FootBiz newsletter #26: Real Madrid prepare to welcome private investment

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Table of Contents

• The state of States in football

• M&A Murmurs

• City case to drag on?

• No comp-laining

• Education, education, education

• Media re-bundling

The state of States in football

I was listening to Miguel Delaney discuss his (superb) book States of Play on Ian Wright’s podcast this week, and was surprised that he felt there was an optimistic tone at the end.

The book is pretty haunting, and a painstakingly researched sledgehammer through football’s veneer of normality.

Having football clubs (community institutions) owned by autocracies for political and national security motives is not normal. Miguel takes a lot of time and effort to dig into how this came to be, those who stood by and allowed this to happen and why. Spoiler: the answer is always money and power.

But then I saw Bayern’s fans unfurl their banners against Nasser al-Khelaifi on Tuesday night and it made me wonder if he had a point.

“As weighty and grim as some of the book is,” he said.

“It does feel like there’s a bit of a low level awareness that something is happening.”

Obviously I am an incredibly boring person and spend a lot of time thinking about the politics of football, but for a fan group to call out Nasser’s multi-hatted position as the de facto ruler of French and European football is not something I expected to happen.

So many people have no idea about the power structures that ensure the maintenance of the status quo (or the tweaking of it to benefit a certain few) that it was quite something to see it spelled out so clearly.

“Minister, club owner, TV rights holder, UEFA ExCo member & ECA chairman all in one?”

Well, when you put it like that it does pose some questions… Questions football hasn’t come close to answering, but the fact fans are asking them means maybe Miguel is right to be optimistic.

M&A Murmurs

Real Madrid president Florentino Perez has spent the last year working with lawyers Clifford Chance and investment bank Key Capital devising a way to allow private investors into the member-owned club, and signs are that he is pushing ahead with his plan.

The construction magnate has presided over one of the most successful spells in club football history since being elected president of the Bernabeu club, and looks likely to remain in place for a while after strategically changing the institutional statutes to make it harder for rivals to run against him.

Perez’s plan, teased last week, is for the club to become privately owned and for existing members to become proper shareholders (though with reduced voting powers, in reality) but unable to transfer those shares to anyone outside their family.

The plan is necessary, according to Perez and his mouthpieces, to “defend the club” against “attacks” from outside.

Already boasting €1bn in revenue and a freshly expanded, space-age stadium, Madrid do have a need to get private capital in to backfill some of those renovation expenses and the sudden lack of forecast concert revenue (covered here).

More details when we get them, but if Madrid were open for investment then there would be a raft of the world’s biggest investment firms clambering over each other for the opportunity to stuff the club with money.

We’ve been covering the saga of Reading’s protracted sale since the first FootBiz newsletter, and the news today is that Rob Couhig hasn’t given up on his efforts to buy the Royals.

Indeed, his next step is to take Dai Yongge to the High Court in an effort to force the sale of the club - per The Independent, who spoke to him this week.

Couhig had loaned Reading around £5m to help with operating costs last summer after agreeing to buy the club, with the paperwork all completed other than Yongge's signature. FootBiz has been told that the pair had not spoken for months however, a period of silence which ended with Couhig being informed by email that his funding had been repaid as the deal was off.

Doubts over just how complex a situation Yongge has got himself into with debt to Chinese institutions are still hanging over any possibility of a deal but the American remains hopeful he can force the issue via a legal route.

Another wrinkle is that Reading have since entered exclusive negotiations with another buyer, but have not revealed their identity. Couhig has insisted all along that his offer remains on the table as previously agreed.

Hellas Verona is close to an acquisition by US investors that would mean 50% of Serie A clubs are owned by North American investors.

AC Milan, Inter, Roma, Atalanta, Fiorentina, Parma, Genoa, Venezia, Bologna and now Verona will have ownership from across the Atlantic if the Hellas deal is consummated.

Sources with knowledge of the numbers involved say the club is transacting for around €55m on EBITDA of €27m, core revenues (excl. player trading) of €56m and total revenue of around €100m.

Investors raised around €20m extra capital to inject into the club.

One of the downsides of American ownership? American pricing.

See Chelsea for details…

Similarly, Manchester United fans are planning a protest after the Old Trafford club did away with concession pricing in the middle of the season.

The Manchester United Supporters Trust (MUST) expressed disappointment at not being consulted over the move and warned that it may lead to a “significant price rise” for fans next season.

United and Everton fans will march together outside Old Trafford on Sunday in support of the Football Supporters’ Association’s ‘Stop Exploiting Loyalty campaign’ and Man City and Liverpool supporters also plan on displaying a banner ahead of their crunch meeting at Anfield later that afternoon.

City case to drag on?

The hearing of the Premier League’s 115 (130) charges against Manchester City has been notable for its lack of leaks.

In fact, it’s been interesting that most of the tiny squeaks of information that get out tend to come via legal circles, proving lawyers love gossiping as much as anyone.

And so perhaps it isn’t surprising that The Lawyer, a website focused on the legal profession, had an exclusive story that that the hearing at the International Dispute Resolution Centre (IDRC) in London has been paused while the two parties — City and the Premier League — prepare their closing arguments.

All fairly normal, but the new piece of information is that those closing arguments are not due to start until early to mid-December. Beyond that, it may be three months or more before the three-man commission issues a judgment, which means it is looking more and more like the end of the season for any white smoke to emerge from the IDRC in St. Paul’s.

Considering the likelihood of appeals, this would likely drag on into next season - though sanctions would be applied immediately (if there were any) with the appealing party able to claw them back/have them reduced on appeal.

Lord Pannick is leading City’s defence while the senior barrister representing the Premier League is Adam Lewis KC. Both hail from Blackstone Chambers, and Lewis has represented the PL previously in cases against Everton, Newcastle United and the European Super League.

No comp-laining

The Premier League are confident of avoiding any claims for compensation from other clubs and broadcasters if Manchester City are found guilty of serious breaches of Financial Fair Play rules.

Manchester United, Liverpool, Arsenal and Tottenham lodged legal notices earlier this month reserving the right to claim against City, but they are not believed to hold the Premier League liable for failing to enforce their own rules. 

City's rivals are understood to have received legal advice that if a significant number of the 115 (130) charges are proven then they could all have a claim for loss of income due to missing out on Premier League titles and European qualification over several seasons, which could total several hundred million pounds. While clubs cannot sue each other through the courts under Premier League rules they can seek compensation through independent arbitration under Rule X. 

In the most recent comparable case Leeds, Leicester, Nottingham Forest, Burnley and Southampton served notice against both the Premier League and Everton over a potential compensation claim after the Merseyside club were first charged with PSR breaches in April 2022. 

Everton have since been found guilty of two separate breaches and were docked a total of six points last season, but the compensation claims have not materialised. Burnley are understood to have come closest to seeking compensation from Everton, but have yet to activate a claim.

The Premier League have also received reassurances from their main domestic rights partners, Sky Sports and TNT Sports, that the broadcasters will not demand rebates in the event of City being relegated. Both broadcasters would be materially affected by the absence of City from the Premier League, but have no plans to seek compensation.

The Premier League gave a rebate of £223m to Sky and BT Sport after three months' of matches were postponed in 2020 due to the Covid-19 pandemic, but are not anticipating any demands for refunds irrespective of the outcome of the City case.

Education, education, education

For premium subscribers, Rob Draper wrote a piece yesterday on the strong links between academia and the new school of Portuguese coaches.

With Ruben Amorim’s arrival at Manchester United, the more intellectual approach to coaching is under the spotlight.

Read here, and upgrade to premium below if you haven’t already….

Media re-bundling

A key court case is happening in America that could affect the global sports broadcasting landscape more than you might think.

Last year Fox, Warner Bros Discovery (WBD) and Disney announced they were coming together to launch Venu, a sports streaming service that showcased their various broadcasting rights.

Fubo, which already boasted a similar business model, sued them over their plan complaining it was a monopolistic and anti-competitive move.

While the Department of Justice under Joe Biden has been hot on antitrust, that feeling is expected to soften under president-elect Donald Trump. Nevertheless, the early brief from the DoJ appeared to favour Fubo

“The evidence that Defendants (Fox, Disney and WBD) would have incentives to foreclose distributors like Fubo from access to unbundled sports content, and `the market power to follow through on these incentives,’ indicated that the formation of Venu may substantially lessen competition,” DOJ argued.

Fubo alleged that Venu stifles competition because the new entity is not required to buy non-sports content, just the 14 sports channels of the three companies partnering in the joint venture.

When these companies usually negotiate individually with distributors like Fubo, sports channels are forcibly bundled with entertainment and news channels. Fubo claims that Venu is a joint effort by three media monsters to corner the market on the so-called ‘skinny sports bundle.’

Zooming out, we are still in the fragmentation phase of streaming companies and the only guarantee is that at some point this disparate landscape of streamers will consolidate through M&A. A Trump White House probably brings forward the timeline on this.

Should Venu pave the way for major sports broadcasters to club together and demonstrate the blueprint for a combined sports-only bundle, you can expect it to be imitated across the world.

If Fubo succeeds in blocking this, it will slow down the re-bundling cycle a little.

Dig deeper: Great piece from 2017 on the bundling, unbundling cycle in media