Finance before football
The business of sport: the proposed super league for Europe's top clubs puts money firmly ahead of fans, other teams and sponsors
Sunday 09 August 1998
Last Wednesday, Manchester United and Arsenal finally confirmed what everyone already knew - that they were involved in discussions about joining the breakaway competition - but public statements from the main business players have been restricted to generalities.
Media Partners, the international sports marketing consultancy behind the project, issued a statement on Friday saying only that it was "examining proposals for European club football competitions". A similar line has been adopted by the investment bank JP Morgan, Media Partners' financial adviser, which plans to invest around pounds 2bn.
For all the secrecy, though, it is clear that the super league will happen. What is not so clear is whether it will be Media Partners that runs with the ball.
The company's intentions seem serious enough. Already it has brought 16 European clubs together and is believed to have offered each one pounds 100m a season for five years. It has also set up a chain of companies that will take receipt of TV revenues; two of these are in Holland, which has favourable taxation.
However, a consensus now seems to be emerging in the City that all the dealings may simply be a manoeuvre to force the hand of Uefa, European football's ruling body. "I don't think we'll see any European league outside the auspices of Uefa; it's too complex and difficult," says one leisure analyst, pointing out that teams could be booted out of their domestic leagues and players barred from turning out for their country. It is believed that the Arsenal board is divided about breaking away and that Liverpool is lukewarm. But, the analyst adds: "It does put pressure on Uefa to come up with a satisfactory structure."
If it is a ploy, it seems to be working. When details of the breakaway league emerged last week, Uefa was forced to admit that it had plans of its own for an expanded European competition. Proposals could be unveiled at a meeting scheduled for October.
It may now be that Uefa and Media Partners reach an agreement by which the authority runs the competition and the consultancy receives a payment. In effect, Media Partners could earn a lot of money from a small financial investment.
But if Uefa does take up the running, the effect on football club finances and business sponsors will still be far-reaching. For a start, it will have to match the revenues promised by Media Partners, and this means that the proposed format for the competition could remain in place.
Details of this are sketchy, but the league would comprise 32 teams: the 16 "founding members", which are seeking immunity from relegation, and a further 16 teams which would vary each season according to domestic performances. Running alongside the league would be a knock-out competition, the "Pro-Cup", consisting of around 50 clubs which would qualify by winning domestic cups or finishing high up their leagues.
Arsenal, Manchester United and Liverpool have all contacted the Premier League to say they remain fully committed to the domestic competitions. But the European format implies a total of at least 30 matches, and it is hard to see how the elite clubs can turn out anything remotely resembling a full-strength team up to 80 times a season.
David Brooks, a leisure analyst at Nomura, says the trade-off will be a reduction in the Premier League - possibly to 18 teams - and the demise of the League Cup (now called the Worthington Cup), at least as far as the top teams are concerned.
However, given that the leading clubs would be guaranteed entry to the European league each season, regardless of their performance, the domestic competitions may still be devalued. This would be bad news for Bass, which is sponsoring the Carling Premiership in a deal worth pounds 36m over five years, as well as spending pounds 23m on backing the Worthington Cup.
It would also be bad news for the other Premiership clubs, among them listed companies such as Tottenham Hotspur, Aston Villa and Leeds Sporting (the owner of Leeds United). Not only would their "big" games against the likes of Manchester United become less compelling, but they would be unable to match the revenues of the top clubs and would struggle to attract the top players.
The Premiership may also find that it has less negotiating power with TV companies; its deal with Sky ends in 2001.
Underpinning the manoeuvrings has been the advent of digital television. Negotiations for a pan-European digital network are already under way and partners include Rupert Murdoch, Silvio Berlusconi, the owner of AC Milan (another super league "founding member") and the German media magnate Leo Kirch. It is believed that the network would show games from the European league on pay-per-view TV.
The president of Media Partners is Rodolfo Hecht Lucari, who used to be chairman of Fininvest, the holding company for Mr Berlusconi's media interests. Media Partners denies any involvement in the football venture by Mr Berlusconi, but its directors include a former AC Milan footballer, a former organisation manager at AC Milan, and an executive who has helped Mr Kirch in the introduction of digital technology.
All of this is a long way from the terraces. and one City analyst warns that fans may simply walk away from grounds or switch off their TVs if domestic matches are downgraded. These are the substance of the game, he warns, and European matches the "cherry on the top". Turn it the other way round and even high-profile games can become turn-offs. Last season Barcelona played Newcastle in the Champions League in a match that had become meaningless because neither team would qualify for the next stage; only 20,000 people turned up in a ground with a 115,000 capacity.
However, Mr Brooks says the proponents of the super league do not need the backing of supporters to make the venture pay. "It's a function of digital technology to bring teams to new audiences," he says, pointing out that there is a massive potential market in Asia. If that means romance is dead in football then so be it. "It's not a glory decision," he explains, "it's a financial decision."
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