American Soccer Exports: Talent and Money

It was announced on Friday that Jacksonville Jaguars owner, Shahid Khan, purchased storied British Premiere League (BPL) club, Fulham FC from Egyptian businessman Mohamed Al Fayed for a reported $300 million.

Khan, who made his money originally in the Illinois auto industry, is not the first American to invest in the BPL. In fact, American money leaving the continental United States for soccer investment is becoming a steady trend these days. Khan’s new London side, Fulham, is now the 6th BPL club to have an American as the majority owner in it’s front office. The Pakistani-born businessman joins the ranks of other American BPL club owners, Malcolm Glazer (Manchester United), John Henry (Liverpool), Stan Kroenke (Arsenal), Randy Lerner (Aston Villa), and Ellis Short (Sunderland), according to Wikipedia‘s latest table. An American investment group also owns the majority stake of Italian Serie A club AS Roma, who ironically will face off against the MLS All-Stars on July 31st.

Shahid Khan, owner, Fulham FC. Photo courtesy of fulhamfc.com

Shahid Khan (right), owner, Fulham FC. Photo courtesy of fulhamfc.com

Fulham’s selling price was only about 2.5 times the club’s 2011-2012 revenue, according to an article from Forbes. The reason for the low valuation, according to the articlewas the club’s consistently mediocre performance, which routinely saw the team miss out on the UEFA Champions League, and has also prevented the club from maximizing broadcasting revenues over the years. Khan commented about his recent purchase in a statement:

Fulham is the perfect club at the perfect time for me. My priority is to ensure the club and Craven Cottage each have a viable and sustainable Premier League future that fans of present and future generations can be proud of. We will manage the club’s financial and operational affairs with prudence and care, with youth development and community programs as fundamentally important elements of Fulham’s future.

English football holds grand allure for American investors like Khan, and according to the founder of investment bank Park Lane, Andrew Kline, who was quoted in an article from The Daily Beast,

One owner takes another potential owner to a game and they’re hooked. They say, ‘I gotta have one of these too’.

The BPL holds more potential monetary value for investors than domestic professional sports franchises in the U.S., according to Kline. The potential lies in the fact that there is often room for improvement in the way the clubs are run commercially, he said to The Daily Beast. Some might scratch their heads at the notion that there is room for improvement in the commercialization of BPL clubs, which are arguably part of the most well-known league in the world. First, there is always room for improvement in just about anything. Second, the myriad of new Asian partnerships with BPL clubs announced in the last year has only scratched the surface of the potential of the globalization of English football, just as one example.

There are other factors specific to English football that pull American investors towards the BPL and away from MLS or other U.S. based sports investment opportunities. BPL clubs can spend significantly more than their MLS counterparts in order to attract the world’s most talented footballers, due to the differences in salary cap limitations. MLS salary cap for 2013 stands at $2.95 million according to an article from Soccer America. The BPL has different financial regulations, and does not have a salary cap per se, but it does limit the amount of broadcasting revenue, which is the major source of income for clubs, that can be spent on player salaries, set at £52 million ($78.54 million) for the 2013/14 campaign as stated in an FTBpro article. A talented squad breeds success on the pitch, at least theoretically, and that ultimately leads to more revenues from broadcasting, as 25% of the BPL’s TV money is distributed to the clubs on a merit basis, determined by each team’s final position at the end of the season. With these considerations in mind, it is easy to see what would attract any investor to the opportunities that lie across the pond.

Khan’s latest addition to his sports portfolio sheds light on a seeming trend of Americans investors seeking opportunities in the world of soccer outside of the United States. This trend is one that is not limited to the world of finance. Top U.S. soccer talent have yearned for a chance to play in Europe for years, long before American BPL club ownership became a fad. At first, most felt that the export of American soccer talent to European leagues was a good thing for U.S. soccer because it showed the world that we could produce top class players.

While that statement holds true, it has become the handicap for MLS at the same time. As our domestic league attempts to grow to heights at parity of the likes of the BPL, and other top European leagues, one of the major issues is that MLS can not hold on to top talent that have come up from within the ranks. MLS is not seen as the desired pinnacle of any professional soccer player’s career; not even our homegrown players. Any true athlete wants to compete against the best, at the highest level. Right now, if an American playing in MLS is offered the chance to play abroad they jump on it. Imagine if the roles were reversed: international players jump at the chance to play for a MLS team. That is the ultimate goal.

If we can not hold on to our own top talent, how then are we supposed to attract the best players from abroad? While it is wonderful to see U.S. players like Clint Dempsey and Michael Bradley succeed in some of soccer’s most competitive and prestigious leagues, if we export all of our talent, what then is left for MLS to work with? This is this is the catch-22 American soccer finds itself in at present. The question is, what then is the solution? One theory, is money.

If MLS and it’s clubs had more financial backing, it could raise the salary cap, and offer players more incentive to bring their talents here. The introduction of better talent would raise the level of competition within the league and would offer a better product to soccer fans, both domestically and internationally. This would make broadcasting rights for MLS more lucrative, with the right marketing efforts, and would generate more revenue for the league – and the cycle continues.

There are obviously many more moving parts and other circumstantial reasons as to why MLS is not quite the ultimate destination for the world’s best soccer talent. However, if a key difference between MLS and other top leagues around the world is the amount of money coming into the league, it certainly does not do American soccer any good to see money leave the country and invested elsewhere. Yes, it shows that our business leaders are showing more than an interest in the sport and are getting involved. However, just like a balance is needed for exporting and retaining top American soccer talent, a balance is needed for American money to invest in MLS as well as foreign ventures if the league is ever to reach the heights we all dream of as U.S. soccer fans.

 

 

Reporting on the business side of the world's game.