The business of football. As the owner of Chelsea FC sells the club, we are seeing into the window what happens behind the round leather balls. Yes, Abramovich bought Chelsea in 2003 for £140 million. Today, that club is now worth £3 BILLION.
(That possibly excludes £1.514 billion in loans Chelsea took from Fordstam Limited which Abramovich is saying does not need to be repaid. If you include that, it simply means the club is worth £4.5 BILLION. You can do the multiples generated in less than two decades).
In the game of modern football, there are two emerging elements: winning trophies and making profits (not high valuations) seem to be largely uncorrelated. Yes, as Chelsea was racking up trophies, it was losing tons of money. However, those trophies boosted its reputation and value, making the value move up.
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So, it did not make profit, but it increased valuation. Is that not how technology startups work? The difference here is that the scaling which is typical in startups is here equivalent to winning trophies!
Contrast that with Arsenal under Arsene Wenger who was actually making profits (yes, keep selling the best players) but struggled to win trophies. So, as Arsenal fans waited for trophies, the owners were smiling to the bank.
People, see beyond the round leather, football is business. It is all about business models. Chelsea FC under Abramovich was managed as a fast-growing tech-startup which was losing money but scaling fast, with high valuation as the outcome!
Russia-Ukraine Conflict: Abramovich Puts Chelsea Up For Sale At £3bn
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So, who’s going to pay $3 billion to own Chelsea FC? It’s almost 20 years since that purchase was made, there were no Meta (Facebook), Twitter, iPhone, YouTube, Google wasn’t sure if it would survive then, Amazon was still a ‘small’ business, no AWS, and a billion dollar plus has been invested in the club over that period…
It’s still not a great business, and if not for FFP, perhaps more cheques would have been written, to keep the club competitive.
Elite sports is perhaps the only industry where you spend over 70% of your revenues to pay your employees, no other industry (even elite universities know how to be profitable) runs with such framework, and they keep suffering.
The sports industry is never a paragon of virtue in prudence, sustainability and profitability, so reinventing the business model of that industry will obviously count as great innovation.