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Professional football — business or sport?

Walter Scott

Tuesday, April 20, 2021

THE European media, politicians, and fanatics, aka fans, have all gone ballistic since the announcement late Sunday night of the formation of the European Super League (ESL) by 12 of Europe's largest and most powerful football clubs. This is, perhaps, the most appropriate metaphor to use to describe the conjoint reaction stated above since the clubs have triggered the “nuclear” option.

The harshest criticisms are that the ESL will be a closed shop, the clubs have put money above all else, and it will deprive lesser clubs of revenue.

British opinion writers have been furious as they see the ESL with its closed-shop approach as destroying the romanticism of the game. The prospect of neither promotion nor relegation is an existential sporting crisis. Upward sporting mobility, for small clubs, will not only no longer be possible but will no longer be even a dream.

Large doses of vitriol are being spewed by the British press, the fans, and even the UK prime minister on the Big Six English clubs which have signed on for the ESL. Manchester City, Manchester United, Liverpool, Chelsea, Arsenal, and Tottenham Hotspur are being shellacked.

But what are the facts?

i) Football is the world's sole truly global sport.

ii) Football in the UK and Europe has operated for over 100 years on a system that incorporates promotions and relegations.

iii) North American professional sports leagues all operate on the closed-shop principle. Thus, the National Football League (NFL), the National Basketball Association (NBA), Major League Baseball (MLB), the National Hockey League (NHL), and even Major League Soccer (MLS) all operate on the closed-shop principle. The leagues are all both profitable and successful. The fans in the USA are not pining for promotion or relegation. They all want only champions!

iv) According to Forbes magazine the most valuable sports teams in the world in 2020 (in US dollars) are:

1) Dallas Cowboys - US$5.5b

2) New York Yankees - US$5.0b

3) New York Knicks - US$4.6b

4) Los Angeles Lakers - US$4.4b

5) Golden State Warriors - US$4.3b

6) Real Madrid - US$4.24b

7) New England Patriots - US$4.1b

8) Barcelona - US$4.02b

9) New York Giants - US$3.9b

10) Manchester United - US$3.81b

11) Los Angeles Rams - US$3.8b

12) San Francisco 49ers - US$3.5b

13) Chicago Bears - US$3.45b

14) Los Angeles Dodgers - US$3.4b

15) Washington Football Team - US$3.4b

16) Boston Red Sox - US$3.3b

17) Chicago Bulls - US$3.2b

18) Chicago Cubs - US$3.2b

19) New York Jets - US$3.2b

20) Boston Celtics - US$3.1b

21) Houston Texans - US$3.1b

22) San Francisco Giants - US$3.1b

Forbes stated the following as its methodology:

“The franchise values are based on Forbes' published valuations during the past 14 months, with additional reporting by Mike Ozanian and Christina Settimi. The most recent soccer valuations were published in May 2019. Team values reflect enterprise values (equity plus debt). No teams from the NHL, Nascar, MLS, or Formula One made the top 50. The highest-ranking franchise outside the NFL, the NBA, MLB, and European soccer was hockey's New York Rangers, at 70th, with a value of US$1.65 billion.”

v) None of Juventus, Inter Milan, Chelsea, Arsenal, Liverpool, or Tottenham Hotspurs are in the top 20 most valuable sports teams.

vi) Manchester United is owned by the Glazier family, which owns the Tampa Bay Buccaneers [earlier this year it won the Super Bowl], Liverpool FC is owned by Fenway Sports Group out of Boston, USA, which also owns the Boston Red Sox MLB team. Arsenal FC is owned by the American billionaire Stan Kroenke, Manchester City is owned by Sheikh Mansour of Abu Dhabi. Chelsea FC is owned by the Israeli billionaire and oligarch Ramon Abramovich.

So, apart from Real Madrid, Barcelona, and Manchester United, there are no other football teams from the world's truly only global sport in the top 20 most valuable sporting teams in the world. The NFL, NHL, MLB do not represent global sports. Only football does!

Professional sports are a business. The same principles that one learns in business school are to be applied to the management of a professional sports team or league. Return on investment (ROI), return on equity (ROE), positive cash flow, net profit attributable to shareholders, risk minimisation or avoidance are all very important metrics for the business of sports.

Why should an owner invest billions of dollars in a team to risk it being wiped away after one bad season and the team is relegated to a “lower division” where basic costs cannot even be met?

I became a fan of Liverpool FC in 1970. I have remained loyal. At that time Derby County was also in the First Division. It played at the old Baseball Ground. It now plays in the EFL Championship and is currently 21st. As to Bolton Wanderers, Ricardo “Bibi” Gardener's old team, it is in League Two [the old Fourth Division], a long way from the Premier League, and was recently on the brink of extinction as it was in administration. Such are the perils of relegation and a lack of funds.

Romanticism, as emotionally powerful as it is, respectfully, is for amateur sports. It has no place in pro sports. My NFL team, the Chicago Bears, has not won a Super Bowl since 1984. Yet, it is in the top 20 most valuable sports teams — valued US$3.45 billion. In the period 2019 to 2020 Liverpool FC won the European Championship, the Premier League, the World Super Cup, and World Club Championship, yet it cannot make the top 20 most valuable sports teams in the world.

Investors in sports teams have other investment options. If professional football does not create a business model that minimises the inherent investment risk (relegation) and maximises value inclusive of profits, football will become an 'also ran' in professional sports. There will be many more Bolton Wanderers.

Walter Scott is a Queen's Counsel, president of Kingston Cricket Club, and chairman of Supreme Ventures Enterprises Inc.