The Pros and Cons of Ups and Downs, part two

Yesterday I described the ways relegation and promotion, or the lack thereof, impact decision making at the top level of sports organisations. A knock-on effect of this is that America and Europe attract different types of club owners with different priorities. Again, this might not sound important, but read on.

In 1976 Ted Turner bought the Atlanta Braves baseball club. The Braves had been in Atlanta for ten years previous to this, but there is no record that Turner had shown a particular interest in the team. He wanted it for one reason only:programming . Turner owned a small, independent local television channel called WTCG. Major League baseball teams play a 162 game regular season, so owning the Braves equated to roughly 486 hours of quality programming that was virtually guaranteed to get good ratings in the south-eastern United States. Even if the Braves played badly having their presence on the broadcast schedule would give the fledgling station enough cache to expand beyond the local Atlanta market. After a name change to WTBS and the cable television explosion of the late '70s, Turner created the first of the 'superstations' that continue to be a big presence in the American media today. Four years later, using the revenue from WTBS, Turner launched his second channel. This was based on a crazy idea to have a channel that only showed news. He called it the Cable News Network, or CNN, and the rest is history.

The Braves did play badly. In the following fifteen seasons they placed last in their division nine times. They did win the division once, in 1982, but failed to win a single game in the playoffs. Since 1991 the Braves have racked up one of the most remarkable records in baseball history, but the important fact remains that for the initial fifteen years of his ownership Turner was able to leverage his ownership of the club into a worldwide media empire despite the fact that they were consistently one of the worst teams in baseball. They would never get relegated, so no matter how badly they played he knew he could still offer Major League Baseball on his airwaves the next year. And as long as he had Major League Baseball, no cable company was going to not carry WTBS in its channel package. The fans suffered, but Turner made good on his investment.

There have been businessmen who have bought Premiership football clubs in England, but rarely as in investment. A football club is a millionaires' bauble, a hobby that can occupy the otherwise idle rich. Roman Abramovich has spent roughly £600 million on Chelsea FC since his arrival in 2003. No one expects him to recoup his investment. Lord Alan Sugar sited the time and money he spent on Tottenham Hotspur as the main reason for the decline of his computer firm, Amstrad. There are plenty of rich men in English football, at all levels. The difference is that they almost always become rich before they get involved in football. No one, bar players and managers, gets rich from the business of football.

The reasons for this are simple. If you own a team that cannot be relegated you have a fixed asset. It can decline in value if it is badly managed as a business, but not significantly if it is badly managed on the pitch. Short term results will not make or break you. In other words, it will be a fairly normal business.

If you own a team that can be relegated, suddenly your investment is in constant jeopardy. If you get in a financial pickle off the pitch, you cannot cut costs on the pitch or you will find yourself in an even bigger financial pickle than you were before. In fact, if you don't dedicate any and all available funds to getting better and better players you are going to be outspent by the other teams in your league and you will be relegated anyway. You need a ready supply of cash at all times, and don't expect the banks to be your friends with such a crazy business model. In short, a football club cannot really operate like a normal business. If you buy shares in a football club you are crazy to think of it as anything other than a charitable contribution.

And here is an important irony. In European sports, money (as in short-term cash flow) is the most discussed topic in sports news after the results themselves. American sports franchises, which run like small corporations, very rarely discuss money publicly. Who woulda thunk it?