Top soccer clubs are becoming the “trophy assets” of international billionaires seeking capital gains rather than annual profit, accountant Deloitte & Touche LLP said in its Annual Review of Football Finance.
England’s Premier League, the world’s richest, generated revenue exceeding $2.97 billion in 2006-07, Deloitte said. Double-digit wage inflation led to a second straight year of falling operating profit and record pretax losses, however.
Most of the 11 percent increase in clubs’ record income was plowed back into squad improvement, delivering “minimal regular returns” to owners such as Manchester United’s Malcolm Glazer, Chelsea’s Roman Abramovich and Tom Hicks, and Liverpool’s Vail- based businessman George Gillett, Deloitte said.
“We are seeing football clubs treated as ‘trophy assets,’ except with clubs now owned by billionaires from a range of nationalities, rather than local businessmen made good, reflecting the global appeal of the game,” Deloitte said. “The key strategy for earning a return from owning a club appears to be brand value and long-term asset appreciation.”
Premier League clubs increased spending on wages 13 percent in 2006-07. After that spending, English clubs have become the dominant force in Europe: Three Premier League teams reached the semifinals of the Champions League, the top club competition in which Manchester United beat Chelsea in the May 21 final.
“Year to year there’s not really an increase in profits out there,” Alan Switzer, director of the sports business group at Deloitte, said in an interview. Owners could make a “pretty significant” profit when they sell, he said.
The strategy of seeing little return during the period of ownership and making significant profit when selling mirrors U.S. sports, said Douglas Harmer of Seymour Pierce.
“If you look at what’s happened to sports teams in the United States, the capital values have increased over time,” Harmer said.
Former NFL team owner Red McCombs bought the Minnesota Vikings in 1998 for $246 million and sold the team to Zygmunt Wilf in 2005 for $600 million.
The Phoenix Suns basketball team was bought by an investment group led by Jerry Colangelo in 1987 for $44.5 million and sold to a group led by Robert Sarver for $400 million in 2004.
