Sporting Passion vs Commercial Reality
By iSportconnect | April 14, 2011
This week has seen Arsenal added to the ever-growing list of EPL football clubs sold into foreign ownership. Meanwhile, drugs Chelsea has failed once more to deliver its owner’s dream of European Cup success. Both of these events reflect different facets of the same sporting conundrum – the inherent conflict between an individual’s passionate support for a team and the need for commercial success to sustain it.
Unlike the days in which wealthy benefactors like Jack Hayward at Wolverhampton and Jack Walker at Blackburn funded loss-making clubs from their personal fortunes out of a longstanding commitment both to the team and its local community, bronchi today’s owners are much more interested in the commercial possibilities of club ownership.
This is because football at the highest level has transformed from a sport to a business. But it is a business unlike any other. This was recognised almost immediately by the markets following the rush to convert to PLC status in the 1990s. The investment community likes to see a year on year improvement on its returns, yet the very definition of the sports club means that results both on and off the pitch are mostly uncertain. To compensate for this inconvenience, some clubs began to diversify into non-core activities requiring large-scale capital investment and management skills not traditionally associated with winning football matches.
The twin challenge of stock market indifference and the need to sustain success on the pitch while diverting funds into new capital projects led several clubs to seek new benefactors. What they got is a new breed of owners who see the strong cash flows leveraged from matchday, media and commercial activities as a more attractive opportunity than those available from traditional business sectors. The trick for these investors is to balance a fan’s natural passion for success on this pitch with a hard- headed appreciation that this comes with a high price tag as the cost of acquiring match-winning talent and the salaries they command spirals ever upwards.
In this brave new commercial world, the basic business disciplines of leveraging debt, controlling expenditure and investing only what can be afforded from growing existing revenue streams are being ruthlessly implemented. The beauty of this model is that to a large degree, the ultimate objectives of both fans and owners are aligned. For without the success on the pitch that is craved by the fans, the owners are unlikely ever to receive the commercial rewards they desire.
Only those clubs whose benefactors have the financial resources to ignore the commercial reality of spending more than they earn can break the virtuous circle. In so doing, and if success does not materialise before UEFA’s new financial fair play rules put an end to such behaviour, the question of whether their passion and patience is deeper than the reservoir of their financial support remains to be answered.
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