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It’s hard to think of a more explosive period in recent football history.
On Sunday afternoon, a dozen of Europe’s top clubs by revenue and prestige, announced a plan to form a breakaway Super League. The competition is supposed to supersede Uefa’s Champions League, which pits the top clubs across Europe against one another. It would be a smaller competition, with a core of 15 clubs and five more spots for other entrants based on clubs performances in their respective domestic competitions.
The plan has been almost universally condemned by anyone not directly involved in making money from one of these elite clubs, with dissenting voices ranging from British PM Boris Johnson to former Manchester United footballer Gary Neville, to fan groups.
With good cause. The rationale is entirely financial. The plans are also wholly inevitable given the path football has gone down over the past three decades.
Let’s take what’s happened in England, where half of the breakaway clubs — Manchesters United and City, Liverpool, Chelsea, Tottenham and Arsenal — play.
There, the Premier League’s start in 1992 was the catalyst. The new league, flush with cash from satellite TV — the Murdoch-owned BSkyB — proved a hit. The league capitalised on the lifting of a ban on English clubs playing in Europe (the ban was the result of the Heysel Stadium disaster in 1985) to entice some of the world’s best players to forego sunnier climes for higher salaries, which in turn raised the standard of competition and helped market English football’s top tier to a global audience.
Yet, it wasn’t always easy going for clubs. In 2003, Chelsea was on the verge of bankruptcy before Russian oligarch Roman Abramovich famously took the club over.
While Sky brought with it a constant rise in TV money, the cash coming in really began to accelerate in the 2010s, as two consecutive deals saw the value of the television rights rise 70 per cent. The rise of streaming services — such as Amazon Prime — in recent years has only increased the commercial promise. Bumper revenue has lured foreign investors with private equity now hunting across Europe for clubs. Silver Lake spent £500m for a 10 per cent stake in Manchester City in 2019, AC Milan are owned by Elliott Management and there’s been wide private equity interest in both Italian and German television rights.
Still, for the elite club owners, there’s a nagging problem. While the television deals for the domestic leagues keep the profit and loss statement ticking over, the real prize is the cash offered by the Champions League, set up in the same year as the Premier League to replace the European Cup and now the most prestigious competition in the world, a showcase for the game’s superstars.
Entry is only guaranteed by qualification through domestic leagues, which involves (in the case of clubs in the major European leagues) a top four finish. Not securing entry into Europe’s elite competition can be ruinous. You lose revenue and your best players dump you in favour of Champions League football somewhere else, through which they also build their global brands (which, in the case of superstars such as Juventus’ Ronaldo, are bigger than those of the clubs whose shirts they wear).
The most high-profile victim of the race for Champions League qualification was Leeds United. Their gamble on entering the top tier and scooping club football’s biggest prize led to a lost decade as it struggled to regain a sound financial footing.
That uncertainty, which is a real problem even for this elite dozen (neither Chelsea, Liverpool, Arsenal or Tottenham are at present in a position to qualify for next year’s competition — while less glamorous clubs like West Ham and Leicester are), immediately disappears under this new structure.
The elite — when they do qualify for the Champions League — also believe that they should be able to command a greater share of broadcasting revenues than they do right now. The Premier League and Spain’s La Liga reign supreme in terms of global popularity, yet the Uefa tournament features clubs from all over Europe. The feeling among the elite and their investors is that, as they and their superstar players are the reason why the competition’s popularity has become so widespread, they should be able to command a greater share of the spoils than minnows from minor leagues that few people can even name, let alone want to cheer for.
The timing of the breakaway speaks to this. UEFA’s plans for the Champions League post-2024 are set to be announced today, with the expectation that the competition’s knockout stages will include 36 teams, as opposed to the current 32. That would mean the elite commanding an even smaller slice of the spoils than they do right now. Uefa also want to keep matchdays to midweek evenings, which limits the potential Asian audience.
One can appreciate then, why a fixed payment of a reported €264m per year, per club sounds so marvellous. In effect, these elite clubs will be going from a world where revenues are unpredictable, to guaranteed. That’s especially attractive right now, given the impact that Covid has had on ticket revenue. And, as we know from software valuations, there’s nothing more appetising to investors.
The market seems to agree — shares in Juventus, one of the breakaway dozen are up 18.6 per cent to €0.92 at pixel time. While Man Utd’s are up 8.6 per cent, to $17.57, in early market trading in the US. More puzzlingly, Borussia Dortmund’s shares, despite them so far refusing to join the league, are up 11.6 per cent to €5.95.
The market seems to think Dortmund will blink. Given the depth of the negative reaction to the proposal so far though, shortly there might not be even ever be a Super League to join.
Related Links:
Breakaway dozen European football clubs sign up to Super League — FT
Super League clubs net €200m-€300m ‘welcome bonus’ — FT
Europe Super League: breakaway should ring antitrust alarm bells — FT
Premier League boss attacks breakaway ‘Super League’ plan — FT
Was Ronaldo worth €100m? — FT Alphaville
Chants, rants and wurst: the return of fans to the Bundesliga — FT Alphaville
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