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Foreign Investment in British Football Clubs

A look at the situation regarding foreign ownership of British football clubs – how it got started, and where we are now.

Football in Britain has transformed over the last couple of decades, and not just on the pitch. Television deals are worth billions1, transfer fee records are broken every season, and Manchester United recently announced an official ‘mattress and pillow’ partner2. In short, there is a lot of money in the sport these days. And that makes it an attractive prospect for investors. Individual businessmen and companies from foreign countries, in particular, have taken a keen interest in British football.

So, how did it all start?

The Monetary Potential of Football Club Ownership

Football clubs in England have historically been owned by local businessmen and their families. Even the biggest and best teams – such as Manchester United and Liverpool – were run by people from the community3. But that began to change in 1981, when certain owners started looking football clubs as genuine investment opportunities.

First, the so-called “big five” (Man Utd, Arsenal, Everton, Tottenham and Liverpool) believed they should receive 100% of the profits made from ticket sales – as opposed to equally dividing the shares3. Several disputes later, and the big clubs decided to break away and form their own league in 1992, meaning they would receive lucrative satellite TV pay-outs for airing their games3.

Thus, the Premier League was formed and with it, the freedom for clubs to earn money relevant to their status. They negotiated more expensive TV deals, started paying players higher wages. They even began focusing on their global brand – particularly Man Utd – because this made them more appealing to investors.

For United, this came to a head in 1999 when Australian media mogul Rupert Murdoch attempted to buy the club, even having a £623 million bid accepted4 (the deal was rejected by the Monopolies and Mergers Commission)5. Although it didn’t work out, the idea of foreign investors buying a Premier League team started to become more appealing and after Roman Abramovich successfully purchased Chelsea FC in 20036, the floodgates began to open.

Why is Investing in a Football Club Worthwhile?

Not all football clubs are viable for investors. But for those in the Premier League, or on the cusp of making it to the top division, investors see an opportunity. This is mainly due to the new television deals that have been negotiated. As of the 2016/17 season, a three-year deal was signed worth £10.4 billion to the 20 Premier League clubs. England’s top division is the most popular league in the world, with an audience of 3 billion per season. It reaches 225 broadcast territories7, which for teams like Manchester United, only strengthens their efforts to build an international brand. The more people they reach, the more income streams become available through sponsorship deals and the like. They have local partners in places such as Vietnam, Nigeria, Cambodia and Taiwan8.

Of course, some of this money is required to go back into the running of the club. To buy new players, to pay their wages, to have the best facilities – because all of this helps to build success on the pitch and the more trophies they win, the bigger their brand can become. But you don’t need to be Manchester United to make lots of money here. As long as you can retain your Premier League status, you are allowed a chunk of that £10.4 billion.

Another way investors are using clubs to make money is by simultaneously buying marketing and media companies, which own the rights to broadcasting licenses and media marketing rights9. And it isn’t just about money, either. Investors from China who have purchased football clubs in England, and elsewhere in Europe, do it because they want to improve the quality of football in their own country. After buying a team, they arrange for young talented Chinese players to train in the world class academies based in Europe. Zhang Jundong claims this is one of the reasons he bought Inter Milan9.

How Common is Foreign Investment in British Football?

Foreign ownership in British football, particularly in the Premier League and Championship divisions, is more prevalent than ever before. A total of 25 clubs are now under foreign ownership, or 57 percent of the top two divisions10. Championship side Wolverhampton Wanderers are the latest to be bought from overseas, in the form of Chinese firm Fosun International10. In the Premier League, only Middlesbrough, Burnley, Tottenham, West Ham, West Brom and Stoke City are not owned by a foreign national10.

Where do things go from here?

It’s likely that this trend of foreign individuals and companies buying English clubs will continue for a long time. More and more investors are now looking at clubs in the lower divisions, due to a lack of options available in the Premier League. 11 out of 24 Championship teams are now under foreign ownership, while even teams further down the football league are of interest to some10.  There’s no doubt that this has been a good thing for English football. With all the money that has become available, teams are able to compete at a worldwide level. Manchester City and Chelsea, in particular, would not be where they are today without foreign investment. It has allowed them to buy the very best players, and bring extraordinary football qualities to England.

And with more and more investment coming in, things are only expected to get better.

 

Source:

  1. http://www.espn.co.uk/football/english-premier-league/23/blog/post/2917119/how-premier-league-record-tv-deal-will-affect-english-football
  2. http://www.manutd.com/en/News-And-Features/Club-News/2016/Oct/manchester-united-announces-global-partnership-with-mlily.aspx
  3. http://thetwounfortunates.com/dilemmas-of-football-ownership-history-and-the-need-for-change/
  4. http://news.bbc.co.uk/1/hi/business/167564.stm
  5. http://www.independent.co.uk/news/murdochs-man-utd-bid-blocked-1086123.html
  6. http://news.bbc.co.uk/1/hi/3036838.stm
  7. http://fanresearch.premierleague.com/global-media-platform.aspx
  8. http://www.manutd.com/en/Partners/Regional-Partners.aspx
  9. http://knowledge.ckgsb.edu.cn/2016/09/26/sports/chinese-companies-investing-football-clubs/
  10. http://www.dailymail.co.uk/sport/football/article-3703138/Wolves-25th-club-England-s-two-tiers-foreign-owner-majority-shareholder.html

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2017-05-29T22:39:35+00:00