Covid-19: A change accelerator for European football?

More than a year and a half after its outbreak, the Covid-19 health crisis continues to affect the entire global sports industry. Amateur and professional clubs as well as sports federations, the media, event organizers, and manufacturers and distributors of sporting goods are wondering about the sustainability of their business models in the face of this crisis.

Analysts are cautious, given " the lack of visibility we have regarding the conditions for a return to [a] 'normal’ [situation]; that is to say, the re-establishment of the interplay of supply and demand, with supply being -administratively- partially prevented, while demand is substantially impacted by restrictive measures", [1] underlines Hubert Tuillier (Manager Sports Advisory KPMG). Deloitte concluded that "the permanent loss and/ or deferral of key revenue streams for sports rights holders due to COVID-19 resulted in acute cash flow problems and rising pressure on key stakeholders in the sports industry including team owners, leagues and Governments to provide access to emergency funding and liquidity." [2] So far, two main trends have been accelerated by the Covid-19 crisis: The growing relationship between private equity and European clubs, and the emergence of the idea of a closed league for European football.

Investment funds and European football: An increasingly close relationship

Despite the difficulties caused by the health crisis [3], several investment funds belonging to individuals, consortia, or sovereign states, have maintained their operations in European football by taking stakes in the capital of both major and minor clubs, but it would be "a mistake to classify all the 'new' owners in a homogeneous group. Some investors see football as a profitable investment. Others invest in football to revive a family and/or territorial heritage, to honor their roots." [4] What these investments have in common is that they are essentially a strategy to diversify investors' asset portfolios, especially since "interest rates are currently extremely low. The accommodative monetary policy of the major central banks is encouraging the flow of liquidity. This is generating strong bullish trends in the markets," [4] indicates Olivier Jarosz (Managing Partner at Club Affairs, a Swiss independent advisory group specialized in football organizations strategies).

Furthermore, he states that, in a highly uncertain period due to the current pandemic, football represents, for investors, a first-class choice from a security/return-on-investment point of view. This is all the more true since, when we refer to history, football clubs, especially European ones, rarely disappear, despite the financial or legal difficulties that some of them may encounter. Moreover, “European football clubs are currently considered undervalued compared to North American franchises. An investment in a U.S. sports franchise is now rapidly rising above the $1 billion. The resources needed to invest in most European clubs are generally much less. New investors -especially American ones- believe they can significantly increase the value of their new clubs by streamlining their operations and importing proven methods from America”, [4] Olivier Jarosz adds.

These investments must meet the governance standards established by the internal regulations of the leagues where they wish to operate. Each league has its own regulations regarding investments in clubs, based on three different variables: whether or not to evaluate potential new owners to approve their applications (to ensure the solvency of the investors), whether or not to prohibit multiple ownership (to avoid conflicts of interest), and whether or not to allow fan participation in clubs.

The most sensitive point is that of multiple ownership because it could distort the results of matches if two teams belonging to the same owners were to play each other. “The ability to develop players to use across the franchise, combined with growing global commercialization and broadcast appeal in football, has continued to convince investors of the potential of multi-club ownership. The fastest-growing ownership model in world football is multi-club ownership. The best-known proponents of this strategy are energy drink giants Red Bull –with an empire stretching from Germany and Austria to the US and Brazil– and City Football Group, who have demonstrated the potential of this strategy with four clubs in Europe as well as in the US, Australia, China and Japan.” [5]

This concentration of economic power in a limited number of clubs could lead them to organize themselves in a closed league where an assured participation and the absence of the possibility of relegation make them less vulnerable to sports results and give them a longer financial visibility.

Closed versus Open Leagues: The characteristics of two historical models

On April 18th 2021, the European Super League (ESL) project, which had been publicly launched three days earlier, was, at least temporarily, buried. In the meantime, the world of football was in turmoil. Comments and analyses were abound. While some questioned the suitability of the economic model proposed by the ESL, others questioned its political legitimacy. Today, this project is no longer being pursued, but it highlights the growing interest of the big clubs to move from a traditionally European open league model to a closed league model, which is used in North America. What are the fundamental differences between the two models?

The funding structures between the North American and the European model are very similar: The Media-Magnates-Merchandising-Markets-Global structure has become established and has led to a strong and continuous growth of revenues in most leagues since the 1980s. Yet there are also crucial differences between the two models.

Media-Magnates-Merchandising-Markets-Global structure: A model of clubs' financing based predominantly on media (television), on funds allocated to football clubs by magnates (from industry, commerce, media, Eastern European oligarchs, and Middle Eastern emirs), and on revenues from merchandising (the sale of club products), all from global markets, i.e., foreign or worldwide sources of financing.

Leagues’ governance

In the North American model, the professional league is independent from federal and Olympic structures. It takes the form of an autonomous organization that groups together several clubs participating in the competitions that the league organizes according to its own calendar. In Europe, the league is integrated into the traditional pyramid structure in sports which ranges from the local to the international level. The professional league, made up of professional clubs, is thus linked to a national federation. Both the league and the national federation are then integrated into a global hierarchy regulated by an international federation. This interdependence between the different levels within the pyramid explains why the clubs making up the league are involved in several levels of competition -national and supranational. In contrast, in North America clubs are only involved in competition involving American and Canadian clubs.

How competitions are organized also differs between the two models. Competitions are referred to as open in Europe because the participation of clubs in a professional league is conditional on their sports results, and subject to the promotion-relegation system. In contrast, North American professional leagues are organized in a closed system, which means that clubs are not dependent on their sports results and are guaranteed to compete from one season to the next without the risk of relegation. This system is based on the league's control of new entrants and their ability to pay the fee for entry.

These organizational differences naturally lead to differences in clubs’ governance. In the European model, the primary objective of clubs is to maximize victories. The promotion-relegation system encourages them to perform well on the sporting level: On the one hand, good sporting results are a prerequisite for access to the upper divisions; on the other hand, a minimum sporting performance is required to remain in a division and avoid being relegated to a lower one. Furthermore, in Europe it is essential to perform well in national competitions in order to be able to join supranational ones.

Clubs strategies

In such a competitive environment, clubs in Europe have a high demand for players, since the aim is to compose the most successful team possible. This is all the more true because many European clubs, in several different sports, regularly benefit from financial contributions at the end of the season that make up for all or part of the excess spending by the clubs relative to their initial budget.

Because they operate in a radically different institutional context, North American franchises do not pursue the same objective. They are primarily concerned with maximizing profits for two reasons: first, maximizing profits satisfies the direct profit-seeking of the investors who take part in the capital of the franchise; second, realizing a capital gain when they sell their franchise. This also fulfills the profitability requirement necessary to maintain a franchise in the league. Under the league's control of franchise mobility, a franchise must be profitable in order to enter or remain in the league. The control of new entrants and the geographical control implemented by the North American leagues serve their objective of maximizing the collective revenues of the league.

To achieve this objective, the North American leagues have initiated a process of collective selling concerning the supply of sports products, allowing them to collectively negotiate and sell the national and international TV rights as well as the rights related to merchandising. The offer of visibility spaces (sponsorship) and the offer of live sports events (ticketing) are also centralized in certain leagues, such as the NBA. This gives the leagues a monopoly power from which they derive high revenues, which they then redistribute to their component franchises on an equal basis. The sharing of the revenues centralized by a league among the clubs contributes to reducing the financial gaps between them. This maintains a competitive balance in the league and guarantees a high quality sporting spectacle.

The Bosman ruling is a 1995 ruling of the European Court of Justice, which has banned restrictions on foreign EU players within national leagues and allowed players in the EU to move to another club at the end of a contract without a transfer fee being paid.

Third, European competitions commonly called "semi-closed" should not be considered as closed leagues. This is notably the case for the UEFA Champions League as envisaged by the 2024 reform project; access to these competitions remains dependent on the sporting performance of the clubs in their respective national competitions. However, even after the reform, the methods of selecting clubs for these competitions and the methods of redistributing revenues will continue to favor the major national leagues and the "big" clubs. It now remains to be seen whether the UEFA reform will prevent the temptation for big clubs to attempt to start their own leagues.


[1] Tuillier, H., De Guibert, A. (2020, April 3). COVID-19 : quelles solutions pour l’industrie sportive ?

[2] Deloitte. (2021). Riding the challenge Annual Review of Football Finance 2021.

[3] Widdop, P., Chadwick, S. (2021, March 22). Football in Europe is being transformed by US private equity firms – here’s how.

[4] Jarosz, O. (2021, February 21). The back story of investment fund expansion into European football.

[5] Tifosy Capital & Advisory. (2021). European football club ownership: rules and regulations.