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A League of Their Own… Almost

My winter experience in Southwest Florida included watching the “BMFR” index redline at levels of conspicuous wealth not seen in my lifetime. For those of you who do not visit the Naples area, the BMFR index is the number of Bentley’s, Maserati’s, Ferraris and Rolls Royce’s you see on a regular basis on Fifth Avenue. There is even an event called Ferraris on Fifth, where vintage car collectors can display their collections.

This year with Covid-19 shutting down normal interactions the car show was a major event. Porsches, Jaguars, Tesla’s and Corvettes were also in abundance, but considered to be more of a ride for the proletariat.

Needless to say, I kept my Mini Cooper in the garage all weekend and since then have only been driving it at night.

International Owners Propose a New Soccer League

On the international business front there was also a display of conspicuous wealth as owners of major soccer (really “football”) franchises unveiled a plan to create a “Super League” comprised of 20 teams in a cartel business model like the NFL. This reorganization would have eviscerated the existing system where winning big money in the Champions League (a long playoff) turned on doing well in your country league or else qualifying through a grueling play-in format. A few of the clubs like Liverpool did not enjoy being denied automatic access to The Champions League due to Liverpool’s poor Premier League win/loss record. Liverpool was just eliminated from Champions League this year after losing a quarterfinal play in match.

The rationale for the new league was “more dough” for international scions/owners/oligarchs/oil sheiks who also redline on the BMFR scale. Maybe they were trying to have a system more like the NFL where good and bad teams alike all prosper, and where team revenues rarely go down.

Kings Bested by Knaves

The fan reaction was immediate and quite clear. Here is one post I read from a fan of Liverpool who commented on an apology by John Henry, owner of the Boston Red Sox and Liverpool, about failing his fan base. John Henry’s apology can be read here from a publication called “The Athletic” in an article written by James Pierce on April 21:

FAN “Oliver B. No, they don’t need to consult every single fan, that would be impossible. And no, they don’t need to consult on every single club decision (IE do we buy a certain player) but there are certain decisions that alter the future of the club in a drastic way (the super League, ticket prices) and there are decisions that will clearly hurt fans due to the working-class roots of the club and city (furloughing staff and Trademarking Liverpool). These are the sorts of decisions they need to consult fans on, in order to avoid making decisions that a) make them look incredibly stupid, short sighted, ignorant and horribly arrogant, b) show they know nothing about the history of the club and c) don’t care about the fans.”

Similar fan reactions all over Europe led to immediate withdrawal from the Super League by really talented clubs like Manchester City, and Chelsea. The self-anointed 12 quickly became 6 clubs as all of the English participants blinked and walked back a really unpopular idea. By the time I was writing this blog the Super League had disbanded after 48 hours.

Post Covid-19 Fans Rule

This is a pretty amazing immediate repudiation by the masses of a tone deaf, money- driven scheme by BMFR owners. The ability of fans to assemble and react almost immediately speaks to the power of communication tools like social media and the rise of populism as an economic hammer. Major League Baseball also blinked on populist reaction to alleged voter suppression in Georgia by pulling the All-Star Game from Atlanta. Corporations are tailoring their investor relations and corporate messaging to appease an angry crowd.

Merit and Achievement, Not Privilege

To understand the enormity of this repudiation it is also necessary to understand the European footballers have a business model that rewards merit and achievement. Hopefully, repudiation is also about the little guy having a chance.

Access to the really lucrative “Champions League” playoff brackets is based on annual domestic league standings. Powerhouse teams like Liverpool can be eliminated from The Champions brackets if they don’t finish in the top 4 of the Premier League, and nascent teams like Paris St Germain, who was runner up in Champions last year, can take their place and earn as much as 100 million euro from just one tournament.

Teams with big payrolls and big stars will not automatically qualify for The Champions League if their domestic league performance is poor, although they can gain a spot by succeeding in a play in bracket. This would be like the NFL allowing Canadian football teams to displace fan- based teams like Green Bay or Cleveland Browns in the NFL Playoffs and force brand names like the Patriots to try to re-qualify through a last chance bracket.

I wonder whether fan populism will now topple cartels like Major League Baseball and the NFL? Even though their wealth is redlining on the BMFR scale, empty stadiums tend to grab owners’ attention.

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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records. Founder and chairman of CW Industrial Partners (originally CapitalWorks, LLC), he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CW Industrial Partners or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.