Managing the diverse stakeholders in the business of sport
In the heyday of his Chelsea ownership, Roman Abramovich conducted a rare interview with the Observer where he admitted, “while money plays an important role in football, it is not the dominating factor”. His acquisition of the Premier League club back in the summer of 2003 personifies the emergence of foreign capital investment in the Premier League and is seen by many as the catalyst for the multi-billion-pound global media deals which have propelled the top-tier of English football to gargantuan heights.
However, even this money-orientated Russian oligarch is denying the supremacy of money in the beautiful game. His comments of course allude to a certain stakeholder which is unique to the business of sports and can wield ultimate power, the fan.
With the increasingly blurred lines between business and sport, and the prevalent ownership of sports teams by private equity, businessmen and royal families alike, a multitude of new stakeholder groups need to be considered for ongoing engagement.
Sport has a unique, varied and impassioned group of stakeholders. Fans, pundits, broadcasters, advertisers, players and even politicians all have their views, and are often vocal with it. In the world of sport, each of these groups can arguably influence business strategy and decisions more forcefully and effectively than the traditional board member, consumer or banker. Investors therefore need to be seen to give their views due consideration in every decision being made.
The common perception of the David and Goliath relationship between a sports club’s owners and their various stakeholders is often overplayed, often to the detriment of these owners.
A prime example of this was the campaign which led to the demise of the proposed European Super League back in 2021. This movement was led by a combination of pundits, journalists, politicians and fans. Influential football media figures such as Gary Neville, Gary Lineker and Roy Keane rallied hard against the proposals, using traditional and social media to do so. These concerns were mirrored by politicians, with then British Prime Minister Boris Johnson stating that “plans for a European Super League would be very damaging for football and we support football authorities in taking action.” Financially the benefits of such an agreement in any other business sector would have meant that criticism of the deal would have been few and far between.
Fan protests are often more unconventional than traditional stakeholders raising a grievance. However, even in instances where the protest is outright amusing, they tend to be incredibly effective.
A perfect example of this occurred in 2012, then Premier League team Blackburn Rovers’ fans protested against their chairman by releasing a chicken (with poultry being the primary business of the club’s owner) draped in a flag of the club’s colours, halting the game live, which was being watched by millions of people across the globe. This humorous and visually striking image of a chicken pecking on the pitch of a Premier League club is still talked of today.
Another peculiarity of stakeholders in sport is that they are part of the product itself, particularly players and fans. This influence has allowed players to obtain very favourable partnerships with sporting organisations and advertisers. The most notable case of this is all the way back in 1984, with Michael Jordan’s groundbreaking endorsement deal with Nike. Creating the “Air Jordan” brand gave the young star a 5% stake, which nearly 40 years later has amassed Jordan over $1.3 billion.
This player power has continued into the modern day and can be seen through Lionel Messi joining Major League Soccer team Inter Miami. The contract offered to the Argentine this year provided more than just a salary. The deal reportedly includes profit sharing with two of MLS’s biggest commercial partners, Apple and Adidas as well as an option to purchase a minority stake in the club.
The convergence between business and sport is a trend which is only gathering pace. The revenue generated by the global sports industry is expected to grow at a compound annual growth rate of 5.2% over the next 4 years, forecast to reach $487bn in 2027. Navigating the difficult landscape of sports ownership in 2023 is an arduous experience, and investors neglect the views of sports stakeholders at their own peril.
Even after the huge commercialisation of sport, it is not overly sentimental to suggest that money is not as powerful a force as in other industries. This means that the importance of an advisor bench who knows the landscape and can take a comprehensive overview of engaging with each sport’s stakeholders is paramount to the long-term success of an investment.