How football clubs make profits

Over the years, people from the U.K might often be the only folks to indicate interest in owning a football club in the U.K  but now, a lot of people from overseas are indicating that buying a football club is a good investment. While that may seem heavy for many of the rich folks, someone like Rihanna thinks that it is an excellent way to grow her business.

She plans to set up a football academy in her hometown and then have a deal with one of the English football clubs in Europe.

Of course, owning a football club is a statement that you’re at a certain level as a businessman, but it is not just about status. Owning a football club is like having a heavy burden. It is harder for those who own football clubs more than it is for many businesses to survive. And who says that football clubs can’t hit on bad times or suffer under the merciless hands of a recession?

The calibre of people who that have owned football clubs have been astute business people, who have years of managing the ups and downs of business. Some of these people are experts who know about multiple businesses before they decide to own a football club. An excellent example is that of Manchester United, which during its 132-year history, has been owned by a brewer, a clothing manufacturer and a butcher.

Football clubs have been known as the means by which some business people promote their brands. A businessman could derive personal and potentially commercial benefits from an association with a football club. In Rihanna’s case, this may not apply, since having a football club cannot in any way lead to selling more albums. But she probably hopes that the football academy she wants to set up will elongate celebrity status and boost her popularity.

Certainly, a person investing in a football club is presumed to be rich. Yet, he or she will refrain from being the one of the main reasons a club failed. On the other side of things, a few powerful people in the world will always be ready to bankroll a Premiership club in case anything is about to go round. U.S. investors are of most interest, since they believe they can make ownership of a top club work as a sustainable business in its own right in the long term. Perhaps, what they want is the global reach of football with an American business model because they know that there’s a global TV audience out there that is worth billions and billions of dollars if they can get that audience to watch the league.

You won’t be surprised, because there’re reports that Liverpool is expanding these days and they’re bringing in American sports marketing expertise. They’re seeking global growth and when you talk of NFL, that doesn’t seem to be it. But talk of United, or Liverpool, and there you are! The whole world is very much tuned in to accommodate European football. What makes it so tick?

It isn’t just the crowds shouting, wailing and egging on their football teams on the field of play. A lot of these investments from Americans in English football clubs came when sterling was at a high level compared to the dollar, so, one would think that these were not short-term investments.

Whether a Barclays Premier League club can, during the long run, turn a sustainable profit is a debatable point. However, despite the fact that many clubs currently barely make a profit (as many of us will find it hard to believe), while others lose money year-on-year, a few businessmen have been able to make a healthy return from their ownership of a club over time.

How do they do it? “The idea that these clubs are going to be yielding assets, as in paying a dividend every year, is not the way they work. But from a capital growth point of view they can make sense,” says Deloitte’s Mr. Jones. “To an extent, they are a rare asset, just like a fine art painting, classic car or a collection of fine wines. Their scarcity and desirability gives them intrinsic value for interested purchasers.”

Is Rihanna thinking like this? Probably! Liverpool University’s Dr. Miller concurs. “For the most part, football clubs are seen as a trophy asset,” he says. “As long as a football club keeps performing on the pitch at the same level as when you bought it, then it will hold value and likely increase its value. It’s a long-term asset that you hope will appreciate.”

Appreciate? You ask. Not when your club is being relegated, or has been relegated a few times. And that’s the idea. As long as a club owner manages to keep the club maintaining a high level of performance, meaning that the team keep winning games, probably, almost every other negative thing can be dealt with.