Netflix and Nations prompt surge in football club acquisitions

This may have been the year of Covid-19 and its brutal consequences, but the virus does not appear to have disrupted one area of activity: football club takeover deals.

Indeed, although many clubs and governing bodies across the world have grappled with an absence of fans and ticket revenues, some of the most significant club acquisition deals in recent decades have been undertaken over the last twelve months.

The year started with a bid by Saudi Arabia’s Public Investment Fund for English Premier League club Newcastle United. Given the Kingdom’s domestic sport policy focus, the move seemed like an implausible one.

Yet, as the year progressed, the country, its government and those involved with the football club became mired in all manner of hurdles and problems. Human rights groups called for the acquisition to be halted, and many labelled the deal as merely Saudi sport washing.

In the end, the deal was scuppered when the World Trade Organisation judged that a pirate broadcasting service – beoutQ – had been traced to Saudi Arabia. This service was found to have stolen the official content of Qatar’s BeIN Sport, which should be viewed in the context of an ongoing feud between the two countries.

On this basis, the Premier League refused to grant the Public Investment Fund permission to buy Newcastle United. As things currently stand, the Saudi Arabian government is yet to acquire an overseas football club, although rumours continue that France’s Olympique Marseille could be a target for Riyadh-based investors.

By contrast with Saudi Arabia’s politicking in football, this year has also witnessed a resurgence of American investor interest in football. Several clubs in Europe have been acquired by US corporations, including AS Roma and Parma in Italy. Whilst North American investors are seeking to buy a stake in Italy’s Serie A and in Germany’s Bundesliga.

At the same time, 2020 has witnessed a growth in both the number and the activities of SPACS – special purpose acquisition companies – “blank check” shell corporations designed to take companies public without going through traditional IPO processes.

SPACS enable retail investors to engage in private equity type transactions, particularly leveraged buyouts. One of the highest profile sport SPAC developments this year was the creation of Red Ball, led by Billy Beane (of Moneyball fame). Mid-year, reports circulated that Fenway Sports Group (owners of English club Liverpool) was in talks with Red Ball.

As digital technologies have changed how football is produced and consumed, so new revenue generating opportunities have increased thereby prompting considerable interest among the likes of US sports entrepreneurs and of SPACS.

The Amazon ‘All or Nothing’ documentary series’ (which this year has focused on the English Premier League’s Tottenham Hotspur) illustrates what is currently happening. Some observers have described this as a process of Disneyfication – which involves the internationalisation of entertainment, that embodies the values of US mass culture.

The apparent convergence of sport and entertainment is not a new phenomenon, though the pandemic has arguably depressed the value of clubs, something conducive to a buoyant influx of investors. Some observers nevertheless point to the advent of Netflix and a consequent proliferation in the number of sport-focused docudramas as the impetus for club acquisitions.

A much-hyped example this year of football’s possible Disneyfication came in the unlikely form of Ryan Reynolds and Rob McElhenney’s acquisition of Wrexham, a fifth-tier club in English football’s league pyramid. There has been intense speculation about why two Hollywood A-Listers would make such a purchase, though the opportunity to generate and commercialise content is one of them.

Taking inspiration from Walt Disney’s playbook inevitably implies a process of commodification, commercialisation and industrialisation. As such, the can be no doubt that US private investment in sport is largely motivated by personal financial gain and enabled by free-market enterprise.

This stands in stark contrast to countries such as Saudi Arabia, which often engage in sports for geopolitical and economic reasons. Yet this ideological juxtaposition is one that increasingly characterises investments in football.

However, this year has demonstrated that liberal capitalists and authoritarian states can become entwined with one another. A good illustration of this is the City Football Group, owners of the English Premier League club Manchester City.

In 2020 and in spite of the pandemic, CFG has acquired Lommel F.K. in Belgium and Troyes AC in France, which adds to the business’ ownership of existing franchises in countries including India, China and Australia.

CFG is majority owned by an Abu Dhabi government investment vehicle, with a 13% stake held by China Media Capital. CMC is technically a private company, but there are long-held suspicions that it has close links to Chinese government.

Alongside these two shareholders, a US private equity investor – Silver Lake – holds a further 10% of CFG shares. Silver Lake is based in Los Angeles, and holds a diverse portfolio of investments many of which are focused on sport and, crucially, entertainment properties.

This nexus of politics and business challenges the late 20^th, early 21^st century liberal capitalist hegemony that had built-up in football. Indeed, the way in which Abu Dhabi continues to use football is a geopolitical economic instrument is striking.

Following normalisation of relations between the United Arab Emirates and Israel this year, a member of the Abu Dhabi royal family acquired a 50% share in Israeli football club Beitar Jerusalem. This was a stunning purchase for many reasons, not least that Beitar has previously been labelled as anti-Arab, anti-Muslim and the most racist football club in the world.

This raises all manner of questions, which may be answered in the months and years to come. However, what it does reveal is that alongside business and economics, there is politics and statecraft underpin the way in which the emirate engages with football.

Based on recent trends, there seems little doubt that football clubs in Europe, and across the world, will continue being the target for prospective investors during 2021. Yet what is unfolding with each high-profile acquisition is a new geopolitical economy of football, in which sport meets entertainment, business meets politics, and East meets West.

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This article belongs to the GeoSport platform, developed by IRIS and EM Lyon.