Multi-Club Ownership: Transforming the Global Sports Landscape
Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, particularly soccer. As investors acquire stakes in multiple teams simultaneously, they are reshaping the dynamics of competitive leagues and introducing new business models. The phenomenon, however, brings both substantial opportunities and significant controversies.
Private Equity's Strategic Play
The rise of private equity groups in sports ownership highlights a critical shift in the investment landscape. These groups often enter with an exit strategy rather than a long-term operational focus. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," an industry insider reveals. This trend underscores a focus on maximizing short-term gains before divesting assets.
Financial Gains and Operational Synergies
The benefits of MCO are apparent, particularly in the realm of commercial revenues and market valuation. Clubs within MCO networks often experience a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. Additionally, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues. This financial uptick is not just a fluke; it is a result of strategic synergies. According to RedBird Capital, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
Technological Advancements and Future Growth
Technological advancements are refining the MCO model significantly. Artificial intelligence and data analytics are playing pivotal roles in streamlining operations and enhancing decision-making processes. These technologies enable clubs to optimize various aspects of their performance, from player acquisition to game strategy, thereby fostering sustainable growth in an increasingly competitive environment.
Impact on Women's Soccer
The influence of MCOs extends beyond men's soccer, notably impacting women's soccer as well. Michele Kang, a prominent figure in the industry, has asserted that "multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." This statement underscores the importance of strategic investments in elevating the visibility and viability of women's soccer on a global scale.
Controversies and Opposition
Despite its advantages, MCO faces considerable opposition, particularly from traditional sports communities in Europe. Soccer supporters in these regions are predominantly against the concept, fearing it undermines the integrity of competitive play. However, a large-scale legislative intervention to roll back MCOs appears improbable. As one source notes, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)."
Risks and Challenges
The model is not without its risks. Financial pressures and market fluctuations can lead to distressing scenarios. Financial institutions' unwillingness to meet profit targets could result in "fire sales," where players are hastily sold off and clubs potentially face relegation. This volatility adds a layer of uncertainty to an otherwise promising investment landscape.
Notable Examples and Expansion
Several high-profile examples illustrate the extensive reach of MCO. Red Bull, for instance, owns multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. In baseball, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises and has contracts with MLB to negotiate national sponsorships for all 120 minor league teams.
The number of soccer teams under MCO structures surged from 117 in 2021 to a projected 336 by 2024, reflecting the exponential growth of the model. Profluence Capital is also looking to create a multi-club ownership ecosystem, further solidifying the trend.
Case Study: Westchester SC
Westchester SC is a notable example of a club thriving under the MCO model. The team secured the second-largest jersey sponsorship deal in the USL and signed a former Premier League player for his final career stage. Westchester SC also set records as one of the fastest teams to transition from an expansion agreement to a public announcement in USL history, achieving this feat in just four months.
The future of multi-club ownership in sports remains dynamic and complex. As stakeholders navigate this evolving landscape, the balance between maximizing financial gains and maintaining competitive integrity will remain at the forefront of industry discussions.