Arguably Premier League football is a heavily subsidised business. Subsidised by the riches of broadcasting rights which have grown exponentially over the last 25 years ago. Participation in the Premier League has guaranteed levels of income not dreamed of even 10 years ago. However, it is often argued by economists that subsidised businesses or sectors run less efficiently because of their subsidy.
Is that the case in football?
Six clubs have been ever present in the Premier League era. Of the six, Manchester United, Chelsea and to a lesser extent Arsenal have dominated the honours boards over the years, Liverpool and Tottenham have huffed and puffed, occasionally threatening but never quite made it, and then there’s Everton. Once in the top 4, several times 5th or 6th and seemingly perennial winners of the famed 7th place trophy. In addition to the six ever-presents there’s Manchester City who through the ownership and stewardship of Sheikh Mansour Bin Zayed Al Nahyan are threatening to become the dominant force in the years ahead.
What is it that differentiates between the successful and the unsuccessful? In a regulated business (competition) like football it can only be one of two reasons – the resources available to the clubs and the people who run it on and off the pitch.
The resources available to a club can only come from a limited number of sources, the financial power of the owners, Premier League and European competition participation, and the revenue that is driven by the commercial activities of the club. Whilst the first two sources are given and performance related, the key differentiator is the strength of commercial operations. It is argued that commercial success is predominantly driven by success on the pitch.
Whilst I understand the logic of that argument, to me it is too simplistic and can be viewed as self-defeating. Other than broadcasting revenues (including European revenues as a result of league position) which are given and relatively equal in distribution, it is the commercial performance that differentiates financial performance. Is it right to accept that commercial performance can only come about by success on the pitch when (because of FFP and PL profitability and sustainability rules) it’s necessary to generate that revenue to acquire success? This argument seems like the classic chicken and egg scenario – which comes first?
In my view, commercial performance is driven from board level. It is the board that sets the ambitions of the club, including critically what is, or is not acceptable commercial performance.
Thus, it is interesting to look at the boards of the “big 6” to see if lessons can be learned.
Two key features of board composition stick out for me – the level of representation the major shareholder/shareholders have at board level, and the degree of commercial expertise that exists on each of these boards.
Manchester City are understandably the best resourced club, and the club in my opinion demonstrating the greatest vision for the future. (see the excellent article in the Guardian about their global dominance plans) Interestingly in the early years of Sheik Mansour’s ownership their commercial performance has not been spectacular. Strip out the association with Abu Dhabi and there’s little to be too excited about. However, that’s changing and I expect to see Manchester City significantly expand on their commercial relationships.
At board level they have a number of interesting characters with extensive international, sporting and commercial experience. As you might expect senior executives from within the Abu Dhabi ruling family and Government dominate the board. Their Chairman is Khaldoon Al Mubarak, a very senior football administrator and Abu Dhabi official being Chairman of City Football Group and Abu Dhabi Executive Affairs Authority. He’s joined by two other senior Abu Dhabi executives in Simon Pearce and Mohamed Al Mazrouei both with considerable external business experience in addition to their state duties. They’re joined by John Macbeth having held senior positions with BP, Statoil and BAE systems, and Alberto Galassi, CEO of the luxury goods Ferretti Group and Chairman of Piaggio Aerospace.
Throw in the CEO Ferran Soriani with his business experience and Director of Football Aitor “Txiki” Begiristain and you have a very powerful board and senior executive team. With the resources available to them it is no surprise they seek both at City and within the Group national, European and global domination.
Manchester United have long dominated the commercial performance table. Driven by an ambitious board in the early days of the Premier League and the club’s embodiment of Sir Alex Ferguson’s desire to win they mastered the art of local, national and international commercial partnering.
Their board is dominated by the Glazer family, the owners of Manchester United. Its purpose has been to provide sufficient funds for footballing success (albeit with diminished returns on the pitch in recent years), and to build sufficient income to meet their debt burden (caused by their leveraged ownership model) and increasingly to provide dividends to the Glazer family. The board is co-chaired by Avram and Joel Glazer both relatively quiet men with limited desire for public appearance or indeed scrutiny. The public face of the board is Edward Woodward, Executive Vice Chairman, a former investment banker, now senior administrator and presented as the driving force behind their commercial success. Interestingly he is increasingly coming under public scrutiny for the decisions made post Ferguson, and perhaps with the growing dominance of Manchester City may find the Glazers looking unforgivingly in his direction. The board has four other Glazer family members and three independent directors, Robert Leitao, Head of Rothschild’s Global Financial Advisory business, Manu Sawhney, with vast experience in Asia of media, rights, distribution, consumer products and setting up entertainment businesses, currently CEO of Singapore Sports Hub and John Hooks, with a distinguished career in luxury goods, now CEO of PGM and an advisor to McKinsey & Co.
The Managing Director of Manchester United is Richard Arnold, formerly commercial director at United and with a technology and telecommunications background prior to that.
Despite under-performance on the field, in financial terms Manchester United continue from strength to strength. Whilst there is concern from their supporters that their financial dominance is not reflected on the pitch they clearly remain well-resourced and the leading example of the effect of long term commercial strategic thinking.
As is well known to many Everton fans, Arsenal are majority owned (67%) by Stan Kroenke a serial investor in sporting franchises and a shrewd property investor. As a football club Arsenal have built a brand new stadium, re-developed their old ground for residential use, been a model of financial security and enjoyed consistent ‘success’ on the pitch all without their majority shareholder putting funds into the club. Whilst they maintain a status and security most other clubs can only dream of, the frustration for Arsenal fans is the lack of ambition on the pitch, and increasing perhaps off it.
Their board consists of a combination of the Kroenke family in Stan and his son Josh. Josh Kroenke is a key part of the Kroenke sporting empire being President of the Colorado Avalanche NHL franchise and the Denver Nuggets in the NBA and plays an increasing role in the day to day activities at Arsenal. Their board is chaired by Sir Chips Keswick, a British merchant banker, member of the Keswick family who control Jardine Matheson, a predominantly Asian based multi-conglomerate. Increasingly he succeeds in moving the board further and further away from the Arsenal fan base. His performance at the last Arsenal AGM was something to behold. The public face of the Arsenal board is Ivan Gazidis, the extremely well rewarded CEO. He has an extensive background in football administration formerly being part of the founding management team of MLS in the US, rising to Deputy Commissioner. Whilst instrumental in Arsenal’s commercial success, he is under increasing pressure for his continued support of Wenger.
In addition, there are two stalwarts of the club Ken Friar with over 60 years association with the club and Lord Harris of Peckham, the famous retailer and founder of Carpetright.
Whilst Arsenal have benefited hugely from their new stadium, their long-term association with Emirates and strong commercial performance, it’s difficult not to consider that they are not as ambitious as once was and that must be reflected in their commercial performance going forward. Nevertheless, they remain a very strong commercial organization.
Chelsea, of course, are dominated by the ownership of Abramovich and this is reflected with close associates in a small board. Bruce Buck a very senior lawyer and partner of US law firm Skadden Arps Slate Meagher & Flom, is Club Chairman. On the board are two very close associates, Eugene Tenenbaum and Marnia Granovskaia. Both were with Ambramovich in the days he owned the Russian oil company Sibneft, and have served on the Chelsea board since 2003. Granovskaia is particularly involved in the club’s transfer business.
Chelsea’s management structure is interesting in that they have a football board sitting under the main board, comprising of the board members above and David Barnard a senior football administrator with over 30 years experience. In recent times Chelsea have recruited a commercial director, Chris Townsend tasked with the role of doubling their turnover to a target of £650 million in the next 7 years. Chris was previously commercial director for the London Olympic and Paralympic games raising more than £2.4 bn of funding.
Tottenham Hotspur have in recent years been considered very tough negotiators and have grown both on and off the pitch. Majority owned by Enic, (owned by Joe Lewis and Daniel Levy) the dominant figure on the Tottenham board is Executive Chairman Daniel Levy. His name has become synonymous with Tottenham’s rise through not only their tough, rigid pay policy, but their property development, new stadium build and increasingly higher profile commercial deals. The one significant missing piece in the Tottenham jigsaw is the naming rights deal for their new stadium. However given it is underwritten by Joe Lewis’ Tavistock group it doesn’t represent a barrier to their development.
Joining Levy on the board is a fellow Enic director, Matthew Collecott, a Chartered Accountant with extensive sports media and property development experience. In addition there is Donna-Maria Cullen an expert in corporate and financial communications. She has been a board member since 2006.
Interestingly Tottenham have a Director of Football operations, Rebecca Caplehorn a Chartered Accountant with a strong financial background. There are also two non-executive directors in Kevin Watts , Vice Chairman, Global Banking HSBC, and Ron Robson MD of Tavistock and Deputy Chairman of Mitchell & Butlers, the large pub and restaurant owners.
With their increasingly expensive stadium development, the commercial performance of Tottenham will be placed under huge pressure in coming years. They are a brand which is yet to be fully exploited globally as their commercial revenue figures show. Their progress will be fascinating to watch.
Finally of the ‘big 6’ we have Liverpool. Owned by the Fenway Sports Group their board is dominated by the principals John Henry, Tom Werner and Mike Gordon. Relative to their success on the pitch, it is Liverpool perhaps who have been most successful in exploiting their brand, particularly internationally. A combination of shrewd thinking and mostly inexplicably favourable press and media relations have allowed the club to build a very successful commercial operation. Completing the FSG representation is Michael Egan, a partner at FSG.
In addition to the FSG representation, Peter Moore, CEO sits on the board. He joined in 2017, and has a career of growing businesses in the technology and entertainment spaces. His CV includes senior positions at Sega, Microsoft and Entertainment Arts. Andy Hughes has been finance director and Chief Operating Officer since 2013. Finally Kenny Dalglish, who needs no introduction, is a board member.
The Liverpool board is on my opinion the weakest of the ‘big 6’ in terms of external expertise. It is however backed by a strong executive team comprising principally of Sporting Director, Michael Edwards and Commercial Director, Billy Hogan.
Each of the largest 6 clubs in the Premier League have boards characterised by strong ownership representation, considerable commercial experience in different sectors and strong representation from non-executive directors who bring success and differing business practices and experiences from other commercial sectors into their respective clubs.
It can be argued that the success of their clubs is in effect a self-fulfilling prophecy – that success attracts the best talents which furthers future success. But as I said at the beginning of the article, for me that view is too simplistic. For there to be success someone, at sometime had to create it. We can argue the causes for that success of course, be it the extreme wealth and backing of owners, or indeed prolonged success on the pitch, however all of these arguments fail to recognise that in business as in life, challenger organisations challenge the status quo, the established pecking order.
They do so, sometimes through fortuitous circumstances, but usually through a single vision and a determination to get to the top.
Everton, with our famous motto Nil Satis Nisi Optimum and creator of so many ‘firsts” in football, should already be at the top of the game, however as we all know that is not the case. We can though become the challenger brand, through vision, determination and the introduction of leaders driven, talented and resourceful enough to get us there.
In a year when our next home for future generations will become a reality, the need for the business of Everton to compete at board level as well as on the pitch is totally apparent. As demonstrated elsewhere, that is in the hands of the owner, and just as the balance sheet has been transformed, perhaps the task after the stadium confirmation is that of the board….
Categories: Everton finances