English clubs banking on American dream
The influence of US investors in the Premier League is growing, writes Owen Gibson
F rom a penthouse atop Denver's Pepsi Center, one American surveys a sporting empire that now stretches all the way from Dick's Sporting Goods Park and the Edward Jones Dome to the Holloway Road. Another lives in Florida, where he too owns an NFL franchise, impervious to fierce criticism from fans across the Atlantic amid continued success on the pitch, despite £45m that flows out every year in interest payments to service the club's debt.
A third pores over data from his base in Boston, home of baseball's Red Sox, owned by his Fenway Sports Group, plotting a course for a famous English club in transition in which the world's most famous basketball star and the venerable New York Times now hold stakes.
Collectively Stan Kroenke, Malcolm Glazer and John W Henry represent a definite tilt in the delicate balance of power around the table at Premier League shareholder meetings. Arsenal, Manchester United and Liverpool -- arguably the three most famous and evocative names in English football -- are all now in American hands, as are Randy Lerner's Aston Villa and Ellis Short's Sunderland. Kroenke's £500m bid to take majority control at Arsenal last week took the number of US owners of Premier League sides to five.
It is unfair to generalise about the quintet on the basis of their passports. All are individuals who bought clubs in dramatically different situations to vastly differing reactions. But there are common threads. Four built up major league US sporting interests before looking to the Premier League. They are generally private men who do not invite media scrutiny.
Kroenke and Liverpool's Henry, having seen the Glazers at United and Tom Hicks-George Gillett at Anfield scenarios play out, have positioned themselves in opposition. Both owners understand the importance of getting influential fans' groups onside. Rational, considered, long-term investors with an emphasis on youth and an eye on the bigger picture is how they would like to be seen -- the direct opposite of the cliché of brash, swaggering American incomers.
On taking control at Anfield following a bitter legal scrap, Henry and his chairman, Tom Werner, were keen to stress their long-term vision and that "every dollar" earned by the Red Sox had been reinvested. Kroenke sold his vision to the fans while the club's board were still deriding him as "not our sort".
"He has looked me in the eye and said 'I have never sold a single share in any of the clubs I have got involved in and have no plans to do so'," says Tim Payton of the Arsenal Supporters' Trust, which forged close links with Kroenke when he first bought into the club in 2007. "This is a long-term investment -- I fully expect he will be there in 10 years and his family will be there in 25 years." In contrast to the 'silent Stan' image, Payton insists he is "very engaging and easy to talk to".
The Americans also share a common belief that their clubs can be run at break even, with profits reinvested to deliver a virtuous circle of success and an ever-appreciating asset. Werner has spoken of his "admiration" for the "sustainable" Arsenal model. Kroenke is well placed, with the Emirates matchday revenue-generating machine functioning well and eyeing £20m to £30m a year in additional income when key commercial deals with Nike and Emirates are up in 2014.
Strip away the righteous anger about a leveraged business model that has diverted hundreds of millions of pounds from United's coffers to service debt, fees and financial instruments and the Glazer blueprint is not so very different from the Henry or Kroenke one. Even Short and Lerner, who have poured tens of millions each into their respective clubs, share a belief they can reach a sustainable nirvana.
That confidence stems from hopes the global appeal of the Premier League will continue to grow and that they will be able to add expertise and knowledge from US sport and business. And partly too from the expectation that UEFA's financial fair play break-even rules will bring some rationality and cost control to football's "prune juice economics".
There is irony in that Michel Platini, the UEFA president who railed so publicly against the first wave of US takeovers at Liverpool and Manchester United, could be partly responsible for the second through rules designed to bring some sanity to football's overheated finances.
Stefan Szymanski, a professor of economics at Cass Business School, believes the Americans see a relationship between UEFA's new rules and the global reach of the Premier League that may allow them to import some of the certainty of the US model. "If the top clubs can effectively agree a level of cost control that would ensure they didn't spend all their money but were still spending more than the teams below them, they hope to make sure they remain a consistent part of that group," he says.
As much as the Americans like to position themselves as rational investors, there is emotion at play. The risks may be higher than in the US, where the absence of promotion and relegation and redistribution of talent and funds helps level the playing field, but the potential rewards in England are perhaps even greater.
Telling a parliamentary committee how he pitched Sunderland to Short, the chairman, Niall Quinn, said: "For somebody in that bracket it seemed a great story, a great adventure to go on. These people are winners. They like to see if can they improve it. If I can marry that in with the fans' approval, then we have a good formula."
The belief in continued global growth appears well founded. The last overseas Premier League television deal brought in £1.4bn and could soon outstrip domestic revenue, currently around £2.1.bn over three years.
Global marketing may see its most headline-grabbing manifestation in the Miami Heat star LeBron James signing a partnership with Liverpool in return for a small stake. But more significant is the growth potential of a world connected by high-speed broadband and the possibilities opened up by emerging markets, such as India and the far east.
The American investors will seek to emulate lessons learned by American sport in harnessing the power of the internet and social media. They are not yet quite sure of the exact location of the long-promised pot of converged gold but they are sure it exists somewhere.
Some speculate that might mean a drive towards reclaiming individual media rights at the expense of the collective contracts that have driven the Premier League's financial growth, but the opposite is likely to prove true.
Having seen the divisive consequences of clubs securing their own TV rights deals in Spain and Italy, they recognise it is a collectivism similar to that at work in the US leagues that will provide the fuel to maintain the Premier League's global growth. Despite the violent backlash engendered among fans and deep disquiet over their motives, it is hard to deny the Glazers have turbocharged United's global commercial revenues and Kroenke and Henry will try to follow suit.
In the States, Kroenke owns the TV network on which his sports teams are shown, the buildings in which they play and the ticketing company that puts bums on seats. "They have this vision of global growth and global dominance over the next 10 years," says Szymanski. "It's by no means certain, but if things did go that way then the possibility of introducing a more American-style structure becomes more appealing. If they are making no progress in five years' time and the Premier League is falling back towards the other leagues, then I think they've got a problem."
The key question for the Americans, however, may be whether overseas growth will generate sufficient income at a time of challenges at home. Supporters surveying the latest round of price rises may eventually decide to vote with their wallets. Fans, meanwhile, have their own concerns about owners who shun the limelight and register their holding companies in, say, Delaware.
History shows that in sport the best-laid plans do not always play out as hoped, as Gillett and Hicks discovered to their dismay at Anfield. At Villa Park, Lerner -- celebrated since his arrival as a model owner -- has seen how the volatile nature of the Premier League can alter perceptions at speed.
Kroenke made his fortune from analysing the real estate market, Henry from micro-managing fluctuations in commodity prices using complex models. But nothing is likely to prepare these wealthy men for the challenge of trying to marry financial sanity with supporter expectations of success on the playing field in English football.
Perhaps more appropriate to the American high rollers' Premier League adventure is the warning contained on Henry's fund management website: "An investment is speculative, volatile and involves a high degree of risk."
Sunday Indo Sport