Global red thread defining football's future

Simon Chadwick July 08, 2020 08:31

During recent weeks, several investors have acquired stakes in Reliance Jio, an Indian telecommunications business. Reliance is India’s biggest company, operating in a territory that is the world’s second largest internet market.

Reliance Jio is headquartered in Mumbai, not only India’s largest city but also its tech capital, financial centre and home to India’s film industry ‘Bollywood’. In just two (coincidentally mid-pandemic) months, Reliance Jio has raised more than US$12 billion.

Among recent investors in Reliance Jio, several are especially notable. In one case, American private equity investor Silver Lake has spent nearly US$1.5 billion to secure more than 2% of the company.

Based in California (home to Hollywood and Silicon Valley), Silver Lake is invested into numerous other organisations including Chinese e-commerce business Alibaba, AMC in the entertainment sector and the sport’s Ultimate Fighting Championship.

The Abu Dhabi government’s sovereign wealth fund Mubadala has also taken a stake in Reliance Jio, spending US$1.2 billion on its holding. In addition, Saudi Arabia’s sovereign wealth fund – PIF: the Public Investment Fund - has spent nearly US$1.5 billion on the company’s shares.

Significantly, links between Silver Lake and Abu Dhabi are already well established, the former having taken a stake (of US$475 million) in the country’s City Football Group (CFG) late last year. CFG most notably owns English Premier League club Manchester City, as well as a franchise network of other clubs across the world.

This network includes clubs in New York, one of the world’s most important financial centres, as well as in China (Chengdu) and in India. It should be no surprise that CFG chose to acquire the Indian Super League club Mumbai City as the focus for its operations. For that matter, it should be equally unsurprising that CFG decided to invest in Sichuan Jiuniu of Chengdu.

Not only is Chengdu populated by more than 16 million people (which is more than 30 times larger than Manchester itself), it amongst the top-5 fastest growing cities in China – having achieved economic growth of more than 70% over the last decade.

Furthermore, whilst Beijing is the political capital of China and Shanghai the country’s commercial centre, Chengdu is its cultural capital. The city is a focus for Chinese music, cinema and the arts, whilst at the same time playing host to one of the fastest growing tech sectors of in China.

The decision to focus on Chengdu is presumably also an outcome of guidance provided by CITIC and China Media Capital, both of which acquired a 13% stake (worth US$330 million) in CFG during 2015, a deal that was announced as President Xi paid a visit to City’s stadium when he was in Manchester on an official state visit to Britain.

It is also worthwhile noting that CFG’s global franchise network also extends to an ownership stake in Japanese football club Yokohama FC, which is located in the Greater Tokyo area. Tokyo surely needs no introduction: like New York and Mumbai, it is one of the world’s most important financial centres.

Tokyo is also one of the world’s biggest cities (with a population of 38 million), in a country that still has the third largest economy in the world. Indeed, CFG now owns football clubs in four of the five countries that have the world’s largest economies. Of course, Tokyo has long been a global leader in technology and innovation, and is an important film making hub.

In taking a red thread starting in Silver Lake in California and stretching it across to New York, Manchester, Abu Dhabi, Mumbai, Chengdu and finally Tokyo, it therefore becomes clear that something significant is happening.

In simple terms, this is a networked form of integrated business that increasingly characterises the ownership, organisation and structure of 21st century global corporations.

For this particular network, football plays a key role both in connecting nodes across the network and also in being the source of content that forms the basis for digital developments (of which Manchester City’s ‘Cityzens’ platform is an example) and content creation (such as Amazon’s ‘All of Nothing’ series).

But the network is not just about football; rather, it constitutes a value chain that links a multitude of stakeholders each of which is working to derive benefits from their investments.

For Abu Dhabi, a rentier state for which it is commonplace to generate off-shore incomes, it is seeking to wean itself off a dependence upon oil and gas revenues. It helps as well that CFG’s franchises are all located in cities to which Abu Dhabi’s state owned airline, Etihad Airways, flies.

For the likes of Silver Lake, a private business in the world’s biggest free market, its involvement is driven by the need to generate a financial return for its owners. In turn, for CITIC and CMC, in a highly state-regulated country the pressure is inevitably upon building China’s presence and political influence overseas.

Back at base (if that’s what Manchester City’s Etihad Stadium can be called), senior managers are driven by a vision of football that draws heavily from notions of ‘Disneyfication’. That is, using Walt Disney as a reference for CFG’s development and growth.

Interestingly but not uncoincidentally, in addition to acquiring a stake in Reliance Jio Saudi Arabia’s PIF has also recently spent US$500 million on Walt Disney shares. Cartoons aside, Disney itself owns sports broadcaster ESPN, which won’t have gone unnoticed in Riyadh.

Indeed, government in the city has of late been making some rather bellicose noises about building its own global sports media empire. This has been accompanied by even louder noises as PIF has engaged in the protracted pursuit of Newcastle United, a club that plays football in the English Premier League.

Rumours have also been circulating that Saudi Arabia may also be interested in buying Italian Serie A club AS Roma and France’s Olympique Marseille. An international network of football clubs with links to media, entertainment and digital – sound familiar?

If this is Riyadh’s game plan, we shouldn’t be surprised; after all, Saudi Arabia and Abu Dhabi are close allies, though the former’s mimicking of its much smaller neighbour is intriguing.

It might seem like long way from Manchester to Mumbai. However, with Abu Dhabi as a staging post and with the means of transport fuelled by money from the United States and China, football’s journey from being a sport to becoming an entertainment product embedded in global tech and finance is just a red thread away.

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BN

Simon Chadwick

Simon Chadwick is Director of Eurasian Sport, Professor of the Eurasian Sport Industry Director, Centre for the Eurasian Sport Industry.