Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, particularly in the realm of soccer. The concept, which involves investors acquiring stakes in multiple teams simultaneously, has seen a considerable surge in popularity over recent years. This approach is not just limited to soccer; it is making waves across various sports, including baseball.
The Rise of Multi-Club Ownership
The primary drivers behind MCOs are private equity groups, which often aim for an eventual exit strategy rather than long-term operational involvement. RedBird Capital captures the essence of this investor mentality: "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake." The appeal of MCOs to these investors is clear, given the leverage it provides in negotiating shared sponsorship deals and global branding efforts that significantly boost commercial revenues.
Clubs within MCO networks frequently experience a 20-30% increase in commercial revenues. This surge is primarily due to the collective bargaining power for sponsorships and the capacity to enhance global branding. Notably, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues.
Technological Advancements and Operational Synergies
Technology is playing an increasingly pivotal role in refining the MCO model. Artificial intelligence and data analytics are at the forefront of this transformation, allowing clubs to draw operational and investment synergies across all the intellectual properties they control. As RedBird Capital puts it, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch." These advancements are crucial in maintaining a competitive edge in an evolving sports ecosystem.
Support and Opposition
The rise of MCOs, particularly in European soccer, has sparked both opportunities and controversies. While some see it as a step toward a more commercially viable sports model, soccer supporters in Europe are predominantly opposed to MCOs. They argue that the tradition and local uniqueness of clubs are jeopardized by the influence of external investors.
Despite the opposition, a large-scale legislative intervention to roll back MCOs appears highly improbable. As noted by some sources, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)." The current trend suggests that MCOs are here to stay, shaping the future of sports in significant ways.
Impact on Women's Soccer
The influence of MCOs extends to women's soccer, a sector that experts argue needs such investments to grow. Michele Kang, a prominent advocate, states, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." This perspective underscores the potential positive impact that strategic investments can bring to a burgeoning sports segment that is often overshadowed by its male counterparts.
Case Studies of Multi-Club Ownership
Red Bull's ownership of multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino, serves as a prominent example of successful MCO. The brand's global presence and integrated marketing strategies significantly benefit the affiliated clubs, boosting their visibility and commercial appeal.
In baseball, Diamond Baseball Holdings (DBH) owns 35 of the 120 affiliated minor league franchises. DBH's contracts with Major League Baseball (MLB) enable them to negotiate national sponsorships for all 120 minor league teams, creating a unified and powerful commercial front.
Future Prospects and Challenges
The number of soccer teams under MCO structures surged from 117 in 2021 to a projected 336 by 2024, indicating robust growth in this ownership model. However, the market is not without its challenges. Financial institutions' unwillingness to meet profit targets could lead to "fire sales," where players are sold off, and clubs face potential relegation.
Profluence Capital is among the new entrants looking to create a multi-club ownership ecosystem, demonstrating the continued investor interest in this model. Meanwhile, in the USL, Westchester SC has made headlines with significant moves such as inking the second-largest jersey sponsorship deal and signing a former Premier League player for his final career stage. The club set records by becoming one of the fastest teams to go from an expansion agreement to public announcement in USL history, accomplishing this feat in just four months.
The MCO trend is more than a passing phase; it is a structural shift with profound implications for the future of sports. While controversies and challenges persist, the financial and operational efficiencies that MCOs bring to the table are hard to ignore. With technological advancements continuing to support this model, the landscape of global sports will likely see even more significant changes in the years to come.