Explaining different ownership structures within football by Daniel Liptrott, partner at international law firm Eversheds
Fast forward nearly 30 years and the different models have become more and more complex.
Highly publicised supporter campaigns such as the Red Knights (based upon a few very wealthy individuals) and ShareLiverpool (based upon a large number of ‘ordinary’ fan subscribers) have been set up in order to try and replace the leveraged buy-in model of the pre-recession, easy debt era. Following the success of Spain and Germany at the World Cup, both of which have leagues containing football clubs of very different ownership structures, many commentators have again raised the question of what the preferred ownership structure is in modern European football.
A further incentive to try and get the structure right lies in the introduction of UEFA’s Financial Fair Play Regulations for clubs wanting to compete in UEFA club competitions and probably the ultimate test will be the introduction of the break-even requirement by the 2013/14 season. Perhaps now is the time for clubs to look at their business models.
The Traditional Owner/Supporter
The traditional owner model that many football fans grew up with is typified by the likes of Steve Gibson at Middlesbrough - a local businessman who has made money and invested in his home town club. This is still the most popular model used in England but how sustainable is it? Relatively wealthy individuals like David Moores at Liverpool have given up the dream of owning their favourite club as the cost and stakes have escalated in recent years.
Aside from the exception, such as Sullivan and Gold’s buy out of West Ham, very few clubs will be able to attract local investment with sufficiently deep resources to compete at the highest level. The clubs that have had short term success (Leeds, Portsmouth) have had to over-extend and are now struggling to re-gain a footing to launch themselves into the top flight of English football. This model appears antiquated and unsustainable.
Egotistical Investor
It is often difficult to see what individual investors who are not fans of the target club actually get out of an (often) unprofitable investment. Many fans dream of having a Roman Abramovich or a Sheikh Mansour to underwrite the success of the club for a period but these types of structures usually have more to do with raising the profile of the owner than promoting the long-term success of the club. Unless the investors plan to stick around in the long-term then this type of structure can go sour very quickly.
Ask Newcastle fans.
The Leveraged Buy-In
The leveraged buy-in model, most famously used by the Glazers’ in their acquisition of Manchester United, is a reflection of the commercial nature of Premier League football. True businessmen who see that the commercial revenue streams of top clubs have not been achieved use huge bank loans to purchase the club on the belief that they can maximise revenue, increase profit and service the debt.
The critics of this model point to a more esoteric condemnation. They say the model takes the soul out of football. The protests at Manchester United last season about the Glazer campaign were as much about the lack of understanding of the community as the level of debt. But the two go hand in hand. The interest on the debt needs servicing and prices go up to keep the profit levels stable.
Supporter-owned collectives
Fans often want to be included in their club and feel a sense of ownership. To exclude them from the considerations of the club is to alienate the biggest resource a club can have. Whilst the fans clamour for more control of the club and the previous government announced plans to give fans up to 25% stake in their club, is this a good idea?
The model that fans hold up as an example is that of FC Barcelona and Real Madrid. They are owned by ‘socios’ - individual fans who pay an annual subscription and vote for a president to run the club. Fans own the club, they win trophies - the perfect model? Barca recently applied for €150 million to pay staff and player wages. Real Madrid’s debts were paid only when the local Council bought their training facilities for €270 million. Easy money if you can get it, but very few can. Very few clubs in the Premier League have the fan base or the assets to support the level of spending that these two clubs rely on for success.
Let us not forget that we have just enjoyed the closest Premier League from top to bottom in a decade. In La Liga, Barca and Real are so far clear it is a two horse race every year. They take 55% of La Liga’s TV rights between them. Mid-table clubs spending more and more to compete against the few clubs who continue to enjoy the lion’s share would be even more unhealthy than our current system.
Part Supporter/Part Investor
The final model to note is the one used by members of the Bundesliga in Germany. The 50 + 1 model ensures that the club is controlled by the fans, whilst allowing outside investment to bolster the accounts. The clubs are virtually debt free, have world class stadia (some of which are legacies from the 2006 World Cup) and a quality and competitive league, with ticket prices as low as £12.
The Bundesliga model - protected by regulation - promotes the development of home-grown talent and financial prudence. Some argue that this prevents the German teams from competing for top players and threatening on the European stage. But with the Bayern Munich team of the 1990s and the current emerging stars, this is a model that looks to the future without missing out on the present.
