I have just read a blog1 about the unintended consequences of forming the Premier League in 1991. It was anticipated that it would bring more money into the game, which it did, and that this income would stabilise the financial position of football clubs, which it didn’t. In spite of the massive amount of money coming into the game, many clubs are making losses.
The blog goes on to ask why anyone, other than a squillionaire, would buy a club. That is a very good question. Less than half of all Premier League and Championship clubs are wholly owned by UK nationals and a lot of clubs have been bought by owners who have had no previous connection with them. What motivates foreigners to invest in British football clubs?
It is true that there are some prospects of making a profit in the future, from television deals or by building a Championship club up and getting it promoted. There are other possible motives for buying a club. The individuals at the top of a club can make money even if the club itself is making a loss. Complicated corporate structures and the absence of control mechanisms make it possible for owners of any nationality to make money in rather dodgy ways. Foreign ownership makes the whole process more opaque and creates more opportunities for individuals to make money while clubs are losing it.
The blog I’m referring to is not a football blog. It’s written by a member of the team at the Centre for Research on Socio-Cultural Change, a Manchester University/Open University research centre. One theme of their recent research has been the relation between elites and the businesses in which they work. Football elites are made up of managers, players and agents as well as owners and they form networks that control the game. Success in football depends on who you know as well as what you know; the right connections can provide access to talent. So the men at the top of football add value by improving the chance of success on the pitch but they also take away by skimming off some of the money that is made. A lot of people are getting very rich but the business of football is not sustainable.
I’ve tried to summarise some of the main points of the blog but I’d recommend that you click on the link below and read it yourself; I’m not an expert on business or finance so may not have understood it completely. I only read this kind of stuff because I’m trying to make sense of the situation at Birmingham City FC and understand why a group of men from China decided to buy it. At present I think it’s unlikely that I will ever know the answer to that question.