Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, especially soccer. This business model, in which investors acquire stakes in multiple teams simultaneously, is marked by significant opportunities and controversies alike.
The surge in multi-club ownership, particularly in European soccer, reveals a complex landscape. While these networks often yield a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts, they also stoke substantial opposition from traditional sports communities. Soccer supporters in Europe, for example, are predominantly opposed to MCOs, lamenting the homogenization and potential conflicts of interest within their beloved sport.
Despite the backlash, the average market value of clubs associated with MCOs is estimated to be 15-25% higher than independently owned teams in comparable leagues. This financial incentive remains a powerful draw for investors, especially private equity groups. "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake," noted an industry insider, underscoring the short-term focus that often accompanies such investments.
Technological advancements are also reshaping the MCO model. Artificial intelligence and data analytics play significant roles in optimizing operations and investment strategies. A representative from RedBird Capital emphasized the advantages, stating, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
The Rise of MCOs
The number of soccer teams under multi-club ownership structures has surged from 117 in 2021 to a projected 336 by 2024. A prominent example is the Red Bull conglomerate, which owns multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino. These extensive networks not only boost financial stability and commercial appeal but also facilitate player movements and tactical collaborations across teams.
However, the influence of MCOs extends beyond men's soccer. "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing," said Michele Kang, emphasizing the importance of investment and resource pooling for the development of the women's game.
Commercial Interests and Legislative Challenges
While the financial rewards are evident, multi-club ownership faces considerable opposition from traditional sports communities. Yet, large-scale legislative intervention to roll back MCOs seems improbable. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)," noted an insider, casting doubt on the feasibility of reversing this trend through policy measures.
Failure to achieve expected profit margins could lead to drastic measures like "fire sales," where players are sold off and clubs potentially relegated, adding another layer of instability to the scenario. Financial institutions' unwillingness to meet profit targets further exacerbates the volatility.
Extension to Other Sports
The practice of multi-club ownership is not confined to soccer. It has made significant inroads into other sports as well. For instance, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises in baseball and holds contracts with MLB to negotiate national sponsorships for all 120 minor league teams. This approach helps to standardize operations and amplify commercial opportunities across the board.
Profluence Capital is also looking to create a multi-club ownership ecosystem, aiming to replicate the success seen in soccer and other sports. This expansion into various sporting domains indicates the versatility and broad appeal of the MCO model.
Case Study: Westchester SC
A telling example of the dynamic nature of MCOs can be seen with Westchester SC. The club set records as one of the fastest teams to go from an expansion agreement to public announcement in USL history, accomplishing this feat in just four months. Moreover, Westchester SC inked the second-largest jersey sponsorship deal in the USL and signed a former Premier League player for his final career stage, underlining their ambitious and strategic approach.
"Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet," added a RedBird Capital representative, indicating the ongoing evolution and adaptation of financial strategies to support the long-term sustainability of sports enterprises under the multi-club ownership model.
As multi-club ownership continues to reshape the landscape of global sports, its impact is likely to be felt across various levels and disciplines. From the significant financial benefits to the controversies it generates, the MCO model presents a multifaceted picture of modern sports investment and management.