Football Group Model
The football group model is becoming more common across the world and has been sprung into the public eye in more recent times with the exploits of the City Football Group and their high profile Financial Fair play Case with UEFA. In this post, I look to explain the football group model and the benefits which it has to football clubs.
What is the Football Group Model?
Essentially it is where the owners of one club buy one or more other clubs for the purposes of their footballing interests and strategic purposes. The City Football Group is the most well-known and have recently acquired their 11th club in Bolivia only a short number of weeks ago. Leicester’s ownership owns OH Leuven in Belgium, while the Red Bull football group comprising of Salzburg, Leipzig, New York, and Brazil. Premier League clubs Brighton and Sheffield United also have ties with foreign clubs.
How is it being used?
Having a number of football clubs under the one ownership group allows for the balancing of staff, income and expenditure, and commercial & sponsorship contracts, being balanced across the football group as a whole rather than on one club. This was an interesting perspective taken from the 77-page Court of Arbitration report that ruled Manchester City had not broken Financial Fair Play regulations. A number of employees are contracted as City Football Group employees rather than employees of Manchester City, while the significant sponsorship contracts that were signed to offset losses incurred within the group were spread across all clubs. It is an extremely grey area and something that can be considered a loophole that has been exploited and properly looked at properly by world football organisations as of yet. A key aspect in relation to the football clubs an ownership group can purchase is governed by the rules in relation to ownership and preventing unfair competition. In England, no one owner is allowed to have an interest in more than one football club in the English Football pyramid. Whereas in Spain there are no specific regulations prohibiting one owner from controlling two clubs in different divisions. In recent years RB Salzburg and RB Leipzig qualification for the UEFA Champions league dug up allegations of unfair competition as they are owned by the same company Red Bull, however, they were able to prove exponentially that both clubs were completely separate entities and conveniently RB in their names means RassenBall rather than Red Bull.
The City Football Group have been able to build the best of facilities for their teams, which includes top of the range medical facilities, training pitches, and academy campuses around the world. This wishes the illustrate the benefits this has to the development of football around the world. Arguably one of the biggest advantages of the football group model is the movement of players. Two notable cases are Aaron Mooy and Jack Harrison. Aaron Mooy was signed by Melbourne City, played a number of games for them before transferring to Manchester City on a free, he was then loaned straight away to Huddersfield Town, before being sold to them for £8million at the end of the year loan. The money received then going back into the football group kitty. Jack Harrison was signed by Manchester City, spent time on loan at New York City for his development, and is currently in the second year on loan at Leeds United. This illustrates how having owned a number of clubs can have significant benefits to developing players elsewhere and bringing them back. While another major development recently will undoubtedly grow the interest in clubs developing a football group model.
Impact of Brexit?
Britain leaving the European Union on January 1st, 2021 has meant that English Football clubs are no longer able to sign players under the age of 18, which will change the dynamics of youth recruitment. It is a FIFA rule set out in their regulations for the transfer of players between countries. Brexit ends the previous freedom of movement between the UK and EU. Notable players who have come to England under the age of 18 were Arsenal’s signings of Cesc Fabregas and Hector Bellerin and Manchester City’s acquisition of Eric Garcia. This new ruling has had mixed thoughts of the English clubs, with the top clubs more aggrieved than those further down the football pyramid. Clubs have been asked to consider developing more home-grown players by the English FA, which is considered a growing issue in the English game with those homegrown players making it professionally dwindling. However, the top clubs see themselves at a disadvantage when competing in Europe where other clubs don’t have these restrictions.
In order for any player to be awarded a work permit to transfer internationally to an English Club they will need to achieve 15 points, which are calculated based on player's international status, the league they have signed from, minutes played, the success of the last club, minutes played in continental competitions. The more they have achieved the greater points they gain. So, here arises the importance of English clubs having partner clubs internationally. Previously those players coming from Africa and South America would have played in other top European Leagues before making the move to England. This is due to the work permit system not being as strict in these countries as in England. English clubs that signed players directly from South American clubs would have instantly loaned the player out in Europe to gain this experience and hopefully achieve a work permit in England. However often this never materialises and they are sold on without little being known of them by the club’s fans or playing a game for that club. English Football clubs being able to continue to purchase young players and players from the African and South American markets and placing them in their partner clubs in Europe will assist greatly in gaining the sufficient number of points required to make the move to the English Club. It means that English clubs are not missing out on the option to purchase young talent or finding gems at a lower cost and developing them, instead of having to wait for them to develop in another club in Europe, achieve the necessary points for a work permit and then having to buy them for a much higher transfer fee. Having a partner club that acquires these players allows them to adapt to a certain style of play that the English team plays before moving over, something that may not be possible at other clubs.
The Future
There are a number of investment groups that are raising finance with intention of investing in football clubs in Europe. The City Football Group is 77% owned by Abu Dhabi United Group, 13% by China Media Capital and CITIC Group, and 10% by US-based private equity firm Silver Lake. This allows more capital to be pumped into the group for investment in infrastructure and football operations. An American investment group Red Ball, led by Billy Beane, who was behind Oakland A’s Moneyball approach to winning the Baseball World Series, is looking to invest in football in Europe. A deal seemed to have been struck for them to invest in Fenway Sports and therefore Liverpool FC, however in recent days this deal has seemed to have broken down over the valuation of the stake. Hopefully, they can find a compromise as it would be a great deal for Liverpool, to hopeful push forward and invest in a European Club. They don’t want to fall behind when Manchester City is established, while other teams including Manchester United are actively looking for European partner club(s).
Undoubtedly investment and top clubs acquiring other football clubs worldwide is the way of the future. However, it remains to be seen whether more stringent regulations will be brought in to ensure unfair competition doesn’t become a major concern. Often it has been mentioned that football is becoming a greater commercial and financial asset than the core product of football. So, it is vitally important that it doesn’t get to a point of no return.
Sources
The Athletic
Danial Geey
