Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, particularly soccer. This burgeoning trend involves investors acquiring stakes in multiple teams simultaneously, a concept met with both opportunities and controversies. It's clear that MCO is shaking up traditional notions of club ownership and competition, especially in Europe where soccer supporters have shown strong opposition.
The Surge in Multi-Club Ownership
The trend of MCOs has gained significant traction over recent years. The number of soccer teams under such structures surged from 117 in 2021 to a projected 336 by 2024. Private equity groups, often the driving force behind these acquisitions, typically have an exit strategy in mind rather than long-term operational involvement. As one insider noted, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake."
Despite the controversy, MCOs present clear financial benefits. Clubs within these networks frequently experience a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. Additionally, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues. Red Bull, for instance, owns multiple clubs worldwide including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino, exemplifying the extensive reach and economic potential of these networks.
Technological Advancements and Financial Models
Technological advancements are playing a crucial role in refining the MCO model. With artificial intelligence and data analytics, investors can make more informed decisions and optimize operations across their portfolio of clubs. Such synergies are evident in the operations of RedBird Capital. A representative from the firm highlighted, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch."
However, the shift to multi-club ownership is not without its risks. Financial institutions' reluctance to meet profit targets could result in "fire sales," where players are sold off and clubs potentially relegated. The pressures for quick financial returns can sometimes undermine the long-term stability and success of these clubs.
Legislation and Opposition
Despite widespread opposition from traditional sports communities, large-scale legislative intervention to roll back MCOs seems improbable. One source commented, "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)." The entrenched nature of these ownerships and the economic benefits they bring make legislative rollbacks a challenging proposition.
Impact on Women's Soccer
The influence of MCOs is also extending to women's soccer. Michele Kang, a prominent figure in the sports industry, asserted, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." The financial stability and increased resources provided by MCOs can help elevate the women's game, providing a platform for sustainable growth and greater visibility.
Beyond Soccer
It's worth noting that MCO is not limited to soccer. Diamond Baseball Holdings (DBH) exemplifies this trend in baseball, owning 35 of the 120 affiliated minor league franchises. DBH has contracts with MLB to negotiate national sponsorships for all 120 minor league teams, demonstrating how MCOs can consolidate resources and maximize revenue across vast networks.
Case in Point: Westchester SC
Westchester SC offers a snapshot of the rapid integration into the MCO ecosystem. The club inked the second-largest jersey sponsorship deal in the USL and signed a former Premier League player for his final career stage. Remarkably, Westchester SC set records as one of the fastest teams to go from an expansion agreement to a public announcement in USL history, achieving this feat in just four months.
The Future of MCOs
As more investors and private equity groups explore the MCO model, its impact on global sports is likely to grow. While skepticism and resistance remain strong, especially among traditional supporters, the economic benefits and operational efficiencies offered by MCOs present a compelling case for their continued expansion. As one voice from RedBird Capital pointed out, "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet."
In summary, the landscape of sports ownership is undergoing a profound transformation driven by the rapid rise of MCOs. Whether this shift will ultimately benefit the sport and its fans, or exacerbate existing concerns, remains to be seen. What is clear, however, is that the era of multi-club ownership has arrived, reshaping the world of sports in unforeseen and significant ways.