Why are American sports owners investing in British football clubs? It’s a valid and pertinent question facing soccer fans of the English Premier League clubs. Certainly it is not for the love of the game. What is well known about American businessman is their love of investment and money. As I did research and explored the topic more, those where the two themes that kept appearing. While the true reason for this foreign invasion is not really known, I am going to bring some points up that I thought about as I researched my own answer.
The first owner I will turn the spotlight on is Stan Kroenke. He is a bit of a sports entrepreneur these days, owning franchises in the NBA, NFL and MLS. His track record in sports ownership is reasonably successful. He recently won the MLS Cup last season with the Colorado Rapids. The Denver Nuggets has been a consistent playoff team in the NBA, although never playing in the NBA Finals.
The St. Louis Rams is a team that he just gained full ownership stakes in last season. The Rams went from one of the worst franchises to contending for a playoff spot late in the season. That is a pretty remarkable turnaround, although more fortunate due to the drafting of a franchise quarterback. Just recently, he has acquired a controlling stake in Arsenal Football club after carrying a minority ownership stake for the past three years. During that period of time he was also part of the Board for Arsenal.
What does he have to gain by having a controlling interest in Arsenal? To me it has to do with TV rights in the United States. ESPN has recently bought rights in the UK to show Premiership matches on its channel. They also have rights to show Premiership matches in the U.S and it has been rumored for sometime that ESPN was looking to get into the EPL long term. Stan has TV rights deals through ESPN with all of the sports leagues that he owns. So if ESPN was looking to do a deal, they would have a familiar partner to work with. Arsenal, along with the other top clubs, have a strong following in the U.S, so a partnership between the largest sports broadcaster in America and the EPL could be mutually beneficial for the expansion of the league into the U.S; The ESPN marketing machine would increase viewership, advertising and merchandise sales in the States. So the TV deal benefits the entire league, but the increased revenue puts more in his coffers and allows him to move to phase two.
Once he secures TV rights in the U.S., the next logical step would be to flex his retail muscle. Kroenke is part of the Wal-Mart empire, which is around 8500 stores in 15 different countries under 55 different names. His largest increase in investment has been in South America and China, which are the markets Arsenal are in desperate need to gain entry into. They are the fastest expanding economies in the world today and Wal-Mart has been cultivating a brand identity in them for some time. Add the demand that could be created in the United States for Arsenal and you have a high-demand product in three very powerful economies. Using these stores as a way to flog merchandise is a way to increase capital for Wal-Mart and generate huge merchandise sales for Arsenal. It’s a win-win scenario for Stan. It makes Sportsdirect.com look like a mom and pop operation. If he was to use this model he would be getting paid out of both ends of the deal. Arsenal is becoming involved in India, a booming economy where Wal-Mart has not gained entry to yet, what better way to gain entry than by using your football team?
The next ownership group I researched was New England Sports Venture, a group headed by John Henry. It also includes investors like Tom Werner and The Times Corporation. This same group is in control of the Boston Red Sox, New England Sports Network and Roush Fenway Racing of NASCAR. Henry is reportedly worth 1.1 billion dollars, made mostly as a futures and exchanges trader. That is the part that should concern Liverpool fans, he is a man that has made his fortunes buying low and selling high. Even though he has had great success in doing it, there is always a chance that other ventures drain his capital. Tom Werner is another of the major investors, his identity was forged as a TV producer for ABC, which is now owned by ESPN. The Times Corporation controls the Boston Globe, New York Times and two dozen other regional media companies. The group has taken the Boston Red Sox from a perennial loser to a winner. They invested heavily in players, but they also maximized revenue from TV, advertisers and stadium expansion. The NASCAR company is one of the most successful in the industry.
NESV took control of Liverpool in what former owner Tom Hicks described as an “epic and illegal swindle“. The club was bought for 300 million pounds. A mere pittance when you compare the value of Arsenal at £731 million and Manchester United at over a billion. Almost like they bought a low future. Imagine how much they could generate from building a new stadium and getting them back into the Champions League. The value of the club would also rise with the emergence of some big time players, which they will invest in. It’s also interesting to see the connection with ABC/ESPN again in this group. The more you look into it the more you find ESPN all over the map. It seems clear to me that ESPN want to do a deal and that American businessmen think a deal is to be had with them. American sports make a majority of their capital from TV deals, so I keep wanting to connect the dots with ESPN. They also have their own media outlet which they could use to market and sell advertising for Liverpool. The fact that they also own most of the major newspapers on the East Coast would not hurt the branding of Liverpool in the United States either.
American businessmen don’t invest in sports to lose money. Both of the new ownership groups have a chance to make big money over the next few years. The growth of soccer in the U.S. has put a premium on owning the top tier franchises in England. TV deals in the United States will lead to more revenue for the Premier League and demand for preseason tours and possibly Premier League games abroad. I never had bought in to the 39th game deal being dead.
In the case of Kroenke, his retailing empire gives him a unique avenue to capitalize on his investment. There are always rumblings of a NFL franchise moving to London as well, would it not be beneficial for someone like Stan to own a stadium? He could move the Rams to London or lease the stadium out to another owner. Could you imagine Wenger bitching about the conditions of the turf at his own stadium? NESV is a group of futures exchangers that have bought low on Liverpool and will make the necessary investment to flip a handsome profit. A nice new stadium, Champions League football and a few tidy players will see NESV flog Liverpool off to some Middle Eastern oil tycoon. The goal of the EPL is to expand into new markets, both of these owners have the connections and vehicles to make it happen. That does not mean that these clubs will not be well run or successful in the meantime. Both groups have a good track record of improving operations and results. Don’t be surprised if they use these clubs as ways to start negotiations for other business ventures, including with the other clubs they own. But lets be honest here, these guys have a track record of making boat loads of cash, which is the real reason they are invading English sports.