Monday, December 11, 2006

Dave Boyle: Overseas Investment in Clubs

The issue of foreign ownership is one which is generating a lot of heat, but not as much light as the column inches the issue has received would suggest. For starters, the real issue is less the nationality of the owner (though there are legitimate concerns here) than the fact that they can be bought and sold in the first place. There are reasons why this isn’t happening in Germany, nor Spain, and it’s nothing to do with bombast about the Premiership being the best league in the world.

This isn’t a natural, inevitable consequence of the increasingly globalised sports world, but a specific function of the way in which English football has been (un)regulated, and its market-based approach to dealing with its financial problems.

If we are serious about responding to this issue, we have to deal with the fundamental economics. The game has in the past been blasé about the kind of people who have bought its clubs, and the effect they have on those clubs. That issue has started to receive far more attention thanks to the campaigning work of fans, who have lobbied for fit and proper persons tests. These need to go further if they are to deliver on their promise of deterring the unsuitable, but we need also to look beyond the effect an owner can have on their own club and look at the league as a whole.

For example, Roman Abramovich prevented Chelsea going bankrupt, but are the actions of that club making others more likely to go bankrupt, by starting an ‘arms race’ of players and salaries that only Chelsea have the resources to win?

The early response has been caution, with no club attempting to match them, but the recent wave of takeovers are all prompted by the fear that the virtues many within the game have worked hard to promote – good governance, prudential management and good cost control – will never enable a club to compete. As clubs are driven to achieve glory, the good work of recent years threatens to be undone. And, given the sums of money required to buy a club, pay-off debts and invest in stadia and players, the pool of people from the UK who can ride over the hill to the rescue of once-great clubs is very small, hence the search abroad.

But at least we know who Randy Lerner is, and we can have a giggle about his name. As worrying is the development of debt-based takeovers, such as that of the Glazers, who look at the new TV deals, home and abroad, secured by the Premiership and think that this time, there are pickings to be had. Kia Joorchabian, prospective owner of West Ham, said that he and his partners ‘saw an opportunity for gain’. His refreshingly honest statement of intent demonstrates that following the Makhtoums might be hedge funds, truly faceless and dedicated not to adding-value to the cultural capital held by England’s great clubs, but to generating a nice return.

That’s all based on the idea that fans will, as they have done so before, put up with it, keep on going, keep on paying for tickets, for merchandise, for pay TV subscriptions. I can’t speak of the elasticity of demand in the other markets around the world, but all my experience here in the UK suggests that a business plan built on the idea that football fans remain a captive market and easy to exploit is a lot shakier than it would have been 10 years ago. There’s a growing disquiet in the air, and the gamble is whether this lingering discontent represents a potential sea-change, or a classic example of British grumbling, about which nothing will ever transpire. In short, the fans might not like it, but they’ll keep turning up. I wouldn’t be so sure. Supporters Direct

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