With Vegas Golden Knights owner Bill Foley receiving After AFC Bournemouth last month, the number of US-owned Premier League clubs now stands at eight out of 20, including four of the so-called Big Six (Manchester United, Arsenal, Liverpool and Chelsea). And every time a Premier League club goes up for sale, US billionaires and private-equity types pop up to kick the tires.
Chelsea was the most recent example in the spring, when a bidding process shortlisted offers from the Ricketts family (which owns the Chicago Cubs), a consortium led by Boston Celtics co-owner Stephen Pagliuca, Los Angeles Dodgers owner Todd Bohly and Mark Walters. And another group that included Josh Harris and David Blitzer (who owns the Philadelphia 76ers).
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Most American owners – indeed, most foreign owners, who represent 75% of the Premier League – haven’t done much to rock the boat in terms of how the league does business. But with the changing sports and media landscape – and the league turning an operating profit in only two of the last 10 years – according to Kieron O’Connor, who Writes the Swiss Ramble newsletter In football finance – you wonder how long it will take. (Note that operating profit/loss is different from accounting profit, which includes player trading, i.e. the cost of acquiring players versus the revenue of letting them go.)
And given that the Premier League’s shareholders are themselves the 20 member clubs, there is no question that they have the power to make radical changes – such as introducing, reducing or abolishing salary caps and altering revenue distribution – if they choose.
Why might they choose to do so? Well, because conditions have changed and because this set of owners (not just Americans) is different from the people who owned European clubs in the past.
Historically, teams were bankrolled by individuals or corporations who weren’t necessarily looking to return the bottom-line. Many clubs ran at break-even levels, while the losers were fine with it because their owners got it back in other ways. Sometimes, they were rich super-fans like rich boosters at NCAA sports; Sometimes they were businessmen looking to raise their profile or gain political influence.
None of the current US ownership groups fit this profile, but still, they invested because the situation seemed favorable. The logic was simple: getting a Premier League club was relatively affordable, and it gave you a place in the most popular league (one with a truly global footprint) in the world’s most popular game.
Many were convinced that with some knowledge of American professional sports, they could monetize the game more effectively and the league would grow in popularity, and heck, if it cracked the American market meaningfully, you were set for a payday. the day Also, since money was cheap at the time — and many of these investors were sitting on piles of it — acquiring unique assets like a sports team (or a piece of art or real estate) was a natural hedge against inflation.
Things have changed a bit. Money isn’t that cheap (interest rates are up), the economy has taken a hit and people are realizing that there is no quick US fix to boost revenue. (well, Most of all anyway…)
There are basically three criteria that can lead an ownership group (not the nation-state, which has other reasons) to acquire property. One is vanity/philanthropy/personal pleasure (like historic owners of football clubs), but that doesn’t usually apply here. Another is profit and cash flow, but as O’Connor points out, Premier League clubs made an operating loss of £1.4 billion ($1.7bn) in the eight years pre-pandemic (and a bigger £2.3bn – or $2.8bn – operating loss). . Losses in the last two years which were affected by covid). The third is capital appreciation: what you get back when you sell the asset will be more than what it cost you to acquire it and run it for years (if you make operating losses).
That last factor seems to be the only one that still applies. Perhaps this has been prompted by the fact that both Fenway Sports Group and the Glazers are open to selling all or part of Liverpool and Manchester United at valuations of between $3bn and $5bn to $7bn – several times more than they paid. For them. But as the fine print says, “Past performance is not indicative of future results.” This is not something you want to admit.
The main reason many Premier League clubs continue to incur operating losses is rising wage and acquisition costs each year, more than doubling from around £2bn ($2.4bn) to £4.8bn ($5.8bn) in a decade.
Another way to think about this – and understand the deficit – is to consider the percentage of revenue that goes to labor costs, i.e. the amount paid to players in salaries. In the NFL, this is limited to 48% as a result of the collective bargaining agreement with the NFL Players Association (NFLPA). Only in the Premier League one Out of 20 clubs (Tottenham, at 39%) were below that threshold in 2018-19, the last season before the coronavirus pandemic. Excluding the three newly promoted clubs that year, the league average remained at 65.6%.
And remember that unlike in the NFL, where money doesn’t change hands when players change teams, in the Premier League you pay a transfer fee when you sign a player from another club. In that 2018-19 season, the Premier League’s net spending — the difference between the cost of signing players and the revenue received from sending them away — was a whopping $1.15 billion … far more than the NFL’s figure. Of, well, zero.
Simply put, the fastest way to turn a profit is to control your costs, a concept that is all too familiar to American sports owners, including some version of a salary cap or luxury tax. Premier League bosses will push for something along those lines, possibly adding squad expenses (not just player wages, but transfer fees, agent fees and coaching staff wages) to a percentage of revenue. In fact, comparable systems already exist in Spain’s La Liga and European football’s governing body UEFA. Implementing new rules For teams competing in continental tournaments such as the Champions League, the target is to limit team expenditure to 70% of revenue by 2025-26.
So the appetite for something like this is already out there, and you’d expect Premier League clubs – including those not involved in European competition – to follow suit in some way. Of course, limiting your spending increases your risk of relegation, which can be financially devastating.
Is it possible that there could be a push to reduce the number of relegation spots? Why not? This is the fastest, easiest way to increase the value of all Premier League clubs, especially the smaller ones.
Also, why stop there? Could we see more revenue sharing like in the NFL, where almost all revenue except for corporate sponsorships, concessions and 60% of gross ticket sales is split evenly between the 32 teams? In the interests of equality and stability and with certain safeguards (eg no relegation), who knows?
The main argument against this model is that it could disrupt English clubs in the Champions League – another problem that the NFL doesn’t have to worry about. And sure, if UEFA’s new rules are not properly implemented or work, it will hurt the performance of Premier League teams in Europe. But even for clubs that qualify for Europe, revenue from UEFA competitions does not represent more than 15-20% of the total. And it’s not like English clubs will suddenly stagnate and disappear if they spend a lower proportion of revenue.
Think it will never happen? Maybe you’re right. When times are good, the cash keeps rolling in and club valuations rise, maybe there’s no need for it all. But it’s worth noting that the Premier League’s Big Six have all signed up for the Super League, and that’s Liverpool and Manchester United. was behind Project big picture. Both projects were abandoned under public outrage and political pressure, but the will was there. And if they are willing to be lawyers and face political pressure, 14 of the 20 Premier League clubs need to rewrite the rulebook. And no, given the NFL’s success and profitability, it’s not just American owners who might look favorably on it.
Every single owner, no matter where they are from, knows how things work across the pond and how successful the NFL and NBA are. Every single owner found their niche by knowing how to run their business. And not every owner is wedded to the long-standing pyramid model of the European game.