Selling Soccer Clubs

2 good articles from the Observer this weekend on EPL clubs selling out to overseas investors:

The big sell out

With nine top-flight clubs under foreign ownership - and more set to follow - what is our national game in danger of losing, asks Tom Bower.

The Observer
July 29, 2007 6:09 PM

No other country allows the crown jewels of their major sport to become the uncontrolled playthings of investors whose backgrounds remain untested. The Football Association’s failure to investigate properly the background of the foreign nationals buying top clubs or their growing influence on the sport heralds the end of the Premier League as an English institution. Persuaded that football’s only hope of survival is spending unlimited millions of pounds, the game’s administrators have swallowed the myth that the Premier League can flourish only by unquestioningly allowing a wholesale takeover by foreign investors. The silence and self-inflicted paralysis in Soho Square is endangering the whole of English football.

The rot started when Roman Abramovich, the Russian oligarch, was allowed to buy Chelsea in 2003, despite the controversial origins of his fortune. Many Chelsea fans believed that Abramovich’s billions would not have any negative effects on football in England. Standing on the sidelines, the FA and even the government, with powers to scrutinise any directors seeking to control a public company, allowed Chelsea to become an oligarch’s toy without heeding the warnings that, while Abramovich’s love of football seemed genuine, his money would destabilise the Premier League. The predictions were accurate.

Four years later, the billionaire’s investment looks shrewd. Having paid 150m for Chelsea, Abramovich could now resell the club for at least 500m. Over the next two years, the majority of Premier League clubs are destined to be owned by foreigners. Premier League football will not be played for English fans, but for one billion paying spectators on global television. Financially that might be rewarding for rich investors and for the players themselves, but the benefit for fans and for the national team is questionable. The English game, some believe, is facing a fatal blowback.

Richard Scudamore, the gung-ho chief executive of the Premier League, has welcomed foreign takeovers as ‘irresistible’. Their millions, he predicted some years ago, would enhance the game. Thanks to foreign players and foreign money, the Premier League has certainly become the world’s wealthiest, most watched and admired national competition. But Scudamore now risks being devoured by his new paymasters and the consequences for English football could be catastrophic.

Over recent weeks, some of the nine foreign owners of Premier League clubs have been quietly discussing Scudamore’s dismissal and his replacement by a non-British executive. Their motives are financial. Having spent millions to buy the clubs and many more millions on foreign players, they are impatient about inadequate profits. Scudamore, they complain, is an amateur compared to his American peers. ‘Only the Americans know how to really market the Premier League brand,’ says a football agent close to the foreign owners. ‘They’ve got Scudamore with his unsophisticated “Third World” mentality. A proper marketing expert could earn millions more from the most exciting sporting fixture in the world.’ To maximise the profits, the foreign investors argue, the Premier League should be rebranded and marketed like Coca-Cola.

In his defence, Scudamore can parade the high fees being paid by Asian television companies for the rights to show Premier League matches. In Hong Kong, the host broadcasters have just paid $200m (100m) to screen the next three seasons’ matches, which amounts to about $10 spent per match for each viewer. In Singapore, the TV rights were sold for $160m over the same period. The biggest area of potential growth is China, which has paid $50m but is identified as a future bonanza. Those deals will contribute 625m to the Premier League over the next three years. And that’s the rub. While Scudamore practically doubled the league’s income over the previous contract, the new foreign owners want more. The recent tours by Chelsea, Liverpool and Manchester United to America and the Far East and South Africa are as much about long-term marketing as generating immediate income.

Scudamore’s successor is likely to be an American without any interest in the 37,500 English clubs affiliated to the Football Association, or the Premier League clubs’ commitment to the England team. The Premier League’s relationship with the FA, already frail as a result of Scudamore’s disdain, would be further jeopardised. With at least four more Premier League clubs, including Everton, Arsenal and Fulham (owned by the would-be Brit Mohamed al-Fayed) expected to be sold over the next year or so, the balance of power is inexorably tilting in the foreigners’ favour.

No alternative scenario seems feasible. To remain in the Premier League with a chance of qualifying for the lucrative Champions League requires tens of millions of pounds to buy new players. Liverpool, for instance, have just signed the young Spain striker Fernando Torres for an improbable 26m, a club record. One of Liverpool’s main rivals, Arsenal, have in recent seasons begun to struggle because much of the club’s money was spent on a new stadium, the 60,000-capacity Emirates, rather than players. Depressingly, none of the club’s potential buyers is English. That is consistent with the absence of any Englishmen offering to buy West Ham, Aston Villa or Portsmouth. Even Liverpool were never destined to be bought by a wealthy local fan. The English are cashing in their national sport to earn fast money. Greed is not the only reason. No Englishman, it seems, has the vision and ability to secure an adequate profit from Premier League football as an owner.

Daniel Levy, chief executive of Tottenham, would accept, it appears, an offer at 200m for the club (his company ENIC bought an initial 29.9 per cent share in Spurs in 2000 for 22m and now owns 66 per cent), while Danny Fiszman, one of Arsenal’s major shareholders, would agree to sell his shares if the club were bought for 400m, plus 300m of debt. There is no shortage of bidders for Arsenal. Boris Berezovsky, the fugitive Russian oligarch, unsuccessfully negotiated to buy the club and, like other oligarchs, oil sheikhs and Asian magnates, is still hunting for his prize. Their reasons are obvious: the international status of owning a Premier League club far outshines possession of aluminium plants and oil wells. Their motives are little different from generations of British owners. Sitting in the directors’ box, surrounded by thousands of screaming fans, and looking down at ‘your’ team does wonders for the ego. Does it matter if Doug Ellis at Aston Villa sells out to an American or Terry Brown at West Ham is replaced by an Icelandic biscuit tycoon? Certainly, few would see little reason to cry that Ken Bates, previous owner of Chelsea, has been swapped for Abramovich.

Pini Zahavi, the Israeli agent responsible for brokering Abramovich’s purchase of Chelsea, Alexandre Gaydamak’s takeover of Portsmouth, and Kia Joorabchian’s failed bid for West Ham, epitomises the unsentimental predator. ‘What’s the problem?’ he asks rhetorically. ‘Britain has sold its banks, its gas, electricity and water supply companies and even its airports to foreign companies.’ Laughing, he adds: ‘Ninety per cent of Mayfair is foreign owned and sometimes all of Arsenal’s team is foreign, so why not the football clubs? Honestly, I can’t understand what difference it makes.’

The difference is that football is not a utility or a bank, but part of the fabric of England, uniting so much of the nation in frenzy and depression during international competitions such as the World Cup. That communal glorification is already threatened by the rising costs of watching Premier League matches. With the exception of the top-six clubs, spectators are increasingly deterred from watching less glamorous matches from the stands because of excessive ticket prices and the amount of football shown on television. More insidious is the growing habit by the managers of the star clubs to ‘rest’ their best players in matches against their inferior rivals and in cup matches. That disappoints the fans, is a step towards potential match-fixing and hastens the introduction of a European super league, a poisonous scheme for English football.

The only possible block to a complete foreign takeover of the game at the highest level would be the Football Association. Notorious for freebies and fiefdoms, the FA’s executives and members are stubbornly loath to reform themselves. Ineffective to prevent corruption by agents, remove conflicts of interest among club owners (such as Chelsea’s flagrant disregard for protocol when they tapped up Arsenal’s Ashley Cole in January 2005) and control the spiralling prices and wages for players, they have meekly accepted their impotence at the power of the Premier League. Outwitted first by Scudamore and now by the foreign owners, the FA are powerless to persuade football’s new tycoons to develop and sustain the sport at a local level.

In those circumstances, English football could be said to be fortunate that foreigners have come to the rescue. Sky - owned by a naturalised American - and the major clubs owned by foreigners have invested enough money to save English football from its mounting debts. The downside is that the foreigners understandably appear only interested in personal wealth and glory. None is genuinely interested in investing in British youth or re-establishing closer relations between the clubs and the fans, or encouraging football’s grassroots in order to strengthen the national game. According to former West Ham chairman Terry Brown, who was replaced at the East End club when an Icelandic consortium bought them for 85m, his successor, Eggert Magnusson, has made little effort to retain the club’s relationship with local charities and council officials. (When contacted, West Ham said they would shortly be announcing ‘two initiatives’ with local charities.)

So far, foreign players and managers have been tolerated because the game remained under English control. The first foreign takeovers were seen as eccentric but not threatening. That will change if Americans, Russians, Arabs and the odd shady Thai politician execute a wholesale takeover.

Not only would the game lose its English identity but, more important, the FA’s benign influence would be further eroded. Impotent against the foreign investors, the FA would find it increasingly hard to organise and train the England team and adequately police the rules about the registration of players and financial probity. As the divorce between the FA and Premier League solidified, loyal fans could well become disenchanted by the internationalisation of their clubs. The blowback for the investors would be empty seats in the stadiums reflecting the fans’ anger that their passion had become a plaything for remote speculators.

Tom Bower is the author of Broken Dreams: Vanity, Greed and the Souring of British Football (Simon & Schuster)

What money can’t buy

In the rest of Europe, they know the value of a club’s soul - which is why no billionaire could prise Barcelona from their fans.

David Conn
July 29, 2007 6:16 PM

Possibly the lowest point in the English football authorities’ limp efforts to do or say anything about the buying and selling of our great clubs was reached shortly after the Glazer family succeeded in their bitterly contested takeover of Manchester United in May 2005. The family’s acquisition had been opposed by the directors and most of the fans, who argued that the Glazers had no discernible connection to the club and were planning to load it with the costs of their takeover. That fear has since proved well founded - United now owe 660m to the financial institutions that backed the Glazers.

United’s dashing title win last season and the cash spent on new players this summer have created a general impression that the takeover has done the club no harm. But the money for players can only be found after 62m in interest alone has been shipped annually out of the club. Armchair fans around the world may be oblivious to the debt, but at home United fans are indignant about the steepling season-ticket price rise, announced just as the richest ever TV deal pours into the Premier League. Old Trafford season tickets have risen 14 per cent, and, in addition, fans will be charged automatically for every cup match United play at home, perhaps another 300. They may be league champions again, but the club’s season-ticket waiting list is disappearing. In July, they announced they had season tickets on open sale, priced 570 to 722, for the first time in more than a decade.

The FA had no rules to prevent the takeover or even enable it to express a view, nor does the government have any legal framework to protect sports clubs, or sport itself, from being treated as just another business. In Britain, we say we value sport, but we have never taken the trouble, formally, to treat it as a distinct social and cultural activity with inherent values, as many other European countries have. Football fans here pledge lifelong loyalty to their clubs, but the clubs are all companies, increasingly bought by billionaires looking to make even more money.

The FA once took a robust view that clubs were not there for owners or directors to exploit. In 1899, just as professional, commercialised football was taking off, the FA imposed rules to protect the clubs’ sporting heart. These allowed clubs to form limited companies, but prohibited directors from being paid, restricted the dividends to shareholders, and protected grounds from asset-stripping.

Later codified as the FA’s Rule 34, these restrictions established the culture that being a club director was a form of public service, that directors should be ‘custodians’, to support and look after clubs. There never was a golden age of selfless club owners, but the system of clubs as not-for-profit companies did provide the basis for their phenomenal growth. Fans were never overcharged, which helped to encourage loyalty and return visits. But it was not all good news: lack of investment led to decrepit facilities, a failure to deal with hooliganism and crumbling and unsafe grounds.

The FA and their rules were in need of updating as football itself changed and modernised, but instead they surrendered completely. When, in 1983, Irving Scholar’s Tottenham Hotspur became the first club to announce the intention of floating on the stock market, the club’s advisers asked the FA if Spurs would be free to form a holding company to evade the FA’s restrictions on dividends and directors’ salaries. The FA, who have never explained why, permitted Spurs to do what they wanted. Every other club that floated after that formed holding companies similarly, to bypass the FA’s rules.

Football clubs became companies for sale like any others, against the ‘heritage’ and rules once insisted upon by their governing body. No other country has a perfect system, but in Spain the tradition of the membership club survives. Barcelona and Real Madrid are both owned by members who democratically elect a president and board. The clubs are resented for receiving the largest share of Spanish football’s TV money and are ruthlessly ambitious, but nevertheless Barcelona, particularly, embody a sense of belonging in their very structure. When Roman Abramovich went looking for a major club to buy in 2003, he considered first Barca and Real, but discovered that, because they were member-owned, they were beyond his reach. Spanish clubs that were in debt in the early 1990s were required by law to convert to limited companies but, alongside Barca and Real, Athletic Bilbao and Real Sociedad survive as member clubs and bastions of Basque belonging.

In Germany, the football association stipulate that Bundesliga clubs must be 51 per cent owned by their members, the fans. This is one part of a general policy maintained by the German FA that clubs should remain connected to their local communities, with prices affordable to young and poorer people. At Schalke 04, entry to league matches at the magnificent 62,000-capacity Veltins Arena (including safe, modern terracing for 17,000 people to stand) begins at 9 (6).

In Italy, the clubs have long been owned by businessmen or, as with Juventus and Milan, by corporations. In theory the clubs could have been ripe for takeovers, but US-leveraged buy-out investors see England, not Italy, as the honeypot. Abramovich is said to have looked at the Italian giants, but Fiat and Silvio Berlusconi’s Fininvest are not for selling Juve or Milan, which add prestige to their corporate, and in Berlusconi’s case political, image.

The sale of clubs to foreign tycoons has enabled the most recent generation of English ‘custodians’ to earn once-unthinkable personal fortunes. Martin Edwards made a reported 93m from selling his Manchester United shares on the stock market, before the Glazers bought the club. West Ham chairman Terry Brown made more than 30m from the sale of his shares to the Icelanders, and so it goes on.

The arriving foreign businessmen, and the top clubs, say what is happening is all for the good, a sign of the Premier League’s international success and desirability. But the relationship between sport and business is much more complicated than that; it is about more than money and television rights.

Elsewhere in Europe - and here when the FA knew their role - there have been attempts to define that relationship, to develop rules to protect the larger meaning and purpose of sport. Years ago, sadly, the FA gave up, and while our government talks of its love of sport, it will not assert itself. So, in English football’s richest era, the greatest clubs have been up for sale, the buyers welcomed with a handshake and with just a feeble plea in their ear from the governing body, asking if they might be kind enough to respect the game’s ‘heritage’.

David Conn writes for the Guardian and is the author of ‘The Beautiful Game?’