By Fred Edoreh
A move by China to redefine global football’s financial landscape has left experts in football economy in a frenzied curiosity of what tomorrow will be for world professional football leagues.
It all started with Chinese clubs offering double of the weekly wages of players in the English Premier League to attract top profile players from especially European leagues to the Chinese Super League.
Expectedly, star players are looking that way. Nigerians couldn’t have imagined, years before now, that the captain of their Super Eagles will be one such drifters lured by Chinese big pay cheque. Yet, we know that financial fulfillment is critical in any profession and many of Mikel Obi’s peers are already earning good money from the Chinese revolution.
Carlos Tevez who had an influential place in Manchester City and helped them to a glorious title journeyed off to Shanghai Shenhua for £635,000 a week from his base in Argentina just as Oscar did to Shanghai SIPG for £400,000 alongside Ghana’s Asamoah Gyan for £227,000.
Didier Drogba has been there and there was news in January that EPL’s poster boy and Manchester United’s all time highest goal scorer, Wayne Rooney, has considered heading east. Though it may all have ended in speculation, it was estimated that he could have been placed on a whooping £1m pounds a week.
The rich Chinese club owners are not paying as much just to feed the fun of their fancy neither was it for fun too that the Government of China itself bought about 13% shares into Manchester City to enable them understand the currency of the global football business.
While the clubs provide rallying hubs and serve as huge public relations and tourism vehicles for their host communities, the leagues have now transformed into very strong economic factors not to be ignored by any serious nation.
The evidence of this imperative cannot be over-emphasized. A 29.5% at £1 stake bought by Ken Bates from Brian Mears with which he took Chelsea to AIM Stock Exchange in 1996 attracted partnership interests which grew the club to attract Roman Abramovich investing as much as £140m, including Bates’ holding for £30m and 50% of Chelsea Village community stake while he also brought additional £80m to clear the club’s debts.
Similarly, 60% stake in Swansea City was sold for £110m to Steve Kaplan and Jason Levien of an American consortium, 49.9-% of Everton was bought by Iranian billionaire, Farhad Moshiri, for nearly as much, 70% of Crystal Palace went for £100m to Josh Harris and David Blitzer while Aston Villa went for £76m to a Chinese businessman, Tony Xia. All these revenue came into the United Kingdom.
Qatar’s Sheikh Mansor injected £210m into Manchester City and the value of the club has increased five times to about £900m. This is even paltry, compared to the benefit Manchester as a city derives from the relationship.
The stadium is owned by the Manchester City Council and with its naming as Etihad Stadium, the club pays the council £3m a year while Etihad signed to pay sponsorship to the club for ten years. The council also approved land for the building of the Etihad Campus and, in return, Etihad Airways signed to create a British hub at the Manchester City Airport. This is strategised to create more jobs and support the realization of the £600m Manchester Airport City project from which financial benefits also accrue to the club.
Mention has to be made of the £790m Manchester United takeover by the Glazers who have since taken the club to the Singapore and New York Stock Exchanges and attracted over 80 sponsorship and partnership deals. The club is now valued in excess of £2b and delivering enormous development values to the city of Manchester.
These investments help to build a commercial and social value circle as the clubs invest in stadium infrastructure, facilities and development of talents which in turn increases the appeal and demand for their games, support media expansion which is converted to commercial success and sustainable growth and enable them to share equity with their fans, community and investors.
Consequently, besides income from transfers, the EPL value in TV broadcast receipts, merchandising, sponsorship, ticketing and other revenue streams continue to grow. External broadcast revenue alone raked in as much as £722m in as far back as 2013/24 season. These enabled the EPL to devote a whopping £225m as solidarity support for other junior leagues and social development while the clubs undertook to re-invest £340m for further development of their youth teams, all to maintain the strong market position.
Ernest & Young, in a 2014 study, revealed that with a value of about £7b and gross value added to the UK economy at £3.4b, the EPL delivered about £2.4b in taxes to the UK economy, provided about 103,000 full time jobs in the 2013/14 season and additional engagement of 546,000 youths in sundry projects and programmes.
These derivatives typify the kind of relationship and benefits between the government, communities, clubs and investors in a professional football league setting as is obtainable in varying degrees in the different leagues in Europe.
Football is a fast growing catalyst for investment and multi-sector development and, interestingly, the Asians know that their region represents a huge one-third of the EPL market even as the English seem to have conquered Africa and stretching towards the Americas.
Having studied these models of the global football economy, the Chinese Central Football Authority decided that the Chinese Super League must go fully professional in January 2017, the Chinese League One (CL1), the equivalent of Nigeria’s National League, in March, while the CL2 is billed to join the system in 2019.
The reform entails the establishment of new regulations and structures aimed at promoting “high quality and high-level competition, introducing advanced managerial concepts to the market, enforcing minimum standards of professionalism, encouraging the influx of more high profile foreign coaches and players, and gradually establishing the European system for players registration and transfers.” In summary, the reform is to restructure the Chinese football leagues as private and investible companies for commercial success.
Worried that their league does not have a major international profile outside the region, Saudi Arabia has also responded with an approval by the government and appointment of a top notch investment management agency, Jadwa, to privatize many of its 14 mostly government-owned clubs.
The reform being driven by the nation’s Deputy Crown Prince, Mohammed bin Salman, and overseen by the Saudi Council of Economic and Development Affairs, aims at turning the government-owned clubs into private companies as part of strategic economic re-tooling “to reduce reliance of various sectors of its social economy on government oil revenue, ease the financial burden on the government and diversify the economy” from just earnings from petroleum.
While they are targeting individual Saudi billionaires and multi-millionaires, in the first instance, the ultimate destination is to elicit foreign direct investments from global football investment and brands portfolios to elicit an inflow for domestic development.
Their projection includes generating about 40,000 new jobs, especially for their citizens, and the Economic and Development Council has assured it will provide loans and other support to the clubs to stand on their own.
The critical lesson here is in seeing that as economically well off than Nigeria as they are, China and Saudi Arabia acknowledge and are responding to the imperatives of repositioning their clubs as investible business entities to tap into the global offerings of football.
The situation in Nigeria is so different. Save for MFM, Remo Stars and FC IfeanyiUbah, the rest of the Nigeria Professional Football League (NPFL) teams are owned and financed by state governments which in themselves rely, in the main, on federal revenue allocations that accrue from oil export.
While virtually all the states have a yawning deficit in various infrastructure and with the oil revenue allocation unable to support the competing development needs, the glut in international oil price has worsened the situation with state governments unable to pay their wage bills, talk less of embarking on capital developments to revamp critical sectors like education, health, power, housing and roads.
Comparatively, with a GDP of about $776 billion, among the world’s top ten, the Saudis who have decided to remove football from the bill of the state is far richer than Nigeria. They host 18% of the world’s oil reserve, ranking second with about 268 billion barrels, as against Nigeria’s 40 billion which places it sixth.
They have the world’s highest production capacity, averaging about 9 million barrels per day as against Nigeria’s 2.7 million at best. They top the world’s oil export index with about $133b per annum while Nigeria grosses just about $40b at the peak of production.
It remains curious that Nigerian state governments, even in their incapacity, insist on funding professional football, contrary to the practice in the leagues that exemplify professionalism and success of the business.
While the EPL are mostly private owned, there is an option in the Bundesliga model of the 50+1 rule in which majority and controlling shares in the clubs are owned by the fans and the communities, save for Bayern Leverkusen, Wolfsburg and Leipzig. This assures the involvement of the communities, adequate and steady funding and sustainable management of the clubs as community assets while also ensuring match day attendance. This structure still leaves about 49% space for local and foreign private investors.
The EPL system also leaves room for the involvement of the community and the fans with several Supporters Trust and Societies in participation with just about £10 contribution per member, per season. They are there in Manchester United, Liverpool and other big clubs.
While the European leagues have set the standard of practice and established circles of growth, the League Management Company of Nigeria (LMC) has persistently hammered on the need to go the right way by restructuring ownership to open up for community, private and foreign involvement, to reverse the arrested development of the Nigerian league and unleash its potentials as possibly the biggest and most commercially viable league in Africa.
The LMC is now partnering with NASD Securities Exchange to support the process of government divestment in eight clubs chosen for the pilot project and open them for private investment. Expression of Interest from financial advisors on the project has been called for and entries being received. Nigerian net worth individuals, supporters clubs and community groups need to embrace the opportunity to develop their clubs as veritable assets.
Beyond the pretensions of the various state governments in merely registering the clubs at the CAC, the potentials of the Nigerian league cannot be attained if the federal government and the states, and indeed the National Assembly, do not come to terms with the facts and imperatives of restructuring to open up space for community and private domestic and foreign investments.
China and Saudi Arabia have shown examples. Nigeria has to act now.
The writer, Fred Edoreh, is the Chairman of the Sports Writers Association of Nigeria (SWAN) Lagos State chapter and publisher of www.sportstalkafrica.com