Why Billionaires Are Investing In Soccer Clubs
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Soccer is the most popular sport in the world. But it’s more than a game for many fans, it's a cultural phenomenon that unites people from all walks of life. With such a massive global following, it's no surprise that soccer has become big business, and the largest clubs in the world are worth billions of dollars. |
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Most Valuable Soccer Teams in World (in millions USD, as of March 2023) |
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The Glazers, owners of one of the most iconic soccer teams in the world, Manchester United, are looking to sell the team for upwards of a staggering $6-7 billion. But is it worth it? |
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History of the Soccer Business |
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The history of soccer's business and financial aspects can be traced back to the late 19th century when the first professional soccer leagues were established. |
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The English Football League (EFL) was founded in 1888, and the league's member clubs started generating revenue by charging admission fees for matches. As the popularity of the sport grew, the EFL became a significant source of revenue for clubs, and sponsorship deals with businesses became common. |
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In the early 20th century, soccer's business and financial aspects continued to evolve as clubs started to adopt more professional management structures. The formation of the Football Association in 1904 led to the establishment of a centralized governing body for soccer in England, and this helped to standardize the rules of the game and the business practices of clubs. |
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During the mid-20th century, soccer's popularity continued to increase globally, and this led to the emergence of international competitions such as the World Cup and the European Cup (now the UEFA Champions League). These competitions attracted large audiences and became significant sources of revenue for soccer clubs. |
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In the 1990s, the business and financial aspects of soccer underwent significant changes as a result of the increasing commercialization of the sport. The formation of the English Premier League in 1992 was a major milestone in this process, as it introduced a more lucrative broadcasting rights model that allowed clubs to earn more money from TV deals. |
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Since then, the commercialization of soccer has continued to grow, with clubs generating significant revenue from merchandising, sponsorship deals, and stadium revenue. |
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Here are some public soccer clubs for those looking for exposure to the industry: |
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Commercialization |
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In today's globalized economy, soccer has become much more than just a sport. With its massive global audience and worldwide reach, it has become a product that can be sold to consumers all over the world. This has led to a race among countries and leagues to improve and market their soccer products in order to increase their global reach and attract larger sums of money. |
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The English Premier League stands out as a shining example of soccer’s commercialization. The Premier League is widely regarded as the most entertaining and popular soccer league in the world. Its success is due to a combination of factors, including its high level of competition, the quality of its players and teams, and the way it is marketed and broadcast to fans around the world. |
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But it's not just the top leagues that are benefiting from the business of soccer. Every club, no matter how big or small, is finding new ways to generate revenue and increase their bottom line. From selling merchandise and naming rights to partnering with sponsors and broadcasting games on TV, clubs are looking for ways to monetize their brand and attract more fans. |
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Brand Deals |
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The business of soccer has become increasingly reliant on commercial revenue, with soccer clubs now viewed as brands. The more established and recognizable a club's brand, the better its prospects for securing lucrative commercial deals. The Manchester United-Adidas and Chevrolet deals (both worth over 500 million dollars) are a testament to this fact. Similarly, Chelsea's $1.2 billion agreement with Nike, a 15-year term set to run until 2032, underscores the importance of brand value in today's soccer landscape. |
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Real Madrid struck a $380 million agreement with Sixth Street in the Summer of 2022. Sixth Street acquired a minority stake in Real Madrid. Sixth Street agreed to revamp the stadium experience and host non-football events and concerts, revamping the ways the club can make money. Football teams are finding they can make money by selling more items in the stadium and hosting concerts and other events at the stadium. |
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Owners |
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Soccer has become a game not just for the love of the sport, but also for its potential as a lucrative business venture. This can be seen in the recent trend of wealthy individuals investing in soccer clubs, like Sheikh Mansour's acquisition of Manchester City. |
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Egyptian billionaire Nassef Sawiris and the American billionaire Wes Edens bought Aston Villa in 2018 and Todd Boehly, who also owns the Los Angeles Dodgers, bought Chelsea for over $5.2 billion last year after Chelsea’s previous owner (Roman Abramovich) was forced to sell the club, amid sanctions against Russia. |
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The takeover by Todd Boehly and his partners not only highlighted the value of the Chelsea brand but also prompted other club owners to re-evaluate their own assets. With soccer being one of the most valuable and profitable industries in the world, it's no surprise that investors are starting to take notice. |
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Manchester United |
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Manchester United is not just a football team, it is a cultural phenomenon. With a colossal following that extends far beyond the borders of the UK, this global brand has captured the hearts and minds of millions of fans worldwide. From the iconic red and white jersey to the superstars who don it, Manchester United exudes an aura of greatness that few other clubs can match. |
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But behind the scenes, there is a fascinating story of business acumen and financial strategy. The club's current owners, the Glazer family, acquired Manchester United in 2005 through a leveraged buyout that involved borrowing a significant amount of money to purchase the club. |
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Manchester United’s looking like it’s on the up. The team is improving and just locked in a coach. But the Glazers are making it known they’re looking to sell the team. Maybe it’s because they’re looking to cash out after buying Manchester United for £790 million in 2005. |
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A big selling point to prospective buyers is Manchester United's brand recognition and loyal fan base. It’s tough to put into numbers just how much it means to have fans in virtually every country across the globe. But given Sixth Street’s success maximizing selling capabilities, it’s nevertheless clear why some private equity firms would salivate over buying a piece of United. |
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But it's not just about the glamour and glitz of being a global brand. Manchester United is also one of the most valuable football clubs in the world. With revenue streams that include broadcasting rights, match-day income, and lucrative sponsorships, the club is a true business behemoth. |
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Some welcome the change of a new owner, and think it could help take the club to the next level. The Glazers' ownership of Manchester United has been controversial, with many fans criticizing their management of the club. The team has struggled at times and while they’re having a solid season, they haven’t been as great as their die-hard fan base would expect. |
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When it comes to whether a deal is worth it, you have to look at Manchester United's revenue. There are two schools of thought here, and the debate is heating up. On one side, some argue that the club has hit its revenue ceiling due to a drop in attendance caused by Covid and drying up television deals. And with players' salaries expected to rise, they suggest that the Glazers are looking to cash out on a peak valuation. Some think the recent hire of Erik ten Hag as manager is a move towards stability to make the club more attractive to potential investors. |
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However, there are others who take the opposite view, believing that Manchester United is not fully maximizing its potential in the 21st century. With the power to build strong engagement on social media, sell merchandise globally, and tap into previously underserved markets like Latin America and Africa, it's hard not to get excited about the untapped revenue opportunities available to the club. The potential for growth is enormous, and it's a prospect that can't be ignored. |
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The Glazers are now finding they could sell the club for up to $6-7 billion dollars. And with private equity firms like Carlyle, Ares, and Elliott interested in buying a piece of the club, the Glazers are trying to drum up interest to enhance Manchester’s sale price. |
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Manchester United - To Invest or Not To Invest |
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Manchester United's market value is not just about its performance on the field, but also about the power of its brand name and international following. This begs the intriguing question: how much is a brand name really worth? While the Glazers may argue that it is priceless, it is crucial to consider the tangible value that it can bring. Small-market American teams are selling for billions of dollars, which raises the question of just how much a global team like Manchester United could be worth with its massive following. |
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Here are some reasons investors, such as billionaires and private equity firms, are interested in investing in clubs like Manchester United. |
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Some fans don’t think the Glazers took advantage of United’s vast fan base. United has the opportunity to monetize its international fan base through streaming, merchandise, and sponsorships. |
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Manchester United also has a strong digital footprint - its social media following alone is 213 million. Manchester United can monetize its digital footprint through advertisements, partnerships, and merchandise sales. |
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Opportunities to own a professional sports team, let alone one with Manchester United’s brand, are increasingly rare. |
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All sports teams have risen in value over the past few years, and billionaires see it as a safe investment. For example, from 2012 to 2021, the average value of NBA teams increased by 387%, and the average NHL team grew by 1,112% since 1996. And Manchester United arguably has a better brand and international following than any NBA or NHL team. During 2022, the average NBA team’s value rose by 15% while the S&P 500 fell by 15%. |
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Here are some reasons investors could be wary of buying Manchester United. |
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Sports teams are increasingly reliant on broadcast deals and ticket sales, and revenues for both, especially in the English Premier League, have plateaued from pre-pandemic heights. |
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A buyer of Manchester United will likely pay $6-7 billion for the club, a hefty premium. Due to the prestige that comes with owning professional sports teams, buyers are often at least overpaying in the short term. |
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The Glazers loaded Manchester United up with debt, which limits the club’s ability to grow in the near future. United’s debt could be especially troubling if its new owners accumulate even more debt to buy the club. |
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Conclusion |
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Billionaires don't just buy sports teams for the love of the game - they do it for the love of business. Owning a sports team is not just a symbol of status and prestige, but it also provides a unique opportunity to network with other wealthy business people and tap into new communities where they may have business interests. With only a limited number of major sports franchises available, competition among billionaires to purchase these assets is fierce. Yet, despite the high price tags, these teams continue to increase in value, making them a coveted investment. |
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The price tag for Manchester United is astronomical, and some may question whether it's worth the investment. However, investing in Manchester United is more than just buying a soccer team; it's investing in a cultural phenomenon that has stood the test of time. It's an opportunity to tap into the loyalty and passion of millions of fans worldwide and create a lasting legacy. |
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So while the appeal of owning a sports team may seem like a frivolous pursuit for the ultra-wealthy, there are many compelling reasons why billionaires continue to pour their resources into this industry. From networking opportunities to the chance to make a difference in the world, owning a sports team is about much more than just winning games - it's about winning at the game of business. |
