This past week, David Goldblatt visited our class to explain his accounts of world football. One interesting comment he made was describing the English Premier league as a business to be completely hopeless. This past summer, Shahid Khan, a US billionaire car parts baron, bought Fulham football club for an estimated $300 million.
Shahid Khan with a personalized Fulham jersey after purchasing the London club this past summer
This purchase made him one of six American businessmen to be owning a Premier League team, including the Glazer family at Manchester United, John Henry at Liverpool, Randy Lerner at Aston Villa, Ellis Short at Sunderland, and Stan Kroenke at Arsenal. These six make up almost a third of the entire Premier League, a number much higher than the American representation in any other aspect of the league.
So what exactly is bringing these American investors to the Premier League? Most of the owners claim that they are avid fans of the club and want to be a part of the rich history that the club entails. However, more practical reasons underlie why they fork over several hundred million dollars for these clubs. Shahid Khan said that, “the Premier League obviously has a huge global audience… It’s got a great media deal, it’s got great leadership at the top and most importantly a very, very passionate fan base and it’s an excellent business platform.”
TV deals are a large factor when it comes to earning profits. According to the Tribune, the 20 clubs will split around $2.6 billion in new broadcast deals this season. John Henry, the Liverpool and Boston Red Sox majority owner, interestingly told The Guardian that he bought the famous soccer club without ever really knowing anything about the game. They understood the business behind it, recognizing the enticing profits made through these television deals. In addition, these clubs come at a fraction of the price to other American sports franchises. Because the Premier League is run in a way of possible relegations, large swings in income can occur if ones team does poorly and is relegated. Therefore, these teams offer a higher risk and are sold at cheaper prices than in closed leagues.
Furthermore, the globalization of soccer, more specifically the Premier League, has offered these businessmen a way to globalize their brand. Shahid Khan is the current owner of the NFL franchise the Jacksonville Jaguars and has vowed to bring his team to London for a game in each of the next four seasons. Additionally, most of the owners also own American sports franchises like the Jaguars or the Boston Red Sox. These offer them a platform to gain more fans in America for their English teams. The purchase of an English Premier League teams offers these Americans another outlet to spread their brand all over the world.
This influx in American owners also underlies the growing popularity of soccer in the United States. An estimated over 24 million Americans are currently playing soccer with another millions and millions watching it every year. NBC is continuing the trend by paying an estimated $250 million for the rights to air Premier League games in the US. With the growth of the MLS as a competitively recognized league by the world, soccer interest in the US is becoming more common, and the influx of American owners in the Premier League is another big step.
These owners also seem to be helping the Premier League teams financially by running tighter budgets. By owning American sports teams, they are often accustomed to limits imposed by the league to limit their spending including salary caps and luxury taxes. The European governing body of soccer, UEFA, is encouraging teams to have more sustainable budgets, after years of Russian and Arab owners spending millions and millions of dollars for their respective clubs, most notably Roman Abromavich at Chelsea. American businessman, Stan Kroenke, however, has invested in a business model that brings in over a $20 million operating budget annually, by being frugal with his spending.
With the popularity of soccer growing in the US and the popularity of owning soccer teams growing among rich investors, Americans could become a larger majority of not only the Premier League, but other popular leagues around the world, like the Bundesliga or La Liga.
References:
1) http://www.theguardian.com/football/blog/2013/jul/12/fulham-us-takeover-english-football
2) http://www.mirror.co.uk/sport/football/premier-leagues-american-owners-not-2312593
3) http://tribune.com.pk/story/590590/us-owners-buy-in-to-new-era-for-premier-league-finances/
4) http://www.thedailybeast.com/articles/2013/07/11/english-premier-league-is-now-an-american-billionaires-paradise.html
5) http://bleacherreport.com/articles/1729357-clint-dempsey-may-have-left-the-premier-league-but-the-us-invasion-continues
The other interesting wrinkle here is that Shahid Khan also owns the NFL’s Jacksonville Jaguars. The NFL has made a significant push in London recently, playing eight games at Wembley Stadium since the 2007 season. The Jaguars, who are also the NFL’s most hapless team and struggle to draw fans in their own stadium, lost to San Francisco in London this season and are expected to return for “home” games every year until 2016. NFL Commissioner Roger Goodell has not been shy in saying that he wants the league to have a London franchise in the future, and if Khan’s Jaguars—who just picked up their first win of the season yesterday—continue to spiral downward, they could be prime candidates. Looks like there’s a chance that the EPL isn’t the only football played in London for long.
Great article, it reminded me of a quote I saw by Abramovich about owning Chelsea, “The goal is to win. It’s not about making money. I have many much less risky ways of making money than this (buying Chelsea football club).” which got me thinking about how volatile of an investment it can be to buy one of these top clubs. We’ve seen examples of billionaires coming in with outstanding funding and failing like with QPR, as well as success stories like Manchester City (although I don’t think they’ve made too much profit from a business perspective). I hope the american investors have better luck!