Soccer’s Latest Big Idea Is Even Worse Than VAR

Private equity needs places to put its money, but getting in bed with FIFA for an extended Club World Cup might make more enemies than friends.

Soccer’s global body FIFA is looking for money and commercial acumen. The private equity industry thinks it might be a solution. Like Chelsea’s Frank Lampard and Liverpool’s Steven Gerrard when they used to play together for England, it’s not obvious the pair are made for each other.

FIFA’s strategic goal is to take the beautiful game to new audiences in new regions. That process is already well underway without the organization’s help. Chinese clubs are bidding absurd prices for Western stars, and soccer has an established foothold in the U.S. Meanwhile, India is emerging as the hot new target market; witness City Football Group, owner of Manchester City, buying a majority stake in Mumbai City FC last month.

But FIFA sees a role for itself in getting the top clubs to expand their global horizons. It wants to expand its Club World Cup. This is currently made up of six regional champions from around the world plus the top club in the host nation, which this year is Qatar. As things stand, the event risks being a poor substitute for Europe’s Champions League, which is home to most of the game’s stars and some genuine club rivalry.

The Club World Cup participants may be leaders in their individual federations, but it’s hard to see how the matches can generate the same atmosphere and tension as a game between teams like Barcelona and Real Madrid or Liverpool and Manchester United.

Hence FIFA is expanding the contest to 24 clubs from the 2021 event in China. The body also seems keen to milk it for maximum commercial potential: It is talking to CVC Capital Partners about a partnership, the Financial Times reported last week. CVC has invested in sports before, having owned Formula One motor racing, and more recently taking a stake in the U.K.’s Premiership Rugby. The firm has also been approached for support on a parallel international club competition spearheaded by Real Madrid president Florentino Perez, the FT said.

What would private equity bring? An expanded tournament should surely be self-funding through the broadcasting rights and sponsorship deals. The need for additional capital isn’t obvious. The real benefit would be the ability to hand over the management of the competition to a well-organized partner with proven expertise that goes beyond selling airtime to the highest bidder. A buyout firm would almost certainly be more skillful than FIFA in making the most of merchandising and hospitality opportunities, and maximizing revenue from video content and data.

The question is what’s in it for private equity. The investment committee of any interested buyout firm should weigh the opportunity with caution. FIFA’s past corruption scandals mean that any check should be written only after a tough due-diligence exercise given the reputation risk.

Then there’s the question of whether an expanded Club World Cup would make more enemies than friends. A global club tournament gets in the way of national leagues — and there is already the lucrative Champions League and Europa League for Europe’s elite teams. Even the current small-scale Club World Cup competition generates scheduling conflicts.

Such confections also risk perpetuating the divide between the teams that qualify (and thereby make more money, enabling them to snap up the best talent) and those that don’t. The bottom line is that outside investors need to be 100% sure they can improve the game for all fans before they get involved.

Private equity has more money than investment opportunities right now so that’s why it’s fishing in new waters. But this has the potential to be much more controversial than its past sporting ventures. The introduction of video-assisted refereeing has probably been the most unpopular development in soccer recently. Small wonder this latest big idea is getting a similar welcome.

Source: Bloomberg

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