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Football is booming right now. You might have noticed. The amount of money being spent on young people that are good at kicking round things has grown exponentially over the past two decades.
The £12.5m paid for Gianluca Vialli in 1992 (the year the Premier League began) through to the £200m shelled out for Neymar in 2017 represents a compound annual growth rate of 20.3% in world record fees.
If this rate of growth is maintained, that means we are nine years away from a £1bn footballer. Even excluding Neymar’s 2017 transfer fee, we get a compound annual growth rate of 15% between 1992-2016. That would give us a £1bn transfer in 11-12 years’ time…
But football as a sector – is it really worthy of investment? Isn’t it characterized by desperate swings in profitability and littered with bankruptcies? Doesn’t most of the profit go straight to players and agents?
Tottenham Hotspur, Aston Villa, Birmingham City, Charlton Athletic and Newcastle United have all taken themselves off the stock market in the past.
Football clubs were once famous for being notoriously poor investments, with local benefactors pumping their fortunes into a loss-making team out of devotion rather than in search of a profit. In recent years, the stock market has proved this received wisdom increasingly wrong. Shares in some publicly quoted European teams have managed to beat the wider stock market over the past five years as revenues at top clubs have surged thanks to ballooning broadcast revenues.
Shares in Juventus, controlled by the Agnelli family’s listed Exor vehicle and Italy’s most decorated club, have risen almost fourfold over the past five years, while the value of Arsenal, which this month saw Stan Kroenke buy out the minority stake owned by his fellow billionaire Alisher Usmanov, has doubled over the same period. Scotland’s Celtic and Portugal’s Porto have also performed strongly.
However, Manchester United shares, listed in New York, have not enjoyed the same success, generating a small return over the same period. British fund manager Nick Train, who lifted his holding in Manchester United in the second quarter, argued that sports franchises with global appeal would be beneficiaries of the battle between rival online streaming services that would bid aggressively for exclusive content.
There are trillions of dollars of market cap hanging on which streaming service will triumph