Why a private league is a ‘dangerous game’ for Europe’s football elites – Financial Times

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Towards the end of his resignation speech, Josep Maria Bartomeu, president of FC Barcelona, the world’s highest-earning football club, hurled a bombshell.

“I can announce something that will change in an extraordinary way the future revenue of the club for years to come,” he said in October. “The board of directors have approved the acceptance of requirements to take part in a future European super league of clubs, a project put forward by the biggest clubs in Europe.”

Though providing few details, Mr Bartomeu became the first senior football executive to publicly confirm the existence of a radical project — one that, for months, had been discussed only in fevered WhatsApp messages and clandestine meetings between the sport’s power brokers as the coronavirus crisis threatened their revenue model.

The richest clubs were contemplating a breakaway competition that would supersede the existing structure of the world’s favourite sport. The motivation was clear: to secure more frequent matches between heavyweight European teams, believing this will draw higher broadcasting and sponsorship income and create a better spectacle on the pitch.

Josep Maria Bartomeu, front right, at Camp Nou. The outgoing president of FC Barcelona said in October that his club's 'board of directors have approved the acceptance of requirements to take part in a future European super league'
Josep Maria Bartomeu, front right, at Camp Nou. The outgoing president of FC Barcelona said in October that his club’s ‘board of directors have approved the acceptance of requirements to take part in a future European super league’ © Albert Gea/Reuters

Gianni Infantino, president of Fifa, world football’s governing body, says agreeing the new 10-year calendar of competitions 'is crucial for the future' of the sport and should be settled next year
Gianni Infantino, president of Fifa, world football’s governing body, says agreeing the new 10-year calendar of competitions ‘is crucial for the future’ of the sport and should be settled next year © Leonhard Foeger/Reuters

Although such a move risks the ire of loyal supporters — who remain energised by local rivalries — club owners are running increasingly international brands, with fanbases in the US, China and beyond. And with the globalisation of football came a sense of entitlement. The biggest sides drew the largest worldwide audiences and so therefore should gain an even greater share of the financial rewards.

Yet a super league also risks devaluing or even destroying the very thing that has transformed top clubs into multibillion-euro companies: existing national and continental contests that have built followings over decades.

It is not a new idea. In the early 1990s, a group led by Silvio Berlusconi, the former Italian prime minister, media mogul and one-time owner of AC Milan, considered a breakaway European competition. Again, in 2016, some of the continent’s biggest clubs, including Germany’s Bayern Munich, discussed joining a new tournament backed by US billionaire Stephen Ross, according to leaked documents revealed by Der Spiegel magazine.

On each occasion, the game’s governing bodies avoided a revolt by ensuring more money from existing competitions flowed to the wealthiest clubs. This has exacerbated the imbalances within the sport. Revenues at the 10 richest clubs in Europe were €6.3bn last season, up from €2.6bn a decade earlier, according to the consultancy Deloitte.

These increases reflect gains from broadcasting and sponsorship deals across football. But a handful of top clubs in each of the “big five” leagues of England, Spain, Germany, Italy and France have pulled away from their national peers, partly through regular appearances in the elite Champions League, where every year €2bn in prize money and TV contracts is distributed between participating clubs.

Qualification for that tournament stems from performing well in national leagues, ensuring domestic competitions have remained vibrant. Some of the wealth from European competitions is shared through “solidarity” payments worth €130m last season to clubs in smaller countries.

A breakaway that does not depend on qualification via a domestic league would create an unbreachable chasm between the biggest teams and the rest of the game. If the rupture occurs, “this fairytale of being in the same football family comes to an end”, says the head of a top national league, referring to the interconnected nature of the sport at all levels. “But it depends if the clubs have the courage. I’m not sure they will really dare to do so.”

Can clubs in Europe’s top leagues recover lost revenues this season?

Using Covid ‘to prove a point’

Interviews with more than 20 leading club, league, media and financial executives — some speaking on the condition of anonymity — suggest a breakaway league is more likely than ever before. They highlight three main factors: a new “international match calendar”, which dictates the timing of club and national team competitions, expires in 2024 and is set to be renegotiated; the financial impact of the pandemic; and a new generation of institutional investors, particularly from the US, driven more by financial returns than emotional ties.

Gianni Infantino, president of Fifa, world football’s governing body, says agreeing the new 10-year calendar “is crucial for the future” of the sport and should be settled next year. Some football executives suggest the disclosure of the super league talks are a bargaining chip to force Uefa, European football’s governing body, to cram more lucrative Champions League ties into this busy schedule.

“History repeats itself,” says Andrea Agnelli, president of Juventus, champions in Italy for the past nine years, and chair of the powerful European Club Association, which represents more than 200 top teams. He is, instead, spearheading efforts to reform existing continental competitions. “Go back and look at what happened 25 years ago when changes were first introduced to the Champions League,” he says. “Everyone was against it. Now, everybody loves it.”

Juventus coach Andrea Pirlo, back right, with club president Andrea Agnelli, who is spearheading efforts to reform existing continental competitions
Juventus coach Andrea Pirlo, back right, with club president Andrea Agnelli, who is spearheading efforts to reform existing continental competitions © Massimo Pinca/Reuters

Liverpool FC owner John W Henry with his wife after last year's Champions League final. The US billionaire is in talks over a stock market listing of his sports holdings, valued at $8bn
Liverpool FC owner John W Henry with his wife after last year’s Champions League final. The US billionaire is in talks over a stock market listing of his sports holdings, valued at $8bn © Carl Recine/Reuters

The talks are happening against a backdrop of financial anxiety. Across Europe, lost match-day income because of empty stadiums, as well as discounts demanded by broadcasters and sponsors for postponed games during lockdowns, will result in €3.6bn in lost revenues over the next two years, according to the ECA.

Barcelona has reported a coronavirus-induced shortfall of more than €200m, leading to a pre-tax loss of €100m last season, which has accelerated the breakaway discussions, according to people briefed on the talks.

“It’s essentially using Covid and the existing chaos . . . to prove a point,” says one club owner. “Small clubs in certain countries can’t survive the crisis and [the super league] is the way to protect football.” 

The other main factor is the arrival of owners and investors seeking a return on investment from the game. This includes billionaire US moguls, such as John W Henry, who bought English Premier League champions Liverpool in 2010, and is in talks over a stock market listing of his sports holdings — which also includes baseball’s Boston Red Sox — valued at $8bn.

US investment banks have helped England’s Tottenham Hotspur and Italy’s Inter Milan tap bond markets. Hedge funds are lending to clubs and, in the case of Elliott Management at AC Milan, acquiring them.

“The mindset of the Americans when it comes to capital is the thing that’s really different this time,” says a top European football official. “You have the Glazers [the family which owns Manchester United] and John Henry who have spent time understanding the game. You have money from private equity pouring into Italian football.

“You have Wall Street,” he says. “It’s pretty relentless and they will come again and again.”

Chart shows number of match dates in 15 leading associations, 2018-19 showing teams in Europe play a lot of football

$6bn debt financing package

Mr Bartomeu’s resignation was forced by an impending vote of no confidence from Barcelona’s members. His parting shot was an attempt to establish a legacy beyond being the man who fell out so badly with Lionel Messi — the club’s greatest ever player — that the Argentine forward threatened to leave.

He discussed going public with the true mastermind of the super league: Florentino Pérez, Mr Bartomeu’s counterpart at bitter Spanish rivals Real Madrid, according to people familiar with the discussions. 

For more than a year, Mr Pérez has sought private backing for his plan. It would involve up to 20 clubs in a “closed” division from which teams cannot be relegated, playing midweek games to allow clubs to continue to participate in their domestic leagues at weekends. It is viewed as a replacement for the Champions League, rather than threatening the primacy of domestic leagues.

Chart shows revenues by type (€bn) showing the English Premier League tops the table for revenue

Mr Perez initially approached private equity groups, such as CVC Capital Partners, before a plan was developed with investment bank JPMorgan, which is assembling a $6bn debt financing package to launch a European Premier League, according to those with knowledge of the talks.

As first reported by Sky News, the money would be paid back against future media rights sales, and will cover start-up costs and guarantee prize money to clubs. Real Madrid, Barcelona, CVC and JPMorgan all declined to comment for this article.

The structure follows the model of US sports such as the National Basketball Association, and is designed to provide more consistent revenues by guaranteeing an increased number of European matches.

It also envisages governance reforms relatively uncommon in football, such as the introduction of player salary caps, which could boost profitability if it can rein in spiralling wages and transfer fees that make up the biggest cost at most clubs. In the 2018-19 season, player salaries in clubs in the big five national leagues increased by €1bn to €10.6bn.

“The point of the European super league project is to create a monopolist employer of players,” says François Godard from research group Enders Analysis. “Cost control is where they must take action.”

Captain Sergio Ramos of Real Madrid shakes hands with club president Florentino Perez, the true mastermind of the super league
Captain Sergio Ramos of Real Madrid shakes hands with club president Florentino Perez, the mastermind of the super league © Denis Doyle/Getty

Lars-Christer Olsson, chair of European Leagues, says “we don’t want anything to be established to make the Champions League closer to a private league at the top of the European pyramid'
Lars-Christer Olsson, chair of European Leagues, says “we don’t want anything to be established to make the Champions League closer to a private league’ © Gualter Fatia/Getty

Domestic repercussions

The super league discussions are having repercussions across the sport. In February, a group of key figures in English football, including Mr Henry and Joel Glazer, co-chairman of Manchester United, began discussing “a reset of the economics and governance” of the game in England dubbed “Project Big Picture”.

The proposals included reducing the number of teams in the Premier League from 20 to 18, and eliminating one of the domestic knockout competitions. This would make room for more European matches. When the plans leaked in October it caused a furore, with critics accusing bigger clubs of a power grab.

One leading European club executive, however, says the subsequent collapse of the talks could work to the benefit of the leading English teams: “The Project Big Picture discussions with Liverpool and United is a way to justify their future decision [to join the super league],” they say.

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Liverpool and Manchester United declined to comment for this story.

Separately, plans put forward by a mixture of clubs and investors to create a new competition featuring top clubs in Scotland, Sweden, Norway, Denmark and Ireland — discussed with JPMorgan and other private equity groups — broke down in recent weeks, according to people with knowledge of the talks.

The talks ended, they say, when Celtic, the Scottish club that would have been its biggest participant, backed out. The Glasgow-based club declined to comment.

A €1.6bn deal for CVC and Advent International to take a 10 per cent stake in Serie A, Italy’s top league, has also been disrupted by the rumblings around a rival super league. The private equity groups want a “breakaway clause” to be inserted in the agreement, fearing that if it goes ahead it could damage the value of the Serie A media rights.

Paolo Dal Pino, Serie A’s president, rejects the idea, saying: “There is absolutely no way we accept clauses like this.” The other option for the private equity groups, according to people close to their deliberations, is to invest in the super league itself.

Chart shows wage bill as % of revenues showing clubs in Europe’s top leagues face an onerous wage burden

Big clubs getting bigger

The super league discussions are filling a vacuum created by the breakdown in talks over radical changes to the continent’s existing club competitions. Last year, Uefa and the ECA proposed reforms which envisaged a promotion and relegation system, with the top 24 teams in the Champions League gaining automatic qualification for the following year’s competition.

Those plans were shelved amid a fierce fightback from smaller clubs, national leagues and fan groups. Mr Agnelli maintains that changes to the Uefa competitions are needed to retain enthusiasm among younger audiences. “It’s not about today or next cycle,” he says. “It’s about 15-20 years from now . . . what I would like is that football remains, if not increases, it’s premium position as the best sport in the world.”

These reform talks — paused due to the pandemic — have been given new urgency. The idea gaining the most traction is to replace the opening Champions League group stage — in which groups of four teams play each other home and away — with a so-called “Swiss model” based on chess competitions.

Each team would play 10 matches against 10 different opponents. Those with the best records would qualify for the knockout rounds.

This Swiss model is generating excitement because “for the first time in history, these Champions League teams would be ranked together on the same table”, says a person with knowledge of the plans. Another possibility is slimming down the latter stages, replacing home and away legs with one-off ties — a format instituted last season due to the pandemic.

These tortuous discussions may stall again, as smaller clubs and leagues worry that altering the status quo cuts them further adrift from the game’s financial giants.

Lars-Christer Olsson, chair of European Leagues, the body which represents national competitions, insists there are “red lines” in any format changes. This includes maintaining the link between performance in domestic leagues in order to qualify for European contests.

“We don’t want anything to be established to make the Champions League closer to a private league at the top of the European pyramid,” says Mr Olsson.

Many football executives do not believe that top clubs will really join a breakaway. English teams, in particular, risk devaluing the Premier League, which has multiyear broadcasting contracts worth £9.2bn — more than any other domestic league competition.

Others ask whether the game’s superstars would even want to play in it. Without Fifa’s explicit approval, players could be prevented from featuring for their national teams. That would mean missing the World Cup, the quadrennial tournament that many footballers consider the sport’s true pinnacle.

Whether through an enhanced Champions League or a breakaway, many are convinced of the final result: more money-spinning ties between Europe’s biggest clubs, further cementing their places in the sport’s hierarchy.

“Financial power is transforming sporting power,” says a top European football administrator. “This is a very dangerous game.”

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