October 28, 2024

Motowndesserts

Automotive to Us

Russian Fallout Has West Reclaiming Influence in Sport

Russia’s invasion of Ukraine has had a trickle-down effect on sports. Governing bodies have moved (see: Champions League Final) or canceled (see: Sochi Formula 1 Grand Prix) events previously scheduled to take place within Russia, Russian athletes have been banned from sporting competitions and Russian oligarchs have had their clubs seized. Yatin Patel, an advisor to multiple football clubs in Europe, says those developments are the latest indication “sport has become a product owned by [society at large in] the West” and predicted it will increasingly be used as both a powerful storytelling canvas and a tool to navigate geopolitical and social change. Sport has become “the pre-eminent form of live and unscripted entertainment and through the proliferation of TV and mobile devices, has amassed a huge number of global eyeballs. Our lives have become emotionally interwoven to [these] teams and athletes. It’s a natural canvas for national and international politics.”

JWS’ Take: Abramovich’s ouster is as symbolic as it is punitive. “He will be remembered as a trophy asset owner. The oligarchs and the sheiks have materially changed the landscape of British football and subsequently European football,” Patel pointed out. Prior to his purchase of Chelsea in 2003, English football clubs were largely controlled by British owners and run as small businesses with a domestic mindset.

More from Sportico.com

The players were largely local too. “In 2002-2003, prior to the Abramovich takeover, the total net EPL transfer spending was £188M. In the following two seasons, Chelsea singlehandedly invested £300M into players. Around 80% of this was on foreign talent,” Patel noted.

But Abramovich’s move started a new era (his exit may signal the end of it). It was the first in a series of investments made by global oligarchs—and in some cases government funds—into European football, an influx of capital that helped to turn the EPL into a league for the best players from around the world. The sport’s highly unregulated nature enabled owners with lots of capital but questionable backgrounds to gain control of clubs with little resistance.

There are a number of reasons why oligarchs have been attracted to English football. For starters, “it is a juggernaut media business which has provided a platform to multiply and diversify their wealth through capital flight,” Patel said. It is also a chance to own a trophy asset in the U.K., and in some cases, the fame gained from ownership can provide a level of political leverage and control.

When Abramovich bought Chelsea in the early ‘00s, the majority of U.S. and institutional investors were still hesitant to invest in English football because of its reputation for hooliganism and place within broader society. But the sport’s perception has changed over the last two decades as the EPL developed into a globally recognized media business and its fan base grew wealthier. American investors took notice and started buying up or providing liquidity to clubs (see: Fenway Sports Group, HBSE, MSD Capital and the Glazer family).

While foreign investment from countries like China, the UAE and Russia undoubtedly helped to propel English football, the sport has started to turn its back on some pockets of capital. “Mr. Abramovich has been ousted, despite bringing unprecedented success to Chelsea by modernizing the club and investing heavily to give it the best possible chance at winning trophies. And Everton has severed ties with Alisher Usmanov,” Patel said.

It is worth noting that while a number of Chinese owners have “disappeared without managing to invest in the wider infrastructure plays they sought,” that has more to do with directives from the Chinese government to pull out of international football investments than anything else.

It would be logical to attribute the shift in attitude to the growth of the game. In essence, European football may have become so visible on the global stage and built such a diverse audience that it is now too big to ignore broader issues facing society. In Europe in the 1990s, “You did not see many female fans, barely any female participants and there wasn’t variety in ethnic stakeholders on or off the pitch. It is now a big mixing bowl,” said Patel.

But the boutique investment advisor, who focuses on soccer, believes the pivot is actually representative of a “bigger picture thing.” He sees the move to push out Russian money as the West “regaining control over European community assets and slowly engineering reform to repackage the businesses to fit modern day society.” That includes a focus on human rights, sustainability, diversity and equality.

As U.S. and institutional investors increasingly look beyond North American borders, the Western sports investment resurgence will only increase. That does not mean countries with different beliefs for how society should operate will necessarily be excluded. But sporting events can be a useful tool to promote change in attitudes—which is often why oligarchs got involved in the first place. As the pendulum shifts, a sport’s governing body could require evidence that a host country corrects human rights injustices before awarding it an event.

It is easy, from a public perception standpoint, to take a hard line stance against a country invading a neighbor. It remains less clear that pro sports leagues are prepared to walk away from lucrative markets, wealthy sponsors and problematic investors when public outrage is not so palpable. If a league does so, Patel said, “you have to expect, at least in the short-term, the ecosystem is going to shrink.”

We might find out in the coming days how serious the EPL is about vetting its owners. Saudi Media Group, led by Mohamed Alkhereiji, is reported to have made a $3.5 billion offer for Chelsea. There are supposedly no direct government links to the bid. But there has been talk that the league could add a human rights component to its owners and directors test (meant to keep unscrupulous characters from buying and running teams).

Click here to read the full article.