Multi-club ownership (MCO) is increasingly redefining the global sports arena, with soccer witnessing the most pronounced transformations. The concept, which enables investors to acquire stakes in multiple teams concurrently, is rapidly gaining traction, particularly in European soccer.
A Controversial Landscape
The surge in MCO has not been without controversy. Soccer supporters in Europe predominantly oppose MCOs, fearing the erosion of traditional club identities and local fan loyalty. Nonetheless, the financial incentives are compelling. Clubs within MCO networks frequently experience a 20-30% surge in commercial revenues, bolstered by shared sponsorship deals and global branding initiatives. Furthermore, the average market value of MCO-affiliated clubs stands an estimated 15-25% higher than their independently owned counterparts in comparable leagues.
As one private equity source noted, “Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake.” This strategic approach underscores the primary objective of these investment groups: maximized short-term returns rather than long-term operational involvement.
Technological Edge
The operational dynamics within MCO structures have been further honed by technological advancements. Artificial intelligence and data analytics are playing pivotal roles in this evolution, offering investors deeper insights into performance metrics and business efficiencies. “There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch,” remarked a representative from RedBird Capital, emphasizing the streamlined processes facilitated by these technologies.
Legislative Landscape
Despite the growing resistance, a large-scale legislative rollback of MCOs appears improbable. “Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely),” said an industry insider. This sentiment underscores the entrenched nature of MCOs within the current sports business framework.
Financial Risks
However, MCOs are not without financial risks. Should financial institutions fail to meet profit targets, "fire sales" of players could ensue, potentially leading clubs to relegation. This scenario presents a precarious balance for owners, necessitating judicious fiscal strategies to maintain both profitability and team competitiveness.
Growing Influence
The scope of MCOs extends beyond men's soccer, touching women's soccer as well. Michele Kang asserted, “Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing.” This perspective reflects the broader vision of MCOs as enablers of development across various tiers of sports.
The expansion of MCOs is undeniable. The number of soccer teams under MCO structures surged from 117 in 2021 to a projected 336 by 2024, showcasing the rapid adoption and integration of this ownership model. Prominent examples include Red Bull's multi-club ventures, which encompass RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino.
Beyond Soccer
MCOs are also making significant inroads in other sports. Diamond Baseball Holdings (DBH) exemplifies this trend, owning 35 of the 120 affiliated minor league franchises in baseball. DBH's contracts with MLB to negotiate national sponsorships for all 120 minor league teams further highlight the strategic benefits derived from such ownership models.
New players are continually entering the MCO fray. Profluence Capital is actively working to create a multi-club ownership ecosystem, driven by the perceived benefits of shared resources and integrated management.
Case Study: Westchester SC
A closer look at Westchester SC provides a tangible example of MCOs' influence in practice. The club recently inked the second-largest jersey sponsorship deal in the USL and signed a former Premier League player for his final career stage. Additionally, Westchester SC set records as one of the fastest teams to transition from an expansion agreement to public announcement in USL history, achieving this milestone in just four months.
RedBird Capital’s reflection on the nature of capital in sports encapsulates the ongoing evolution: "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet." This insight suggests a future where MCOs could become a permanent fixture in the sports investment landscape, shaping the fortunes of clubs and leagues around the globe.
As the sports world continues to grapple with the implications of multi-club ownership, it's clear that the model offers significant financial opportunities, albeit with accompanying challenges. The ongoing debate and developments in this arena will undoubtedly remain a focal point for stakeholders across the sports ecosystem.