777 Partners is presently awaiting regulatory clearance to finish purchasing Everton.
A wave of private equity has been pouring into teams and leagues as a result of the acceleration of sport’s growth as an asset class in and of itself in recent years.
The rise in television rights has laid the groundwork for investors to feel confident about funding sports, especially European football, and this trend is expected to last for some time, at least in the Premier League.
After securing a victory in 2021 amidst the pandemic’s uncertainty, the Premier League managed to persuade Sky Sports, BT Sport, and Amazon Prime Video—broadcasters that had previously signed on for the previous cycle—to assume another three years of domestic rights at the same cost. Maintaining the stability of domestic rights was crucial, given how unstable the sporting landscape appeared at the time and the doubts about whether live sport would be able to recover sufficiently to resume its upward trajectory.
Now that the pandemic is over, the environment is shifting once more. Even though football clubs had to bear the financial consequences of COVID-19 due to severely reduced revenue streams and nearly eliminated matchday income, football’s ability to bounce back from such a potentially disastrous situation has only served to reassure investors that investing in this specific sports ecosystem is a wise move, especially considering the possibility that media rights will increase in value as more streaming companies enter the market as traditional broadcast media becomes disintermediated.
The value of media rights is at the center of 777 Partners’ sales presentation, which was made available to potential investors on Monday, according to a report in The Athletic. The sales pitch included forecasts indicating that the value of media rights in football, which currently stands at £5.7 billion annually for 2022–2023 internationally, would increase to £11.3 billion by 2031–2032.
In the upcoming years, Premier League clubs will have a lot to cheer about. With the cycle being four years instead of the customary three, and with the number of games available for broadcast increasing from 200 to 270 per season, the cycle for 2025 and beyond has been put out to tender. As a result, the value of the current package, which was estimated to be just under £5 billion for the three years, is expected to significantly increase. Increased equitable share and merit payments will be used to distribute additional revenue to Premier League clubs. According to several people that ECHO has spoken with, the value of the upcoming domestic rights package might be somewhere between £5.5 billion and £6 billion.
Given its status as the most popular football league in the world, the Premier League is a much safer bet for investors. However, investing in it comes with a higher price tag than other markets because of the possibility of relegation and the accompanying financial catastrophe. Some investors, at least in the US, view Everton as an investable club in the event that the 777 Partners takeover fails and regulatory permission is delayed. However, given the uncertainty surrounding the potential financial penalties that could be imposed should the club be found guilty by an independent commission regarding an alleged violation of Premier League profit and sustainability regulations, as well as the substantial debt incurred from multiple lenders and the amount of capital needed to complete the stadium, some have decided to hold off and wait to see what happens.
According to The Athletic, the sales presentation emphasizes Everton’s role as a catalyst for the expansion of 777 Partners’ multi-club football business. That’s not surprising, considering that the latest agreement in Italian football, where the US company owns Genoa, has reduced media rights. Napoli owner Aurelio De Laurentiis, who gatecrashed his own manager’s press conference to voice his displeasure over the agreement, predicted that this would lead to “the death of Italian football.”
The LFP, which oversees France’s major professional leagues and of which Red Star FC is owned by 777, was forced to re-tender for the rights because no companies bid at the necessary €1 billion (£870 million) annually price for a five-year cycle. It will be extremely difficult for French football to close the growing gap with the three major leagues: La Liga, the Bundesliga, and the Premier League. To avoid the top division of English football from slipping away from the rest of the European competition, the other two members of the so-called “big three” must also overcome their own obstacles.
In European football, the multi-club strategy has grown in popularity recently as investors consider it from many angles. The global network of 12 teams that owns Manchester City, City Football Group, prioritizes network synergies over individual club growth in every market. These synergies span beyond scouting, recruitment, analytics, and medical practice. All of that, however, is centered around Manchester City, the team that serves as its flagship, its gem in the crown, and the reason for its success.
There are ownership groups like RedBird Capital, for example. RedBird, who owns 11 percent of the Fenway Sports Group, the owners of AC Milan, Toulouse, and Liverpool, is heavily involved in commercial development. Toulouse and AC Milan run their respective businesses entirely apart, and there has never been any talk of the French team serving as the Rossoneri’s feeder team. It is improbable that RedBird will expand their portfolio of football clubs. In reality, as Bloomberg reports, they are considering whether to sell Toulouse, a team they bought for €20 million in the summer of 2020 after being demoted to Ligue 2, but which has since qualified for the Europa League and returned to Ligue 1.
When it comes to football, RedBird is expected to concentrate on the Milan project, with the construction of a new 70,00-seat stadium in the San Donato region at the top of the “to do” list. The club has a marketing partnership with the New York Yankees, so RedBird will be able to leverage these relationships to turn AC Milan into a truly global brand and capitalize on the booming interest in football in America and emerging markets. It is unlikely that European football will add several assets in that approach.
Then there are organizations such as Arsenal’s owners, Kroenke Sports and Entertainment, and Liverpool’s owners, FSG. Their goal in diversifying their sports portfolios is to either become the rights holders in numerous sports or form partnerships with them. The Boston Red Sox (MLB), Pittsburgh Penguins (NHL), and RFK Racing (NASCAR) are owned by FSG, Liverpool, and the league. FSG and the Saudi Public Investment Fund are currently in negotiations to acquire a stake in the PGA Tour, challenging the latter’s plan to combine the Tour with their own LIV Golf brand. This competition caused a sour dispute and split the sport at its highest levels.
777 Partners’ approach has been to purchase troubled football assets all across the world. Not much has been accomplished in terms of competition success thus far. Genoa was demoted from Serie A in 2021–2022 and then promoted in the previous season after finishing in second place; Standard Liege, Vasco do Gama, and Hertha Berlin are all having difficulties. Red Star, on the other hand, appears to be a solid contender to return to Ligue 2 since they currently lead the Championnat National, the third division of French football.
According to people close to 777 Partners, Genoa is the team that most accurately represents their goals and objectives. After being demoted in their debut season, they recovered the previous year and are doing a better job this time around. However, it makes sense that they would want to prioritize Everton in their pitch to potential investors given the current state of challenges facing the Italian media landscape, as well as those in other markets where they own clubs.
However, some ownership groups are beginning to shift their emphasis from buying numerous clubs to increasing and streamlining the largest assets in their portfolio—the ones with the best likelihood of generating growth and yielding returns. There is a worry that having so many assets—the bulk of which are still in crisis and require a practical plan to ensure future success—means that something has to yield because there are simply too many juggling responsibilities.If 777 Partners is successful in their takeover attempt, Everton would need to put in a lot of work. The Blues have the highest potential for financial gain of any team that 777 currently owns, but they also carry the highest financial risk and load, despite assertions to the contrary that the clubs are equally distributed.
A single asset management strategy and a strong emphasis on data are also highlighted in the sales pitch to investors (something that all major European league teams have long needed to take seriously). In addition, it examines player paths, how to increase income through player trade, and how to find untapped potential early on by being present in countries like Brazil.
But the strength of the media rights and the belief held by many US investors with whom the ECHO has spoken indicate that they will keep speeding up to catch up on broadcast deals in America, which will drive team valuations much higher than they are now.
Owner of the Boston Celtics and Genoa’s Serie A rivals Atalanta, Steven Pagliuca, stated at Leaders in Sport 2023: “I’ve been investing in media companies for 40 years now and you’ve seen cycles of bundling, unbundling, re-bundling and unbundling.” Because to the advancements in streaming technology, we are currently in an unbundling cycle. The good news regarding streaming is that the number of supporters at the Boston Celtics has increased from hundreds of thousands to millions. A game can be seen at any moment by hundreds of millions of people thanks to streaming and cable.
“The bad news is that there will be a temporary retreat since the streamers, namely Google and Amazon, are currently at odds with the networks and are spending a lot of money bundling the product. I believe that there is a temporary lull in the decline of media rights, but in the long run, streaming will give viewers access to more content.
Fans who choose to pay for a premium product, say $50 per month, and those who simply want to watch one game can be tier-ed. That will increase revenue even more than it is currently. However, we are currently in a transitional phase, and I believe that the media rights landscape will become more stable over the next three to four years, at least, until we resume the trend of streaming and reach all of those fans worldwide.
In terms of growing broadcast rights and, consequently, prices, the Premier League is where it’s at for the time being. With 20 member clubs, there is a very high scarcity value. It is imperative that Everton stays a member of that exclusive group, and considering the value 777 Partners places on the media rights, they will undoubtedly be aware of this. It appears to be essential to its goals for the football business’s future.
