Behdad Eghbali became a co-owner of Chelsea as a face of Clearlake Capital along with Jose E Feliciano, and has taken a leading role at the club alongside Todd Boehly. Eghbali spent a great deal of time working across Europe with Boehly in the summer transfer market, and held meetings with directors of some of the world's biggest clubs in his role.
The Chelsea co-owner was quizzed on his for plans, the impact of venture capital on the relationship with Chelsea, plans to have multiple clubs and more at SporticoLive's "Invest in Sports" Summit.
What are you focused on with a European investment?
For us, it was about looking at the macro. You look at the NFL, the NBA, NFL, 20 or so billion revenue, 150-200 million fanbase, media rights, all rights, all IP is shared within the league whereas European soccer you have a massive - English Premier League - massive global audience, you share broadcast revenue but big disparity otherwise in terms of your IP, your assets.
We thought Chelsea was good beachhead, it was frankly an asset, a business that was not terribly well managed on the football side, sporting side or promotional side, so meaningful opportunity at the club and we'll get to it for us, who needed the beachhead to then look at multi clubs. Obvious Blitzen, Ian and others have done other clubs without the beachhead first but for us we wanted to start with Chelsea and I'm sure you'll ask us about multi club and how you piece all of this together, hopefully, there's at least a theory and a business plan to do so.
Can you pick up on the idea of Disney or a platform or a beachhead and what you're trying to achieve there?
It could be Disney, sports is religion, could be, not to pick on the Catholic Church, but the Catholic Church - these are institutions that have a wide generational following that thanks to technology and streaming and digital rights are in the really early days of global audiences of live content.
They are to some degree public-private partnerships but like anything you've got to put a good product on the field. You've got to win. You're content, your asset is that play and I think the opportunity to make it a platform is there. These things are generally not well-managed. They're not optimised, some of the US ownership, Fenway Group with Liverpool or Abu Dhabi model with Man City have done it well but for the most part, these things haven't been optimised.
We looked at it and we think European sports is probably 20 years behind US sports in terms of sophistication on the commercial side, and sophistication on the data side. I had one super high-level sporting director at the world's biggest, top three club tell me when I asked about their approach to data and said the data is my eyes. He has six scouts, no data and using some of the data points we know of the good sports teams of any league here there are 20-30 data analysts and wie use of data.
That is one analogy, one place we think there is a lot of runway in terms of European sports which by the way have a global audience, a global opportunity. I think 90-95% depending on the team, of the top teams in England the fanbases are outside of the UK. These are global assets, global audiences which we think we can certainly help grow.
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No collective bargaining like in US sports, passion of European fans an added complication?
I think it's also an asset not to share your revenues if your New York City with Memphis. London, what we have in the portfolio, outside there is a tremendous amount of ways we can monetise the media asset that hasn't been done yet. The approach to mobile is 1999 in terms of most of the clubs out there, again Fenway does it well, is nicely profitable. We think there's a lot to do around games, media, and live content stories. We have content from players in the academy, Chelsea academy along with Barcelona probably the two best in Europe, we have stars starting six, seven, and eight. Monetising some of that content into a 30 for 30 or a lot of the stories we like to have as opposed to sharing with the leagues.
The question is how do you run these more effectively, how do you control salary cost. I think there's a global pool of talent, for the multi club, comes into play you have clubs that can be development pathways for players where you're managing your content, labour costs much more effectively. You're not signing the 30-year-old free agent, you're signing players, keeping players, you're not subject to arbitration.
We think there's a path to controlling labour costs and still producing a winning product using data, using the multi club. We think the multi club is an interesting tool for player trading. The ones we've looked at successfully generate on payroll of 20m, Red Bull Group which does it well we think, 15,20, 25 maybe 40 million payrolls for their largest club they generate 50-100 million yearly in profit, in player trading, player sales. You bring in the data overlay and a cohesive global structure.
Teams that are better run in second-tier markets that you're buying at revenue multiples and revenue multiples matter in so far as you can structurally make money. We look at some of the US sports leagues and teams and NFL, NBA, NFL is profitable but there are revenue multiples at 5,6,7, 8, 10. I think Gerry is buying teams at 1,2, 3, 4 times revenue multiples and if you have a cost structure that can sustain and you invigorate the fanbase we think you can have a business that makes money that are natural monopolies in their markets without the regulation, without the salary caps.
Minimum salary caps are what you've got to spend if you're a small market team. We think early days and you look at the track record of folks who have invested, there are certainly folks who have lost money, but for every one or two bad investors, the well-run clubs there have been a lot of good success stories and we think we are embarking on one but a lot of work to do to accomplish it.
On the gap between Europea and US?
One interesting data point, is cumulative market cap, use the Forbes value of NFL teams probably 150-155 billion, the Premier League, La Liga, France, Italy I think you're probably 30 billion, fanbases of maybe 3-4 billion globally compared to 200 million and that's being generous to the NFL. A league and a sport that is optimised, clearly not everything is created equal but a four billion fanbase on a cumulative market gap of 30 billion maybe and cumulative media revenue of five or six billion against 20 for the NFL on 20 times the fanbase globally.
Factor it into investment pieces?
At Chelsea or AC Milan levels, these are the premium teams, the premium payrolls in respective leagues. I think that's less of an issue. What relegation means for Chelsea is frankly a league that has three partners leaving and three entering each year.. So in terms of alignment to grow the pie, and redistribute the pie it's not exactly what the US sports leagues and teams, the fraternity that exists. The league-wide thoughtful management that exists in most US leagues doesn't there, it's more of a collective confederacy of teams that maybe work together but not always.
Frankly, for an astute US investor, it means an opportunity where you're stepping into a division two or three team, you run it better, you create the player pathways, and you get it promoted. These are prize teams that are teetering on the edge of relegation or teams that are second division, appropriately are priced for it. Story after story, Italy is more complicated and people have lost money but you guys have a choice asset. In England, largely people have done well, and made money.
I think places where people have made mistakes on relegation, honestly, in our diligence has been inept management of commercial and the sports side of it. If you're buying a division two or team teetering you are getting paid for it. Especially if you can improve it.
Multi club models
I think three different reasons for it. One, if done well you can make money on each specific enterprise. What Gerry has done, Ian you guys have done, you've bought well you're going to make money on a specific investment.
Two, if done right, if you use data, if you're thoughtful about this global market for talent and access of talent that is not effectively done through a draft or an extensive college or baseball farm system which I would attribute as a multi club model. You can capture, acquire, retain, sign talent and monetise talent. There's a talent arbitrage opportunity that exists.
Three, for an AC Milan or Chelsea it's the perfect pathway of developing talent whereby you don't have to spend crazy money on payroll. There are teams in the Premier League that spend 10% of what the top five or six teams spend on payroll. We hired a coach from Brighton and we think they're one of the best-run teams in the Premier League. The owner is from a sport gaming, data background. Spends 10% of the payroll, wins almost as much and is a very stable mid-market, mid-table, very profitable club. I think if you apply some of that IP into developing talent but keeping your talent. Not subject to arbitration, certainly subject to free agency but the model of six, seven, and eight-year contracts earlier based on players you've retained who have market value we think can be a sustainable model.
We're probably in the third inning of that, of teams, all of us and others are looking at different markets, making bets in different markets. For us, Portugal is an interesting market. A gateway to South America, a gateway to European visas, the French market is interesting given the quality of the league, given frankly quality, French speakers in Africa. Africa wef think is a big, big market. The Dodgers, you mentioned Todd, they have a farm team in Uganda. Looking at Africa as a market with an untapped amount of talent, close to Europe time zone-wise. Again, I think we're all teetering at the surface of where we're going to go.
Clearly, our approach was, it so happened because of a global conflict Chelsea was available and we thought we'd start with that. Ian, what you've done with Blitz is not start with the large market club and frankly built a nice network of clubs that have cohesion and symmetry. When we've seen it not work is when people are buying clubs largely because it's there and for sale. Even they've made money on it.
One thing to be mindful of there is really Champions League or continental competition. There have been solutions for that in terms of ownership level. We could partner and be a minority holder on a team and still get the benefit of some of the know-how but really firewall off the scouting and decision-making. There's thoughts to do that if you want to own the first team in multi that will qualify for Champions League. That's a barrier that has been crossed a little bit by folks but not fully crossed yet and I think creating the right governance will enable that. We think the individual club is stronger.
Ultimately, if you're investing capital into a training facility, an academy, a stadium, if you're improving the team you're going to have a lot of public support and I think there are a lot of untapped niche markets that are avidly supportive of the teams. There are teams in small cities in Europe that sell 40-50,000 seats. These are 200,000-person cities. Pretty incredible. We're attracted to the fact we don't think it's operated in Europe, nearly in the same level of sophistication that US sports teams are. Notwithstanding some of the exceptions like Fenway Group, most of the teams are not operated efficiently and professionally and that presents a pretty good opportunity.
Venture capitalists usually have an exit strategy, how does that mesh with ownership?
I would say, we think winning and a good product on the pitch and commercial success go hand in hand. You have to have a good product to generate sponsors for the content to work. The ESPN special worked because Michael Jordan won. Luc Longley didn't have a special during COVID, it's just the way it is. You've got to win. Winning on the pitch, you can do it efficiently as opposed to not, but you have to do that to have commercial success.
On the second question, at Clearlake, we've done five continuation vehicles, that we call icon vehicles. These are permanent vehicles where LPs (Limited Partner) can choose to sell or stay in. There's certainly a market we think for long-duration ownership for specific assets where we give LPs a choice to sell or stay in. We've done about 9 billion of it in the past 18 months. Sports have multiple folks, institutions, and individuals who are interested. Some of the largest pension funds in the US, actually the largest, asked us if they could go invest. The affinity level of sports, and everyone has an opinion so everyone has an opinion on all of the above. We think there's a market for it and we think there's a market to afford LPs the ability to exit and others to step in and to have a long-duration vehicle to keep these assets. We've done it with other assets. There are certainly businesses you want to own for a long time and private equity has to evolve from the formation 'Hey, I raised a fund, I've got to sell'. But cn we keep some assets whether sport or otherwise and enable people to come in and out and the market is evolving to that and I think you're going to see more innovation from a lot of sponsors to do that.
Super League?
I think the sport needs more high-quality premium matches and content. It doesn't have to be a super league. Todd went there on an all-star game. Baseball all-star game, talent competition, draft generates 2/300 million of revenue on a Monday, or Tuesday. Here none of that exists. Could you see a EPL vs Serie A all-star game, could you see a pre-season match that we do that puts more premium content on the pitch? Structurally, given how botched that effort was to create something else, does anyone have any appetite for anything that sounds like that. I think a couple of teams in Spain do and they're vocal about it and everyone else doesn't want to go there.
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