Silver Lake Managing Director Egon Durban (right) and Manchester City chairman Khaldoon Al Mubarak in the stands at the Etihad Stadium, November 23, 2019.Andrew Yates/Reuters
In their marvellous, dishy book about the global rise of English soccer, The Club: How the Premier League Became the Richest, Most Disruptive Business in Sport, Wall Street Journal reporters Joshua Robinson and Jonathan Clegg recounted that, about 10 years ago, the-then chief executive officer of Manchester City outlined the team’s strategy to court new audiences.
“We’re not a football club, we’re actually a sports entertainment media company," Garry Cook told colleagues, according to the book, which was published last December. “So we must create content. We must provide events, we must create shows, we must create drama. And we must be part of the news, front page and back page, in every way. Am I competing with the other football club down the road, Manchester United, or am I competing with Walt Disney, with Amazon?”
On Wednesday morning, Man City vaulted to the front of the business pages with a bit of upbeat drama, announcing that a Silicon Valley private equity firm had agreed to buy a little more than 10 per cent of its ownership company, known as City Football Group (CFG), for US$500-million.
The deal values CFG, which also owns soccer clubs in New York, Australia, Japan, Uruguay, Spain and China, at an eye-popping US$4.8-billion, believed to be a record for the sport. (Most sports franchises, such as the NFL’s Dallas Cowboys, which Forbes estimates to be at the top of the list at US$5.5-billion, are privately held and therefore make a mockery of those who try to accurately place objective valuations on them.)
Silver Lake, based in Menlo Park, Calif., is known primarily for its investments in technology ventures such as Tesla and the e-commerce player Alibaba Group. But it has also moved into media and entertainment, including buying stakes in the mixed-martial arts organization UFC and the Hollywood talent agency Endeavor, where the brawls are usually confined to boardrooms.
What does it want with English soccer? Who knows? Silver Lake declined my request for comment, but the press release said the investment would be used “to fund international business growth opportunities and develop further CFG technology and infrastructure assets.”
Man City is a global brand – Twitter isn’t a perfect proxy, sure, but the club’s 7.4 million followers dwarf the Toronto Maple Leafs’ 1.9 million followers – and you can see its potential for more growth, especially as its ownership invests in more teams around the world. (Manchester United has 20.6 million followers on Twitter.)
In an e-mail exchange, I asked Clive Reeves, the head of the sports business advisory at PwC Switzerland, about the significance of the Man City announcement, particularly given Silver Lake’s track record in technology. Though he didn’t want to directly address the deal itself, he pointed out that it “is increasingly important that sports teams know their audience, and digital [technology] provides a great opportunity for sports teams to achieve this goal. The challenge for many clubs today is building assets and capabilities to capitalize on the opportunities provided by direct-to-consumer business models, which enable clubs to capture fan insights, offer new opportunities to commercial partners and grow new revenue streams.”
Silver Lake is a savvy company, to be sure – its US$43-billion in assets under management is roughly US$43-billion more than I have, give or take 20 bucks – but you have to wonder if it’s buying in at a peak.
Since Sheik Mansour, a member of the royal family of Abu Dhabi and the Deputy Prime Minister of the United Arab Emirates, bought Man City for pocket change in 2008, he has poured in more than US$1.5-billion, helping to make it a repeated champion.
Money is gushing into sports leagues across the globe, from broadcasters and emerging, deep-pocketed streaming services desperately fighting for eyeballs, based on the belief that audiences feel the need to tune into sporting events when they’re live.
In North America, Fox Sports signed a five-year deal in 2018 to pay the NFL US$660-million annually for the broadcast rights to Thursday Night Football, or US$60-million a week: an astonishing figure for a broadcast that pulls in perhaps 15 million viewers. (True, very few prime-time shows pull in even half of that nowadays. But they also cost perhaps US$5-million an hour.) The wisdom of Rogers Media’s $5.2-billion, 12-year NHL deal, which began only five years ago, is still to be determined.
Earlier this month, CBS elbowed aside competitors for North American rights to the UEFA Champions League games, to boost the offerings on its CBS All Access streaming service. Amazon Prime is about to start streaming soccer in Britain.
And yet, even a club like Man City is finding it tough to make a buck. In its 2018-19 season, it reported revenues of £535-million ($919-million), yet could only eke out a profit of about £10-million ($17-million). That’s partly because the superstars – or at least their agents – read the papers, and know how much the leagues are bringing in from the sale of the TV rights.
The other teams under the management of CFG, including New York City FC of Major League Soccer, are said to be unprofitable.
Still, for Sheik Mansour, that might count as a win. Because while we’re all occupied with the upbeat drama of this week’s news, there is a different kind of drama he would like us to ignore. Organizations such as Amnesty International argue that his investment in Man City is what it calls “sportswashing”: putting a happy face on an abusive emirate, where justice is capricious, government critics disappear, and freedom of speech, freedom of association and freedom of the press do not exist.
But at least the games are fun.
Simon Houpt