Investment, just as we shared on our “growth flywheel,” is one of the key pillars that drive growth in football, or in any sports ecosystem, along with talent, revenues, and partnerships. We are currently going through a window of change in the sports industry and with it, the investment landscape adapts to the new market dynamics that arise.
The popularity of sports helps it overcome more challenging times. Laurie Pinto, Partner at Pinto Capital, shared on this episode of the “Are you not entertained?” podcast, his belief that the sports industry is quite resilient to economic downturns, and that it is usually more a matter of “confidence” in the evolution of inflation and interest rates that impacts it rather than real economic issues. This is something that we covered in our deep dive into the SportsTech space in WFS Digest.
For this article, we have identified five trends that are shaping the future of football from the investment perspective and adding insights from some of the most recognized experts in the field.
The multi-club ownership model: When football clubs become multinationals
This form of governance is quickly gaining traction. City Group may be one of the most popular examples; 10 years after being founded, they already own 10 clubs that help the brand presence in every continent except Africa.
Other groups worth mentioning include:
- Orlegi Sports and Grupo Pachuca, who have recently purchased Sporting Gijon and Real Oviedo respectively, have been able to diversify their businesses into European soil and will probably heat up the rivalry between these two historic Spanish clubs.
- New City Capital Group owns 7 clubs, amongst which we can find Kaiserlautern or Barnsley.
- Redbird Capital Partners have an interesting model as they own football clubs like Liverpool and Toulouse but also other sports properties like the Boston Red Sox.
- 777 partners, who own Genoa, and Standard Liege, have a small stake in Sevilla, and Vasco da Gama.
- John Textor is a unique case as in only 12 months he has been able to buy stakes in Crystal Palace, Botafogo, Olympique Lyonnais, and RWD Molenbeek.
????️ "Moving into the future, we’re going to see more and more interest from foreign investment in European football."
— World Football Summit (@WFSummit) September 22, 2021
Some of the benefits of this model, as Jordan Gardner from FC Helsingor pointed out, include being able to gradually onboard players from foreign cultures and playing systems into a new philosophy and style. Other benefits that Brett Johnson, an investor who partnered with Gardner on the FC Helsingor deal, points out in an interview for The Athletic:
“There are benefits in recruiting and retaining players and coaches if you can highlight a pathway to advance within your own eco-system. Additionally, there’s some back-office synergy on the finance, legal, accounting, player contracts, sponsorship fronts to have a more experienced, centralised team handling a lot of the day-to-day minutiae.”
Multi-club ownership also allows for revenues and earning distribution among the different entities of the group. Kieran Maguire, on this episode of The Price of Football Podcast, shared the example of an Australian player that transferred from Melbourne City to Manchester City without a transfer fee and actually never played for the “citizens.” He was then sold to another club for 10 million pounds, and it was Manchester City, not Melbourne who recorded a profit for that same amount, which is then taken into account for Financial Fair Play calculations.
Overall, as Javier Sobrino pointed out in an exclusive conversation with WFS Digest, investing in a multi-club ownership model allows for synergies and transfers of skills and resources from one property to another.
American investors are betting on the future of European “soccer”
The recent acquisition of Chelsea FC by Todd Boehly for 4.25bn pounds is just the most recent example of an American Investor entering the European football scene.
In general terms, Americans perceive European clubs as being undervalued which is why they are entering the scene. It does seem though that they will look to invest in those clubs and renovate them in order to reset them again for a profit in the midterm. Moreover, with the current dynamic in which the dollar is strengthening and the euro is weakening, it is only fair to assume that more of these deals will take place in the near future.
Other deals worth mentioning that have taken place this year are Real Zaragoza, where Jorge and Jose Mas purchased a 51% stake of the club, or Atalanta, where a group of investors led by Boston Celtics co-owner, Stephen Pagliuca, purchased 55% of the club.
Finally, and although it is not necessarily an acquisition of a football club, one cannot forget how Sixth Street has made a big investment into acquiring around 25% of FC Barcelona’s broadcasting rights and, together with Legends, a 30% of the business that will manage Real Madrid’s Santiago Bernabeu stadium for the next 20 years.
SPACS are losing momentum
It seems like just several months ago SPACS (Special Purpose Acquisition Companies) were all over the place and with a particular focus on sports. Today though, momentum has halted as the reality seems that not many of those projects have materialized. According to a report by Forbes, “21 of 33 SPACs tied to famous public figures posted negative returns for 2021 — and in 2022 alone, 30 SPAC mergers have been called off.”
And, as reported by Bloomberg, “of the 375 firms that went public by merging with a SPAC in the last five years (e.g. DraftKings, Allied Esports, Vivid Seats), just 34, or less than 10%, have outperformed the S&P 500 Index over the past 12 months, according to data compiled and analyzed by Bloomberg.”
Companies changing football through technology
One particular area that always draws interest from potential investors is that of technology. While given the current market conditions startup valuations may be down versus what could have been a few months ago, the reality seems to be that those companies that are willing to change the game of football through technology end up raising significant amounts of investment to fulfill their missions.
In this edition of WFS Digest we already covered how Gloria, OneFootball and Pixellot, drew significant investment rounds:
- In July of 2022, Pixellot announced a $161 million investment round
- OneFootball announced a funding round of $300 million back in April 2022.
- Gloria App has drawn interest from top-tier investors like Alexis Ohanian.
As the acceptance of web 3 technology by the mass market accelerates, and if the economic environment enables it, one can only assume that these investments are bound to get bigger and more frequent. On this note, Luis Vicente, Chairman at APEX capital and confirmed speaker for WFS Europe, had this to say on a LinkedIn post about the role of technology to enable better fan engagement initiaitives:
“I am also a big believer that Web3 capabilities and utility can be the missing link that will allow sports brands as such, to connect with its community on an efficient way as well as create a dual direction relationship with every member of that community”
Women’s Football: How the NWSL is leading the way in “soccer” team valuations
An article about investments in football would not be complete without talking about the huge opportunities behind Women’s Football.
Victoire Cogevina-Reynal already shared with WFS Digest how she believes football is a market of 3 billion untapped customers.
The pioneering market seems to be the United States, where valuations have skyrocketed over the past few months. As Yahoo Sports reports, the price to enter the NWSL was in the $2-$5 million range. This year though, the picture is quite different as the Washington Spirit was valued at $35 million in February, and Gotham FC at $40 million in July, with star athletes like Kevin Durant, Sue Bird, or Eli Manning among some of its investors.
Leading the way in women’s football investment though, is the American sports property, Angel City, currently valued at $100 million. With support from top-notch investors such as Alexis Ohanian, Natalie Portman, and many others the club is definitely disrupting the women’s football industry with force. The way they have marketed the team is remarkable and this has led them to land major partnerships deals with DoorDash, Heineken or Gatorade and has booked more than $35 million in sponsorships and has been able to sell 16,000 season tickets ahead of its first season ever. The team’s president and co-founder had this to say about the remarkable feat during a Sportico event:
“I would say that Angel City has more sponsorship revenue today than two hands worth of men’s professional sports teams. We believe our kit is the highest grossing of any women’s team in the U.S.”
Alexis Ohanian identified the opportunity very quickly after attending the quarter-finals match of the US Women’s National Team at a World Cup:
“You had both really die-hard fans and then also, let’s say passionate haters,” said Ohanian, an early-stage investor. “And anytime you have something that’s able to generate that much love and that much irrational hate, you’re probably onto something really special.”
The game of the future will be radically different
While it is hard to predict exactly how these trends will materialise, they seem to suggest that the game of the future will be radically different.
Step by step, clubs are becoming more similar to multinationals run by foreign investors. At the same time, new investment vehicles will emerge to try to back these new models and strategies of outside investors.
Two things seem certain: One of them is that football for women is no longer a “promise” but an established reality with great business potential. The other is that technologies like AI will play a leading role in taking the football industry to greater heights.
This article features in the latest edition of WFS Digest, our insider’s guide to the latest and most relevant thoughts and practises from within the football industry. You can subscribe to WFS Digest HERE.