The Daily Telegraph – which in my view continues to go downhill as a newspaper – has this decidedly mixed quality article by Jim White about the alleged evils of a large sporting institution being owned not by its “local community” but, horror of horrors, by a US family living in the sleazy state of Florida, no less. Words such as “leeches” are used. We are talking about the Glazer family, owner of Manchester United. Perhaps someone at that newspaper might gently remind Mr White that the Glazers are of Jewish origin, and that it is not terribly clever to use words such as “leeches”, given the historical demonisation of Jewish speculators as “bloodsuckers”. To be fair to White, I am sure nothing untoward was involved and he got carried away. Even so, this paragraph should have set off some editorial alarm bells:
“I believe United’s success has arrived in spite of the Glazers, not thanks to them. Rather than astute custodians, they are merely monumental leeches, blessed, in their endless requirement for blood, to be attached to such a healthy host body.”
Mr White struggles to lay out how awful it is that the club, purchased earlier in the ‘Noughties in a leveraged buyout, is now a privately held firm with a large debt interest bill. Indeed, it does seem eye-watering that since the day of purchase, interest charges of around £300 million have been paid on the debt, financed through things like rising ticket prices and the like. And yes, the days when factory workers could watch the likes of Duncan Edwards or George Best in the 50s and 60s for a relative puny sum have gone. There are even software engineers and financiers watching football these days (how vulgar!). But surely, the Glazers bought the club in a free market – no gun was held to anyone’s head when that transaction was made.
Mr White does not, as he could have done, argue that the tax rules could be changed so that equity financing is put on a level playing field (excuse the pun) with debt; arguably, some of the more foolish-looking leveraged buyouts that arose just before the credit market debacle of 2008 were encouraged by favourable tax treatment of debt. But he should realise that had ManU remainded a listed business, then the shareholders would want to see return on equity and for those returns to increase. They also want a dividend occasionally. This growth has to come from somewhere. With many sporting institutions, that growth requires things like rising ticket revenues, sponsorship, and the like. I personally think that outside of a few very big sporting institutions, such capital growth is questionable and that sport is subject to all manner of vagaries that make it an unappealing investment, in my view.
Now, if Mr White wants to make the case that the state should somehow decide and regulate the ownership of sporting institutions, then he should have the courage of his convictions and argue for sport to be run on socialist principles. Let’s see how far he can go with that.
I don’t like much of the modern professional footballing world, and yes, the lure of big money has made some players behave with particular foolishness in recent years. But Mr White should remember that if people really detest the vulgarity of modern sport as much as he claims they do, there is a simple solution. Don’t go to matches and do something more edifying instead. Or even play some football with your kids in the back yard.
How do you make a small fortune out of football?
Start with a large one.
Why is there this extreme hatred for the ownership of Manchester United, but not for the Russian mafia team Chelsea, or the ownership that did terrible things to Leeds United? Could it have anything to do with the fact that the Glazers are American, and America hating is the one form of xenophobia that’s acceptable in so-called polite society?
I really don’t think it’s as bad as you imply. He’s a United fan and that emotion is obviously going to cloud any hard headed realism. The leeches line is actually perfectly accurate when you are aware of the numbers regarding the Glaziers finances and the cash MUFC has created in the last few years.
Sadly it’s mostly just pointing out the obvious. We were a plc, anyone could buy us and some one did. It’s the fact we were bought purely as a money making scheme when to us fans it’s so much more than that which is so painful. Also I don’t think he has anything against Software Developers etc more the fact that a historically working class sport has become an expensive rather than affordable pleasure.
We were a plc, anyone could buy us and some one did. It’s the fact we were bought purely as a money making scheme when to us fans it’s so much more than that which is so painful.
You think pain for a football fan is your club not having quite so many millions to spend on players as it might otherwise have whilst landing a league title and a champions league final spot? I’m a ManU fan too, but that isn’t pain. Try supporting Leeds or Forest, or Man City in the freefall days. As The Economist once pointed out, fans of other clubs might quite like some of the problems ManU fans are moaning about. It certainly doesn’t improve their image any.
Rubbish. The club was a listed entity and no doubt any shareholder receiving a dividend or rise in its capital value is also, on this line of reasoning, a “leech”. As I said in the piece, while we can question the financial good sense of what the Glazers did, and point out that the buyout happened when the cost of borrowing was absurdly low due in part to central banks, it is hard to bash the Glazers for running a club that has, during their tenure, won a hatful of cups, and continued to play at the top level.
As an Ipswich Town fan, I would not mind some what ManU fans, the poor darlings, have had to “endure”. I find their self-pitying, sentimentalism, laced with anti-American vitriol, to be hard to take. As Ted said, it is not as if people make similar complaints when a dodgy Russian oligarch or Middle East monarch uses ill-gotten gains to buy a club, as in the case of Chelsea and Manchester City.
As a Chelsea fan*, all I can say is he may be a dodgy Russian oligarch, but he’s our dodgy Russian oligarch, (and compared to some owners in English football, and Chelsea history, Roman is a pillar of moral rectitude).
The attitude of some, (many), fans that the club is all about them and the owners are there merely to funnel money into buying the latest, greatest, players for their entertainment does tend to get on my nerves. Football clubs are a business and fans are customers and if they’re not satisfied with the product they can stop buying it.
*I say I’m a Chelsea fan, but when I used to go to games regularly, Hudson, Cooke and Osgood were the stars. I’ve hardly been since the fateful day they bought Garland. Still, I always follow their progress and when they’re successful, we’ve won .
@Steve B
Oi! As for “pointing out the obvious”, how about this: two wins in SAFC’s last twelve games is rubbish, that’s for sure. Get it sorted.
The point is that the owners of Chelsea and Man City used their own money to buy the clubs (however dodgily it may have been acquired). The Glazer clan bought Man Utd with borrowed money, then passed the debt on to the club, in effect mortgaging Man Utd for the extremely dubious privilege of having them as owners.
This may happen in “normal” business, but the difference is that the customers of “normal” businesses can always take their custom elsewhere if the consequences of an LBO are price hikes in the order of 100% (as happened at Utd). A football fan however is a captive audience, he cannot transfer his allegience, and is thus a prime candidate for corporate rapists such as the Glazers. I think Jim White was spot on.
A football fan is no more a “captive audience” than is a fan of Dr Who. “[H]e cannot transfer his allegiance”? If you truly think yourself a “captive” you deserve to be separated from your money; that’s clearly your primary purpose on this earth.
Well, leaving aside whether such people are owners in any legitimate sense (Russian oil oligarchs?), the point is that if a person buys X or Y with borrowed money, with collateral on the loan and proof of a certain cashflow to fund it, then that person is just as much entitled to operate as the owner of that business as someone who has bought it with cash. Legal title is his. And if the owner can run the business efficiently, as the Glazers seem, what is the issue?
An outright cash owner of a club might run it as a hobby, rather than try and make some revenues out of it. Of course, if the credit markets had not been so distorted by crazy central bank lending and the rest, then maybe the Glazer lbo of ManU would not have been possible. But I fail to see how it is so immoral for a businessman to buy a business, in a free market, with money lent by other consenting parties, to then generate revenues from said and use part of those revenues to repay the loan. I am not aware that the Glazers have any intention of going bankrupt, and assuming there is no economic catastrophe, no reason why they should do so.
Debt is part of the capitalist system, and so long as the price signals are not distorted, there is no reason why business mergers and acquisitions funded by debt should be a terrible thing.
(and compared to some owners in English football, and Chelsea history, Roman is a pillar of moral rectitude).
I think Anders Frisk might have a quibble with that.
Laird:
Remind me what team you follow?
No. It isn’t akin to slavery; being a sports fan is slavery. As a fourth generation Pittsburgh Pirates fan, it’s been a multi-generational shakling of my and my ancestors’ spirits. to turn my back on sports would be selling out of my heritage. I think I’m entitled to some reparations.
Personally, I’m a fan of the Pittsburgh Steelers (but not the Pirates; condolences to you on that, Steven) and the Boston Red Sox. I enjoy it when they win. But I am no “captive” of either, and feel no entitlement to “reparations” (whatever that means in this context). The teams are the property of their owners, not their respective cities or fans. If you don’t want to pay the ticket prices don’t go. You can still read about the games in the newspaper or watch them (mostly) on TV for free. But merely because you have formed some emotional attachment to a team doesn’t give you any claim to it. “Heritage” my ass.
Hey, I like Reece’s Peanut Butter Cups, too, but if I want to indulge I know that I have to pay for the privilege. I have no legitimate beef if they raise the price; it’s their product to sell as they choose. Same with a sports franchise. Deal with it. And stop whining.
There is one way around the “eeeevil owner” syndrome. DO what the city of Green Bay did: the town got together, raised money from the locals and purchased the NFL Packers franchise. So Green Bay got the Packers in perpetuity, the town (pop. ~100,000 compared to Manchester’s ~450,000) got their icon, and season tickets have become contested items in deceased estates.
In other words, instead of whingeing constantly, the people of Manchester should get up off their arses and do something for themselves. Note that I said “the people” of Manchester and not Manchester City Council.
Yeah, Man U’s franchise is likely to be expensive — but once again, Manchester is five times the size of Green Bay and the purchase should be a simple thing to arrange (and don’t even begin to compare the economic disparity; I love GB, but it’s a dump).
And for the record, I’ve been a Chelsea fan since the Ian Delacour days of the late 1960s.
Kim du Toit wrote:
Slight problem with that, Kim; there aren’t any Man Utd fans who actually live in Manchester. True Mancunians all support City 😉
And, more seriously, the Green Bay franchise was set up in the 1920s with articles which mean that the sale of the franchise would not make anyone any money (after expenses, earnings from the sale must go to the upkeep of a military memorial in Green Bay). The town never actually bought the franchise, they just never lost it; there were plenty of small town franchises in the early NFL. To buy an NFL franchise today would cost on average a bilion dollars, so even a city of a million people would be looking for a payment of at least $1k from each inhabitant to purchase one.
I keep wondering what makes all those Russian oligarchs ‘oligarchs‘, and how are their gains any more ill-gotten than those of any comparably-Big Business anywhere in the West? Also, what does Jewishness have to do with any of this? IIRC, Roman, just like most other “oligarchs’ happens to be Jewish too.
Oh, and what Laird said – although as a not-a-sports-fan I shouldn’t be commenting on that point…:-)
Laird:
I’m getting the feeling you don’t quite get it. As it happens the Glazer clan have not had one penny of my money since they began their corporate rape of Man Utd. But my point remains, sport is not a “normal” business. Look at the USA, where the NFL is run in such a way that it would be classed as a cartel if it were a “normal” business. The fact is, it isn’t.
Perhaps I missed it, but has there been any discussion here of the people who sold Man U to the Glazers? Surely, if they had in mind more than mere money, they could have refused to sell. If all they cared about was money, then are they not just as much to blame for this supposed mess as the Glazers are?
After all, they are the ones who made the really big profit. Aren’t they?
Kim, another problem with the Green Bay model is that, as I understand it, the current NFL rules prohibit team ownership by public corporations; the owners must be individuals or small private groups. So that model couldn’t be used any more. Whether that’s a good rule or not I leave as an exercise for the reader. Of course, I don’t know if european football’s governing body has any such rule.
John K, of course I “get it.” You think that because you’ve formed an emotional attachment to a particular team its owners somehow “owe” you something. Here’s a clue: they don’t.
That’s the same mindset which makes residents of a town think a local company “owes” them something: jobs, a tax base, charitable contributions, whatever. Danny DeVito gave a wonderful speech about that in the movie “Other People’s Money”, when as “Larry the Liquidator” he addresses the shareholders of a company he wants to buy and liquidate. His talk follows Gregory Peck’s character’s stock speech about “obligations to the community”, etc. It’s worth watching. And thinking about.
All joking about emotional slavery, heritage, and reparations aside, I don’t think the relationship is quite as simple as a private entity that we somehow think we’re entitled to. Danny Devito wasn’t asking the taxpayers in his town to foot the bill for a billion dollar facility, he wasn’t saying he wanted parades paid for by the taxpayers when his company did good as well as constant police, fire, and EMS coverage at the plant to be paid by the taxpayers, and he didn’t demand other concessions or he’d move the company to Florida/Las Vegas/Puerto Rico.
All of these sports teams have played the “Civic Pride”, “Bringing Jobs and Tourist Dollars to the City”, and “Your Team” cards for years, especially when there is something they want but want the citizens to pay for. Legally, the fans may not be in the least bit entitled to voice an opinion on a sport team’s operations, but I’m not sure if morally that is true, especially since many of the fans, and non-fans, are somehow subsidizing that team in the first place, even if they don’t want to, with their tax dollars.
Fair point, Steven. I agree with you about public financing of professional sports stadiums: there’s no justification for it, ever, and I oppose it at all turns. And if a city is going to finance a facility with tax dollars, or through guarantees of a bond issue, and demands some sort of concessions or guarantees from the team’s owners in return, that’s a contractual obligation to which they should be held. So yes, I will back off somewhat on my position in the situation where there has been public financing for the team. But that’s an issue which has not been raised by the people bleating about “reparations”; they’re too caught up in considering themselves “captives” and their demands of faux ownership.
“As a Chelsea fan*, all I can say is he may be a dodgy Russian oligarch, but he’s our dodgy Russian oligarch, (and compared to some owners in English football, and Chelsea history, Roman is a pillar of moral rectitude).”
That very much sums it up for me as far as the Brits go, i.e. any US interest in soccer = bad but any Russian mafia money-laundering specialist who wants to use England to achieve some form of respectability is welcome to go ahead. Perhaps the Glazers should be investing in prostitution, extortion, corruption and murder instead of such a humdrum American activity as legal commerce .
I joke about the Pirates owing me reparations and that is simply because of the years I have spent watching them suck. At least I know going into the season they’re going to suck. I feel worse for people like Cubs fans who get so very close to seeing their team win and then watching them self-destruct in the post-season. Still, if the Pirates said, “we know you’ve suffered for years because of our craptacular play. Here’s a check and we’ll do better…” I’d cash that sucker.
I don’t know if it is the right word, but I do think the heritage aspect gets overlooked. Here’s a game and the teams that multiple generations of my family, and many families, have followed. My great-grandfather, my grandmother, my mother, and I have all followed the Pirates. It is just another thread that connects us. Sports brings people together in some way, and the teams are counting on the emotional investment to follow them (and give them money) season after season and generation after generation. They count on parents passing the love for the game (and their team) to their children and then to their grandchildren.
Obviously the teams management are only beholden to the owner(s) and there should be no way to force the owners to simply do what the fans want, but I do think they should remember that they have demanded the emotional investment as a part of the equation and not just look at the bottom line. It isn’t the fans’ team, and until they pony up the bucks to buy the team they are going to be stuck with the decisions of the front office.
I think a good case in point is with the Red Sox. Truck Day was the day they loaded all their stuff at Fenway onto the trucks and sent them to Florida for Spring Training. Some fans found out and it became their thing to remind themselves Spring was here, the Red Sox are getting ready, and all is good in God’s World. Then the office found out a buck could be made off of it and simply co-opted it into yet another money making venture. Now Truck Day isn’t quite so special for the fans. Or an entire generation of New Englanders were born, grew up, raised families, grew old, and died without seeing a Red Sox World Series but they kept with the team. But now you aren’t really a fan unless you pay for a $10 Red Sox Nation ™ card each and every year.
I guess to boil it down, the part where the owners say “you [the fan] are the tenth man on the baseball diamond” and then they say “it’s our team and we’ll do whatever we want and there’s nothing you can say about it” are diametrically opposed.
I can understand fan distrust at the front office’s decisions. I don’t think they should have a vote or any type of legal remedy short of buying the team, but I can understand the fan reaction to team sales, especially when they see the details of the deals.
Laird:
You haven’t really addressed my point. Professional sport is not like a “normal” business. The NFL is run in such a way that a “normal” business would attract a RICO charge. No-one to my knowledge has ever asked for their ashes to be scattered at the Reece’s factory, however delicious their sugary products may be. My beef with the Glazer clan is not that they bought Man Utd, it is that they bought Man Utd with borrowed money, and then transferred their debt on to the business they bought, a billion dollar burden unprecedented in world sport, and which may well bring down an otherwise well run club. I am sure you can appreciate the difference between going into debt to fund an asset, such as a new stadium, and going into debt to fund the acquistion of the club by a very dodgy bunch of Florida real estate spivs. That leaves a taste in the mouth than even a Reece’s Peanut Butter Cup can’t hide (and they are brain numbingly sweet in my experience).
I honestly don’t understand why Man U fans would be outraged over the fact that the Glazers used debt to purchase the club. If the debt had caused the club to have to sell off its best players and wind up near the bottom of the league, that would be a problem. But since the Glazers bought Man U, the club has won four Premier League championships in six years.
I’m from the USA and grew up in Tampa, where my favorite (NFL) football team was the Tampa Bay Buccaneers. For much of the Buccaneers’ history, they were the laughingstock of the NFL. However, since the Glazer family purchased them, they have been a generally respectable team, with seven playoff appearances and a Super Bowl in the last 15 years, compared to three playoff appearances in the 20 years before the Glazers bought the team.
No doubt there are lots of things about the Glazers not to love (they’ve repeatedly raised ticket prices at Tampa’s Raymond James Stadium as well, not just at Old Trafford), but they are far from the worst owners in professional sports, and probably not even close to being the worst owners in either the Premier League or the NFL.
John K, you’re conflating two entirely different issues.
I can’t speak to the organization of European sports leagues (except to note that they wouldn’t be subject to the RICO statute since that’s a uniquely American law). Anyway, you’re simply wrong about the NFL: there are no “predicate acts” to support a RICO charge; you’d be on firmer ground alleging violation of the anti-trust laws. But even there, only Major League Baseball is statutorily exempt from anti-trust; the NFL is not. And since it hasn’t been so charged in the 80-or-so years of its existence I suspect that it has pretty fair defenses.
As to your other point, buying a business with borrowed funds and burdening that entity with the debt is the sine qua non of the leveraged buy-out, and has been since the origination of that tactic back in the 1970s. Read “Barbarians at the Gate” (an oldie but still a goodie) for more details on how it works. Whether the target is an old-line industrial company or a sports franchise the concept is the same, and there’s absolutely nothing special about Man Utd in this regard. You are far from the first to complain about this, but your beef is not with the Glazers but rather with the US tax code, which strongly encourages that legal structure. Complain to your congressman.
Your comment that “no-one to my knowledge has ever asked for their ashes to be scattered at the Reece’s factory” (by which I infer that someone has made such a request with respect to Yankee Stadium or some such sports venue) merely affirms my point: your objection is purely emotional, not rational. Your other arguments are merely attempts to find some superficially rational basis for your complaint. I understand the emotion, but am not swayed by it.
Laird,
I believe that the Brady et al. v. NFL case is arguing anti-trust. In fact, wasn’t the USFL v. NFL case also an anti-trust case? The USFL was awarded treble damages, amounting to a total of $1.
Laird:
Seriously, the way that sport is adminsitered is unlike any “normal” business, as the xample of the NFL and baseball shows. In England the FA has a “fit and proper persons” test (though the bars don’t seem to be too high), whereby it can veto a takeover of a football team, however much money the buyer has. Where does that happen in “normal” business? I repeat, I have read Jim White’s column, and agree with him 100%. What the Glazers did was legal, but it doesn’t make it right, and I have every right to have an opinion on the matter, my opinion being that they are asset stripping corporate rapists who are leeching about £40 million a year from man Utd just to pay the interest on the debt incurred so that they could buy the club.
JohnK, you may be entitled to your opinion, just as others are entitled to snort with derision at a paragraph like this:
“In England the FA has a “fit and proper persons” test (though the bars don’t seem to be too high), whereby it can veto a takeover of a football team, however much money the buyer has. Where does that happen in “normal” business? I repeat, I have read Jim White’s column, and agree with him 100%. What the Glazers did was legal, but it doesn’t make it right, and I have every right to have an opinion on the matter, my opinion being that they are asset stripping corporate rapists who are leeching about £40 million a year from man Utd just to pay the interest on the debt incurred so that they could buy the club.”
That is not the case. To be a company director, and hence be able to make decisions about things such as mergers and so on, there are tests – albeit not necessarily very strict ones. In financial services, for example, such tests are now set by the Financial Services Authority.
The Football Association is not a government body, but a private association of clubs. If some clubs decided they no longer wanted to be a part of it, and break away, they could. Breakway leagues are a feature of sports, particularly when big money is involved.
I see no real justification for your heated language in relation to the people who bought a business from their owners. The owners of the club – the Magniers and so on – were not forced to sell; they did not act under duress.
The real problem is an environment that favours debt rather than equity financing, which can ultimately be laid at the doors of central banks and governments. Absent such distortions, I would hope that the financing of such takeovers, both in sport and elsewhere, would be a more sober affair.
I still find the hatred directed at the Glazers to be unfounded, and certainly, evidence of prejudices of a discreditable kind.
Jonathan:
I return your snort of derision, with a ruinous rate of interest added.
The “fit and proper persons” test the FA imposes relates to ownership of the clubs. Anyone with the money can buy a company, they do not have to be a director. But anyone with the money cannot (in theory) buy a football club. That very fact establishes that football, like other sports, are not “normal” businesses, and I reserve my right to hate anyone who wishes to burden my club with a billion dollars of debt solely so that they can own it, adding no value whatsoever, I don’t care whether the Glazers are Mormons, Jews, or followers of the Great Prophet Zarquon. But I do admit to disliking asset strippers, spivs and corporate rapists. Sorry about that.
‘Where does that happen in “normal” business?’
It happens in any regulated industry. If you want to buy a bank in the US you have to be approved by all the regulatory agencies involved (some combination of the FDIC, the Fed, the OCC and the state banking commission). Same with the insurance, securities brokerage, and casino industries. The SEC can bar someone from being an officer or director of a publicly-traded company. Need I continue?
Of course you have a right to an opinion; no one ever said otherwise. Just as I have a right to dispute it. What’s your point?
Laird:
There may be special requirements about ownership of banks, but by and large anyone with the cash can buy any business they like. Sport is not quite the same though, because they have to pass the requirements of the sport’s governing body. Of course in theory, if the Glazers had failed the test, they could have taken Man Utd out of the Premier League and set up their own league, consisting of Man Utd, but that would have been absurd. They wanted Man Utd because it plays in the Premier League, and I wouldn’t have minded them buying the club, if they had the money. They didn’t, all they had was borrowed money, a debt which they lost no time in loading on to the company they had bought. I realise this is legal, what I am saying is that the governing body of the sport ought to act to make it against the rules. I am not accusing the Glazer clan of criminal behaviour, they are law abiding corporate rapists, just don’t expect me to be happy about it.
JohnK, now this is getting absurd. Are you saying that if any sporting institution that plays in a private sector league (the Premiership and FA are not government, state bodies, BTW), should never be able to finance all or part of a purchase with borrowed money, even if the terms are pretty easy?
If the sporting associations want to lay down such rules, let’s see how that works. Presumably, we should also ban advertising, TV sponsorship, and all the other ghastly things that sully the game. Why not, for that matter, ban professionalism, full stop?
What is about sport that rots people’s brains?
Johnathan:
Financial fair play is indeed a responsibility of sports’ governing bodies, and is belatedly being addressed by UEFA.
As to Man Utd, if you have a debt free company taken over by speculators, who load a billion dollar debt on it, take £40 million a year out in interest charges, and double ticket prices, do you expect the fans to be happy? Maybe in your world you expect them to support City instead? Now that really would be absurd.
“Green Bay’s metropolitan area is home to fewer than 200,000 people, yet the Packers rank in the top 20% of all professional teams in terms of franchise value. As player salaries have continued to escalate, however, the shareholders in late 1997 decided that more revenue needed to be raised for the team to remain competitive into the future. The 10,000 shares issued in 1950 were split into 10 million shares, 400,000 of which were made available to the public at $200 a piece. ”
There’s absolutely nothing to stop any football team’s fans from doing this. Expensive, yes, but not impossible.
I don’t think that’s strictly correct, Kim, although I can’t cite definitive chapter and verse. I have found a citation to Article V, Section 4 of the NFL’s constitution which states:
Unfortunately, it appears that the NFL’s constitution and bylaws are not public documents (they’re not on its website or anywhere else I can find), so I can’t verify that this citation is either accurate or current (the rules do change over time). Assuming that it is both, however, what this says is that except for the Packers (who were grandfathered in when the rule was adopted), only for-profit corporations can own teams (which eliminates municipalities and 501(c)(3) organizations), and every single shareholder must be individually approved by the League. Obviously, that would be an impossible standard for any publicly-held corporation. Non-corporate entities (partnerships, etc.) can own teams, but you still run into the individual-approval rule. (And with large numbers of owners it’s difficult to avoid using the corporate form anyway.)
First, as Brian Micklethwait pointed out earlier, the club, when a listed public firm, was sold by its owners for, presumably, a profit. So perhaps they are the people whom should be on the receiving end of your ire, if ire is justified at all.
Second, as others have noted, a fan of a football team, unless he or she owns the club, does not have some mystical entitlement to go and watch it at the same price, year in, year out. The sense of victimhood does not impress me. That is why I made the point from the start that professional sports institutions are businesses like any other. Presumably, if the club had remained in its pre-Glazer structure, then other ways would have to be found to pay for new players, extend the ground, or whatever: more sponsorship (which comes with strings attached), higher ticket prices, different wage structures, less investment in youth players, or whatever.
Given the relatively cheap cost of debt back when the Glazers bought the club, it was not inherently better or worse, from a moral or business perspective, for the Glazers to have acquired the club in an LBO as opposed to a total cash or equity transaction, in the manner of Abramovich at Chelsea or some MidEast oil tycoon enjoying the fruits of largely unearned oil wealth).
As I said, had the Glazers bought the club outright as a hobby, then they could, of course, have neglected it; ironically, the need for continued success means the club has been left to be run by Gill and Ferguson with pretty good results.
I support a modest football team in the East of England – Ipswich Town – and the wailings of ManU fans strike me as odd, to be polite about it. If you want to watch a bunch of mediocrities play, you’re most welcome.
Johnathan:
I am sure you would not be impressed if Ipswich were plunged into debt by new owners either. I am not saying it is illegal, I am saying the FA should put a stop to it, and impose a fit and proper persons rule that works. Man Utd can cope, for the moment, with a billion dollar debt, that may not always be the case. Portsmouth FC was destroyed by a succession of dodgy owners. The LBO model is not right for a sports club, football is not a normal business. Tell me another business where an average of 68% of turnover is paid to the staff. You seem strangely compacent about the dangers facing English and European football unless the ruling bodies get a grip on things.
Ipswich – until Marcus Evans bought the club about 4 years or so ago – were heavily in debt, due to spiralling wage bills, the hangover from being relegated from the Premiership (sigh) and so on. The club was at the time privately owned. But it was badly in debt, and there was some risk of it going out of business.
An LBO may not be right for most sports clubs. Depends on the nature of the club, its reach, ability to service revenues and reduce them, etc. Come to that, it is not necessarily ideal for a club to be a listed business, either. There is no right or wrong way in my view for a club to be owned. On one thing I suspect I agree with you is that I am adamantly opposed to the government getting involved. There is no more “public interest” here than in how a theatre or cinema chain is owned.
Truthfully, I’m not sure that the LBO model is “right” for any business, sports club or otherwise, but US tax law currently strongly favors that structure. Over the years there have been lots of calls to change the law to eliminate the preference for debt, but I don’t see that anywhere on the horizon. And until it happens, this is what we’ll get. Usually, though, it’s the employees of a company which has been burdened with debt who complain, not the customers.
“Tell me another business where an average of 68% of turnover is paid to the staff.” That’s a feature of any professional services business. Law firms, accounting, consultancy, investment advisory, just about any business you can name which doesn’t manufacture or sell a tangible product. Most of their expenses are for salaries. Just like a sports team. They just don’t get their names on their jerseys.
John, you are obsessed with the notion that sports is not a “normal” business, but every argument you make simply proves that you don’t know what you’re talking about. Every industry is unique (not “normal”) in some way. The sports business different only in the sense that its customers, like you, develop an emotional attachment to the company (which admittedly is somewhat unusual). If you had the same emotional attachment to your cell phone company or your grocery store you’d be making these same arguments. And they’d be just as wrong.