How to buy a Championship

In September of 2008 Manchester City Football Club’s history would change forever. The former Prime Minister of Thailand, Thaksin Shinawatra sold the club to Sheikh Mansour. Over the following years Manchester City has become one of the most important soccer clubs in the world. They’ve set records, won cups and built a valuation of over one billion pounds. The club now has satellite clubs in Melbourne, New York, Yokohama and many cities across the world. The club invested in youth player development and have become a premier destination for the best young players in the world. Manchester City has created a sustainable beast, but have yet to win football’s biggest prize, the Champions League.

Although the club has accomplished so much, it is easy to question their methods. Sheikh Mansour is the deputy Prime Minister of the United Arab Emirates and his family rules the country. When he bought the club his plan to develop the club was to invest as much of his money into the club as possible. This payed off for the first time in 2011 when they won the English Premier league and has continued to do so. Traditionally, personal wealth is not the favored way to build a club because it skips all the growth steps required to become the best. City has had several summers where they’ve spent in excess of 200 million pounds of fees to get new players.

Even worse than personal wealth is state wealth. The United Arab Emirates is a constitutional monarachy. This means that on family controls each emirate and the countries 90 billion dollar oil industry. Much of this wealth makes it into the pockets of the ruling families. The situation at Manchester City and Paris Saint-Germain (owned by the ruler of Qatar) have forced the European Football community to question the involvement of monarchs investing in sport.

This February Manchester City was banned from Champions League play for two seasons. The cause was violations of Financial Fair Play (FFP) regulations. This could have meant a loss in 200 million dollars of earning based on appearances in the tournament. In June the Court of Arbitration for Sport overturned the ban.

FFP are a set of rules enforced by UEFA (Union of European Football Associations) meant to protect the financial health of European football. Critics say that the real intention is to keep small clubs from spending their way into the elite levels. The idea behind FFP is to limit what a club can spend based on their earnings. Clubs generally earn money through three avenues; tickets, media and sponsorship money. Sponsorships have been the avenue through which clubs evade FFP rules.

The easiest way to become more successful in European football is to spend more money. City saw an opportunity to increase their FFP limit by finding larger sponsorship deals. Pretty easy when you consider that they have access to Abu Dhabi (Mansour’s Emirate) and its assets . The club found a new sponsor, Etihad Airways Abu Dhabi’s airline which Sheikh Mansour’s family owns. In 2011 Etihad bought the sponsorship rights to the club for roughly 400 million pounds. This value was at the time the largest sponsorship deal in the league by a factor of 4. Conflict of interest was immediately cried by competing clubs because of the ownership stakes the family has in both businesses. However, now the value could be roughly correct because of the success the club has had. U.S. Airline companies have complained about unfair subsidies from UAE’s government to Eithad, similar to rival clubs complaining about sponsorship deals.

Manchest City was one of the clubs that fell victim to the Football Leaks scandal. Some of the front office operators were caught discussing the less than legal method they were using to grow the club. This included the above market value of the Etihad sponsorship. A hacker got into Manchester City’s email and showed that the deal was illegitimate. The emails revealed that most of the almost 70 million pounds the airline payed the club each year was subsidized either by the government or the clubs ownership.

Over the last decade professional football has changed. The clubs with the deepest pockets dominate, while almost all others fall behind. The Manchester City FFP case begs the question to what extent sport is decoupled from state. City has had access to unlimited funding, they’ve been able to hire the best players and coaches in the world and see almost unmatched success. UEFA has refused to take a stand against this; instead nullifying all fines and punishments for the club. This has shown that FFP is a farce. I don’t think there is anything wrong with clubs spending like mad in an effort to win. Last night in the Champions League finals Bayern Munich proved it takes more than buckets of money to become the best. The games must still played on the field and as my dad aways says, “it’s sports, nothing matters until the clock runs out.”

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