pursuits

The NFL vs. the EPL

Following sports business headlines these days, we're not sure what's more volatile—the state of the NFL collective bargaining agreement negotiations or worldwide sports team ownership.

Outside the NFL, every other major American team sport currently has a problem-child franchise that has been taken over by its respective league. The NBA has the New Orleans Hornets, the NHL, the troubled Phoenix Coyotes. And on Wednesday, baseball Commissioner Bud Selig added the Los Angeles Dodgers to the naughty list when he used his powers as commissioner to wrestle financial and operational control away from current Dodgers owner Frank McCourt.

While Dodgers fans are largely breathing sighs of relief, the move is no doubt causing extreme uncertainty in other quarters—will the New York Mets' Wilpon family, their fortune compromised by Bernie Madoff, be next on Selig's list? Will NFL Commissioner Roger Goodell also get the takeover bug, with the Detroit Lions and Buffalo Bills in his sights? And will McCourt, spurned by U.S. leagues, make a run for the greener pitches of European soccer—or "football," as they call it in the U.K.?

Perhaps—if he has been following the moves of some prominent NFL owners, notably, Malcolm Glazer (Buccaneers/Manchester United), Stan Kroenke (Rams/Arsenal), and Randy Lerner (Browns/Aston Villa).

Glazer Poised to ThreePeat at Wembley

If the NFL's labor issues are resolved by Aug. 1, the Tampa Bay Buccaneers and owner Malcolm Glazer and his family will be packing their bags for London for the second time in three years. Not coincidentally, Glazer's English Premier League club Manchester United plays but a short train ride away.

Glazer, No. 136 on the Forbes list of richest Americans (with an estimated net worth of $2.6 billion), was the first U.S. sports franchise owner to assume a majority stake in a foreign sports franchise. As noted by the St. Petersburg Times, the Glazer family "continues to embrace the opportunity to take their brand abroad."

"We are looking forward to promoting Tampa Bay's emerging young team on the world stage. We have the longest running fan club of any NFL team in the U.K. and look forward to seeing so many familiar faces from the Bucs U.K. Fan club at the game," says Buccaneers co-Chairman Bryan Glazer, Malcolm's son. The team has also done a much better job of selling out the Wembley game than they do at Raymond James: In 2010, they were the only NFL team to have all 10 preseason and regular season home games blacked out because they didn't reach the league's mandatory ticket sellout threshold.

Another possible factor in the league's move to go ahead and schedule an international game despite the current lockout: lawyers. As Kevin Seifert wrote on ESPN.com, "If they passed on this year, it could aid the NFL Players Assn.'s argument that owners have been and continue to plan on a long and damaging lockout."

Kroenke Now Has Arsenal in His Sports Arsenal

Both Malcolm Glazer and fellow billionaire Stan Kroenke (whose wife is Ann Walton Kroenke, daughter of Wal-Mart (WMT) founder Sam Walton) hold controlling stakes in NFL and EPL franchises, and both are notoriously media shy. But that, according to industry observers, is where the similarities end.

Kroenke's portfolio of sports franchises and related businesses is deep. Besides the NFL's St. Louis Rams, he owns the NBA's Denver Nuggets, MLS Colorado Rapids, NHL Colorado Avalanche, the National Lacrosse League Colorado Mammoth, the Pepsi Center, and the Altitude regional sports network. His latest acquisition is EPL club Arsenal, which he clear-kicked from Russian investor Alisher Usmanov earlier this week in a globally monitored takeover.

Under EPL rules, Kroenke—by boosting his stake in the club to about 63 percent after he purchased shares from fellow directors Lady Nina Bracewell-Smith and Danny Fiszman, who died Apr. 12 of cancer—triggered a mandatory buyout of all other shares. Usmanov, who tried to counter Kroenke's move by a last-minute, $115,600 purchase of six shares to boost his own stake in the club to 27 percent, maintains that he won't sell his shares. (Also a factor: the Arsenal Supporters' fan group, whose members own about 3 percent of the club.)

Kroenke's takeover puts Arsenal's value at about $1.2 billion, and as part of the deal, he has vowed, for the club's long-term financial health and ability to compete in European football's complex transfer market, that the deal will be funded by cash, not by debt secured against club assets and future earnings—as Glazer did when he took over Manchester United in 2005. The club currently has an estimated net debt of $180.5 million, and Arsenal is the second-highest revenue club in the U.K., behind ManU.

Futbol's "cross-border" potential is thought to be a major factor behind Kroenke's pursuit of a majority stake in Arsenal. As the U.K.'s Daily Telegraph notes, "new markets have opened up to Kroenke that would be impossible to crack with his other sports holdings. Arsenal has a lot of catching up to do commercially, as Manchester United will be the first club to break the £100 million mark for commercial revenue alone, more than double Arsenal's reported £44 million last year."

One reason why Manchester United is so far ahead in the EPL revenue game is that Glazer and ManU officials have long capitalized on the worldwide strength of the ManU brand. Arsenal officials, the Telegraph continues, "have done research that shows their 'brand awareness' is not that far behind" Manchester United and Spain's La Liga clubs Real Madrid and FC Barcelona. But the "problem is making money out of this global popularity."

Now, under Kroenke's stewardship, Arsenal is expected to step up its hunt for global partners that align with the club's brand. A new shirt sponsorship, for example, is expected to bring in an extra $22 million per year, and club officials acknowledge that the more overseas deals they can ink, the less they'll need to raise ticket and concession prices for the fans who attend games at Emirates Stadium.

Kroenke's Arsenal acquisition means that one-quarter of the Premier League is now in American hands. But as the U.K.'s Secretary of State for Culture and Sport, Jeremy Hunt, told the Guardian, "I have no problem at all with foreign ownership. I think we have the best Premier League in the world partly because there have been some very rich foreigners prepared to invest in making it the best in the world. What matters is not the nationality of the person investing but the intentions of the person investing."

Rick Horrow is a leading expert in the business of sports. As chief executive of Horrow Sports Ventures, he has been the architect of 103 deals worth more than $13 billion in sports and urban infrastructure projects. He is also the sports business analyst for CNN, Fox Sports, and the Fox Business Channel. Karla Swatek is vice-president of Horrow Sports Ventures and co-author of Beyond the Box Score: An Insider's Guide to the $750 Billion Business of Sports (February 2010).

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE