Thursday, May 10, 2007

20 years of England's football business revolution

Less than 20 years ago, English football was known more for radical fans and decrepit stadiums than for the sort of classy crowd that now fills the suites at the Stamford Bridge and Old Trafford. But the question that arise is that how did the local game of the English working class become a global business? Extracts from Adam Smith's review of the change in England's football business fortunes in Time Asia magazine:

Before English football could take over the world, it had to sort itself out. Though a powerhouse on the field - its teams were champions of Europe four times between 1977 and 1984 - Liverpool's fans had a reputation for being a dangerous disgrace. When some of them rioted at the 1985 European final in Brussels, 38 fans of the Italian team Juventus were killed. It would be five years before English teams were allowed to play again in European competitions. Back home, aging stadiums offered neither comfort nor safety; in 1989, 96 Liverpool fans were crushed to death on an over-crowded terrace at the Hillsborough Stadium in Sheffield. Financially, too, the game was a mess.

Most top-flight team owners poured money into their local team in the hope of boosting their social standing, not its bottom line. Even Manchester United, English football's most successful team in the last decade, was led through much of the 60s and 70s by an enterprising local butcher.

But the 1990s brought change. The official report into the carnage at Hillsborough mandated that top grounds had to be all seated by mid-1994; the government even offered millions of pounds to help pay for reconstruction. Out went crumbling terracing; in came safer seating and improved facilities that made fans feel more like spectators than animals. And as the game began rebuilding its domestic appeal, a handful of chairmen with a sharper eye for profits made a bold move.

For years, the top teams had threatened to split from England's four-tier, 120-year-old football league, claiming that with a domestic game in the doldrums and top clubs impotent against Continental opposition, they needed a greater say over their own affairs - and the enhanced broadcast revenue they thought they could win.In 1992, England's top clubs walked out of the Football League to form the Premier League, a commercially independent alliance able to hammer out its own TV deals on behalf of all its teams. Nobody went short. Sky, a satellite-TV broadcaster that is part of Rupert Murdoch's media empire, forked out around $350 million to air the élite's first five seasons in Britain.

The game was transformed. For fans accustomed to the stodgy - albeit free - coverage offered by terrestrial channels, Sky's whizzy stats and graphics brought football up to date, and made it much more entertaining. Fans were treated to fireworks and dancing girls at grounds.

As player salaries have ballooned, talented foreign players have made a beeline for England; there are now more than 300 overseas players on Premier League clubs' books. When the four top teams clashed one weekend in January - Liverpool against Chelsea, and Arsenal against Manchester United - players from 18 different countries, from Togo to Norway and Serbia to Brazil, took to the turf in those two games alone. Businesses have been booming too. Current league sponsor Barclays Bank recently committed $125 million in a new three-year deal, up 15 per cent from its present agreement.

To see the new face of football, there's no better place than Old Trafford, the home of Manchester United. The ground has been expanded three times in the last 12 years, and now holds 76,000 compared with just 44,000 in the early 1990s. There are two-dozen suites hosting between 44 and 700 on a match day, and 164 boxes, costing between $34,000 and $300,000 each for a season. There's fine dining - you can get smoked halibut and quails' eggs with caviar in the Gallery. Even the canvasses on the restaurant's walls are up for sale. There's similar grandeur on offer at Chelsea's Stamford Bridge stadium, too, where business leaders are escorted to their suite by glamorous women in sharp suits.

For all its success at home, it is the Premiership's global reach that sets it apart from other sports leagues. Of course, translating an Asian fan base into revenue isn't simple. Adding an Asian player to the ranks can help. When Manchester United goes to Malaysia, Korea, Japan and China this summer, shirt sponsor AIG will be with the team every minute. When one shareholder wondered why AIG would spend so much on the U.K., a relatively modest part of its empire, ceo Martin Sullivan explained: "I am not buying the U.K. I am buying Asia."

The Premiership's triple play — losing the hooligans, luring big money at home, expanding overseas — has made it the envy of other sports leagues.

In the 2005-06 season, estimated revenue hit $2.5 billion, much more than that of any other league in Europe. The Premiership still lags behind major U.S. leagues like the National Basketball Association or the National Football League — the latter earned more than $6 billion in 2005-06. But with only 20 clubs competing in the English league, average club takings are already more than in the NBA.

With that kind of stability, building a brand in Asia and other foreign markets may not seem such a stretch, even for relatively small clubs. Analysts are impressed. "If a club hasn't got a high profile or heaps of cash, building relationships in the local market is a cost-effective way to build brand awareness and suit longer-term Asian sensibilities," says Geoffrey Gold, ceo of Football Dynamics Asia.

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