Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, particularly soccer. Investors, emboldened by the potential for financial gains and operational synergies, are increasingly acquiring stakes in multiple teams. This practice, while revealing numerous opportunities, also sparks controversies, especially in European soccer where traditional supporters often stand opposed.
A Changing Landscape
Once viewed as a novelty, MCO is now embedding itself in the fabric of the sport. From 117 teams under MCO structures in 2021, projections suggest a surge to 336 by 2024. This growth isn’t just a testament to the financial muscle behind MCOs, but also to the advancing technologies refining the model. Artificial intelligence and data analytics are increasingly playing significant roles in shaping strategies, scouting talents, and optimizing team performance.
Private equity groups have become major players in this realm. As one unnamed source highlighted, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake." This strategy often means that these groups aren't necessarily looking at long-term operational involvement but rather an eventual lucrative exit.
Financial Gains and Operational Synergies
The financial benefits of MCOs are hard to ignore. Clubs within these networks frequently enjoy a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. Furthermore, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues. "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch," noted RedBird Capital, encapsulating the strategic advantage of MCOs.
The influence of MCOs is not limited to men's soccer. Michele Kang's assertion that "multi-club ownership is ‘a necessity’ for women’s soccer to continue growing" underscores the expansion of this model across gender lines, indicating a broader impact on the sport's ecosystem.
Controversies and Opposition
Despite the apparent benefits, the surge in MCOs has not been without its detractors. Soccer supporters in Europe, in particular, are predominantly opposed to the concept. The resistance stems from a fear of losing local identity and control, and of clubs prioritizing commercial interests over sporting integrity. This sentiment is echoed across traditional sports communities, who view MCOs as a threat to the age-old traditions of the game.
However, large-scale legislative intervention to roll back MCOs appears unlikely. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests," a source commented, highlighting the improbability of such drastic measures.
Case Studies and Current Trends
The success stories of prominent MCOs illustrate the model's potential. The Red Bull group’s ownership of multiple clubs worldwide, including RB Leipzig, NY Red Bulls, and Red Bull Salzburg, is a case in point. Similarly, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises in baseball and has contracts with MLB to negotiate national sponsorships for all these teams.
In the burgeoning ecosystem, Profluence Capital is another notable entity looking to create a multi-club ownership structure, indicating a trend towards consolidation and streamlined operations within the sports industry.
Challenges Ahead
Despite the promising outlook, MCOs face significant risks. Financial institutions' unwillingness to meet profit targets could lead to "fire sales," where players are sold off, leading to potential relegations for the respective clubs. This scenario underscores the precarious balance MCOs must maintain between financial objectives and sporting success.
Furthermore, permanent capital remains a crucial element. RedBird Capital remarked, "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet." This highlights the evolving financial landscape and the importance of stable, long-term investment in sustaining MCOs.
The Road Ahead
The rapid rise of multi-club ownership is reshaping global sports, bringing about unprecedented changes and challenges. As the model continues to evolve, the industry must navigate the fine line between financial imperatives and preserving the core values that fans hold dear. With no signs of legislative rollbacks and technological advancements further enhancing the model, multi-club ownership appears to be here to stay, heralding a new era in the world of sports.