Multi-club ownership (MCO) is rapidly reshaping the global sports landscape, most notably in soccer. The increasing trend involves investors acquiring stakes in multiple teams, a strategy designed to maximize revenue streams and operational efficiencies across their sports portfolios. Private equity groups are particularly active in this space, often eyeing an exit strategy from the outset, an approach encapsulated by a source stating, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake."
The surge in MCOs, especially within European soccer, is a double-edged sword. It opens doors to enhanced commercial opportunities while simultaneously igniting controversies among traditional stakeholders. One glaring point of contention is the stance of European soccer supporters, who overwhelmingly oppose the concept. This opposition poses a significant challenge to the universal adoption of MCOs, despite the tangible benefits it offers in terms of revenue and branding.
Boost in Commercial Revenue
Evidence suggests that clubs within MCO networks frequently witness a 20-30% increase in commercial revenues through shared sponsorship deals and global branding efforts. Furthermore, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues. These financial incentives are hard for investors to ignore, driving a relentless pursuit of multi-club ownership structures worldwide.
The role of technological advancements cannot be understated in this transformation. Artificial intelligence and data analytics are revolutionizing how clubs manage operations, refine strategies, and enhance player performance, creating a synergy that is invaluable for investors. RedBird Capital, a key player in the MCO arena, emphasized this point, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
Women's Soccer and Legislative Hurdles
The influence of MCOs extends beyond men's soccer. In women's soccer, the model is increasingly seen as crucial for sustained growth. Michele Kang highlighted its importance, stating that multi-club ownership is "a necessity" for the continued growth of women’s soccer. This importance is reflected in the skyrocketing number of soccer teams under MCO structures, expected to jump from 117 teams in 2021 to 336 by 2024.
Despite the palpable advantages, MCOs are not free from legislative challenges. While large-scale legislative intervention to roll back MCOs remains unlikely, continuous pressure from traditional sports communities could lead to tighter regulations in the future. An unidentified source succinctly put it, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)."
Risks and Downturns
Financial risks also loom large over stakeholders in multi-club ownership. The unwillingness of financial institutions to meet profit targets could trigger "fire sales," where clubs might sell off players drastically, potentially leading to relegation. This financial volatility is a significant concern that hangs like a sword over the heads of MCOs.
Examples of MCO Dominance
Some notable examples highlight the dominance of MCO models in global sports. The Red Bull conglomerate owns multiple clubs, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. In another sport, Diamond Baseball Holdings (DBH) owns a substantial 35 of the 120 affiliated minor league franchises in baseball. DBH has even secured contracts with Major League Baseball to negotiate national sponsorships for all 120 minor league teams, underscoring the cross-sport applicability of the MCO model.
New entrants are also keen to cash in on the MCO concept. Profluence Capital is one such entity seeking to create a multi-club ownership ecosystem, highlighting the continuous evolution and expansion of this strategy in the sports world. Meanwhile, the nascent Westchester SC team in the USL has already made significant strides. It signed the second-largest jersey sponsorship deal in the league and set records for its quick transition from an expansion agreement to a public announcement, achieving this milestone in just four months. The club also attracted a former Premier League player for his final career stage, further solidifying its market presence.
As the MCO phenomenon continues to gain traction, it remains to be seen how it will shape the future of global sports. While the financial allure is evident, navigating the labyrinth of traditional opposition, legislative hurdles, and financial risks will require astute management and forward-thinking strategies. For now, multi-club ownership stands as a transformative force, one that is rewriting the rules of the game, on and off the pitch.