Man, I miss the old days when the rich would do worthwhile and constructive things with their money like building homes, putting up schools, or trying to kill James Bond. It seemed a better time.
We now live, without irony, in a Fight Club world. When Jeff Bezos took his rocket into space, it was hard not to think of one of the film’s adaptations lesser-known lines – “When deep space exploration ramps up, it’ll be the corporations that name everything, the IBM Stellar Sphere, the Microsoft Galaxy, Planet Starbucks.” Fight Club may have been dystopian, but who now would not prefer to go back and live in 1999?
But while Amazon’s dear leader can play out his Dan Dare fantasies while we all watch, there has been a trend over the last two decades of the mega-rich buying up top-flight sports teams.
A little bit of swagger
It is, on one level, not hard to understand. If 50,000 people pay £50 each week to attend a game, that is a guaranteed monthly revenue stream of £10m. Add to that the money from merchandise, TV rights, and media licensing, and it seems like a fairly good investment. And that is if a team plays just one game a week. There are 38 games for each team in the UK’s Premier League and that does not include things like the Champions League, friendlies, and international tours.
But if you are investing in a football team (or an NBA side, or a hockey team, or a baseball team), the question is ‘Why?’. I’m sure that some sides are being bought for a giggle, as a way to assuage an ego, a bit of fun when you have the money. That might explain Elton John and Watford, and probably—definitely—explains why Ryan Reynolds has gone in to buy 100% of Wrexham AFC.
But recent events are showing that investing in a sports team may not be the smartest idea.
As posted on its own website in the last month, FC Barcelona is in the middle of its own financial crisis. When you are admitting this stuff yourself, you are definitely in a space where there seems to be no real good way out, even if Joan Laporta said, “the Club will be in a healthy state in two years”.
According to Laporta: “The end of the financial year of the 20/21 season will bring losses of €481m. This has been audited by Ernst&Young and presented to the league. The impact of the pandemic is €91m.”
He also highlighted that the financial costs of the Club “are around 6%, which is unsustainable, so we can congratulate ourselves that the new credit claimed of €595m is with an interest rate of 1.9%”.
With respect to Barça Corporate, Laporta pointed out that “our board has not found any of the proposals to be acceptable … It is a lie that there was revenue of €220m. They made a low offer for Barça Studios and made no contribution to Barça Escola, or to the Barça Innovation Hub, or to BLM”.
Man U malady
This is not the only time that a football team has come up short financially. In the last year, Rhyl, Wigan Athletic, and Bury have gone into administration. At the time, each side said both of its fans would be disappointed.
Bigger sides have attracted controversial financing, too. In 2005, the Glazer family took over Manchester United. To do so, the Glazers borrowed £525m from JP Morgan, a sum that the club itself would be forced to pay back. This has proven controversial in the decade-and-a-half since.
As The Guardian recently wrote: “At United, as the supporters predicted in 2005 and still emblazon on banners, the Glazers have put nothing in during 16 years of ownership, but their corporate machinations have drained out more than £1bn. Manchester United plc, re-registered in the Cayman Islands tax haven in 2012 and floated on the New York stock exchange, has always been an investment for them personally. The interest on £236m ‘payment in kind’ (pik) loans taken on for the takeover had reached 16.25% five years later; £67m had gone out of the club in interest alone in 2009-10, when they refinanced, costing the club another lump of multimillion-pound fees.”
The Glazers were not the only ones to move in and take control of a football team. Look at the UK Premier League today and who owns the sides in it, and check out the ownership. And even if the pandemic shut down much of 2020 and 2021, there was still merchandising and TV money flowing in.
All of this brings me to this week.
As the BBC reported a few days ago, shares in Chinese property developer Evergrande have continued to plunge. Last Friday, they were trading at €0.40 per share, falling to €0.28 earlier on Thursday. On 25 January, they were each valued at €2.10.
That is a company that is about to implode.
Perhaps the least-interesting part of the Evergrande saga is that it owns the majority of football team Guangzhou FC. That team was known until January as Guangzhou Evergrande FC. The name change was apparently unrelated to Evergrande’s financial problems.
Given that Evergrande seems about to implode, what will happen to Guangzhou FC? Well, it appears that the local government is about to step in. According to Bloomberg, “Governments at the city or provincial level are considering taking minority stakes in Chinese Super League teams including the Guangzhou Football Club […] according to people familiar with the plans.”
So after investing all this money, attempting to build a new stadium, and then failing spectacularly at being a company, it now seems that ownership of a football team is now also beyond Evergrande.
A government stepping in like this is an interesting way of limiting contagion. I have an idea. Instead of buying football teams and using rockets to write their name on outer space, all I ask of our billionaire overlords is that they get back to being boring with money. You can have it. We will keep on giving it to you. Just stop being the nerd that tries to win over the cool kids by renting a bouncy castle for a party. Know your place.