Multi-club networks are when two or more clubs work together for mutual benefit. This can be formalised through shared ownership (majority or minority) or informal cooperation.
City Group and Red Bull being the most well-known networks. There are many more groups. and while they can be controversial they aren’t going away. In the UK alone Leicester, Brighton, Brentford, Cardiff, Barnsley, Sheffield United, Watford, and others, already have partnerships with teams around Europe.
Given the new work permit requirements (GBE) for footballers teams are going to be faced with a dilemma. Pay premium prices to recruit established starters from the biggest leagues or get creative and try and recruit the talent earlier. If you recruit early you are going to need to find loans for the players in suitable leagues to ensure the player qualifies for a permit. But loans give you no control, the success rate is low. What if you gained control by taking a stake in a club in one of the GBE favoured leagues?
As a simple example many clubs in France, Belgium, and Portugal can be purchased outright for far less than £20m. If you run the club at a loss of <£5m a year you have effectively purchased a club for the cost of recruiting a single average Premier League player.
Economies of scale
Economies of scale are the cost savings an organisation can make by getting bigger.
We do see this in some of the groups. The City Group for example has a large central expert group in scouting, analytics, coaching. They effectively aim to have a programme they can roll out quickly to any club that joins their network. Or as we’ve seen with their recent partnership with a team in Bolivia they believe these services can be packaged off and sold as a solution.
But what is the major cost centre of a football club?
Playing staff. By far. But how many groups are actually taking full advantage of economies of scale in that area?
Blank slate or established?
It is almost inevitable when walking into any new business, in a sector you lack experience in, that mistakes will be made. Most of the time when entering a new market as an investor you would ideally buy a business that is already functioning well, and have a period of time where you assessed the capabilities of the existing staff, and look at how you could improve things.
You could do this by phased purchases of the business, a minor stake, then moving to take a majority over time. We have seen this with the investment in Leeds United by the San Francisco 49ers. They have invested in a business, liked what they’ve seen, and increased their stake.
However, in football the majority of investments seem to be taking the majority stake and replacing almost all the key staff. There can be very good reasons for this. Often you are buying a very poorly run business.
The main issue is you don’t get time off, football is almost uniquely time-pressured, there is no scaling back production to retool a factory and launch a new product. Even a theatre or concert venue can just cancel performances while major issues are sorted out. It took a global pandemic to introduce some slack into the sporting calendar and all that has happened is that even more games are being played with even less time to think strategically.
Most new ownership groups attempt to solve this by buying in football expertise at the start of their process. The problem is although there is much experience on the market of people running a single club successfully this is not necessarily the same skill-set as required to create a network of clubs.
In fact, some practices that work really well in a single club may actually inhibit the success of a network. That brilliant, charismatic leader, who creates an “us against the world” bond, who gathers together the best in their fields and jealously guards their ideas might be perfect for a single club structure. But where collaboration and sharing of best practice is fundamental this can be a problem.
Aims of ownership
I often say the football investment model is too often:
Buy a club
In a rising market sometimes just buying into an asset class and running it adequately is enough to make a huge profit. Looking at house prices in my city just buying a house 20 years ago would have been an excellent investment.
Buying multiple houses was an even better investment and there is a school of thought that, when compared to valuations of US teams, that European sport is undervalued. Just coming in and buying clubs, run them adequately, and this may be enough of a return to justify the risk.
Certainly most sports teams in Europe under exploit the fact they have a huge social reach. No other business has a 5 minute slot on the TV news every night, no other business can get 10 pages written about them every day in the local press. As someone who started their career trying to get a barcoding equipment manufacture mentioned in trade magazines I’m amazed at how little club owners leverage this inherent interest in what they do.
On the sporting side the best thing you can do to increase the value of the club is to build up the capacity to identify good players, to improve the ones you have, and to win games and trophies.
And the single biggest advantage a multi-club group has in the quest to perfect the identify and improve functions is the ability to experiment.
The Scientific Method
In football the word “experiment” is misunderstood. It should not be taken to mean “just try crazy stuff and hope it works”.
We are talking about using the scientific method.
Every coach who runs a training session does so with the aim of improving the players he has. Every scout who watches a game does so with the aim of finding a suitable player for their team.
The annoying question is “how do we know what we are doing works?”.
This is enough of an issue when you own a single club. But problems can multiply through a network. Do we put the problem of a lack of suitable players being produced down to player identification, coaching, demographics? Without an organised approach to collecting information and ensuring repeatability, we can never truly say there weren’t external factors that lead to our success or failure.
To run a network like this you need to think in a strategic and scientific way. A lot of people won’t want to work like this. When AZ Alkmaar started testing player’s cognitive abilities and making positional changes in their youth ranks based on experiments on spatial perception a lot of people thought it was nonsense. Now AZ has the highest percentage of youth graduates playing in their first team in Europe.
The scientific method should not be seen as being in opposition to “just hire good people and let them get on with the job”. Indeed that part is crucial too, the difference is we should be recording the what we are trying to do, measuring the impact, and building up a club owned database of what we have tried and whether we think it has worked. How many clubs actually have a comprehensive club-owned history of all the training sessions run, all their records on medical, fitness, cognitive, mental health, spatial awareness, scouting, recruitment, performance, opposition analysis in a central location?
As a single club, run by traditional managers, perhaps you don’t need this. If most of the key staff change they will bring in people with their own ideas of how things should be done. This can still work well if you choose a manager with a long term outlook.
However, if you are running more than one club having two or more independent units working with different methodologies and systems would be to miss out on most of the benefits of scale.
How and where to begin?
The joy of a club network is you can choose where and when to move to the scientific method.
The go-to example is always that Red Bull perfected their model at Salzburg before forming the Leipzig club.
RB Leipzig reached a Champion’s League semi-final 10 years after being formed. Not (just) because of the financial backing but they also had the benefit of 5 years of expertise developed in Salzburg before they existed and a further 10 years of support as the group grew together.
Red Bull could just have put £150m into an established top 5 league club, but it would probably have cost another £100m to turn the club around, managing out unsuitable players, replacing staff, all the while risking destabilising a club, annoying the supporters and damaging their brand.
Perfect and scale.
Systems and software
The problem with trying to run a large multi-site, multi-lingual operation cannot be underestimated.
Local context does exist and cannot be ignored. Recruiting youth players requires local knowledge.
But still, we need to try and build systems that will support the business in the long term from the start.
There are a number of software systems that can be used for organising and coordinating coaching, scouting, and more across several teams. The ability to create comparable datasets on a large scale is a huge advantage.
We need to think beyond software, the human element is vital. Get the best coaches you can find, pay them so well they won’t want to leave and give them professional freedom but make them follow the scientific method.
Football is penny wise and pound foolish. Comparably small amounts of money are required to have absolute best of breed data, sports science, coaching, medical, scouting but these areas are often the first to suffer budget cuts. These are the areas that build the capacity of the club, providing the information to find, improve, and retain the best players.
A new role at some of the more forward thinking clubs is Head of Research, a person who is responsible for making sure all the best advances in sports technology and implemented at the club. Such a role should be in place at every major club network.
Research and development should be at the heart of all sports clubs. There are still advantages that can be gained through data, market knowledge, and simple forward planning. But building a network that can take advantage of the opportunities of scale, and truly change the game, requires a scientific approach.