City Football Group: The Building of an Empire
The game of football has evolved a lot over the years. From a game that used to be played only by the “gentlemen” of the English high society, to a sport that is played in almost every corner of the world. As the game itself has evolved, so has the business around it. Not long ago, football clubs were small entities that acted as a fundamental pillar of the local community. Then, with the rise of new technologies and globalization, football clubs and players became known all over the world. Now, a new era seems to be on the horizon, the creation of Football Corporations. In a previous article, we talked about how Red Bull was creating a big football conglomerate, but today, we are going to analyze the biggest of them all: The City Football Group.
Formed in 2013, City Football Group (CFG) owns a total of 10 football clubs, among other academies and investments. They aim to create a network that will provide all members of the group with a competitive advantage in the footballing and commercial areas of the business. As explained by CFG, their goal is to grow a sustainable and socially beneficial business by “playing attractive football, engaging our community of passionate fans, and adopting a uniquely global yet local approach”. Their ambitious project, which started in 2008 with the acquisition of Manchester City by Abu Dhabi United Group, is quickly turning into football’s biggest empire.
Structure
The structure of the group is somewhat simple. The City Football Group has three shareholders, Abu Dhabi United Group (ADUG) (77%), the China Media Capital (CMC) Consortium (13%), and Silver Lake (10%) and is formed by a total of 10 clubs (Club Bolivar is a partner club):
Each team has one person in charge of the business side (the COO) and one person in charge of the sporting side (the sporting director), both of whom report to the CFG in Manchester.
The group acts as one big network in which each member can benefit from the experience and participation of the others. The structure of the group facilitates the flow of resources, information, and even players among the members. The group aims to bolster the operations of each club, thanks to the synergies created, and make each of them perform better than they would individually.
Ferran Soriano
Although much of the group’s success can be attributed to ADUG and Sheikh Mansour’s extensive resources, there is one man that has played a vital role in the development of this ambitious project; that man is Ferran Soriano. Before joining Man City, he worked for FC Barcelona as economy vice-president between 2003 and 2008. During his stay at the club, Barcelona went from making €123 million to €308m in revenues and managed to turn a €73m loss into an €88m profit. However, what attracted Man City’s interest was Soriano’s ideas. He thought that the football business was changing, and that big clubs could be transformed from a local business into “global entertainment companies like Walt Disney”. He saw the club franchise model as a perfect opportunity to gain a competitive advantage over the competitors in the industry. Unfortunately, his ideas were not aligned with Barcelona’s president at the time, so they never came to fruition.
Soriano saw that, even though a club had fans all over the world, only a few of them contributed to the club’s revenues. This is because Man City fans around the world have limited possibilities to spend on the club, due to their location. So, the only way to get these fans financially involve is to be “global but local”. Meaning that by establishing a corporation with a global brand like Man City and other franchise clubs, the group could reach a larger audience and make them interact with the organization. Additionally, this network of clubs would enhance the sporting performance of the member clubs, because it would provide them with a larger foundation to develop players, a wider scouting network, and a bigger database of knowledge and players.
Business Strategy
The group’s strategy is to target markets or countries where the competition is relatively low and the demand for football is high. They aim to enter these markets through wholly own subsidiaries that will allow them to have full control over the operations of the club. When acquiring a club, they look for teams that might be competing in the lower divisions or that might not be doing very well and try to improve their performance by utilizing the group’s resources, expertise, and network, with hopes to reach the top tier and increase their value. As explained by Don Dransfield, chief strategy officer at CFG, there is an incremental benefit whenever the group acquires a new business or in his words “it is very much 1+1=3”.
When making an acquisition, there is always a deep analysis behind the choice; for example, one of the reasons Montevideo City Torque in Uruguay was chosen, is because Uruguay is the biggest per-capita exporter of professional footballers, meaning that a lot of talent comes out of that region, and it seemed like a perfect place to expand CFG’s network and pipeline of players. Another objective that the group had was to own a club in every continent. This is something they recently achieved with the acquisition of Mumbai City FC in India. Now, their objective is to exploit this global reach and try to find or develop new players that will ultimately have an impact on the corresponding teams.
Marketing Power
One important thing about CFG’s business model is that since they have such a global reach (a club in every continent), they are very appealing to other companies in marketing terms. As Dransfield explains, “from a commercial perspective, we have more assets across more time zones which means that we’re able to better serve our partners. Finally, but most importantly for our fans, it means that we have a greater volume and better quality of interaction with our fans because we’re able to have multiple assets”. This means that the ad you see in a Man City game, you will also see it in a Melbourne City game, making it a dream marketing opportunity for the marketeer.
As with the acquisition of teams, every marketing deal or partnership is done to enhance the performance of the group on and off the pitch. For example, the deal between Man City and SAP, in which SAP became the official cloud software provider for CFG. SAP provides the club with innovative technological applications to analyze player performance and development. Another example is the deal with Cisco; the club and company struck a deal to improve the connectivity among the clubs and thus become more efficient.
Player Development
For years, CFG has utilized Sheikh Mansour’s seemingly endless resources to fund the purchases and operations of Manchester City. The club has acquired some of the best players in the world, such as Kevin De Bruyne, Riyad Mahrez, John Stones, Ruben Dias, and many more in the last couple of years. Having spent more than $1 billion in transfers over the last 5 seasons, and only earning $355 million from outgoing transfers during the same time, clearly shows that this is not a sustainable model. CFG is aware of this and relies on its strategy to develop a long-term sustainable business.
As mentioned before, one of the objectives of the group was to own a club in every continent. Now that they have achieved that, the next step of the plan is to start expanding their scouting network and recruit some of the most promising players in the corresponding regions. The end goal is to have players move or transfer to clubs within CFG, with the very best ending up in Man City and thus decreasing the transfer costs.
One of the key aspects of their player development model is to implement the same style of football and coaching in all the academies and clubs at every age level. Similarly, to what FC Barcelona does with La Masia, Soriano explains that this “will allow a more seamless movement of players” between clubs and divisions. Also, by operating in this way, the group would have “complete control” over the player’s development as the player moves within the satellite clubs as opposed to a non-CFG club.
Conclusion
The football industry is heading in a more sustainable direction. Big investments are being made and the industry is slowly becoming more “professional”. City Football Group has gone a couple of steps further and developed the larges football corporation. This makes you wonder if the future of football will become a battle of corporations and if small independent clubs will cease to exist. If this is the case, does this mean the race has already started? With Red Bull, CFG, and others already forming these conglomerates, will the other clubs be able to compete with them in the long run? I guess that this is one of those things that only time will tell, but for sure it looks interesting.
