Welcome to The Bottom Line: the business of football newsletter
Get the inside track on the business of the biggest clubs in the Premier League
The business of football has never been so widely covered, nor has it ever been so important. Gone are the days when supporters only needed to know the starting XI on a matchday, now possessing more knowledge about what happens away from the lush green grass means fans can make more informed decisions when it comes to who is running their football clubs and where they are heading.
As part of this shift towards fully understanding the game behind the game, and how it impacts what happens during 90 minutes, this weekly newsletter, the Bottom Line, will bring you all the happenings at the biggest clubs, at home and abroad, interviews with the people who make the big decisions behind the scenes as well as shining a light on what is happening in the world of technology, media and finance that could have a lasting impact on the game and how we consume in in the future.
I’m Dave Powell, Business of Football Writer at the Liverpool Echo. I’m passionate about the business of sport and how it continues to evolve and find ways to thrive in an ever changing world. The goal of this newsletter is to ensure that you are informed, not only to know what is happening with regards to the business of football and covering the big stories, and the stories that may have gone under the radar, but also, and most importantly, telling you WHY it matters.
I hope that you’ll join me on this journey.
WHY AMERICAN CAPITAL LOVES THE PREMIER LEAGUE
For US investors the rise of sport as an asset class has seen billions of dollars worth of capital poured into the teams and leagues of many sports.
European football, particularly the Premier League which, if 777 Partners were successful in their attempts to acquire Everton, would mean half the league having some kind of American ownership, has been very fertile ground. In Italy, notable acquisitions have taken place over the course of the last 18 months, such as the purchase of AC Milan by the Gerry Cardinale-led RedBird Capital Partners firm.
Many US investors see major clubs in European football as undervalued and under-monetised assets, where broadcast rights are expected to rise, new markets can be tapped into and, as a result, the exit point for the investor will have a far higher sticker price than the one paid upon entry. One only needs to see the leap from the £300m paid for Liverpool by Fenway Sports Group in 2010 and how it is now worth some £4.5bn, and still growing, to realise just why there is major potential for returns seen here.
The banks know that too, with Goldman Sachs launching its own global franchise sports division this week, a development with the aim of partnering super-high net worth clients and investment opportunities in sports teams and leagues. Goldman Sachs, one of the world’s most recognisable names in financial services, have already advised the likes of Boehly and Clearlake on acquiring Chelsea, and Liberty Media in taking a controlling stake of Formula One in recent times, and now they want to expand that by creating their own lane to operate in.
The division, which will draw on the bank’s sports mergers and acquisitions and sports financing units and also offer investments in sport-adjacent media, entertainment and technology projects, another major focus of US sports investment, will be led by Goldman executives Greg Carey, who chairs its public sector and infrastructure group, and Dave Dase, who heads up regional investment banking activity.
The valuation of football teams is now growing at a faster rate than that of North American sports teams in leagues such as the NFL, NBA and MLB for the first time. That means that the move by Goldman is likely to pique the interest of plenty of would-be sports investors looking for a slice of European football, with the Premier League of particular focus.
One of US sports’ most prominent sports investment figures, Bruin Capital founder and CEO George Pyne, told the Bottom Line: “What is attractive about the Premier League, and also the other major football leagues in Europe from an American standpoint is that unlike America, as a team owner I’m really riding along with the league as everything is so centralised, so my impact is really on the pitch.
“The way that the Premier League and international football is organised, team ownership can actually make a bigger difference. You can make a bigger difference in the value, in the revenue streams and in the performance of the club than you can in the American leagues. I think that’s why American investors find the Premier League so interesting as you have a set of rights that are really on you and your management, whereas in the US it is more on the league than the teams.
“I think the decentralised nature of the revenue rights make the Premier League more interesting as the investor believes they can do more with that than they can somewhere else.”
WATCH OUT FOR 2025
For so long it has been predicted the bubble would burst around the Premier League. Sure, it will eventually, just as all things come to an end and nothing can keep going up, it’s anti-Darwinian.
But for owners of major Premier League clubs, some of whom have been linked with either a full or partial sale, there really isn’t a compelling argument, aside from a price being offered way above market value for the team, for ridding themselves of such valuable assets that are still on a growth incline.
In two years time there are going to be two major events happening that will further embolden club owners of the biggest teams to hang tight. The first is the inaugural, revamped FIFA Club World Cup, where 32 teams will battle it out for global supremacy, generating enormous interest, and pots of cash in the process. To be part of that competition will be a very valuable opportunity for teams and their owners, with the revamping of the competition done in part to help scratch the itch some of the biggest sides had in terms of breaking off and trying to create their own European Super League.
The next is that 2025 is when the new broadcast rights cycle will kick in domestically and internationally for the Premier League. It will be the first full package negotiated away from the concern for the future of the game that existed due to the COVID-19 pandemic.
For the 2022 to 2025 cycle, negotiated largely during 2021, international rights outstripped domestic ones for the very first time, with the US market alone worth around £2bn of the overall £10bn package for the cycle. The domestic deal had been rolled over at the same price, seen as a win at the time given the uncertainty of 2021 and a season played behind closed doors. That deal will almost certainly get a significant bump, not least through new competitors arriving into the mix to drive up the price, and the fact that the interest has flooded back post-pandemic.
That means more money for clubs, more money for investors and more reasons why football will remain an attractive proposition for some time yet.
HOW LIVERPOOL IS EVOLVING COMMERCIALLY
In terms of sports investments, Fenway Sports Group’s 2010 acquisition of Liverpool is up there with the very best.
Purchased for a little over £300m 13 years ago, investment into infrastructure and implementation of strategy, helped in no small part by the hiring of the charismatic Jurgen Klopp in 2015, has seen Liverpool achieve on-pitch success that they have been able to leverage into off-field success during a period where valuations of sports teams globally have exploded, particularly scarce assets such as the Reds.
Part of the success can be seen in the way that commercial revenues have been driven forward year after year. For the 2021/22 financial year the club posted a record commercial performance of £247m, a rise of £29m on the previous year. That figure is set to rise once more when the 2022/23 accounts are published, and again when the current financial year comes to an end in May 2024.
The two most visible partnerships the club
has, front of shirt sponsors Standard Chartered and sleeve sponsors Expedia, extended their deals with the club last year. The past 12 months have seen more renewals and more new business arrive, with major blue chip brands such as Google, Peloton and, most recently, UPS all coming on board. These deals help Liverpool drive revenues forward that have a direct impact on how much the club can invest in the on-pitch product.
But Liverpool’s success with renewals is telling, with the club having a track record of delivering for its partners. The relationship the club has with its commercial partners has benefits for both sides beyond the traditional marketing tie up. Partners now want more value for their money, while Liverpool seek to align themselves with businesses that can help them deliver on driving the club forward in other areas.
Speaking to the Bottom Line, Liverpool commercial director Ben Latty said: “For us it is a sign of the times that we’re partnering with brands of a premium nature, like UPS. These are brands that are very particular about what sports properties they associate with.
“For us it is a testament to the teams that we have working behind the scenes here at Liverpool. I can honestly say they work tirelessly, day in day out, across multiple time zones. There is a lot of work that goes into these deals and signing with UPS is amazing for us, and quite frankly what we should be doing as Liverpool Football Club.
“Clearly, monetary value is important for us and the way that we run the football club, and we’d never apologise for talking about the sustainable business model that we have got, and that we are proud of, quite frankly.
“What you have seen with the partnerships we have announced is a bit of an evolution of our business model. Most of the partners that we have now bring more than just monetary value for us. There are a few examples of that. There are those who support us with our Red Way strategy and our sustainability strategy and, ultimately, our commitment to building a better future for the people, planet and communities in which we serve. An example of that would be someone like SC Johnson and their commitment to reducing waste at Anfield. Our recycling rate now is over 90%, when we started that partnership it was about 25%.
“Another example is someone like Vista, through their support of local businesses and the local community. There are others, like Expedia providing free transport to away women’s games, and other partners who are supporting our drive for women’s football, whether that be Google Pixel, Standard Chartered or AXA.”
Liverpool’s recent multi-year deal with UPS will see the American firm become the club’s official logistics and shipping partner. While the monetary value to the Reds in terms of a commercial boost is vital, what the partnership could help Liverpool achieve, especially given the incentivised nature of the club’s kit deal with Nike, means that there is more to it than meets the eye.
Said Latty: “Every partner we bring in now we like to integrate fully into the club and provide more than just a marketing partnership and provide to different areas of the club. UPS is an interesting one as they are going to be fully integrated into our retail operations, and part of that will be moving some of our operations into the EU with them.
“The benefit of that should be seen by our fans, whether that is better delivery options for our fans, better tracking capabilities, increased capacity in our UK distribution to serve our UK fans better, and also a simplified returns process. That gives you a flavour of what we look for now in partners and having these blue chip brands coming and providing more than just a marketing partnership is really important for us.”
QUICK FIRE FIVE
Newcastle United are looking to increase the capacity of their St James’ Park stadium to 65,000, a move that would mark the first capacity increase at the Magpies’ home since 2000.
Asian Football Confederation may be sued for allowing multi-club ownership. Three PIF-owned teams from Saudi Arabia due to play in this year’s competition.
ITV win the rights to show England men’s senior team matches outside of major tournaments via free-to-air channels between 2024 and 2028.
Spain’s La Liga has agreed a one-year deal to become shirt sponsor of Welsh fifth division side Llanfairpwllgwyngyllgogerychwyrndrobwllllantysiliogogogoch, also known as CPD Llanfairpwll.
UEFA is looking to expand the Women's Champions League format to include more teams to encourage growth.