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City Football Group: The business model that is taking over soccer

Given the rapid success of both football and financial Manchester City, it is worth analyzing the financial model of its owners, the City Football Group.

City Football Group: The business model that is taking over soccer

During the last century, Manchester City Football Club was far from being one of the most famous and important soccer teams in England. At the end of the 90's, the team had only been champion of the English league twice in its history of more than 100 years and at that time played in the third division of their country, marking the worst stage since its founding in 1884.

Leer en español: City Football Group: El modelo de negocios que se toma el mundo del fútbol

In contrast, today Manchester City is a successful team both inside and outside the courts: it has won the Premier League three times in this decade, the last time last season, in which only They lost two games. He has participated in all versions of the Champions League since 2011-2012, having managed to reach the semifinals of the 2015-2016 edition. It has some of the most famous players in the world such as Kevin De Bruyne and Sergio Agüero. It is headed by one of the most successful technical directors of recent times, Pep Guardiola; and, according to a Forbes report, it is the tenth most profitable sports team in the world (with operating income of USD $ 133 million) and the fifth highest rated football team in the world (valued at USD $ 2.474 billion).

What drove the exponential growth of Manchester City in recent years? The acquisition of the equipment by the Abu Dhabi United Group (ADUG) in 2008. ADUG is an Arab capital investment company of Sheikh Mansour bin Zayed Al Nahyan, a member of the royal family of the United Arab Emirates, current Minister of Foreign Affairs of the United Arab Emirates. Presidency (since 2004) and Deputy Prime Minister of his country (since 2009).

In 2013, ADUG established the commercial company City Football Group (CFG) with the purpose of dedicating itself exclusively to business related to football and, two years later, sold 13% of the company to the China Media Capital (CMC) consortium for USD $ 485 million. ESPN reported in 2016 that CFG expects to form and own a global network of football teams of which at least one football club from each continent participates and that, in addition, the word "City" will appear on its behalf.

At this time, CFG is the owner or co-owner of six teams around the world:

  • Manchester City of England (100% owner)
  • New York City FC of the United States (owner of 80%)
  • Melbourne City FC of Australia (100% owner)
  • Atlético Torque Club of Uruguay (100% owner)
  • Yokohama F. Marinos from Japan (20% owner)
  • Girona FC of Spain (owner of 44.3%).

You may also be interested: Premier League: The millions behind the success of Wolverhampton

Shopping addicts

As The Guardian reports, ADUG's early soccer investment years were marked by spending on world-class players and improving Manchester City FC's training camps, which allowed them to win the Premier League in 2011, causing accusations to Mansour of "Buying the league for GB £ 1,000 million", which corresponded to the amount of money invested in the team since its purchase in 2008.

These accusations were well founded since, as the Independent points out, it seemed as if, overnight, Manchester City had become the richest team in the world, investing almost € 150 million (US $ 174 million) in such players like Robinho in a single year. This model had to be quickly put aside by the implementation of UEFA's Financial Fair Play rules in 2012. This, however, did not stop Mansour and ADUG, who, according to The Guardian's report, confirmed that their ambition is to be successful both football and in terms of business.

Spreading the model

Currently, each football club formed by CFG has a clear administrative structure: each team has a president who is responsible for purely financial issues and a football director who is responsible for responsibilities relating to the purely sporting. According to Independent, both figures, although acting with a certain autonomy, must respond to the CFG executives in Manchester.

On this, a network of financial and football support is established whose purpose is to improve the performance of each of the CFG teams.

For example, if a rival located in the United States or Australia develops a new strategy when it comes to collecting corner kicks, videos of it immediately arrive in Manchester for Pep Guardiola to analyze. Similarly, if a Manchester City academy player has some quality, but not enough for the English league, he is easily sent to less demanding leagues like the American (with the New York City FC) or the Australian ( with Melbourne City FC). All this allows a constant improvement of each CFG team, guaranteeing its success in the fields and, therefore, attracting sponsorship investments, making CFG a well round business.

Success on the courts yields benefits

Today, ten years after the acquisition of Manchester City by ADUG and five years after the formation of CFG, the group reports earnings of GB £ 473,375 million (USD $ 616,883 million) in 2017, which is the only evidence of success expected by Mansour. As Independent points out, this success is due to the fact that, despite the initial purchase of Manchester City, losses of up to GB £ 200 million (USD $ 260 million) were reported, such investment gave the team great visibility for its successes on the courts as which led to the acquisition of millions of new fans and the support of illustrious sponsors.

An example of the latter is the sponsorship contract of GB £ 400 million (USD $ 521 million) with Etihad for the name rights of the team's stadium. It is on this successful financial model that Mansour and ADUG decided to expand their soccer business all over the world with the formation of CFG and the purchase of equipment in strategic cities.

 

LatinAmerican Post | Juan Diego Bogotá

Translated from: 'City Football Group: El modelo de negocios que se toma el mundo del fútbol'

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