Multi-Club Ownership: Transforming the Global Sports Landscape
Multi-club ownership (MCO) is rapidly revolutionizing the world of sports, notably in the soccer arena. Investors are increasingly acquiring stakes in multiple teams simultaneously, reshaping both the opportunities and controversies within the sport. This trend isn't confined to soccer alone; it extends its influence across various sports, reflecting a surge in global investments driven by sophisticated strategies and technological advancements.
Private equity groups are at the forefront of this movement. Often, their goal is clear: secure an exit strategy rather than entangle themselves in prolonged operational commitments. As one insider pointed out, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake." This pragmatic approach towards investment is not just about immediate gains but also about smart, strategic exits that ensure profitability.
The significant uptick in multi-club ownership, particularly within European soccer, brings mixed reactions. While supporters of this model highlight the financial and operational synergies, traditional soccer fans express staunch opposition. Michele Kang asserts, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing," emphasizing the potential benefits for the sport's development. However, this sentiment isn't universally shared among fans.
Despite the prevalent opposition, clubs within MCO networks often witness substantial increases in commercial revenues, thanks to shared sponsorship deals and global branding efforts. Reports indicate a 20-30% surge in these revenues, showcasing the tangible benefits of MCO structures. Moreover, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in similar leagues. These statistics reflect the financial prowess and market influence wielded by MCOs.
Technological Advancements and Economic Impact
Technological advancements play a pivotal role in refining the MCO model. Artificial intelligence and data analytics are increasingly employed to enhance decision-making and streamline operations across various teams under the same ownership. This tech-driven approach not only boosts efficiency but also fosters a unified vision across the network of clubs.
However, the financial landscape isn't always rosy. Intense pressure to meet profit targets can lead to "fire sales," where clubs offload players and face potential relegation. Such scenarios pose significant risks, especially when financial institutions exhibit reluctance in achieving desired profit margins.
RedBird Capital highlights the broader benefits, commenting, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch." This perspective underscores the interconnected efficiencies and strategic advantages inherent in the MCO model. Moreover, permanent capital is seen as an ideal fit for sports investments, even though, as RedBird Capital points out, "the public markets aim to serve that, they’re not ready yet."
Expanding Horizons: Beyond Soccer
The influence of MCOs isn't limited to soccer alone. Diamond Baseball Holdings (DBH) exemplifies this trend in baseball, owning 35 of the 120 affiliated minor league franchises. DBH's extensive network enables them to negotiate national sponsorships effectively, amplifying their commercial impact. Similarly, Profluence Capital is exploring ways to create a robust multi-club ownership ecosystem, indicating the expanding reach of this ownership model.
The rapid proliferation of MCOs is evident. From 117 teams in 2021, projections suggest this number could balloon to 336 by 2024. This exponential growth highlights the increasing attractiveness and potential profitability of multi-club ownership across sports. High-profile examples like Red Bull, which owns multiple clubs worldwide—including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino—further illustrate the global expansion and ambition driving this trend.
Case Study: Westchester SC
Westchester SC's recent achievements underline the impact of savvy management and strategic investments within an MCO framework. Securing the second-largest jersey sponsorship deal in the USL and signing a former Premier League player for his final career stage are significant milestones that demonstrate the club's aspirations and market savvy. Remarkably, Westchester SC set records by transitioning from an expansion agreement to a public announcement in just four months, showcasing the efficiency and dynamism possible under an MCO structure.
As the landscape of global sports continues to evolve, the rise of multi-club ownership signals a paradigm shift. The financial benefits, coupled with technological advancements, present compelling arguments for its continued growth. However, balancing these advantages against the staunch opposition from traditional sports communities remains a challenge. With large-scale legislative intervention deemed improbable, the future of MCOs appears set for further expansion and influence.