777 Partners are currently awaiting regulatory approval to complete their takeover of Everton
Josh Wander, co-founder of 777 Partners
The rise of sport as an asset class in its own right has accelerated in recent years – something that has prompted a flood of private equity to arrive in teams and leagues.
The foundation for the confidence in investing in sport, particularly in European football, has been borne from the growth of media rights – a trend that, in the Premier League at least, is likely to continue for some years to come.
Having achieved what was seen as a win back in 2021 during the uncertainty of the pandemic, the Premier League were able to convince the broadcasters who had been engaged for the previous cycle – Sky Sports, BT Sport and Amazon Prime Video – to take on another three years of the domestic rights at the same price as before. Given how precarious the situation around sport seemed at the time, and the uncertainty over whether or not live sport would be able to bounce back strongly to continue an upward trajectory, retaining the security over the domestic rights was important.
Now, post pandemic, the landscape is changing once more. While football clubs had to bear the financial costs of COVID-19 through revenue streams being heavily squeezed, and some lines of revenue such as matchday income almost wiped out completely, the resilience of football to emerge from such a potentially catastrophic situation has only served to embolden investors that placing their money into this particular sports ecosystem is a wise move, especially given the likelihood of the value of media rights rising as more streaming companies enter the space as traditional broadcast media becomes disintermediated.
On Monday, a report in The Athletic revealed the sales pitch that 777 Partners had prepared for would-be investors, with the value of media rights at its very core. In the projections made in the sales pitch, the current annual value of media rights in football globally of £5.7bn a year for 2022/23, was predicted to rise to £11.3bn by 2031/32.
Premier League clubs will have plenty to be chipper about in the coming years. The cycle for 2025 onwards has been put out to tender and, with the cycle set to be four years and not the traditional three, and with games available for broadcast rising from 200 per season to 270, there is likely to be a significant rise in the value of the current package, which stood at just shy of £5bn for the three years. Extra money arriving into the Premier League will be filtered through to clubs through increased equal share and merit payments. Some sources the ECHO has spoken to feel that the value of the next set of domestic rights could reach between £5.5bn and £6bn.
The Premier League is a far safer bet for investors given its positioning as the world’s most popular football league, but it is also one that carries a far higher price to get involved, and one that carries more risk than other markets due to the potential for relegation and financial calamity that comes with it. There are other investors, certainly in the US, who see Everton as an investable club should the 777 Partners takeover not come to fruition if regulatory approval is not forthcoming. But the risk that exists through the uncertainty of what kind of competitive of financial punishment may arrive should the club be found guilty by an independent commission over an alleged breach of Premier League profit and sustainability regulations, and the amount of capital required for the completion of the stadium, as well as significant debt across multiple lenders, means that some have chosen to keep their powder dry and wait to see what happens.
The sales pitch, as The Athletic reports, places significant focus on Everton as being a driving force for the growth of the 777 Partners multi-club football business. That isn’t surprising given that the media rights in Italian football, where the US firm own Genoa, have shrunk with the latest deal – something that Napoli owner Aurelio De Laurentiis declared would result in “the death of Italian football” when he gatecrashed his own manager’s press conference to express his anger over the agreement.
In France, where 777 own Red Star FC, the LFP, the organisation that manages the major professional leagues in the country, have had to re-tender for the rights after no firms came forward at the desired €1bn (£870m) per year tag for a five-year cycle. French football now faces an enormous challenge to stop the gap increasing between themselves and the three biggest leagues, La Liga, the Bundesliga and the Premier League. However, the former two of that ‘big three’ also face their own challenge in trying to stop the top tier of English football running away from the rest of the competition in Europe.
The multi-club approach has become increasingly popular in recent years in European football, with investors looking at it in a variety of different ways. For Manchester City owners City Football Group, their worldwide network of 12 clubs looks for individual growth in each market, but it places major emphasis on the synergies that it has across the network – from scouting, to recruitment, to data, to medical practice. But for all of that it sits under one flagship club, the club that is its crown jewel and whose success underpins it all – Manchester City.
Then there are ownership groups such as RedBird Capital. RedBird, who are the majority owners of AC Milan and Toulouse, as well as 11% stakeholders in Liverpool owners Fenway Sports Group, are very much into building businesses. AC Milan and Toulouse operate completely independently of each other and there has never been a suggestion of the French side becoming some kind of feeder club for the Rossoneri. But RedBird are also unlikely to grow that football club portfolio. In fact they are, according to Bloomberg, looking into the feasibility of a sale of Toulouse, a club that they acquired for €20m in the summer of 2020 after relegation to Ligue 2 but have since returned to Ligue 1 as well as qualification for the Europa League.
RedBird are expected to focus their efforts on the Milan project when it comes to football, with the building of a new 70,00- seater stadium in the San Donato region at the top of the ‘to do’ list, while leveraging the relationships that the firm has in the US with the likes of the New York Yankees, with whom the club has a marketing partnership, to turn AC Milan into a truly global brand and tap into booming interest in football in America and emerging markets. The addition of multiple assets across European football isn’t likely to be the direction of travel.
Then there are groups like FSG, Liverpool’s owners, and Kroenke Sports and Entertainment, the owners of Arsenal. Their sporting portfolios are focused on diversification and becoming, or partnering with, the rights holders across multiple sports. FSG, who as well as Liverpool own the Boston Red Sox (MLB), Pittsburgh Penguins (NHL) and RFK Racing (NASCAR), are currently in talks to take a stake in the PGA Tour, a bid that would rival the Saudi Public Investment Fund’s play to do the same and merge the PGA Tour with their own LIV Golf brand – a competition that created a bitter row and divided the sport at the very top level.
Acquiring distressed football assets across the world has been the modus operandi for 777 Partners. Thus far there has been little in terms of competitive success. Genoa were relegated from Serie A in 2021/22 before being promoted in second place last season, while Standard Liege, Vasco da Gama and Hertha Berlin are all struggling. Red Star, however, sit well clear at the summit of the Championnat National, French football’s third tier, and look a strong bet for a return to Ligue 2.
Genoa is the club that sources close to 777 Partners point to as being the best and fairest marker for what they are trying to achieve. Having been relegated in their first season they bounced back last campaign and are making a better fist of it this time around. But with the Italian media landscape currently challenged, as it is in other markets in which they own clubs, the desire to put Everton at the front and centre of their pitch to investors is understandable.
But some ownership groups are starting to move away from acquiring multiple clubs, focusing instead on streamlining and growing the biggest assets that they have in their portfolio – the ones that have the strongest chance of seeing growth and delivering returns. There is the concern that owning so many assets, the majority of which remain distressed and in need of a workable plan to deliver future success, means that there are just too many plates to be spun at the same time and that something has to give. Everton, should 777 Partners be successful in their takeover bid, would require an enormous amount of work. And while claims to the contrary may point to an even hand across the board, the Blues have the best potential for financial reward of any of the clubs 777 currently own, but it also carries with it the biggest financial burden and risk.
The sales pitch to investors also places focus on a unified management approach across assets, as well as a huge focus on data (which every club in major European leagues has had to be serious about for some time). It also looks at player pathways and raising revenue through player trading, discovering hidden talent at source by having a presence in markets such as Brazil.
However, it is the strength of the media rights, and the view among many US investors that the ECHO has spoken to that they will continue to accelerate to close the gap on broadcast deals seen in America, thus raising team valuations even further beyond where they currently sit.
Speaking at Leaders in Sport 2023, Steven Pagliuca, owner of the Boston Celtics and Genoa’s Se
