The elite tier of professional football in England prior to the formation of the English Premier League was in a state of serious decline. Stagnant revenues, diminishing attendances combined with the egregious image of hooliganism made the highest echelon of English football unappetising for spectators and potential investors. English Football was not highly regarded by global football purists and was not seen as an avenue for investment from potential foreign investors. I am hoping to establish the fundamental differences between parliament style elections and fan ownership, which is more common in Germany and Spain and the ‘laissez-faire’ or “highest bidder wins” market system of private ownership in England. The essence of the argument shall compare FC-Barçelona and Liverpool-FC respectively.
Since the inception of the Premier division the English Premier League has become one of Europe’s most popular divisions. One of the main reasons why some English teams have become financially and commercially more successful is partly due to the ample transformation of the league itself, but also due to the fact that English teams are open and susceptible to foreign investment and ownership. In opposition to that notion are football teams in Spain, with the exception of clubs like Malaga, who have foreign owners; they remain in the minority. A financial institution like FC-Barçelona has a regime in place where members or ‘socis’ buy shares in the club, and elect a President to run and organise the club on their behalf. So the running and handling of the club is at the hands of the shareholders, who are effectively the fans. This is in stark contrast to a club such as Liverpool-FC, whose principal owner John W. Henry and club Chairman Tom Werner run the club on behalf of a firm named Fenway Sports Group. They operate the club without any fan-shareholder scheme. FSG own an array of sports teams, including Major League Baseball team the Boston Red Sox.
Foreign investors have witnessed the growth and expansion of the English Premier League since its formation in 1992. The English Premier League has become the most popular division in world, with broadcasting rights in over two hundred nations. Foreign ownership is the basis of the current argument; foreign investors usually bring vast amounts of financial capital, which is used to aid its competitiveness within the division. The current Premier League champions Manchester United have benefited from substantial foreign investment.
On the 6th February 2007 ownership of Liverpool-FC changed from the Moore’s family into the hands of American businessmen Tom Hicks and George Gillett. The American duo made promises of lavish spending, a new stadium and promises of Liverpool’s ascension back to the elite of English football once again. In 2010 those words could be seen as chimerical at best. The club was purchased with debt and when HBOS could see that there was a good chance they could lose out financially, Martin Broughton was brought in to sell the club. What this episode has done is highlight the potential vulnerability that English football clubs can find themselves in because they are potentially open to ownership from any consortium. This would be impossible at FC-Barçelona due to the system in place.
An institution like FC-Barçelona is not exempt from financial debt, far from it, but the idea of two non-Catalan businessmen buying the club, and adding severe debt to it is unimaginable. This is because there are unwritten barriers in place to prevent such an event from ever occurring. FC-Barçelona pride themselves on certain values, the togetherness with the fans is perhaps the most pivotal. One does not suggest that clubs in England do not share the same unity, quite the contrary, but the actual running of the club is by the fans. Foreigners that are employed can hold influential positions, such as Johannes Cruijff (who was a senior advisor for the club) but never the president. FC-Barcelona would be violating EU law if they abstained from hiring non-Catalans, but elected officials must be from Catalonia if they are to hold the influential positions. This certainly helps matters with the club because football is perhaps the most unique business, in the sense that it requires an almost religious faith an understanding that typical businessmen may not comprehend. No matter how much studying is done prior, people in the city, those around the club are always going to have a far greater passion for the club and this is a problem with foreign ownership because whilst there have been substantial benefits, foreign owners can suffer from imperfect information, which is detrimental to the club.
There are many advantages to foreign ownership within the Premier League however. The increase in popularity because of the increase in foreign investment due to rise in foreign ownership, has propelled it to becoming the highest revenue-generating league in world football. Figures from the 2008/2009 season show that revenue in the elite division of English football was the highest in the world. English football clubs generated some €2.3billion in revenue, this figure was more than double the French Ligue 1 figure of €1.5 billion. This gives us an indication of the revenue generating ability of top-flight football in England. As an entity generating over two billion in revenue it is not surprising that according to Deloitte football accountants, of the top twenty highest revenue raising clubs, seven of them are Premier League teams, including Liverpool-FC. Liverpool were ranked seventh in the 2008/2009 figures, generating some €217.0million in revenue. This figure does show that Liverpool, contrary to popular thought of gross mishandling of financial matters, were still in fact performing to an excellent standard. There was enormous debt, but the figure at hand does at least illustrate an excellent financial performance. Figures prior to 2007, when foreign owners did not own Liverpool were not as high as the current figures. According to Deloitte sport, in 2004/2005, revenue was €181.2million, in 2005/2006, revenue actually fell by €5.2million to €176million, in 2006/2007, revenue rose to €202.1million. This does highlight the sudden importance of new investment, particularly due to the relative financial instability prior to Hicks and Gillett’s tenure.
With the Premier League generating so much in revenue there are many relationships to depict from the increase in foreign ownership and increase in revenues. Arsenal Football Club is a public limited company and their leading shareholder, Stan Kroenke, is an American investor. The recent AGM meeting was viewed as platform for fans to voice their discontent with the running of the club. Further evidence suggesting that a football club requires a strong understanding between fans and board and unfortunately this may be lost with foreign ownership. There is clearly a reliance on foreign ownership in the Premier Division; in addition, the acquisition of Blackburn FC by the Venky family is another example of the clear appeal for foreign investors to buy Premier League clubs. Whilst it would be incorrect to group all foreign owners in the same category, the Venky family’s ownership highlights the lack of cohesion between fans and oweners. This bond is critical for a smooth running of any football club. Moreover, Blackburn’s relegation and farcial managerial “merry-go-round” speaks volumes of a clear lack of understanding from foreign owners.
Més que un club translates to: More than a club. This statement is a reminder of the tradition of FC Barcelona. Due to the harmonisation with board members, players, coaches and fans, FC-Barçelona is operated with coherence, because of the greater understanding, the fans having a much greater input with regards to club matters. The same could be said about clubs such as Bayern Munchen and Ajax. Although they are not of the same ownership model, their respective boards consist of former players. Therefore they function from the bottom up, rather than top down as many English clubs do, Andy Mitten a writer from the UK’s football magazine Four-Four Two suggests that
“Barça is owned by its members and the fans demand daily communication with players and coach.”
The coherence between the fans and the board is one of the main advantages of having fan ownership or heavy involvment of past players. Firstly the bureaucratic responsibilities are spread, not evenly, but spread nonetheless. This means that everybody has got a degree of responsibility and this gives the members a greater voice, so if things are not running smoothly, they can opine some of their immediate concerns and actions will be taken. This kind of power is what majority of Liverpool fans wished they had when the threat of administration was lingering over the club. Because Hicks and Gillett had complete control of Liverpool, the fans discontent went unheard, with their protests and anger failing to produce results they wanted, at the pace they desired. This is an illustration of how fan ownership is superior to a privately owned club that is susceptible to foreign ownership. Liverpool-FC, like every other football club, rely on the bond between club and fans, and that was in jeopardy due to board room events, what made the problem even worse was the fact that many fans felt as if their opinions went unheard, something that could not have materialised at Barcelona, a clear benefit of fan ownership.
The cadre of fans, players, coaches and board members is clearly an advantage in comparison to Liverpool. However, there are some noticeable hindrances to fan ownership nevertheless. FC Barçelona is in debt, despite revenues of €405million. They have outstanding loan repayments of €155million. Debt in business is inevitable, but an option for an English club in this situation would be to try and find a new buyer in order to ease the financial burden, something that drove Liverpool-FC to finding new foreign owners. Not every club that is in debt in England tries to find a new buyer, that is simply not sustainable, however, there is always that option. One of the main reasons why Liverpool had to find new owners was due to the mismanagement of the club’s debt. If Barçelona were open to foreign ownership there would be potential foreign owners waiting to make an approach. Nonetheless, because of the traditions, it is not a possibility. This ‘financial stubbornness’ if you like, thus prohibits all potential avenues of better financial management that would be helped due to foreign investment. Barçelona are a profitable organisation, but debt mismanagement can cripple any organisation, regardless of stature, history or tradition. Even with the possibility of foreign ownership, Premier League clubs are always susceptible to debt; hence the importance to run an efficient model, despite the threat of debt however, there is always that possibility to find a foreign buyer, something that clubs like FC-Barçelona cannot do, or Bayern Munchen would not do..
Barçelona retain all the broadcasting rights, which benefits Barçelona due to the high demand for their services. However, the oligopoly created along with Real-Madrid, has created an imbalanced situation for the rest of Spanish football. English teams receive an equal share of broadcasting revenue, thus increasing competition amongst teams. The oligopoly with Real Madrid has penalised Spanish football as a whole, one of the main reasons why the Premier League is so popular is because of its competitiveness. Moreover, a combination of equal broadcasting rights along with openness to foreign ownership gives the Premier League a competitive advantage.
Fans in England may require a greater voice with non-board room matters, but the fact that clubs are open to foreign ownership is a good attribute, but good owners who understand the needs of the club and the fans are vital to the success of the club, regardless of nationality. Liverpool-FC’s new owners have brought some stability and a clear focus to the club, despite the sacking of previous manager Kenny Dalglish. The renewed stability is welcome, but fans and board alike must realise that a close relationship is vital. Football clubs with heavy fan involvment at fan and professional level function a lot more harmnony and it holds board members accountable to their actions. Certain episodes have blemished English football, the current state of Blackburn Rovers, Portmouth and Liverpool’s financial shape prior to new owners highlight what can happen when owners do not have a clear understanding of the football club they own. Of course other factors must come into consideration, but owners must bear most of the responsiblity, if the owners have a greater input, they have more control, thus the they are more accountable.
The Conscience Blog 