern München´s games on television in the USA, maybe not specifically to watch the actual games, but to get a sense of that special atmosphere at the Allianz Arena.

Social media being the powerful tool here

Social platforms are another potential tool to be used, if executives want to get in touch with a new audience outside the local or maybe even the national league. This is something KPMG notes in its publication: The European Elite 2018:

“Many clubs have started to understand the importance of becoming the second or third favourite choice for football fans. In fact, while followers already have a club they are fiercely loyal to, almost every football supporter also has a second favourite and/or a preferred club in various countries. Winning over this crowd would not only increase a club’s digital footprint, but could ultimately result in a commercial boost.”

KPMG also writes that although overall income from digital activities is still negligible, “monetising the inherent value in social media is crucial for clubs in order to stay competitive and to enhance their profitability.

Club channels also provide a unique setting for partners and sponsors to activate their brands and, ultimately, increase their sponsorship value or a sponsor’s return on investment.”

Sponsors do care about followers on social media

One club to have worked intensively with social media is FC Internazionale.

They have rebranded their media strategy and launched a sub branch called Inter Media House. That work paid off as the number of followers increased by 3.9 million - which is growth of a massive 42 per cent.

They are following the path trodden by Manchester City, Paris Saint-Germain and Juventus - who are all making their clubs available to fans around the world.

The big players on the social platforms are also the big players on the field. According to KMPG, Real Madrid and FC Barcelona lead the way with over 200 million followers on Facebook, Instagram and Twitter, with Manchester United trailing them with 114 million followers.

Though having many followers does not per se mean extra income, it does mean a bigger and broader interest in the club and its brand.

And sponsors become known to far more people, than just those going to the stadium on match days.

Although Facebook is still the biggest social platform, the clubs’ Twitter and Instagram profiles are growing faster. Players are using Instagram for their profiles, which connects with the platform’s younger users, who prefer to engage with exclusive images of their favourite players.

Can't be at the stadium every week

By contrast, older users tend to favour Facebook and Twitter and the text-based content about the team that clubs tend to publish on those platforms.

So financially, embracing polygamy could actually be a good thing for your club. The fans from abroad can´t be at the stadium every week, but they still want to be a part of the club’s community and follow their every move.

So, how do you go about becoming someone’s second or third favourite? This is the beauty of it. You do it in the same way that you become that person’s number one: By being unique and standing out.

But most importantly, by offering fans from all countries the opportunity to be part of something truly unique.


Brian Bødker, senior financial consultant, MSc., is author of the book, The Legendary Ten, a comprehensive insight to the ownership, strategy, organisation, tactics and results of Europe’s ten best football clubs.

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