Ted Lasso, the story of an American football coach bringing his unique management skills to a fictional soccer club in West London, has entertained TV viewers since 2020. It now appears that some investors stateside are looking to experience this close up by buying a real English Premier League club in West London: Chelsea FC.
For the fictional Lasso, swap in the very real Ricketts family. The Chicago Cubs owners have joined up with hedge fund billionaire Ken Griffin to bid for the club and have flown to London to meet with Chelsea stakeholders.
Meanwhile, Woody Johnson, owner of the New York Jets and a former Ambassador to the U.K., also reportedly threw his hat into the ring.
The fire sale of the club is part of the fallout from the unprovoked Russian invasion of Ukraine. The current owner is the Russian oligarch Roman Abramovich. Facing pressure over his links to Vladimir Putin, he promised to sell the club and donate the proceeds for Ukraine relief. Then the U.K. government froze his assets and imposed conditions on the sale process to make sure there was no impropriety. The expected price tag for the club is in excess of US$3 billion.
But why are Americans so interested in the fire sale of this club?
Chelsea is one of the best known soccer clubs in the world and current holder of Europe’s prestigious Champions League trophy, which the team also won in 2012. Chelsea is a five-time champion of the English Premier League (EPL).
But the interest is driven not so much by what Chelsea has been, as what it might become. The EPL is already the dominant soccer league on the planet, and it might plausibly go on to become the dominant league across all sports – a kind of NFL Global if you will. And that makes Chelsea, one of the league’s biggest clubs, a very attractive prospect. Its location in one of London’s most fashionable districts also helps, even if the stadium itself could do with an upgrade.
An open goal …
This interest of American investors in English professional soccer is not new. In fact, it can be dated to 1998 when, temporarily, Manchester United became the world’s most valuable sports team.
The flood of TV money that started to swell the coffers of England’s top teams from the early 1990s piqued interest in the U.S. and led to a series of acquisitions.
By 2005, the Glazer family, owners of the Tampa Bay Buccaneers, had acquired Manchester United. A couple of years later, St. Louis Rams owner Stan Kroenke started buying shares in London club Arsenal, eventually taking overall control. In 2010, Boston Red Sox owner John Henry purchased Liverpool.
For those already super-rich individuals, the move into soccer has paid off. Between 2004 and 2021, the value of these three clubs plus Chelsea increased from $2.5 billion to $14.3 billion, a healthy 11% compound average growth rate.
While Europe’s Champions League gives these clubs international exposure – the final of that competition in 2020 pulled in 328 million viewers worldwide – it’s the global reach of the English Premier League that makes its clubs attractive in the long term. The EPL now generates over 50% of its broadcast revenues from overseas contracts. It recently signed a $2.7 billion contract for the U.S., even though most games air on weekend mornings, meaning people living on the West Coast having to wake up at 4 a.m. to catch some games.
There is almost no country in the world where you cannot get access to EPL games. While Spain’s La Liga and Germany’s Bundesliga are popular, they lag far behind in revenues and reach, and no other league generates even half the revenues of the EPL.
… or an own goal?
But acquiring an English soccer club is not without risk. The promotion and relegation system, in which the bottom three teams in the EPL annually go down a division to the less glamorous second-tier Championship, means that teams that fail to win on the pitch are threatened with commercial as well as sporting failure, as several American owners learned the hard way.
Before John Henry and the Fenway Sports Group bought Liverpool, the club was briefly owned by two other Americans, Tom Hicks and George Gillett, who nearly drove the club into ruin before selling it.
Randy Lerner, the billionaire who once owned the Cleveland Browns, bought Aston Villa FC in 2006 with hopes of bringing success back to a storied team situated in the U.K’s second-largest city, Birmingham. But he decided to sell a decade later after the club was relegated from the EPL, losing a large chunk of TV revenue in the process.
Similarly, American businessman Ellis Short bought Sunderland AFC in 2008 and sold it in 2018 following relegation in that year.
Chelsea’s neighbor Fulham FC – the two teams’ stadiums are only a mile apart – was purchased by Jacksonville Jaguars owner Shahid Khan in 2013, but the club was immediately relegated. And in 2017, former Disney CEO Michael Eisner bought Portsmouth FC – a famous team languishing in the third tier of English football, where it remains today.
Moving the goal posts?
Because of the financial and sporting risks of relegation from the English Premier League, successful clubs must continually invest in talent, making it hard to generate profit.
In the past five years, based on the club’s audited financial statements, Chelsea has reported a cumulative net loss of £227 million ($299 million) on revenues of £2.166 billion ($2.85 billion). The accounts also show that this can be attributed to player wage costs, which have averaged 65% of revenues over the past five seasons, and reached 77% of revenues in the 2020/21 season, when COVID-19 kept fans out of the stadium.
The obvious solution for big clubs like Chelsea is to limit risk by abolishing the promotion and relegation system and then instituting salary caps and other restrictive measures employed in U.S. leagues.
However, when the big clubs proposed something along these lines in 2021 – the ill-fated European Super League – the opposition from fans was so intense that the clubs were forced to back down.
American owners frequently mention a steep learning curve when describing the acquisition of an English soccer club. The attractions are easy to see, the pitfalls are perhaps a little less obvious to the untrained eye.