Scoreboard: US-China tensions threaten the Olympics

In this edition of Scoreboard: we look at how a breakdown in US-China relations would be costly for the organisers of the Olympic Games; explain why high valuations for Premier League clubs are not matched by big takeover offers; ask whether sports’ experiments with cryptocurrencies are here to stay; and more. 

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Boycotting Beijing: the Olympian cost of US-China tensions

Less than three months into the new Biden administration, the US State Department started an international kerfuffle after a spokesman said the country is discussing with allies a potential joint boycott of the 2022 Winter Olympics in Beijing.

The remarks set off a firestorm about the future of those Games, which are just 10 months away. The underlying issue is concern about China’s repression of its minority Uyghur population, which both the Biden and Trump administrations have described as a “genocide”. 

A Cold War-era boycott of the Olympics, if taken, would be a serious escalation of tensions between the US and China.

What remains unclear is whether such a boycott would bar athletes from participating, or if it were a “diplomatic boycott”, in which governments decline to send high-ranking members of their administration to the Olympics, as the US did at the 2014 winter games in Sochi, Russia.

Either scenario is worrisome for the International Olympic Committee, whose business of staging and broadcasting the Games has, for years, been dogged by the dwindling number of viable host nations willing to take on the multibillion-dollar responsibility. 

Only Beijing and Almaty, Kazakhstan — a nation that is no stranger to human rights criticisms — presented full bids for the 2022 Olympics.

The US and China are the two largest economies in the world, and, accordingly, boast two of the most robust Olympic teams. Along with Italy, they are the only nations which have either held or are slated to host an Olympics twice this century. Together they have spent or committed to spend a combined $8.3bn and $44bn, respectively, on staging their Games. 

On top of that, US and Chinese broadcasting rights to the Olympics, where the IOC derives nearly three quarters of its revenues, are among the costliest. The two countries have multiyear TV deals that run into the 2030s worth over $8bn combined.

Both the IOC and the US Olympic and Paralympic Committee say they are opposed to athlete boycotts. Both point out that the organisation of the Games and delegations sent are the domain of sport governing bodies, not governments. 

But put simply, the Olympic movement can’t afford hostility between two of its largest stakeholders.

Read the FT editorial board’s view on a potential Olympic boycott here.

Why the biggest Premier League clubs don’t fetch “insane” prices

Tom Werner, the chair of Fenway Sports Group, the investment vehicle that owns Liverpool and the Boston Red Sox, was asked last week what it would take to sell either club.

“If someone comes into your house and offers you an insane price, you examine it,” he told the FT. “But our interest certainly is to retain and grow the properties that we have.”

In a way, it is a statement of the obvious. Of course, you consider selling an asset if someone is willing to pay over the odds. But Werner’s answer is a reminder that sports club owners are not fans. FSG’s game is to make a profit. And the easiest way to make a hefty return is securing a mega price for its clubs. 

Perhaps that wouldn’t be difficult for the Red Sox, one of the more storied franchises in Major League Baseball. Just last October, hedge fund magnate Steve Cohen bought the New York Mets for $2.4bn.

Selling Liverpool, which FSG acquired for £300m in 2010, is a trickier proposition. The team is the current champions of the English Premier League, the world’s richest and most watched domestic football competition. 

Rival Manchester United, listed on the New York Stock Exchange, has a current market capitalisation of around $2.7bn. Avram Glazer, a member of the family that acquired the club in a £790m leveraged buyout in 2005, made plans last month to sell enough shares to raise around $100m.

In 2019, Manchester City’s parent company was valued at $4.8bn, after selling a 10 per cent stake to private equity firm Silver Lake for $500m. In 2018, Arsenal’s majority owner Stan Kroenke paid £550m for Russian billionaire Alisher Usmanov’s 30 per cent stake in the club, valuing it at £1.8bn.

What these deals have in common are multibillion-dollar valuations — earned from smaller sales of minority stakes. Chelsea’s Roman Abramovich has demanded around £3bn from recent suitors. There have been no willing buyers.

Rather than holding out for a deep-pocketed buyer, FSG has secured new investment from RedBird Capital which values the group at $7.35bn. It hopes to buy more teams, grow its sports portfolio, then perhaps, launch an IPO. That would be a slower, steadier and saner way of extracting a return on investment.

Read the FT’s interview with Tom Werner here.

Are fan ‘tokens’ a pandemic cash grab or sport’s new moneymaker?

Ticket sales, sponsorship and broadcast revenues are the three main pillars of income for sports groups. But the pandemic has led to empty stadiums, as well as rebates to sponsors and broadcasters due to cancelled fixtures. 

This has highlighted the need for sports to diversify their revenues. Increasingly, they are thinking digitally, turning to the emerging online economy powered by the blockchain technology behind Bitcoin, the biggest cryptocurrency.

The National Basketball Association is among the first-movers, selling officially licensed highlights in the form of “non-fungible tokens,” or NFTs, to fans through its Top Shot venture. (Read more about the NFTs here) This week, Tom Brady, the seven-time National Football League Super Bowl champion, announced he is starting his own digital collectibles platform called Autograph.

Meanwhile, Malta-based Chiliz works with sports leagues and teams to sell digital “tokens” that offer special perks for the fans that own them. For example, Juventus, the Italian football team, has allowed token holders to choose which song should be played to celebrate its goals. 

Chiliz has created a digital currency that can be used to buy these fan tokens via its Socios app. It is also planning a $50m expansion to the US, and has partnered with Ultimate Fighting Championship, the mixed martial arts competition.

Alexandre Dreyfus, chief executive of Chiliz, told Scoreboard that sports clubs “used to focus on the 0.1 per cent of their customers that are in the stadium and make the noise . . . but most of the clubs never really engaged transactionally, except to sell their jersey, with their global fan base.”

Dreyfus claims to have generated $30m in revenue in the final quarter of last year. He is targeting $150m this year, generated from selling tokens and subsequent fees as users buy and sell in the secondary market. Roughly half of the revenue goes to clubs, he says. 

There are risks however. Early tie-ups between sports clubs and cryptocurrency groups have caused concern that fans would buy digital items on a belief these were investments that would rise in value. 

The NFT craze has been criticised as a bubble, with sceptics believing that those paying huge prices for digital collectibles are unlikely to recoup cash in future.

It remains to be seen whether this is a short-term punt by clubs grasping for cash until traditional revenue streams return as fans filter back into stadiums. Dreyfus is bullish.

“You could argue that even if the clubs may have done that opportunistically at first,” he said. “Now it becomes a real revenue stream and therefore they are way more committed.”

Highlights

• The French Open at Roland Garros has been pushed back by one week in the hope of admitting as many fans as possible to the tennis grand slam. The tournament, which will run from May 24 to June 13 will now end just two weeks before the start of Wimbledon.

• Augusta National Golf Club, host of the US Masters, one of golf’s four major championships, is set to welcome up to 12,000 people per day during this weekend’s tournament, down from 40,000-50,000 in a normal year, according to GolfDigest. 

• UK sports bodies, including the Premier League, Rugby Football Union, the England and Wales Cricket Board and the Silverstone racing circuit have backed the use of Covid-19 “certificates”, or vaccine passports, to enable fans to return to stadiums en masse.

• Michael Eisner is taking his Topps trading card company public in a blank-cheque deal that values the group at $1.3bn. The FT’s Lex column points out that the former Disney chief is holding on to his shares suggesting “he expects them to become their own kind of increasingly valuable collectible.” 

• Fox, the media group owned by the Murdoch family, is in dispute over how much it should pay to exercise its option to buy an 18.5 per cent stake in FanDuel, the US sports betting business controlled by Dublin-based gambling group Flutter.

• Manchester City, owned by Abu Dhabi’s Sheikh Mansour bin Zayed al-Nahyan recorded net losses of £126m in the 2019-20 season, as a result of the pandemic. But the Premier League leaders also reported a £351m wage bill, the highest ever recorded in English football.

• Wasserman, the sports agency, has acquired Riddle & Bloom, which focuses on connecting brands with high schoolers and college students. Teall Capital, the private equity seller, was advised by boutique investment bank Inner Circle Sports.

Transfer Market

• Carolyn Campbell has been appointed interim chief executive of Basketball Australia, the national governing body. She previously had senior roles across Australian sport, including netball.

Final Dismount

As vaccinations against Covid-19 pick up pace around the world, humanity is developing new ways to express their inoculation status. None have done so with such flair as Evan Manivong, a gymnast at the University of Illinois, who landed a vault with a surprise twist. Check it out.

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Scoreboard is written by Samuel Agini, Murad Ahmed and Arash Massoudi in London, Sara Germano, James Fontanella-Khan, and Anna Nicolaou in New York, with contributions from the team that produce the Due Diligence newsletter, the FT’s global network of correspondents and data visualisation team.