Silver Lake’s expensive foray into English football reflects the soaring value of live matches and a bet that Manchester City’s hundreds of millions of fans represent a big revenue opportunity.
The US private equity firm is buying just over 10% of City Football Group Ltd for around US$500mil (RM2.08bil), the companies said on Nov 27, valuing the club’s owner at US$4.8bil (RM20.02bil). That’s one of the highest-ever price tags for a professional sports group.
Silver Lake is best known for tech investments such as Dell Technologies Inc and China’s Alibaba Group Holding Ltd and could bring that expertise to the English Premier League club.
While the big clubs still make most of their money from broadcast rights and merchandising, they’re looking for ways to use technology to offer privileged access to fans.
Clubs have been developing apps showing exclusive content such as player interviews, short documentaries, press conferences and even match highlights. A platform developed recently by London’s Chelsea Football Club has found an enthusiastic audience.
Manchester City demonstrated the potential value of behind-the-scenes content last year when it partnered with Amazon.com Inc’s Prime Video streaming service for an eight-part documentary charting the path to its 2018 title win.
"There are large international audiences and fan bases for Premier League clubs, particularly in Asia,” said Richard Broughton of Ampere Analysis. "There is potentially a large and arguably under-served opportunity outside the UK – albeit at a lower price point.”
The bigger teams will have to tread a careful path, offering enough to entice fans without upsetting the leagues, whose broadcast rights they still rely on for much of their income.
Income from sports broadcasts has been surging since media companies latched onto live sports as one of the remaining ways to bring in advertisers, which are increasingly moving online. The emergence of the big US streaming platforms in rights contests has helped to buoy valuations for the most sought-after content.
Few TV shows can match the audience pulling power of a big soccer game. Manchester City was the world’s fifth-highest revenue generating soccer club in the 2017/18 season, according to a study by Deloitte, following a strong run of success in domestic and European competitions.
Comcast Corp’s European pay-TV unit Sky has said recent Premier League audiences were 23% higher than last season.
"We remain very optimistic for continued increases in global football broadcast rights,” said Manchester United’s vice-chairman Ed Woodward in an earnings call with analysts last week.
Private-equity investors have long been drawn to sports clubs and agencies. Last year, Apax Partners LLP agreed to acquire data and technology company Genius Sports, fresh on the heels of a purchase by Canada Pension Plan Investment Board and private equity firm TCV of a minority stake in Sportradar AG, another sports data analysis firm. Providence Equity Partners sold its interest in Major League Soccer’s media and marketing arm back to the league in 2017, tripling its initial investment in Soccer United Marketing.
Silver Lake is ploughing more money into sports and entertainment, including an investment in Endeavor Group Holdings Inc, which runs sports leagues, hosts fashion events and represents top athletes and entertainers.
City Football Group has annual revenue of £535mil (RM2.87bil), compared to £627mil (RM3.36bil) for publicly traded cross-town rival Manchester United, whose market value is US$2.75bil (RM11.47bil). City Football Group also owns clubs including New York City FC and Melbourne City FC, although Manchester City is its most important investment by far.
It plans to use the deal funds to expand its business overseas and develop technology and infrastructure assets, according to a statement. No existing shareholders sold their stake, and Abu Dhabi United Group remains the majority shareholder. – Bloomberg