The Billionaires Take Over

I know there is a big football story when Sky dispatches the satellite truck up from Milton Keynes and I get on Sky News rather than Sky Sports News.   I am, of course, talking about the takeover of Manchester City by an Arab billionaire who is said to be so wealthy that his wealth can be seen from outer space.   Certainly, he is far, far richer than Roman Abramovich and in any case he may simply be a front man for the ruling family of Abu Dhabi who have untold wealth at their disposal.

Before discussing the implications of this development, let’s take a step back.  It’s just over a year since Thaksin Shinawatra took over Manchester City.   Anyone with even a cursory knowledge of Thai politics could have advised the FA that the country suffers from serious corruption problems, as is evidenced by the existence of a special court to try ‘Senior Political Persons’.    Sooner or later, some of the mighty take a tumble and this is what happened to Thaksin when his wife was convicted, although she is appealing against the conviction.   But the writing was on the wall for the former Thai prime minister and with his assets frozen he had to find a new buyer for Manchester City while the club itself nervously asserted that it was ‘business as usual’.

All this does raise questions about how thorough the FA’s ‘fit and proper person’ test is.   The joke runs that the interview with Thaksin went something like this:

Thaksin: Hi, I’m Thaksin.
FA jobsworth: Are you a fit and proper person?
Thaksin: You bet.
FA jobsworth: Do you have loads of money?
Thaksin: Yes.
FA jobsworth: Welcome to the Premiership.

Manchester City fans were, of course, delighted when their ground became Middle Eastlands.    Some of them donned makeshift Arab headgear, making them look faintly ridiculous.   But it hasn’t easy being a Manchester City fan and no one should begrudge them their discovery that their football lives had been transformed.  But what about the wider implications of the City takeover?

We may not have seen the last of the takeovers.   Dubai Investment Corporation maintains their interest in Liverpool.    The credit crunch has meant that the American owners have been unable to raise funds to build the much needed new stadium.  If they sold up, they could walk away with a decent profit, but it seems they are asking for a ridiculous price at the moment.   The sheikhs of the emirates may be very rich, but they are not stupid.    They want value for money.

Other branches of the Abu Dhabi ruling family may be interested in other clubs (they wouldn’t be breaking ownership rules as they would be distinct owners).   Spurs and Everton have both been mentioned as they need funding for new stadiums, while Spurs are clearly having problems competing at the highest level.   In Everton’s case, the prospect of a shared stadium has been raised again.   In economic terms, that would be a rational solution, but fans identify strongly with the stadium (the example of the San Siro notwithstanding) and would strongly resist it.    However, if Liverpool and Everton were owned by different Emirates families, they might see sense in a shared stadium.

Why should the super rich want to buy a football club?   In part it reflects the attractiveness of the Premiership competition.     More generally, there is an element of a trophy purchase: as someone remarked, one month it’s a luxury plane, the next week a football club.   However, clubs can accrue in capital value so they are not necessarily a bad investment.    If you have large amounts of surplus money, you have to do something with your money, and the capital assets and land owned by football clubs offer relatively stable fixed assets, quite apart from the value of the brand and the prestige that ownership begins.

One consequence is that transfer fees for the best players have been forced up yet again at the expense of the smaller clubs in the Premiership.   Not much of this money from transfers filters down to the lower leagues, as has been shown by successive studies by Deloitte and Touche.    My opponent on Sky, a talk show radio host, argued that what we needed was more billionaires in the Premiership as it would create more of a level playing field.    In one way, yes, but there is a limit to the number of billionaires wanting to invest in football clubs, so if one followed this logic through, one could end up with a ten club competition.   But there are those who would favour that anyway.

The City takeover does help to put the 39th game back on the agenda.   It had never gone anyway as the overseas market is increasingly important to the Premiership.  However, there will now be increased pressure for such a match and for tours of the Middle East.

City’s extra funds will not automatically translate into a top four place.  Talented players have to be persuaded to play together as a team.   However, assuming that City does break in, who will they replace?   Liverpool looks vulnerable unless they get new owners.   Arsenal have committed a lot of money to the Emirates which they will be paying back for some time and, for all the resistance from the existing board, they may eventually succumb to a takeover if they are to remain in contention.

Has this been a good week for football?   On balance, I would say not.  I am not a Manchester United supporter, but twenty years ago they were in the doldrums.  They got where they are today through good management and performance on the pitch, albeit helped by the greater revenues that success generated.   Nevertheless, there is a difference between triggering a virtuous cycle of that kind and buying one’s way to the top.   But Britain has always been a country open to foreign investment and there is no way that one can shut it out of the Premiership.

Football Economy is a monthly article about the business of football by Wyn Grant, the publisher of footballeconomy.com.