Supercalifragilistic Sports: Intersections by The Connect - Issue #8
Rayde Luis Baez
Dominicano 🇩🇴🚀🌎 Founder of The Connect & Co-founder of SPORTHINK | Brand Partnerships | Marketing Communications | Business Strategy, Innovation & Financing | Sports & Entertainment
This week we're bringing an opinion on the perceived differences between the American vs European ways of sports management, and the forward momentum that will likely see new competitions being formed, in which the teams are active protagonists of the governance and business operations. The botched roll-out of the European Super League, hasn't eliminated the existential threat to the status quo, and other sports and in other latitudes chatter about such formats continue to take place. Also, referencing the findings from a great book I read many years ago, "Tailgating, Sacks, and Salary Caps", on how the NFL business structure was built.
Here, you can also see a special episode of "Intersections: a podcast by The Connect" that we shot in the aftermath of the Super League debacle, in which Luis Baez, Vedran Kusljugic and I debate about what went wrong, and what lies behind the effort and the backlash. Also, a conversation with Jordan Gardner, who is an American investor and sports executive, with a diversified multi-club investment portfolio in football in Europe.
If you enjoy the reading join, comment and share, as in this newsletter we’ll be always covering myriad topics from partnership building, to investment in sports and technology, going through sports governance and economics, always interlacing our own perspective with other esteemed sources.
Join us at the intersection of it all!
- Rayde
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Make Sports Super...Again?
A common topic of punditry in Europe is the demonization of the “American way” of sports management, especially American owners in European football, which are labelled as non-belonging to the ecosystem because their voracious pursuit of profitability. Yet, everyone is in awe of the prowess of the NBA regarding their ever-green globalization process, and the riches they produce -now to the tune of US$ 8 billion per year.
For the product to be spectacular and far-reaching, there’s no other way than to make it a very profitable endeavor that reinvests in the same product.
Truth be told, the bottom line cannot be all. The legacy, the community, and the sporting values must be uphold. But it is a business, with employees that have to be paid accordingly to the capacity of value generation they bring.
"European Big 5 Football" is the total aggregate revenue of all five leagues. The English Premier League is about 34% of the total.
Much has been said and speculated this year with the failed attempt to launch the European Super League -at least, for now-, where the underlaying reality still remains: the top football properties in Europe, think they could do a better job managing the top product.
But this is not an isolated issue just with the top football clubs in Europe, nor it is original. Documented history show that Jacques Ferran and Gabriel Hanot, of French sports newspaper L'Equipe, were the founding fathers of the European Cup, with the support of key executives of top European clubs, most notably Santiago Bernabeu of real Madrid. What is insightfully important is that the launch of the Coupe d'Europe des Clubs in 1955 by UEFA, was inspired -by Jaques Ferran’s own account- in the 1948 by the antecedent of “Copa Libertadores”, the Campeonato Sudamericano de Campeones, or “South American Championship of Champions”.
It is not only pertinent to football; the top European basketball clubs, exscinded the management of the top professional basketball competition from FIBA Europe, and created their own company Euroleague Basketball, which debuted on October 16th 2000, and is still on today after 21 years, having generated hundreds of millions of Euros in revenue for its shareholders: the clubs.
October 16, 2000. First EuroLeague game: Real Madrid vs Olympiacos Piraeus. Source: Euroleague.net
The rationale behind such a bold move -antagonizing the sports governing bodies-, can only happen on the minds and spirits of true entrepreneurs. And while we can’t forget that most of the ailments of the sports industry are the exclusive responsibility of the same executives, it is they who live or die for the glory or failure of sports, and the riches or miseries of the business in between. They are the ones pressed to pay the most competitive team they can, to appease their fan bases, while figuring out how to control cost and enhance revenue, so they as owners are appropriately compensated for their effort. Glory, in sports and everywhere else, is ephemeral; the bottom line of any business is what defines its future.
What is the problem then? Why there’s so much whipping, turning, twisting and dealing, to retain control of the management of the top competitions? “It’s the economy, stupid”
The most essential raw material in the sports industry, are the athletes. They are employed by their clubs to showcase their talents and compete for the maximum amount of wins and championships. They generate interest, people buy tickets and pay TV subscriptions to see them compete. Their clubs bear the economic risks of such an operation, yet the athletes also compete for their national teams (run by their federations), in tournaments run by the confederations or international federations that regulate their sport. Everyone makes good revenue, athletes included, but the risk sits at the club level.
“I’ve been arguing this for 20 years. We’re sending our best stars to the Olympics. Guys don’t get hurt a lot but they do get warned down, especially after this year. All it does is it makes the International Olympic Committee billions of dollars. That money should be going to you and us. Literally, if we did our own World Cup, could we get billions of dollars? Yeah, after a few years.” - Mark Cuban (Entrepreneur, Owner of the NBA Dallas Mavericks) on NBA player Carmelo Anthony’s podcast, “What’s in Your Glass?” July 30th, 2021
As can be expected, any group of top sports teams that command the attention of the masses, is ripe for becoming “super” and breakaway of their old competition model, and build something new that makes more business sense to their shareholders. That is also on top of the agenda in Brazilian sports, where a group of highly influential professionals in world sports are leading efforts to raise capital (some reports peg that number in US$ 1 billion) so the Brazilian Serie A clubs form their own breakaway league, outside of the management control of the CBF (Confederação Brasileira de Futebol), by 2023.
Such proposition reminds me of my time in college, during my undergraduate studies in Economics. What the clubs are demanding is to have control of the whole productive pipeline of the sports they are involved in. That’s a clear neoliberal theory, under which the concept of governance has to put decision-making power back into the hands of those who create capital, and curtailing the influence of government and their regulation. The ones against the idea cry that it would be detrimental for the fans and the solidarity ecosystem…as if sports is a public service like energy, health, education or telecommunications. What I’m afraid is that in the current social and political climate, an incendiary and populist narrative will definitely mislead the public opinion to think that a breakaway competition will have a zero sum impact on the rest of the ecosystem.
The top sports are far away from amateurism, from top to bottom, and what’s a stake here is the control of the cash box.
Source: Nielsen Sports.
The ultimate Super League: the NFL
While mulling about this op-ed topic, have dusted off a book I read 15 years ago: “Tailgating, Sacks, and Salary Caps: How the NFL Became the Most Successful Sports League in History” (Mark Yost. 2006, Kaplan Business). The National Football League has defined the ultimate business model. Mind you that while the game has some popularity abroad, it is a fairly domestic competition. Yet, they come atop the total revenue list, and many its franchises are the most valuable sports teams on the planet (which is proof of how sound business practices drive enterprise value).
Mark Yost narrates in the book how the NFL grew from a regional American competition, to the behemoth it is today, explaining its roots, its cooperative structure, its growth in marketing, and how it handles labor relations with its players. More importantly, he goes in somewhat detail into how key figures of the ecosystem, deemed “mavericks”, have always pushed the envelope to make the NFL and its franchises an ever-growing business. These were, at the time of print, Dan Snyder (Washington Football Team), Jerry Jones (Dallas Cowboys), and the late Al Davis (formerly Oakland Raiders, now Las Vegas Raiders).
It is a very interesting read to have proof that a good governance system in sports, is one in which the collection of teams that associate to create a top product by paying the top players, and its owners, are the top of the business pyramid. They constructed a business system that is predicated on giving up some autonomy for the good of the game, and the collective wellbeing of all 32 partners, based on shrewd business principles executed by an independent figure of management:
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In-house innovation
Sometimes, innovation can happen from existing structures. It is incumbent on the people managing the product, to find ways to engage better and grow the product and it's underlying business. The more recent example is The Hundred, a professional franchise 100-ball cricket tournament involving eight men’s and eight women’s teams located in major cities across England and Wales, created and managed by the England and Wales Cricket Board (ECB) that took place in the summer of 2021.
Must confess that I don’t know the first thing about cricket, other than it maybe precedes baseball, but have to admit that the buzz The Hundred created on social and the aesthetics of the product, made me catch some highlights online. And that was the precise objective: attract younger and more diverse crowds to watch cricket, focusing on the packaging of a much more shorter cricket contest so each match would last around two-and-a-half hours. Furthermore, the tournament gave equal weight to both men’s and women’s sides, with almost all the matches taking place as back-to-back double-headers at the same venue on the same day. The ticket was a full-day of cricket, so people could watch both the men’s and women’s games, and men and women shared the same prize money pot. That’s a 21st Century product, based of a sport that dates back when the Gregorian calendar was starting to be used in late 16th century.
As a fan I would be very afraid of immobilism, and maintaining status quo “on my name”. No one consults fans on the pricing of TV subscriptions, or the ticketing policies, which seem to be more of a priority. On the flip side, especially in the teams and leagues that are run with the private capital of shareholders, forcing an opening of the governance structure where anyone can influence business decisions, without any skin (money) in the game, is counterintuitive. Are we demanding the same for public service companies in the energy, utilities and telecommunications sectors?
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From "Intersections: a podcast by The Connect"
Why The Super League became a Super Flop (April 2021)
The sports industry was turned upside down, when 12 of the most important sports companies on the planet decided to roll out an alternative competition structure, that was called to substitute the current UEFA Champions League. It happens to be that those are the top 12 football (soccer for Americans) clubs: Real Madrid C.F., FC Barcelona, Club Atlético de Madrid, FC Internazionale Milano, AC Milan, Juventus Football Club, Manchester United, Manchester City Football Club, Chelsea Football Club, Liverpool Football Club, Arsenal F.C., and Tottenham Hotspur Football Club.
In a radical, but expected, turn of events the house of cards came down, with a great dose of conspiracy rhetoric, sparkled with misinformation, poor execution, and an evident lack of dialogue from stakeholders.
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The United States of Soccer (Series): Jordan Gardner, Investor and Chairman & co-Owner FC Helsingør
Jordan Gardner, who is an investor and dports executive with a diversified multi-club investment portfolio in football (soccer) and wine. Currently Chairman of the Board, Managing Director & Co-Owner for Danish Professional Football Club FC Helsingør, responsible for all day-to-day operations, strategy and leadership at the club. His investment portfolio also includes a minority stake in Swansea City AFC (United Kingdom), co-ownership of Dundalk FC (Rep. of Ireland), investment into a group bidding on an A-League (Australia) expansion franchise.
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From Rayde's desk
A FIFA World Cup of 48 teams? Great news for brands & agencies (originally published in 2017)
To many, there’s nothing more important than football. Nothing and no one has more power than football. Nothing moves more of ‘everything’ than football. Who has more influence power, Spanish Prime Minister Rajoy, or Real Madrid President Florentino Pérez? Who has the best ability to rally Argentina, global star Lionel Messi or President Mauricio Macri? Like it or not, football, with its highlights and its miseries, pumps the social tissue in the vast majority of the World.
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The Day After Next (originally published in 2020)
And the world came to an almost full stop. A sense of anxiousness not lived by three generations. An economic downturn like the in-between wars period of the 20th century. But most of all the certainty that nothing will be the same, at the social behavior front.
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On previous episodes...
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Rayde Luis Baez is The Connect, and came to service businesses, connecting them at the intersection of advertising, sports, entertainment, tech & media. He has also Co-founded SPORTHINK, that through its founders, partners and advisors bring a wealth of knowledge and insight, to sports & entertainment companies, and the capital markets, building bridges to generate incremental value.