The US Gold Rush into English Football

KEY POINTS

• Undervaluation of Clubs: American investors are increasingly drawn to English football due to the global appeal and perceived undervaluation of Premier League clubs compared to US sports franchises.

• Asset Class Sport: The introduction of US sports business models—focused on commercialization, media rights, and fan engagement—is reshaping the financial landscape of English football.

• Disruption Risks: While American capital brings opportunities for growth, concerns remain about the potential disruption of traditional football structures, especially regarding relegation and fan loyalty.

👉 Bonus: Below you will find five ChatGPT prompts that you can use to develop your expertise in this area.

In the past decade, American investors have been buying into English football at an unprecedented rate. At the top of the English Premier League, 11 out of 20 clubs are now either fully or partially owned by American interests, including iconic names like Manchester United, Liverpool, Arsenal, and Chelsea—while a fifth, Manchester City, has a significant US minority shareholding. Aston Villa, Fulham, Bournemouth, Crystal Palace, West Ham and Ipswich Town also have varying degrees of American ownership. This growing American influence in a sport long dominated by local owners is reshaping the landscape of English football. The influx of capital is changing the way clubs operate, compete, and engage with fans, as well as introducing new financial strategies.

Interestingly, this influx of American capital is not limited to traditional investors; US sports stars, from NFL legend Tom Brady to NBA icon LeBron James, are also diving into football ownership. Tom has recently taken a stake in Birmingham City, while LeBron holds a minority share in Liverpool (in 2022, LeBron exchanged his Liverpool shares for a stake in Fenway Sports Group (FSG), the parent company that owns Liverpool, the Boston Red Sox, and other sports franchises). This increasing interest from athletes-turned-investors highlights football's global appeal and financial potential.

Beyond the Premier League, the trend of international investment is also playing out across Europe. For instance, in France, luxury goods magnate Bernard Arnault, along with Red Bull, is in exclusive negotiations to purchase Paris FC. Although this deal is taking place outside of England, it is indicative of the broader trend of international interest in football as a commercial and cultural asset. Arnault’s ambition to elevate Paris FC—currently competing in Ligue 2—into the elite of French football mirrors the strategy seen with American investors: a mix of financial investment, brand enhancement, and leveraging football’s global appeal.

What’s behind this trend, and what does it mean for the future of football? More importantly, what should prospective investors in the sport consider before jumping in?

Why the Surge in American Investment?

At first glance, the motivation behind this surge in American investment in English football seems simple: financial opportunity. Compared to US sports franchises, English football clubs appear undervalued. For example, in 2022, Chelsea sold for around £2.5 billion ($3.1 billion), which pales in comparison to the average valuation of an NFL franchise of $5.1 billion and the NBA franchise of $3.9 billion. For American investors, European football presents an opportunity to enter a market with global appeal at what appears to be a relative bargain.

Additionally, the potential for brand expansion is enormous. The English Premier League’s broadcasting reach is vast, attracting over 1.87 billion people every week across 189 countries. This global appeal creates lucrative media deals and drives commercial income, making it a prime target for US investors accustomed to the high broadcasting revenues seen in the NFL or NBA. In 2022, NBC Sports paid a staggering $2.7 billion for six-year rights to broadcast Premier League matches in the US.

For US investors, these broadcasting deals—combined with growing American interest in the sport—create potential for even more lucrative returns. While the NFL dominates the US sports market, the Premier League is steadily expanding its foothold in American households, aided by increased accessibility through streaming services and media rights. For US-based investors who understand the power of global branding, the Premier League offers a platform to reach millions of new customers, far beyond traditional fan bases.

Moreover, American investors are keen to apply the commercial strategies that have made US sports leagues highly profitable. Leveraging media rights, maximizing sponsorships, and creating exclusive content are all methods that can transform a football club's bottom line. Manchester United, for instance, has pioneered such strategies by selling global sponsorships for everything from snack foods to car tires, creating diversified revenue streams.

Furthermore, Football clubs offer something unique compared to traditional businesses: intense fan loyalty. Clubs are cultural institutions where brand loyalty runs deep. Even during financial downturns, fans continue to support their teams. This kind of devotion is rare in other industries, where consumers may switch brands in search of better deals.

In essence, US investors see the potential for these clubs to appreciate significantly in value, especially given the worldwide reach of football, which is unmatched by any American sport.

A discussion between Frida AI Fridason (Entrepreneur & Advisor, former S(ai)lor) & Tom AI Tomson (Entrepreneur & Investor, former Mount(ai)n Biker) on the topic:

Be aware that this is one of our AI experiments, so Frida and Tom don’t really exist.

👉 You can find our other podcasts collected in our Athletes in Business Lounge.

What US Investors Bring to the Table

One of the defining characteristics of American investment in English football is the application of US sports business models, especially around commercialization and fan engagement. In the US, sports teams are seen as entertainment assets, and owners relentlessly pursue revenue streams through broadcast rights, merchandise sales, and premium experiences. Many Premier League clubs are adopting these tactics to "sweat the asset," as evidenced by increasing ticket prices and a growing number of global partnerships.

For example, Chelsea's new ownership under the Clearlake-Boehly consortium has embraced high-spending strategies, coupled with innovative financial techniques such as offering longer player contracts. This practice helps clubs avoid UEFA’s financial sustainability rules, although such loopholes are now being closed.

American investors are also more willing to experiment with new revenue sources. Todd Boehly, Chelsea's co-owner, has publicly suggested introducing an All-Star game similar to those in US sports leagues. While this idea has been met with skepticism by traditionalists, it highlights a broader push to make English football more profitable by integrating aspects of US sports culture.

The Relegation Risk and the American Approach

However, one of the biggest differences between US and European sports is the concept of relegation. In US sports, teams compete in closed leagues, meaning that no matter how poorly a team performs, it won’t face the financial devastation of being dropped to a lower division. In English football, relegation from the Premier League can cost a club hundreds of millions in lost revenue.

For American investors accustomed to stable franchises, the risk of relegation is a concern. Some have speculated that the long-term goal for these investors might be to eliminate relegation altogether, creating a closed system similar to the NFL or NBA. In 2021, American-owned clubs were key proponents of the failed European Super League project, which would have created a permanent top-tier league for elite European clubs. While the backlash to that plan was fierce and led to its quick collapse, it’s clear that some investors see relegation as an obstacle to predictable, long-term profitability.

The Financial Stakes: Debt and Leveraged Buyouts

One of the key concerns about American ownership is the financial models used to purchase and run clubs. The Glazers’ acquisition of Manchester United in 2005 is a textbook example of a leveraged buyout (LBO), where the club essentially bought itself by taking on debt secured against its own assets (£600 million secured on its own assets). While this model is common in the corporate world, it was a shock to the football community, where clubs had traditionally been run debt-free.

Since the Glazer takeover, Manchester United has paid nearly £1 billion in interest on its debt (cumulative interest costs of £969 million since the takeover in 2005), leading to widespread fan protests. Despite this, the club’s value has soared to $6.55 billion (£5 billion), and the Glazers stand to make a significant profit should they choose to sell.

Other American investors have used similar models, borrowing heavily to fund acquisitions. This has led to concerns about the long-term sustainability of such practices, especially if a club’s on-field success begins to wane. Investors looking to enter the English football market need to be aware that while leveraged buyouts can generate high returns, they also come with high risk, particularly in an environment where a single bad season can result in relegation and a steep loss in revenue.

For investors considering entering the football market, there are several factors to keep in mind:

• Understanding Club Valuations: Valuations for football clubs go beyond simple balance sheets. Investors must consider not only revenue streams and assets like stadium ownership but also intangible factors such as global fan engagement, brand value, and performance on the field. Clubs with strong global brands and high social media followings can command a premium.

• Understand the Risks: Relegation is a unique risk in football, and while it can be mitigated by strong management and investment, it cannot be eliminated entirely.

• Managing Financial Fair Play (FFP) Regulations: UEFA’s FFP rules are designed to ensure clubs don’t spend beyond their means. Understanding these regulations—and any potential loopholes—is critical. The Clearlake-Boehly consortium used longer player contracts to spread costs, but such loopholes are closing.

• Focus on Global Reach: The Premier League’s global audience is one of its biggest assets. Investors who can tap into this market through strategic partnerships, merchandising, and media rights will be well-positioned to succeed.

• Sustainability and Debt: The use of debt to finance football clubs is common but risky. Leveraging a club’s assets to fuel growth can backfire if the club’s performance on the pitch falters.

• Fan Relations: English football fans are fiercely loyal but also highly protective of their clubs. Investors must be prepared for pushback, especially if they seek to impose changes that are seen as undermining the traditions of the game. As shown with protests over the European Super League, fans are deeply protective of football’s traditions, and investors that push too far risk backlash.

Ultimately, the future of English football will likely be shaped by a combination of old-world tradition and new-world capital. For now, American investors are here to stay, and as they continue to pour money into the game, they will have a significant impact on its future direction.

The Future of English Football Under US Ownership

With more than half of Premier League clubs now under American control, the future of English football is being shaped by US investment strategies. These owners have brought fresh capital, innovative marketing ideas, and a focus on maximizing revenue. However, they also pose challenges to traditional football culture, particularly with respect to the financial risks involved and the possibility of Americanizing the game.

American owners are likely to expand global commercial opportunities. Expect to see more behind-the-scenes content, branding collaborations, and a heightened focus on international markets like Asia and the United States. The popularity of shows like Welcome to Wrexham—which documents the real-life ownership of Welsh club Wrexham by Hollywood actors Ryan Reynolds and Rob McElhenny—highlights the potential for football clubs to reach new audiences.

Investors may also push for football matches to be played overseas. As mentioned above, Todd Boehly, part of the consortium that owns Chelsea, has already floated the idea of a Premier League All-Star game. Similarly, there have been rumblings about playing competitive league matches in the US or other countries, a move that could dramatically increase matchday revenues and grow global fanbases.

American investors are pioneers in integrating technology into sports, and football is no exception. The potential introduction of virtual reality (VR) or augmented reality (AR) experiences, where fans can attend matches in a virtual stadium or interact with players, is on the horizon. Manchester City, part-owned by American interests, has already partnered with Sony to explore metaverse possibilities, allowing fans to experience matchdays virtually from anywhere in the world. This tech-forward approach could be a game-changer for clubs and could help clubs monetize international fanbases that might never set foot in their actual stadiums.

For fans, the biggest fear is that the growing influence of American owners could eventually lead to changes in the structure of the league, such as the elimination of relegation, salary caps, or a draft system. While such ideas are not currently on the table, the fact that they have been proposed suggests that some American investors see the traditional model of English football as incompatible with their vision of a profitable sports franchise.

5 PROMPTS THAT ATHLETES CAN USE TO DEVELOP AND BUILD EXPERTISE

• How can I leverage my sports brand to identify undervalued investment opportunities, similar to how American investors view English football clubs?

• What key business strategies used by American owners in English football, such as media rights and fan engagement, can I apply to maximize revenue in my own ventures?

• What are the risks and rewards of using debt or leveraged buyouts for acquisitions, and how can I manage these risks effectively?

• How can I incorporate global branding and sponsorship strategies into my business ventures, similar to what US investors are doing in the Premier League?

• What are the key differences between US and European sports business models, and how can I adapt these differences to succeed in international markets?

👉 Check ChampionsChat GPT for your prompts.

A Game in Flux: Navigating the Future of English Football

US investment in English football is reshaping the sport’s financial and competitive landscape. While it brings opportunities for growth, technology integration, and commercialization, investors must tread carefully.

As the American wave of investment continues to sweep across English football, the sport is at a crossroads. On one hand, the influx of capital has allowed clubs to expand their global reach, enhance commercial opportunities, and attract some of the best talents in the world. On the other, it raises questions about the long-term sustainability of a business model that prioritizes financial gains over football traditions.

For investors, the rewards of owning a Premier League club are clear: access to a massive global audience, increasing commercial revenues, and a seat at the table of one of the most lucrative sports leagues on the planet. However, these rewards come with substantial risks—relegation, rising debt, and the ever-present threat of alienating loyal fanbases.

For English football, the challenge will be balancing the benefits of American investment with preserving the core elements that have made it the most popular sport in the world. As US investors and sports stars alike continue to pour money into the game, the future of football is likely to be defined by a delicate negotiation between tradition and modernity, ensuring that the passion, competition, and unpredictability that draw millions to the sport each week remain intact. Investors who can appreciate this balance will not only succeed in maximizing profits but will also play a role in shaping the future of football itself.

👇

I really appreciate you reading my note today.

Have a great weekend,

Irg

Irg’s work is provided for informational purposes only and should not be construed as legal, business, investment, or tax advice. You should always do your own research and consult advisors on these subjects. This work may feature assets and entities in which the author has invested.

🙏 Thanks for reading Irg's Athletes in Business Notes! Subscribe for free to receive new notes and support my work.

© 2024 Athletes in Business Notes by Patparius GmbH