Wall Street Sports: Why Goldman Sachs is Getting into Football 💰 ⚽️
Plus Nike makes golf shoes cool and why is the NHL making their adverts blurry?
Welcome to Athletic Interest,
Investment banks and 8-year-old boys have a lot in common.
While that sounds like a great set-up for a joke about financial incompetence, we are actually referring to their shared obsession with sport, and in particular football.
As soon as either of them discovers football it’s all they want to talk about and they will try to convince anyone they meet to spend all of their money on football.
While for 8-year-olds this spending spree is limited to jerseys and playing cards, investment banks have set their sights on controlling entire teams and leagues.
J.P. Morgan and Goldman Sachs, the two biggest investment banks on the planet, have been the most obsessed in recent years.
J.P. Morgan was the money behind the failed Super League and recently expressed interest in buying Serie A’s media business. Goldman Sachs most notably helped broker deals for Chelsea and Formula 1, and has now set up a special division that is tasked with helping investors buy stakes in sports teams and leagues.
This is pretty surprising. There was a time when banks would never dare to touch football (they were too busy with the far safer subprime mortgage market) so, what has changed?
For years, football couldn’t really be considered an investment. It was more of a trophy asset, something for high-net-worth individuals to spend vast amounts of money on in return for a shot at fame, fortune, and possible financial ruin.
As these high rollers burned their money, football began to grow. People started to pay attention and TV contracts began to rise. The players started to demand more in wages and transfer fees reached incredible heights as the millionaires were replaced by billionaires who wanted their shot at fame (and a distraction from their less-than-savoury business dealings.)
While the stakes have been raised, so have the potential financial benefits. Investment funds and banks have noticed this and set their sights on acquiring as much of the European football landscape as possible.
Why Do Banks Get into Football?
While Europe’s top clubs may not be as profitable, football still has plenty of attractive investment characteristics. Most notably, clubs have large income flows, from TV and sponsors, that are backed by ironclad contracts. They also have relatively predictable income from ticket sales and merchandise and a general immunity during an economic downturn.
Investment funds and banks see this as an opportunity. They are pretty much guaranteed a certain income for several years, all they need to do is cut costs and profits will soon follow (at least that’s the theory).
Many new investors, especially those from North America, also seem to think that football in Europe is undervalued.
While some clubs are changing hands for several billion, the average team value in Europe is still less than half that of an NFL team ($2b vs. $5B). This is despite European teams having far bigger international audiences. These investors seem to think that it’s only a matter of time before the TV contracts and sponsorship deals catch up and the team values increase.
The hidden opportunity: stadiums
U.S. investors also appear to think football in Europe is underutilizing its assets, in particular the stadiums.
Over the last few years, sports stadiums in North America have become multi-media entertainment hubs that showcase several different sports as well as concerts, and exhibitions. In Europe, most stadiums stay empty between weekly games.
Football is beginning to catch up under the watchful eye of American investors. Tottenham Hotspur’s new stadium has quickly become one of the most popular concert and event spaces in London and will continue hosting at least two NFL games per season until 2030. Both Real Madrid and Barcelona have begun re-developing their famous stadiums with a view to greater usage outside of gameday. Barcelona’s Camp Nou revamp is backed by both JP Morgan and Goldman Sachs, while Real Madrid have handed over the day-to-day organisation of their renovated Santiago Bernabeu to U.S. investment fund Sixth Street.
The Consequences
With big banks like Goldman Sachs and JP Morgan making it far easier for investment funds to get into football, the landscape of the beautiful game could change forever.
Not only will the cycle of increased investment make the sport more expensive, but it will also change the voices that control these institutions.
Most of the traditional football investors are being priced out in favour of consortiums of investment funds, wealth funds, and billionaires.
Ownership of a football club comes with a vote over how that club’s league is run. Get enough similarly-minded people in one league and those voices will have the power to change that league for generations to come.
But what Goldman & Co. shouldn’t forget: the football business is unique, with the emotions of the fans playing such an important role. A state of play that makes many aspects of running the business unpredictable. The Super League disaster sends its regards.
🍎 Sports Business Bites
⛳️ Nike Unveils USA vs. Europe-Themed Shoes for Ryder Cup
Usually, wearing the latest pair of Nike’s on a golf course is a great way to get asked to leave, but not anymore…
These new golf shoes, which mix Nike’s famous Air Max styling with actual golf performance elements, have been specially developed for the upcoming Ryder Cup tournament.
The Ryder Cup pits the best golfers from the U.S. against the best from Europe, and the two shoes have borrowed elements from the U.S. and EU flags for their design.
Looking at these, this could be the first time that golf shoes find success in the wider sneaker market.
🏒 Why is the NHL Blurring Their Adverts?
Usually, advertisers pay good money to make sure that every fan notices their commercial during the game, but not in the NHL.
For the past year, the NHL has used special billboard technology to allow broadcasters to digitally alter which advert someone sees depending on the location of their stream. While this has opened up new opportunities in advertising, it has angered many fans.
Some argue that the digital alteration makes the advertising screens on the rink way too bright, intrusive, and clean to the point that it even distracts from the play and hides the puck.
In response, the NHL has actually tried to make the digitally imposed adverts more blurry and is utilising AI to figure out how to better blend the adverts into the background.
While some have called for the tech to be completely removed from local broadcasts, the NHL is adamant that the league needs to implement these technologies to maximise revenues.
🎟 Want to advertise with Athletic Interest? → Click here!