In this article Olivier Wicki examines the Red Bull Network and looks at what lessons can be applied to other groups of clubs.
Learning the lessons from the Red Bull Football Network
Multi-club ownership has emerged as one of the most interesting and promising business models in the football industry. In recent years, the ever growing commercialisation of the industry has attracted many investors. The approach changed from buying single-clubs to creating a multi-club model. The Red Bull company was one of the first to forecast, predict, and recognize the potential of the multi-club ownership trend.
In this article we analyse the development of the Red Bull Football Group to provide lessons we can apply to future multi-club ownership structures.
How the Red Bull football portfolio evolved
Red Bull started their investment in the football industry with the acquisition of SV Austria Salzburg in 2005 and renamed the club to Red Bull Salzburg. From a strategic perspective it was a smart move to start the investment with an Austrian club due to the market knowledge Red Bull has as an Austrian company. Starting from Austria they developed their club network all over the world.
Red Bull global football clubs portfolio
As you can see in the map Red Bull owns clubs in four out of seven continents. However, the project Red Bull Ghana was dissolved in 2014, meaning that right now they actively manage clubs in North America, South America, and Europe. The acquisition of USK Anif is worth noting. This allowed the group to field a directly controlled partner club in the second highest division. They renamed the club as FC Liefering, and have been able to establish a team in Austria’s second division whilst also competing (and winning) in the UEFA youth league. This was a significant strategic step for Red Bull, as their talent development program includes an environment in which young talents can compete at the highest level possible against adults from an early age.
The Red Bull Football Group is a multi-club network spread across different continents that gives them access to a huge and diverse football talent pool. The benefit of such a structure is that young talents are not torn out of their environment and can stay in their culture for as long as possible. It means for a young talent in any of the Red Bull clubs to develop in a modern infrastructure, train under cutting-edge scientific training methods, and learn the Red Bull playing philosophy from a young age, all without having to adjust to a new culture. Once the players are older and more mature the transition to another Red Bull Club in Europe is easier as they already know how the system works and can adjust faster to deliver high performance in the new environment.
While analysing and evaluating possible locations for a multi-club ownership portfolio the factors ‘commercial value’, and ‘respective migration laws’ play an important role next to the before mentioned factor ‘access to a huge and diverse talent pool’. The location of a club itself can be a driver for commercial and brand value due to cluster theory factors with the use of synergies to other sports and industries. The example of New York Red Bull is interesting as the franchise cost Red Bull $ 25 mio. back in 2006 and is now estimated to be worth $290 mio according to forbes. Migration laws are important points to consider, especially when a multi-club network wants to transfer players within the system. The migration laws should allow the issuance of working permits to the respective nationalities.
Strategic management of the multi-club ownership
Strategic management to structure the group but also the role of each single club is a necessity to be successful. The value of a multi-club ownership is closely linked to strategic planning and using synergies between the clubs.
To oversee and strategically plan the future of the group a global board needs to be implemented. The global board steers the multi-club ownership and sets strategies together with each club.The global board centralises duties like HR, finance, and marketing and ensures that potential synergies are used with the group and clubs. Furthermore, an information system that stores global and local knowledge helps clubs to exchange information.
A competitive advantage can be reached if the global board consists of people that are experts in both business and football. To occupy the various management positions, a multi-club ownership group can look even outside the football industry for qualified people (e.g. people experienced in managing a multinational corporation). However, roles like head of football, technical director, or head of scouting should be performed by absolute football experts.
It is interesting to note that Red Bull steers its group through the global soccer office. In 2012 Gerard Houllier took over the Red Bull group as head of global football. During his time he set the strategic foundations and developed the group as a whole. Ralf Rangnick took over the role in 2019 for one year, with the position currently unfilled.
One lesson we can learn from Red Bull is to implement a global office with the previously mentioned roles right from the beginning of multi-club ownership. Red Bull only started to structure a centralised office seven years after purchasing the first clubs. The story and the recents success of the Red Bull Group shows that a global office is one of the drivers for competitive advantage over its competitors.
Sporting directors of RB Salzburg and RB Leipzig
Within the club the sporting director occupies one of the most important roles. The sporting director oversees the entire footballing side and is responsible for the strategic development of the club, the team, and the club’s overall philosophy. The position is a leadership one, so it is critical that someone stays in it for the long term.
Sporting directors of RB Salzburg and RB Leipzig
As the sporting director role is on a strategic level, we can learn from the Red Bull case that in the beginning the responsible persons in this role only stayed for a short-term. RB Salzburg had in its first five years four different sporting directors and RB Leipzig four in its first four years.
Frequently changing the sporting director makes following through on multi-year projects very difficult. Therefore, in the beginning of a multi-club ownership structure it is essential to find a sporting director for each club that believes in the overall vision and has a matching understanding of the group football philosophy and playing style.
Role of clubs
One of the first strategic decisions is whether the clubs across the portfolio are equal, or if there is a flagship club with other supplier clubs in the hierarchy – a concept that is common in other industries, where horizontal or vertical integration through M&As is widespread. Furthermore, club-level strategies should clarify and specify each clubs’ goals, roles, and duties in order to avoid counterproductive rivalry inside the group that hinder the use of synergies.
Red Bull implemented a vertical integration of the football clubs with RB Leipzig being the flagship club of the whole group. From a strategic point of view this decision makes sense as Germany is one of Europe’s top 5 leagues with a great history and huge commercialisation potential. But also the other clubs have a clear role aligned. First of all, it is important to mention that each club should be as successful as possible in their respective leagues. However, some clubs also play for the greater whole. The goal of New York Red Bull and the two clubs in Brazil is also to produce talents that in the end can be transferred to Europe whilst also remaining competitive within MLS. In most cases, the best young talents from Brazil and US either play first for FC Liefering or RB Salzburg (the best,such as Tyler Adams, may head directly for Leipzig). In the end, the goal is to transfer the most promising players up through the network in order to strengthen the flagship club.
However, not only RB Salzburg and RB Leipzig profit from this system. The smaller clubs can profit in one of the following ways:
- Receive good players on loans from RB Salzburg or RB Leipzig
- Receive money from the Red Bull group to buy own promising players (RB Salzburg and RB Leipzig have generated a transfer surplus from which all other clubs can benefit)
Transfer activities within the Red Bull group
Notes. The graph shows common transfer pathways within the Red Bull group. Graph includes transfers with disclosed fees, undisclosed fees, free-transfers, and loans. Meaning of the numbers: first number = sum of total market value in Euro at the time of transfer of all players; second number = sum of total transfer payments in Euro for all players (money the selling club received); third number = number of transfers between the two clubs.
The internal supply chain of players developing to the next higher Red Bull club works so well because the implemented all over the group a similar playing philosophy and style. Red Bull clubs tend to deploy an aggressive brand of attractive football at a high intensity. One of the cornerstones of the RB philosophy is to be active with and without the ball. Their goal is to maintain a high level of speed and verticality throughout their game. When the opponent has the ball, they usually employ a high and aggressive pressing strategy. During their own possession phases they permanently try to get runners behind the opponent’s defence.
Having a similar playing philosophy eases the transition of a player from one club to the other. The players know exactly what is expected as they have already played in a similar system. This approach is a huge advantage of the Red Bull group and one of the main reasons for their success.
Having a clear playing philosophy helps to create specific profiles and a clear requirement for the necessary skills of new players. The outcome of this approach is more successful transfers and a smoother scouting process. A shared information system needs to be in place that allows the group as a whole to scout together and plan careers.
A specialism of the group has been in early talent identification, signing players to the group before the age of 18. They are not afraid to heavily invest in high potential players with transfer fees paid out for youth players totalling millions of euros. This approach requires a large network of scouts all of whom need to share an understanding of the types of players the group will be interested in.
Despite the fact that Red Bull Ghana was dissolved in 2014, the Red Bull group still has a strong presence in Africa. Some African leagues are still not really on the radar of European scouts. Red Bull recognised the potential of the current state and found a lot of undervalued players in Africa like Patson Daka or Enock Mwepu. A key role in the recruitment of African talents is former West Ham and Tottenham striker Frédéric Kanouté. He owns the agency 12 management and supports the Red Bull group in the processing of transfers. They have also begun to develop good relations with the JMG academies in Mali. By no measurement is this market saturated, any club network needs to master the African market and provide development pathways to succeed in the 2020s.
The common playing philosophy also helps to hire new managers with a similar playing style. As the head coach has mostly the lowest job security in any club, it is even more important to dictate the playing style at network level. With this strategic approach the inevitable coaching changes do not disrupt the alignment between the group philosophy, recruitment, and playing style.
The following analysis distinguishes the time before and during Rangnick and Houllier managed the group and looks at the clubs RB Salzburg, RB Leipzig, and New York RB:
|Before Rangnick / Houllier
|With Rangnick / Houllier
|Average age of new head coach
|Average games managed on highest level before appointment at RB club
|Average duration of head coach at RB club
|Times new head coach was an internal appointment
|Playing styles of new head coaches
|RB playing style
In the meantime, the Red Bull organization is known for producing not just world-class players but also head coaches. The Red Bull group lays a lot of emphasis on the coach’s approach toward the Red Bull playing philosophy when choosing new coaches for the first team or the academy. The head coach must understand and apply the Red Bull DNA, which also serves as the foundation for the coaches’ internal development training. Whenever possible, a vacant position is occupied with a young coach who is ready to make the next step.
Last but not least, through a clear playing philosophy any club can create a requirement profile with relevant KPIs per position. This simplifies the scouting and talent identification process as you have clear guidelines on what kind of players you are looking for. Ultimately, this approach should lead to the purchase of players who fit the playing philosophy and thus increase the chances of a new player to be successful.
Red Bull has an interesting approach as 30% of the players they buy are transferred from a group club. As the player already played the Red Bull way and does not need much adjusting time, he can perform right from the beginning. Furthermore, 63% of all the players they buy have a nationality from a country they own a club. This indicates that they are well rooted in the respective countries they own a club. The RB philosophy to develop players can be seen in the type of transfers they make and the average age of a player at the time of the transfer – most transfer types are either promotions from internal youth teams, loans, or free transfers and on average 22.37 years old. Once a player is transferred within the Red Bull group for money, the price they pay is mostly under the actual market value. This is a very interesting point as they do not have to overpay for a transfer which is not usual anymore in the past few years.
Net transfer balance of whole Red Bull Football Group
Notes. Formula to calculate net transfer balance of Red Bull group in Euro per season = total transfer revenue – total transfer expenditure.
The case of Red Bull Football Group shows us many best practices on how to manage and structure a multi-club ownership. Red Bull did almost everything right in the development of their football group. However, there is one essential thing we can learn from Red Bull. In the beginning, the clubs were managed decentralised from the sporting directors that mostly did not stay longer than one year. Only in 2012 Red Bull introduced a global office that started to steer the group strategically, centralised specific tasks to better allocate resources, and created synergies between the different clubs. The introduction of the two football experts Rangnick and Houllier was the starting point of Red Bull’s success story in the football industry.
To take a strategic and centralised approach to structure the multi-club ownership group right from the beginning is the most important lesson to learn from the Red Bull case. Based on an internal and external analysis, the owners should create a vision and strategy for its network to set the strategic direction for the clubs and the group as a whole. Furthermore, to define the role of each club, set parameters for the playing philosophy, implement a centralised scouting system, and introduce a global office that steers the group network are relevant parts of the initial strategic work. A global office has the following benefits:
- Optimising operation and using synergies (knowledge-sharing)
- Cost-efficiency through centralised departments like HR, finance or marketing
- On-field performance and talent development using common systems and strategies at each partner club.
With our expertise and methodologies, MRKT INSIGHTS can support your multi-club ownership group by conducting a thorough review of their business processes, re-engineering them to optimal efficiency. We can support your network from laying the strategic foundations, to creating the most effective processes to drive your future success.