Sport, Society, Ownership, & Accountability – Blah Blah Blah

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We like to paint the world in perfectly ordered opposites. On the one hand, as an American, I have grown up with the cold familiarity of the franchise sports model. Here’s how the cookie crumbles in the States. Basically, a businessman (or woman) who has made billions in selling chemicals or prescription drugs hits middle age, gets bored, doesn’t want to start a foundation, and picks a small Midwestern city to inject with happiness and PR via a sports team. Everything’s rosy until the owner refuses to pay transfer fees or salaries, the team sucks, talk show radio hosts call for perpetual coaching changes, the team drifts into the red, and another Midwestern city’s economic development board beckons with tax breaks.

Then, divorce hits. But the team marches on, usually with a new stadium, logo, and name. From a business standpoint, it’s a helluva model. But as already duly noted, the nomadic qualities appear more vulture than trees. And surely things with roots, like trees, have value?

At the opposite end of the spectrum lies the fan-controlled and operated club. In Spain, both Real Madrid and Barcelona technically fit this bill. Fans vote for the President of the club. Last year, my “FC Distrust Supporters’ Trusts Trust” series mocked folks who believed that more fan-ownership in England would be a panacea to rampant debt problems: hello, Barca and Madrid wage tabs, I argued.

But there lies a weird and winding path between. Let us venture to this nether realm.

Despite trophy-filled years, many local (read: English) Manchester United fans hate their clubs’ American owners, the Glazers. Why? Well, the form of their takeover, a leveraged buyout, hinted at corporate raiders gone wild. The personal loans indicated that the club was more of a piggybank than a long-term investment. Ominously at the onset, they de-listed the club from the London Stone Exchange (LSE), presumably to keep the club’s books away from regulatory disclosure requirements.  The green-and-gold campaign clamored for a solution: more fan ownership.

And what has happened? Ironically, more public ownership: United appears on the verge of filing an IPO, ie, selling stock to the public. Of course, they are not re-listing on the London Stock Exchange, but rather at that bastion of transparency, the Singapore Stock Exchange. The rationale: tapping into the growing Asian market. The reality: a quick cash injection with a quite light regulatory burden.

Yet the ownership style which angers opposing teams’ fans is at the other side of town: City. The great risk for the Blues is that their Sheik owner will get bored, sell the club at a loss, and leave behind huge debts and crazy wage bills. Unlike the risk of corporate raiders at United, City poses a different situation: the owner as a transient consumer, rather than a fan. In American baseball, George Steinbruner shelled out tons of cash to turn the Yankees into contenders, yet nobody doubted his dedication or commitment – he was competitive as hell and had an emotional investment in the club. The Sheik has no such credibility.

The EPL has also shown that globalization is not necessarily a race to the bottom. Yes, a fan in London can buy a cheaper Chelsea kit because it’s made in Bangladesh. However, for intangible, unique and limited products, like viewing a concert or soccer game in person, the entrance of millions of new hungry consumers has pushed up prices. Just as the Chinese middle class has kept American soy farmers busy and profitable for the last decade, new Manchester United fans from abroad have pushed up ticket prices almost beyond an average UK income. This is not a race to the bottom, but a race at the top which squeezes out the middle class.

And the parties responsible, you ask? Well, Financial Fair Play and the Premier League’s “Fit and Proper” ownership test have failed to turn the tide in the Americanization of the EPL. Billionaires have really good accountants, businesses all over, and will report losses and profits in the country of choice. UEFA has…Michel Platini, the protege of Sepp Blatter. Sadly, everyday the EPL looks more and more franchised, more commercial, and has not strayed from its amateur roots, but now inhabits a different planet. What could be worse?

Well, the vulture global elites playing with our clubs is disheartening, but the populist duopoly in Spain could collapse the clubs like the Soviet Union at any moment. Hiding debt in Spain is very fashionable at the moment, which is terrifying – because the debt on the books at Barcelona and Real Madrid is staggering. But wait, these clubs are democratic, right? Shouldn’t their fans have the clubs’ long-term interest at heart? Well, let’s take a test – read a couple forums. Count how many people complain about not winning the most recent game. Now count how many people worry about long-term financial stability. Question answered. Pure populism is not the answer.

Which, of course, brings us to the Bundesliga. The league has great attendance, is highly profitable, and has a combination of populist/elitist elements. As Terry “Duffman” explained for Pitchinvasion, clubs must be owned by the fans in a 51% share. This gives enough discretion to the elite (managers, owners, players) to do their job, but is not a carte blanche that would allow corporate raiders or international playboys to do too much damage. How did this system develop? Corporate benevolence? Ha. Rather, the cable TV collapse hit the Bundesliga before anyone else.

Survival is the greatest motivator of all. Which is why you should expect nothing to happen for now. In the near future, the EPL can allure investors with neat powerpoint global revenue growth projection presentations based on some infamous and eternally untapped Asian population. Real Madrid and Barcelona have extraordinary cash flow and debt that, while large, is mostly unsecured/passive. What does that mean, “passive”? In a nutshell, no used car dealer is about to take back the team bus. At worst, some bank CEOs who signed promissory notes may get pissy and not invite Perez’s daughter to their own daughters’ cotillion ball. With unsecured debt, the cancer dies with the patient. Hence, the cancer wants a long and painful period of terminal illness.

Thus, there is no loaded gun pointed at soccer’s head. However, clubs are slowly digging their own graves. From an ethical perspective, fans must decide if clubs are a tree with roots that have spread the branches too far, or accept the reality that our clubs are fish that have sprung legs and left the ocean of our love. Practically, the Germans offer hope in a mixture of populism and elitism. But the path is uphill for now.

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