Jenkins, Iain, Global Finance
When Alan Sugar bought a controlling stake in Tottenham Hotspur five years ago, he applied the management skills he had used to build up his Amstrad electronics' empire to turn around the London soccer club. But instead of being impressed by earnings of $14 million, which made Tottenham one of the few profitable soccer clubs in England in 1996, shareholders complained that their club lacked success on the pitch. As such rivals as Newcastle United spent a staggering $160 million on new players in the past two seasons, shareholders criticized Sugar for not buying top talent.
This season, amid protests from shareholders and abuse-chanting supporters at matches, the combative selfmade millionaire finally succumbed. While Sugar spent roughly $10 million on two players and authorized his manager to spend more, some football analysts saw his actions as further proof that soccer will never make a decent profit.
Indeed, despite the money flowing into the clubs from lucrative television contracts and public offerings, the challenges to putting them on a businesslike footing are enormous. Sixty of the 92 clubs in the English professional leagues are money-losers. Points out Emmett Power, analyst at the Media Intelligence Bulletin: "Agents make sure that any money coming into the sport goes to the players."
Yet few investors are heeding the warnings about the inability of soccer to control costs. Instead, as television pays bigger bucks to air games, everyone-from corporate moguls to s investorswants to buy soccer clubs.
Two clubs changed hands in private deals in December. Secured Retirement, which runs retirement homes, bought Southampton for $13 million, and Conrad, an engineering company, spent $16 million for Sheffield United.
But those private deals are dwarfed by what's happening in the stock market. Five clubs went public during the last 12 months, making soccer the fastest growing IPO segment in Britain last year. Those offerings, plus a 300% rise in the stocks of the 10 publicly quoted soccer clubs, pushed market capitalization in the sector from only $600 million five years ago to $3.5 billion at the end of 1996. At least four clubs are planning stock offerings early this year, including Birmingham City and the hugely popular Newcastle United, which plans to raise $148 million in April.
The excitement is spilling over to the Continent. Three Danish clubs have had stock market listings for more than a year. Three Italian clubs, ACMilan, Lazio, and Fiorentina, and two Dutch teams, PSV Eindhoven and AZ Alkmaar, have indicated that they want stock quotes in the near future.
Economic sobriety is certainly not driving the fervor. Three of the five British clubs that went public in 1996 were not profitable. Chelsea lost $5 million last year after raising $95 million in March.
A salutary lesson for football owners is the experience of London club Millwall, which was one of the first teams to list in 1989. In January, after it fell out of the Premier League and saw its TV income disappear, the club filed for protection from its creditors.
Indeed, many club owners, including Sugar and David Murray, chairman of the Glasgow Rangers, argue that the business environment is not as good as investors think. Says Murray: "You would think that football clubs had found a cure for AIDS."
Murray, who also owns Murray International, a private steel company, has no intention of listing his club: "I want to see where the business goes before we get a float." However, he recently reduced his 82% stake in the Rangers to just over 50% by selling a $50 million chunk to a wealthy investor.
No one questions that TV is increasing soccer's take. BSkyB started the revolution in 1992 by paying $486 million to show live games for five years. Under the new four-year BSkyB deal, an average club in the Premier League will rake in $8-13 million. Top teams will get $18 million-a far cry from the $1 million that they earned from television five years ago. …