Thursday, August 31, 2017

Multi-club ownership, efficiency and collusion

Red Bull owning soccer teams in Germany, Austria and New York, or Manchester City's parent company owning teams in New York, Australia and now Spain (Girona FC) are just examples of a new trend in global soccer: Multi-Club Ownership or MCO. The implications of this are different depending on whether it implies horizontal integration or vertical integration. If it is a case of vertical integration it may imply better coordination among different segments at different levels of a value chain (for example, recruiting and training players at young ages and then promoting them when they mature, and similarly with managers), which is efficient and reduces waste. But if it is a case of horizontal integration, then it may raise market power concerns and concerns in terms of authenticity of the competition. For example, it is not implausible that Red Bull Salzburg has to play against Red Bull Leipzig in the European competitions, and similarly for Manchester City and Girona FC in the future.
Simon Chadwick, an expert, argues in The Guardian that “How do you scout around the world as quickly and cheaply as possible? Rather than having to maintain a scout network where you can always miss out, you have a franchise where you save both on intelligence and scouting acquisition costs."
“My personal view is that multi-club ownership is a very interesting way of leveraging intellectual property,” says Ben Marlow, the head of football at 21st Club, a consultancy that advises potential investors in the game. “Yes, it gives them a geographical advantage in recruitment by having a presence in a market. But it also helps clubs breed economies of scale, it allows clubs to share best practice.”
Other problems of potential collusion arise when player or manager agents are involved. For example, the purchase of FC Girona by Manchester City has also involved the brother and agent of Manchester City's manager, Pep Guardiola. Pere, Pep's brother, will be the co-owner of Girona FC, but he is also the agent of many players and the agent of his brother. Will his decisions be guided by the best interests of Girona's fans or by his interest to promote players of whom he is the agent? Pere Guardiola is also associated with Mediapro, a sports media company investigated by its links with the FIFA corruption scandal. Global soccer is great, but it has some dark corners.

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