Tuesday, August 09, 2005

Paddy's Sports View 9th August 2005

From: "The Emirates Evening Post"

There is an old joke, dating from the 1980s when a stock market and property boom in Japan created hundreds of new multi-millionaires. One of these wanted to buy his son a present for his coming-of-age and asked his son what he would like. His son said that he would like a really good set of golf clubs - so the millionaire bought him Wentworth, Sunningdale and Turnberry! For the Mega rich to become involved in sport is, of course, not a joke these days but a reality. It has always been the case that wealthy Americans have indulged their sports passions by buying Football, Hockey or Baseball teams. These were rarely, if ever, hard nosed business decisions but nearly always indulgences that were driven not by economics but by emotion. Whilst there is plenty of money in these sports most of it goes to players and their agents rather than to the entrepreneurs who hold the team's stocks. But in recent times there has been, in some cases, a more commercial driver behind some businessmen's involvement in sport - and this is certainly the case with the Glazer family's take-over of Manchester United.

The creation of the "Premier league" in English football just over a decade ago meant that all of the top clubs had to be more commercial and far better funded than before. Some of this funding came from TV rights revenues and from hugely increased sponsorship and sports goods marketing. But if a club was to succeed it had also to seek more conventional sources of a funds - usually from a stock market flotation. Manchester United were the classic model; their flotation as a limited liability company allied with the powerful exploitation of their brand, allowed them to mine a rich vein of revenues. This money in turn gave United the edge in the transfer market and they were able to make many star signings and this was one of the main contributing factors in their success. However the very fact that they were no longer a private club, but now a stock exchange traded business, left them vulnerable to take-over. The American Malcolm Glazer, although initially rebuffed by the United board, persevered and eventually took full control of the club this year.

Whilst the Glazer approach would appear to be mainly commercially driven (certainly the Glazers don't seem to know much about "soccer") the story of Chelsea and Roman Ambramovitch is rather different. Where Glazer, although a rich man, has not put much of his own money into Manchester United (he has borrowed heavily to fund the deal) Ambramovitch's purchase of Chelsea is a purely personal one. This man, who is rich almost beyond comprehension from his Russian oil industry fortune, has bought Chelsea as a plaything. He shows few signs of wanting his investment to produce a return and is equally happy to put more money up for even more new star players if his manager tells him it is necessary. This gave Chelsea the 2004/2005 Premiership title.

The Glazer take-over of Manchester United has been roundly criticised by many of the club's fans who see the fine traditions of the club being put at risk by this American carpetbagger. At Chelsea, however, the reverse is the case and most fans are quite happy that their club is now Russian owned and relish in its new nickname "Chelski"! I have a funny feeling, however, that in the end it may be the fans of Manchester United rather than those of Chelsea who are ultimately the happier. For Ambramovitch Chelsea is a plaything - an amusing diversion from his mainstream imperative of staying rich and becoming richer. For the Glazers, however, Manchester United is a business and they will expect it to perfom. In the short term this will be uncomfortable for some of the fans as ticket prices and other costs of being a supporter are bound to increase. But to establish a sound cash-generating business at Old Trafford should ensure that the team continues to compete at the very top in Europe for the long term. Chelsea's over reliance on Ambramovitz may, on the contrary, end in tears. He may bore of his toy or, more likely, start to expect it to give the same level of return that he gets from his other businesses. At the moment, as a fan, I think I'd be happier red than blue!