What is going on in the football world right now? Why are valuations so incredibly inflated? I can understand the market reaction to the Saudi clubs posting comically high transfer fees and salaries for aging players. The Saudi league, much like the Chinese league a few years ago, wants to become a force in the football world, despite the less than subtle and not so effective attempt to use of sports as a way to distract from some of the more distasteful actions of the current government. This did not work for the Chinese league. It most likely will not work for the Saudi league. Not in the long term. Players want to play for trophies and there are no prestigious, historic club trophies to be won outside of Europe. The Saudi salaries of today are offering life altering wealth. The players who take those contracts do so with the knowledge that their grandchildren will be taken care of with just a minimum of responsible financial planning. It’s a strong financial decision on the part of the player.
That being said, the teams from the Saudi league which are pulling in the big-name players are having more success than the Chinese league did. Football is a spectator sport, however. It is driven by those who wish to watch it. When looking at television rights and distributions, the global market for an Arab national league, or any national league outside of the Western hemisphere, is next to nonexistent. Japan and Korea are doing well in that the players from those leagues that make it to larger, more known European leagues tend to do rather well. But the history is not there, and that is the root of it. Football does so well in Europe because of the history tied to the sport. The same can be said for rugby in the region, or why traditional American sports – American football, baseball, basketball – dwarf soccer (football) figures in the United States in every category.
But this spend isn’t limited to a rush of cash from an oil-rich nation. The recent acquisition of Chelsea Football Club by the BlueCo consortium, which was formed as an investment vehicle to purchase Chelsea FC in 2021/2022 and is headed by Todd Boehly. Boehly is not new to the sporting world as he is co-owner of the Major League Baseball team, the Los Angeles Dodgers, though he has no true experience in the business of football prior to the purchase of Chelsea. It should also be noted that BlueCo has recently purchased Racing Club de Strasbourg Alsace, a football club currently in the French Ligue 1. RC Strasbourg has not yet received the level of investment as Chelsea, however, in terms of player/talent acquisition.
Chelsea have spent over £200 million on just two players this transfer window, with the recent record-setting fee of £115m paid for Moisés Caicedo, having set the previous record the year prior at £105 million for Enzo Fernandez. This makes the transfer spend of Chelsea £1 billion since Todd Boehly and partners have taken ownership of the club just two years ago. While it is not unusual for a new owner to spend heavily in the first couple of years, the amount which Boehly and Chelsea have spent is staggering. To put this in perspective, Manchester City Football Club have spent roughly £1.8 billion on transfers since 2008, when the club was acquired by Sheikh Mansour and the City Football Group. Chelsea, then, have spent slightly more than half of the total spend from Manchester City in just two years as opposed to City’s expenditure over the past 15 years.
Financial Fair Play questions aside, this type of spending is unsustainable and could have a detrimental impact to the football market as a whole. The football world is not a stranger to oil rich countries offering astronomical salaries. Qatar has been known to tempt players and managers away from Europe with more lucrative offerings from time to time. The Saudi approach seems to be more serious, however. There is a feeling that a major impact wants to be made, but it is very difficult to generate demand out of nothing, and without demand there is no international market. Football does not have the cultural impact that it does in Europe, at least not yet. Perhaps this will change over time, but an attempt to force such an impact in the immediate future will not bode well for the league overall. If history serves as a guide, the expenditure of the Saudi clubs, like those of the Chinese, would be expected to level off and the market will adjust accordingly to a sustainable equilibrium.
What the market cannot sustain is the way in which owners who are unaffiliated with the intricacies of the sport spending as though they are an adolescent who has just found their parent’s credit card. The longevity of the industry and sport which has the remarkable ability to bring people together and allow them to share in something larger than themselves is at stake if spending is not held in check. This is not an argument in favor for a salary cap or spending limit, but it is a call for a more responsible approach to how clubs conduct business.
The issue here is not about the availability of funds or whether or not certain clubs are “playing by the rules” when it comes to spending and salaries for players. It is a fundamental misunderstanding of how the business of football operates. High spending in business is not always a recipe for disaster. Amazon is a very good example of how continuous spending can lead to high growth. But football is not a mail-order service. In baseball, it is not uncommon for a club to spend a lot for specific players. The anatomy of the sport allows for this sort of thing. If a specific need can be met through trades or free agency, then the acquisition is seen as a good move forward. If a player is purchased because that particular player has a high batting average or is a solid outfield player, it does not matter if the other areas of the game are a little weak. Football does not function this way. The player on the field must be able to offer something to the team within the structure the manager has established or the entire thing will fall apart. Just buying players for the sake of buying them will not help the club. The overall value of the club will not go up simply because there are more assets listed in the financial reports than there are liabilities. The value of a player is set by the players performance and by what the market is willing to support as a reasonable price for that player. Overpaying transfer fees and salaries will inflate the market to unrealistic expectations for all those involved. If nothing else, the FC Barcelona financial disaster that led to Lionel Messi leaving Spain should have taught us this.
A football club is not a business asset in the traditional sense. While a football club is a brand and a property, it is something more. There is a deep connection to the fan base. The club itself is a partnership between the owners and the fans. They are to work together if the club is to succeed. The eternal saga of the Glazer family ownership of Manchester United is one example of how the owners ignore the fan base and operate the club as one would operate a traditional business. While Manchester United is successful as a brand, the football club element has, until recently, fallen into disrepair. One aspect of this could be a result of the club being publicly listed. When a company sales shares publicly, the rules by which they operate must change. There is a fiduciary responsibility to the shareholders, not the fans. This does not mean that publicly traded clubs are inherently bad, only that greater care must be taken in how those clubs operate. At the end of the day, the heart of the club is the fan base and the individuals of the team. If the team does not have the support of the ownership, it cannot perform. If performance drops, the fans will respond but it will also be difficult to gain new supporters when the older ones leave. This reduces the valuation of the club and can have detrimental effects on share prices, should the club be listed. The business of football is not the business of Airbus or GE. The concepts may be similar but the rules are not.
Owners and leagues may use money to change the perspectives from the outside, but money will not be the universal solvent that rejuvenates an image. Too much money concentrated in one place only colors the views of others to match those who hold the funds. Football is a stakeholder industry, not a shareholder industry. It lives and dies on those who hold stake in the club, from the owner down to the young child that bleeds the colors of their club. Clubs primarily are supported locally, not internationally. The locals are the ones who buy the tickets and keep the stadium full on a Saturday afternoon. More care should be given to the local stakeholders, the true community, that forms the club. The owners who understand this, the leagues which practice this, are the ones which will be successful. Football can generate large profits for investors, but only when those investors understand that it is the community which forms the club.