♠ Posted by Emmanuel in Sports at 4/09/2010 12:17:00 AMGiven sport's prominence in our lives--as participants or spectators at local, regional, national, and international levels--there's certainly something to be said about its governance that concerns us all. In North America, major sports like basketball, (American) football, and ice hockey have salary caps to limit the gap between the haves and less-haves. These more or less work as seen by the number of teams that can realistically aspire to winning the championships in the NBA, NFL, and NHL. Even in the more lopsided world of baseball, profit sharing arrangements spread the largesse to smaller teams.
By comparison, Europe's major sport--football (or soccer for American readers)--doesn't have similar arrangements. Across the continent, you see the same (well-funded; maybe by Russian oligarchs) teams winning national and European league titles over and over, while smaller teams can't really have similar aspirations. Worse, it seems these big-spending clubs aren't even well-managed. Although Manchester United is a storied name in football known all over the world (except the United States) for its winning ways, its finances aren't necessarily in the best condition. Somewhat ironically, Manchester United is owned Americans--and highly indebted ones at that in true red, white, and blue fashion. In 2005, the reviled Glazer family completed a leveraged buyout of Manchester United, and the club has had difficulties ever since dealing with the onerous debt they have brought on board. Fat interest payments for the foreseeable future cloud prospects for signing top talent like Spaniard David Villa as stalwarts like Ryan Giggs, Gary Neville, and Paul Scholes near the end of their great careers.
Loyal Manchester United fans and Britons in general abhor the Glazers for being ugly Americans and, worse yet, debt-laden ugly Americans [is that redundant?] seemingly hellbent on ruining the finances of such a storied team. There has been a strong grassroots movement via the Manchester United Supporters Trust (MUST) to throw out these Yankee bums. While reading the Evening Standard on the way home, I came across a very interesting article where Sean Hamil at our sister University of London institution Birkbeck College advises the grassroots campaign to look at the success of FC Barcelona--probably the best football team in the world at the moment. He says that should Man U work itself free of the ruinous Yanks, it ought to look at the combination of a fan cooperative model and highly professional management--alike what they have at Barca:
Who can blame Manchester United fans for being frustrated that their club's owners, the Glazer family, had to sell Cristiano Ronaldo to Real Madrid last summer to cover interest payments on the debt they incurred buying the club in the first place? Particularly after they were knocked out of the Champions League last night by Bayern Munich and their chances of winning the Premier League are seemingly dependent on one player's powers of physical recovery — Wayne Rooney.I look forward to Hamil's forthcoming book covering the governance of European football. As for me, this may be gratuitous advice but...listen up, world: when it comes to Americans bearing "debt," "credit," or "leverage," run like hell--and never look back.
It is therefore a supreme irony that the Barcelona team, so amazingly inspired by the mercurial Lionel Messi, who this week comprehensively took Arsenal apart, is, unlike United, structured as a rather unfashionable member-owned co-operative society. Such co-ops have the image of being unable to take advantage of private capital to boost spending on superstars like privately-owned clubs such as United, as they are reliant on generating income for the playing staff budget through organic business growth.
Barca's president, the lawyer Joan Laporta, will be stepping down in June having completed the maximum allowed two four-year terms of office, to be replaced by a candidate elected by the 170,000-odd Barcelona members, or socios. Imagine for a minute if Malcolm Glazer had to stand for election every four years. Private ownership is of course the dominant ownership model in the Premier League. The received wisdom is you cannot compete without a rich sugar-daddy owner prepared to spend what it takes to finance a winning team. This model assumes that the owners will accept continual losses — virtually all clubs in the Premier League lose money consistently. As former Tottenham Hotspur owner Sir Alan Sugar said, the “prune juice” effect dominates. Money goes in one end of a club and goes out the other in the form of players' wages.
Barcelona doesn't have a “sugar daddy”; its ownership structure prevents it. And yet it has been the most successful team in Europe over recent years, dominating the Champions League with wins in 2006 and 2009. So, should its mutual ownership model be imported here as Manchester United's Red Knights claim? There are certainly similarities between Barca and the Reds. Laporta was elected on a reform agenda on the back of the Blue Elephant fans' protest movement, similar to the Green & Yellow protest led by the Manchester United Supporters Trust (itself a fans co-op).
Laporta and his colleagues were concerned at poor performance and at rumoured plans to convert the club into a private company, which could have seen Barca saddled with similar debts to those run up by the Glazers. His regime has been extremely successful, on the field and financially, kicking any demutualisation talk into touch.
One of his first acts was to replace virtually the entire management team with top-class professionals, many of them drawn from outside the football industry. This might seem an obvious move, but as Portsmouth in the Premier League, and the 53 cases of clubs collapsing into administration in the Football League since 1992 illustrates, competent business management is not the norm in football.
His management paid particular attention to improving financial controls and marketing. Between 2003 and 2009, turnover increased from €123.4 million (£108.2 million) to €384.8 million. Barcelona has been profitable since 2003/2004, and has repaid virtually all its historically-incurred debt. Perhaps Laporta's genius was the way in which he worked with the mutual structure's potential weaknesses in traditional business terms, and turned them to the club's advantage.
Barca could not raise finance through a stock-market flotation or a private capital injection. It can only raise money by tapping its fans. So club members between 2003 and 2010 were almost doubled to over 170,000, via what it called The Big Challenge (El Grand Repte). Members were recruited all over the world. It went on to aggressively sell them club merchandise, a practice it still pursues.
A major criticism of the mutual business model, for example in financial services, is that despite the oft-stated commitment to member democracy, there can actually be less accountability to members by the mutual board than in a traditional private company because membership is so dispersed. At Barcelona this has not been a problem thanks to the natural tendency of the fans to be emotionally engaged in the club. Laporta narrowly avoided removal from office in 2008 by disgruntled socios, unhappy the club had not won a significant trophy for two years.
Such member power and activism is not always the case. Over at mutually owned Real Madrid, a less engaged membership has seen successive club presidents rule in a semi-aristocratic style. These bosses spend heavily on players the club cannot really afford only to be bailed out by public authorities. Taxpayers, in other words. Ultimately, the best argument for mutual ownership is that football clubs are already de facto not-for-profit institutions, due to the structural economic weakness of the football industry so astutely observed by Sir Alan Sugar.
But as Real Madrid illustrates, mutuality alone is not enough. What the Barcelona experience tells us is that the mutual model, when combined with top-class business practice, through a partnership with club supporters, can offer a sustainable alternative to the private ownership model.
The proposed alliance between the Red Knights and the Green & Yellow MUST, with its combination of high-quality management acumen with grassroots credibility and marketing reach, embodies many of the strengths of the Barcelona model. It is a viable and serious alternative to the Glazer family ownership. And they wouldn't have sold Ronaldo.
UPDATE 1: Kindred at IPE@UNC chides yours truly for anti-Americanism. I'd like to point out that there are varieties of it--mine, of course, is a comparatively non-violent, fun-poking strain even if I am truly appalled by what they do sometimes (especially in finance). Hate the sin, love the sinner, I am told. Also:
- Not all American owners are created the same. As an Aston Villa fan, I think the team has prospered during its ownership under Randy Lerner as he respects the club's history, its fans, and its coach unlike the Glazers;
- As proof, Aston Villa's title sponsor is a local hospice for children, Acorns. This gesture is of course very heartwarming in an age of highly commercialized sport and sets Villa apart. By contrast, the Glazers made AIG Man U's title sponsor. Now, I don't know who is more reviled, the poster child of the credit crisis' excesses, or the owners of a team now symbolic of soccer's financial excesses that threaten the long-term financial health of the sport. What can I say? Like attracts like;
- As a long suffering Villa fan, I understand that winning isn't everything. Unsurprisingly, it was an American football coach, Vince Lombardi, who came up with the saying that it's the only thing. From this perspective you can trace the emergence of various steroid freaks who've populated baseball for years and years and other suchlike Americana;
- If you want highly informed commentary on the political economy of football, read David Goldblatt. He explains how football can be a vehicle for upliftment in the direst of poverty and the grimmest of situations. He also has good ideas about the relationship between football and finances;
- There are excellent reasons why a pro-Glazer movement would not gather any mass of adherents as Goldblatt would explain. They violate the spirit of sport--play as "irrational" in an economistic age--and don't have any real management chops besides as evidenced by the ballooning debt at Man U. Typical Americans, as Sir Alex Ferguson would probably say in private ;-)
UPDATE 3: Also see my more recent feature on inequality in football.
UPDATE 4: Manchester City fans can join the mocking Love Glazer, Hate United Facebook page spoofing the green and gold's Love United, Hate Glazer [!]
UPDATE 5: See similar mismanagement by American owners at Liverpool which is now up for sale.