Multi-club ownership (MCO) is rapidly transforming the global sports landscape, particularly in soccer where the phenomenon has generated both opportunities and controversies. This innovative concept involves investors acquiring stakes in multiple teams simultaneously, reshaping the operational and financial fabrics of clubs around the world.
The trend is particularly noticeable in European soccer, where clubs within MCO networks frequently see commercial revenues increase by 20-30% thanks to shared sponsorship deals and expansive global branding efforts. The financial allure is undeniable: the average market value of MCO-affiliated clubs is estimated to be 15-25% higher than independently owned clubs in similar leagues.
The Rise of MCOs in Soccer
Despite its financial benefits, the surge in multi-club ownership hasn't come without opposition. Soccer supporters in Europe are predominantly against MCOs, fearing the inherent risks and potential conflicts of interest that such structures bring. Traditional sports communities remain staunchly resistant, arguing that the soul of the game is compromised when clubs are treated more as investment assets rather than community institutions.
Nonetheless, private equity groups are drawn to the lucrative prospects. “Most private equity groups buying up the ‘low-hanging fruit’ will have an exit in mind before they buy their stake,” one industry insider commented. Rather than engaging in long-term operational involvement, these groups often aim for eventual exit strategies that promise significant returns on investment.
Technological Advancements Driving MCO Strategies
Technological advancements are increasingly refining the MCO model. Innovations in artificial intelligence and data analytics are playing significant roles in optimizing club performance and operational efficiency. Investment firms are leveraging these technologies to create synergy across their portfolios. As RedBird Capital put it, "There is a synergy operationally and investment-wise with best practices that you can do across all of the IPs that you touch." This harmonious approach boosts both organizational efficacy and financial output.
Navigating Legislative and Financial Risks
Despite the advantages, MCOs face considerable legislative and financial challenges. Large-scale legislative interventions to roll back MCOs appear improbable. "Rollback is out of the equation unless governments do it through legislation forcing owners to divest their interests," an industry expert noted, highlighting the unlikelihood of such extreme regulatory actions.
Financial instability also looms as a potential threat. Should financial institutions fail to meet their profit targets, the market might witness “fire sales” where players are offloaded, and clubs potentially face relegation. These risks further fuel the debate around the long-term viability and ethical dimensions of MCOs in sport.
Broadening Influence Beyond Men's Soccer
The influence of MCOs isn't confined to men's soccer alone. The impact is evident in women's soccer as well, with experts like Michele Kang asserting, "Multi-club ownership is ‘a necessity’ for women’s soccer to continue growing." This underscores the potential of MCO structures to provide much-needed resources and visibility to the women's game, aiding its development on a global scale.
Expanding Beyond Soccer: The Case of Diamond Baseball Holdings
While soccer remains the focal point, MCOs are making inroads into other sports. Diamond Baseball Holdings (DBH) is a prominent example, owning 35 of the 120 affiliated minor league franchises in baseball. DBH has also secured contracts with Major League Baseball to negotiate national sponsorships for all 120 minor league teams, illustrating the expansive reach and influence MCO structures can achieve across different sports disciplines.
A Bright Future or a Ticking Time Bomb?
The exponential growth in the number of soccer teams under MCO structures—from 117 in 2021 to a projected 336 by 2024—reflects the accelerating momentum of this trend. High-profile examples like Red Bull owning multiple clubs worldwide, including RB Leipzig, NY Red Bulls, Red Bull Brasil, Red Bull Salzburg, and Red Bull Bragantino, are testaments to the potential and ambition fueling MCO endeavors.
Permanent capital is increasingly being viewed as an appropriate form of capital for sports, a sentiment echoed by RedBird Capital: "Permanent capital is an appropriate type of capital for sports — and while the public markets aim to serve that, they’re not ready yet." As investment groups continue to explore and expand multi-club ownership, the sports world will keenly observe whether this approach heralds a new era of growth and innovation or if it ultimately proves unsustainable.