Multi-club ownership (MCO) is rapidly transforming the landscape of global sports, particularly soccer. With its roots tracing back to the early 20th century, the concept involves investors acquiring stakes in multiple teams simultaneously. This trend has drawn significant attention, with private equity groups often eyeing an eventual exit strategy rather than long-term operational involvement.
A surge in multi-club ownership, particularly in European soccer, reveals both the opportunities and controversies inherent in the model. While some hail it as a modern marvel, particularly for the commercial uplift it brings, critics argue that it threatens the traditional fabric of the sport. Soccer supporters in Europe, for instance, are predominantly opposed to MCOs. They see it as a threat to the competitive balance and the unique identity of each club.
The Business of MCO
Financial interests drive much of the enthusiasm around multi-club ownership. Private equity groups often target "low-hanging fruit" with the plan to offload their stakes eventually. This intent was summed up in the quote, "Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake." The commercial advantages are undeniable: clubs within MCO networks frequently experience a 20-30% increase in commercial revenues due to shared sponsorship deals and global branding efforts. Furthermore, the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in comparable leagues.
Technological advancements are another aspect refining the MCO model. Artificial intelligence and data analytics are set to play more significant roles, further optimizing operations across global sports enterprises. "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch," highlighted RedBird Capital, emphasizing the multifaceted benefits of MCOs.
The Societal Impact
Despite its financial allure, MCOs face considerable opposition, particularly from traditional sports communities. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests (highly unlikely)," suggests that large-scale legislative interventions are improbable, leaving many traditionalists uneasy about the future. Moreover, the unwillingness of financial institutions to meet profit targets could see "fire sales" where players are sold off and clubs potentially relegated.
The influence extends to women's soccer as well. Michele Kang, a billionaire investor, stated, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." This sentiment underscores the critical role MCOs could play in elevating underfunded and underrepresented sectors of the sport.
Expansion and Growth
The sheer growth of MCOs is staggering. The number of soccer teams under MCO structures surged from 117 in 2021 to a projected 336 by 2024. This growth is exemplified by high-profile entities like Red Bull, which owns multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino.
American sports are not immune to this global trend. Diamond Baseball Holdings (DBH) exemplifies the MCO model in baseball, owning 35 of the 120 affiliated minor league franchises. These include teams in Triple-A, Double-A, Single-A, and High-A leagues. D.B.H even has contracts with MLB to negotiate national sponsorships for all 120 minor league teams, further consolidating its influence in the sport.
Future Prospects
Investors like Profluence Capital are eyeing opportunities to amplify their portfolios by creating a multi-club ownership ecosystem. Their ambitious visions include notable success stories such as Westchester SC, an expansion USL1 soccer team. This team inked the second-largest jersey sponsorship deal in the USL and even signed a former Premier League player for his final career stage. Westchester SC set records as one of the fastest teams to go from an expansion agreement to public announcement in USL history, achieving this feat in just four months.
As RedBird Capital puts it, "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet." This perspective highlights the enduring value and potential stability MCOs can bring, despite the traditional market's readiness.
In conclusion, while multi-club ownership has its critics, its influence on the financial, operational, and competitive aspects of sports cannot be overstated. As the model continues to evolve through technological advancements and increased market integration, its ultimate impact on the sports world remains a hotly debated topic.