Multi-club Ownership: The Future of Global Sports or a Controversial Trend?
Multi-club ownership (MCO) is reshaping the fabric of global sports, most visibly in the world of soccer. This emerging trend involves investors and private equity groups acquiring stakes in multiple teams simultaneously, a strategy that carries both promising opportunities and notable controversies.
The Investment Game
Investors in multi-club ownership are not just in it for the love of the game. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," reveals an unnamed source. Essentially, these investors aim for an eventual exit strategy rather than long-term operational involvement, eyeing a profitable sell-off down the line. This approach is reshaping the economic landscape of sports, particularly in European soccer.
Economic Benefits and Market Value
One of the clear advantages of MCOs is the boost in commercial revenues. Clubs within these networks often experience a 20-30% increase in commercial profits, thanks to shared sponsorship deals and global branding efforts. This synergy creates an ecosystem where best practices and operational efficiencies are shared across all owned properties. RedBird Capital notes, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
The impact on market value is equally significant. The average market value of MCO-affiliated clubs is estimated to be 15-25% higher than that of independently owned clubs in comparable leagues. This increase in valuation is driven by pooled resources, enhanced scouting networks, and bulk commercial deals.
Technological Advancements
As technology advances, the MCO model is becoming more refined. Artificial intelligence and data analytics are playing crucial roles in optimizing the operational strategies of these multi-club networks. These technologies help in almost every aspect, from player recruitment to performance analysis, making the MCO approach more effective and efficient.
Controversies and Opposition
Despite the economic gains, MCOs face substantial opposition, particularly from traditional sports communities and soccer supporters in Europe. The idea of clubs losing their unique identities and becoming cogs in a larger corporate machine does not sit well with fans. Legislative intervention to roll back MCO structures appears improbable, as another unnamed source explains, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)."
Financial Risks
The financial risks associated with MCOs cannot be overlooked. Should financial institutions fail to meet profit targets, the pressure might lead to "fire sales," where clubs are forced to sell off players, potentially leading to relegations and destabilizing the teams involved.
Impact on Women's Soccer
The influence of MCOs extends beyond men's soccer, touching women's soccer as well. Michele Kang notes, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." The shared resources and structured investments can significantly propel the visibility and development of women's teams worldwide.
Case Studies: Red Bull and Diamond Baseball Holdings
MCO structures are not exclusive to soccer. Red Bull owns a slew of clubs worldwide, including notable names like RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. These clubs benefit from shared branding and marketing efforts, creating a cohesive global sports brand.
In baseball, Diamond Baseball Holdings (DBH) exemplifies the MCO model. DBH owns 35 of the 120 affiliated minor league franchises and has contracts with MLB to negotiate national sponsorships for all minor league teams. This centralized approach aids in generating consistent revenue streams and stabilizing financial operations across multiple teams.
The Future Outlook
The trajectory of multi-club ownership suggests that it is here to stay and will continue to shape the world of sports. With the number of soccer teams under MCO structures projected to surge from 117 in 2021 to 336 by 2024, the trend seems unstoppable. Even new players like Profluence Capital are eyeing the creation of multi-club ownership ecosystems. Clubs such as Westchester SC are already making significant strides, inking one of the largest jersey sponsorship deals in the USL and setting records for rapid expansion announcements.
Ultimately, while multi-club ownership brings undeniable financial and operational advantages, it also poses challenges and stirs controversy. The future of this model will hinge on balancing economic gains with maintaining the traditional values and passions that make sports so compelling for fans worldwide.