Is it a good idea to buy a soccer club?

Analysis: in a highly unusual situation, two of the world’s biggest soccer clubs, Manchester United and Liverpool, might be up for sale. Why is that?

Recent weeks have seen a lot of changes in the world of soccer and it’s all a little bit unusual. Manchester United owners, the Glazer family, have confirmed they are open to a full sale of the club, while Liverpool chairman Tom Werner has also confirmed that the club, owned by Fenway Sports Group (FSG), is “exploring a sale”.

In May 2022, Chelsea Football Club was sold to a consortium led by an investment group for £2.5 billion. In January 2022, Southampton confirmed the club’s takeover by investment firm Sport Republic. In October 2021, the Premier League confirmed the sale of Newcastle United to a Saudi Arabia-based consortium, in a takeover worth more than £300 million.

“When clubs go up for sale it’s actually quite unusual that they’ll say that it’s up for sale,” says Dr. Robert Butler, lecturer in UCC’s Department of Economics and expert in sports economics. “Because the minute something goes officially for sale, the value is affected. They always like to at least present the illusion that they’re not for sale, so that if somebody wants to buy these assets, they have to pay a premium, right ?”

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“They’re rarely for sale. They’re rarely like a house. I’m talking about the elite clubs here, because the owners are trying to protect the value,” says Butler. “But there’s been quite a few sales in the last couple of years and the fact that Manchester United and Liverpool might be for sale, that’s quite unusual. They don’t come for sale that often, because there’s only 20 clubs in this elite league [the Premier League]. You can actually break it down further and say, but how many of them are actually highly elite? You’re talking six or seven, because there’s always the threat of relegation.”

What is behind all these clubs being for sale?

There could be two possible reasons why we’re seeing a number of sales or possible sales of soccer clubs in the last 12 months; the first is economic and the second is the sporting motivation. Butler references Jonathan Clegg and Joshua Robinson’s The Club: How the Premier League Became the Richest, Most Disruptive Business in Sportwhich looks at how these clubs have developed commercially over the last three decades.

“It argues, rightly so, that the value of these clubs has just exploded over the past 30 odd years. “Liverpool was bought for, I think it was £300 million in 2010, although it was in a bit of trouble. But they estimate it could be worth somewhere between £2 and £5 billion now. So I think you’ll hardly find an asset on the planet that has increased in value by that much.”

From RTÉ Radio 1’s Today With Sean O’Rourke in 2019, interview with Joshua Robinson about his book The Club: How The Premier League Became The Richest, Most Disruptive Business In Sport

“So what Robinson and Clegg said, is that actually what these owners are doing is what they call “fattening the pig”. They’re getting it, they’re looking after it and keeping it, maintaining it, making sure it doesn’t t get relegated, and allowing the value of the asset to just increase, almost on its own. And then, moving it on.”

Butler says that it would be an “extraordinary piece of business” if FSG were to “take something for £300 million and sell it out a decade later for £3 billion”. “It would also be extraordinary, because Liverpool has actually been very successful on the sporting pitch,” he explained.

“One of the characteristics these clubs have started to display is, as long as you don’t get relegated from the Premier League, it doesn’t really matter how you do. In terms of the commercial success, the value of these clubs is just going up and up and up [soccer club owners] can operate under two economic principles, generally; they can be win-maximisers or profit-maximisers.”

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Fans prefer a win-maximising owner, says Butler, one who “spends lots of money, buys lots of players and makes the team better. If the owner is interested in just making money, all they have to do is make sure the club tips over, stays in the Premier League, finishes in the top half. Anything beyond that is a bonus. So winning a competition or winning the league is this bonus and it’s usually a sporting bonus that makes the fans happy.”

Soccer has also become a much more “affluent” product, Butler highlights; broadcasting rights have exploded, merchandising keeps getting bigger and the price of a ticket is going up as the demographic of those going to matches has changed. “Going to a match is quite expensive, it wasn’t like that in the 70s or 80s,” he says.

“To own a Premier League club now you kind of have to be a billionaire. There was a time when you could just be a millionaire. The idea of a kind of local millionaire owning a club, which was the case traditionally in England for decades , you can’t really compete at that level anymore.”

Club ownership has now moved into the sphere where the state owns some of the biggest clubs. This seemingly unlimited pot of money has also upped the game and might be driving the will to sell, Butler says. “Manchester City are owned by a state essentially, Paris Saint-German are owned by a state, now Newcastle are owned by a state — and if you look at what’s happened in Newcastle since that takeover, they just got stronger and stronger and stronger. They seem to be charting the same course as Manchester City. So from a sporting perspective, if you were Liverpool or Manchester United, or Tottenham or Arsenal, you might be getting concerned.”

“Manchester City were in League One (division two) in 1999. The way Manchester City are going at the moment they’re going to dominate English football for the foreseeable future. But with Newcastle now emerging on the scene. The other club owners might be looking around and thinking, “hang on actually, can we compete in a sporting context?” Unlike even the wealthiest owners two decades ago, including the likes of Roman Abramovich, club owners now have no “upper limit” on what they can spend , they “have so much money, they’re not constrained by the profit motive,” says Butler.

Concerns, particularly from fans, about the financial regulation and sustainability of the game led to the ‘Fan-Led Review Of Football Governance’ in the UK in 2021, which made 10 recommendations to the government, one of them being the introduction of an independent football regulator. “There’s a huge public good element to these English clubs,” says Butler. “These football clubs, that are in many cases 100 and 150 years old, they have their origins in small English towns and cities that have become globally famous, but their roots are local and the community is so important. The fan base, whilst it’s global, it’s still very much local.”

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“There is a non-excludable element, which means that everybody can enjoy the success of the club, and there’s a non-rivalrous element, which means everybody can enjoy together. Which is exactly what a public good is. People in England enjoy the fact that they have a team right, despite the fact that they’re in a sense privately owned, privately managed and privately run, so you have to protect that element. That’s why a football regulator is required.”

So is it a good idea to buy a soccer club?

“If you’re a billionaire, of course, right?” says Butler. “These clubs are in an amazing conundrum in some ways. Over the last ten years they’ve been a brilliant purchase because it was like buying a house. It just exploded in value, you didn’t have to do anything other than maintain it , it’s all kind of this “fattening the pig” idea. You have to think about, what would stop that trajectory?”

There is nothing to suggest that the extraordinary rise of soccer is stopping. Most of the revenue comes from broadcasting. “How secure is broadcasting as a revenue stream? To my mind, it would seem to be really solid. For two reasons, one is that there’s no decline in the amount of games people want to watch. In fact, there’s more and more games on. You go back to the 1980s, there’s about 10 games a season, now it’s more than 200 and people watch them.”

Bids for the rights taking place in single closed-bid auctions from the likes of Sky, Setanta Sports, ESPN and BT. “Now you have the likes of Amazon Prime. With the way broadcasting is evolving, you’re likely to see others want to come into this market; it might be Disney, it might be Netflix, it might be Facebook.”

“Are the stadiums empty? Far from it. They were empty two years ago for health reasons, but fans are going back. Most Premier League stadiums sell out all the time. It’s a remarkable industry in many ways. It’s 150 years old but the level of interest is as high as ever. I mean, why would somebody not be interested in the Premier League next August? I don’t know, I can’t see a reason why. There’s incredible loyalty from the fans.”

It’s not like shopping around for the cheapest plane fare. “You don’t do that in football, you stick, you’re committed,” says Butler. Butler mentions that Manchester United owners the Glazers have estimated the global fanbase and followers to be at 1.1 billion people. If they sell, fans will be watching closely, likely hoping for a win-maximising owner over one focused on profits.

Will any of these very rich people ever buy an Irish club?

“One of the things about League of Ireland soccer is there’s always clubs going out of business,” says Butler. “We have a long list of clubs, even in recent times — Monaghan, Kilkenny, Home Farm, Saint Francis and Cabinteely — just cannot survive financially. But in the last number of years, I’m talking say the last six to eight years, a very short period of time, there’s a growing number of clubs in Ireland that seem to be running much more sustainably. One of the reasons is that they’re getting outward investment. It happened in Dundalk, they were the first to do it. Derry have been doing it recently and Shamrock Rovers and you’re seeing more and more wealthy individuals attracted to Irish clubs.”

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Butler reckons the reason we’re seeing more of this outward investment from wealthy people is because of the prize money in European soccer. “If you can qualify for Europe, the prize money rewards are massive,” he says. If I buy an Irish team and I spend half a million pounds, I probably get them into the group stage of the Champions League. Now I might get knocked out of that, but now I’m in the Europa League or the conference league. So for relatively small money I can get access to the same prize money potentially. I think that’s what’s going on, people are seeing sort of low hanging fruit or an opportunity to qualify for European competition for a relatively small cost.”

“The first mover advantage is crucial here. Because the first person that decides to do it is ahead of the game, because they’re competing against owners that are local.”

The views expressed here are those of the author and do not represent or reflect the views of RTÉ

Is it a good idea to buy a soccer club?

What is behind all these clubs being for sale?

So is it a good idea to buy a soccer club?

Will any of these very rich people ever buy an Irish club?

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