roger mitchell
26 February 2023

Federations are Sports’ Maginot Line… expensive and useless.

roger mitchell
26 February 2023

When an organisation or company gets targeted by a financial “raider”, a Gordon Gekko, an activist shareholder like Paul Singer, a private equity fund, an LBO boutique, there are two competing narratives aren’t there?

Either,

  1. They have it coming. They are fat, lazy, complacent, resting on their laurels, spending too much money on central overhead, not innovating. Forgetting the true owners, the clubs; or,
  2. They are a prudent custodian of an asset that is more important than a short-term return on capital. That hold reserves and excess cash to prepare for the seven years of biblical famine. They are the good guys.

You know where I’m going with this, don’t you? 😉

 

The Greed is Good speech is 36 years old.

Listen to this monologue from Michael Douglas and substitute the thrust towards sports governing bodies.

I am not a destroyer of sport, I am a liberator.

God knows sport needs liberating. Its British Leyland in 1975.

Let’s have this debate, shall we?

Sports fat cats have it coming, or they are the Sir Lancelot Percil-white protector of tradition and dignity?

Firstly, let’s separate the categories a bit: Sports leagues are not the same as sports federations and governing bodies. I’m not particularly coming after the NFL, NBA, EPL, IPL, etc. Those are all commercial member organisations owned by their shareholder clubs/franchises who, in my direct experience, are pretty damn efficient and accountable. Their exec leaders are all very very capable guys.

In talking about the FAs, the PGAs, the UEFAs, the IOCs, and today especially the Rugby Unions. Those organisations survive thanks to the amateur vote on committees.

The utter shambles we are seeing in Welsh rugby is nothing short of a disgrace. Players not getting paid, at a time when the WRU has been given loads of fresh capital from CVC. Strike threats.

Red Robbo times indeed.

But no one seems that bothered. Least of all CVC (what were they thinking giving all this money with no conditions on change in governance?).

I’m not going to go deep on the full detail on the situation in rugby. Suffice to say, it’s truly shocking, and the people involved should be ashamed. The AYNE podcast this week covers it well.

Rugby as a sport, in its leadership and governance is exactly as Gordon Gekko described in the video. Maybe worse. Not only are they totally rubbish in themselves, but they also massively hinder the people actually investing in the game. Or trying to. They are killing the game of rugby. It needs to be said. Clubs are dying, rescue attempts flounder.

But it’s not even a surprise. It’s not an outlier. The horrors of IOC and FIFA corruption, the old-fartdom of the blazerati in royal boxes around the world, are known to all of us. We all shrug, guffaw and move on. But rugby now is an utter shambles.

In our Keystone Cops sports governance, the rugger buggers lead the field, throwing the ball around the backline with some panache.

I don’t think that it’s actually in debate that “they had it coming, fat, lazy, complacent, resting on their laurels, spending too much money on central overhead, not innovating”. It’s everybody’s view from what I see. And I usually don’t like to get involved in consensus editorial, writing me-too content, but for these people I’m going to make an exception. I’m going right over the top.

Here is why all of these organisations need the corporate raider, the person to put blood on walls and carpets, to terminate with extreme prejudice. To liberate the sport.

Because they are set up to fail, existing within an orgy of moral hazard and misaligned incentives. In many ways, its not even the old boys’ fault.

They are in the wrong movie; if you will, directing Gone with the Wind in the age of diversity.

Here are the briefing notes for the KC case for the prosecution:

They make money off the assets of someone else. Players are usually paid by someone else. Their clubs, their sponsor. These FAs and Unions get the power to call up someone else’s assets when they want, not pay a fee for their rent, use them for their unending appetite of “internationals”, from which they make loads of money. Isn’t that the greatest business in the world? No cost of sales.

And they do all this with an arrogance of entitlement.

They have no real incentive to look after those assets. Using a motor sport analogy, I summon all the best and most expensive Ferraris from their owners, not pay for them, and create an event where hopefully they will run at full revs, for a month or two, crashing into each other. I’ll of course make money from that event and

I don’t care if the assets don’t perform for their employer before and after.

You can’t reason with these FAs and Unions because they are dominated by the butchers, bakers and candlestick makers of amateur sport. People of moral outrage, who have not invested any of their own capital, as Gekko also notes. You know that saying about giving a small man a uniform, and watching how it goes to his head? That’s every single one of these organisations, writ large. Jack Warner cubed.

Nobodies, from the committee rooms of Smallville, up and down the country.

These people, being, in the main, anonymous, cling on for dear life to what makes their lives special; their expense accounts, their first class jollies to the confederation AGM, their VIP tickets, the royal box, their handshakes with Princess Anne and Nelson Mandela. But they also have

a “my precious” relationship with something else… their national stadium.

They have all taken much needed monies from their sport, generated by someone else’s asset, and hosed it away on a white elephant stadium, which then utterly dominates their financial and commercial strategies going forward. I mean, there are no stadia already available in football and rugby that can be used? Give your member clubs some much needed income? Oh no. Let’s build something that costs hundreds of millions in capex, massive annual maintenance, and obliges you as a strategy to throw as many games at the location for decades. More internationals (with someone else’s asset). A national stadium is possibly the worst idea in sport. I saw the shambles of Hampden in 1999, Murrayfield in the same period, where eventually it likely hits the taxpayers pocket. But oh, how these executives committees love this stuff. Symbols of grandeur. Sports Maginot Lines. Who pays for these errors? Not them, but their member clubs and their sport.

The moral hazard is off the charts.

These organisations have no separation of powers, and are equally the legislative, executive, commercial, and judiciary. If not enough, they aren’t even accountable. Almost untouchable, as

the weight of diddy team democracy will dominate their gentleman’s-club constitutions and prevent any innovation.

These people, as marketeers, are actually in competition with their member clubs. Their shareholders. Let’s remember the shock of Ryan Reynolds when hearing about the ban on broadcasting of Wrexham games. The insanity of the Saturday afternoon broadcast black out period “to protect the playing of the game at local fields by amateurs and very small community clubs”. FAs are in competition with their clubs right across sport’s revenues lines of TV, sponsorship, matchday.

FAs are crowding out the club game.

They are monopolies and restraint-of-trade organisations who will have no hesitation to cripple any attempts at fresh thinking, of innovation, in formats. The PGA since LIV, has evolved and moved more in 12 months than in 12 decades. That’s what happens in monopolies.  Competition is, as Gekko says, what keeps us improving, innovating, and remaining relevant. These people don’t, in any way, think like that.

They think the Trabant is a competitive product in the car market.

They promote mediocrity. People of A quality hire A+ people. People of B and C hire Ds and Es. Because it is more important they aren’t threatened from within. And they promote loads of the Tim, Nice but Dim characters.

All these places are dripping roasts of excess fat. Nepo babies, old-chap jobs for the boys.

Ok, as I am a fair guy, here is the other side of the trade. In reading below, you’ll realise that I’ve personally had these debates many many times.

we may be sleepy. but

we won’t sell our soul for a quick buck”.

“We have loads of cash reserves because we are custodians of the social fabric, that is sport. I know it makes financial sense to lever up on debt, but we won’t do it.

You never really own a Patek Philippe, you protect it for the next generation.”

Any players we pick from your club side, benefits just by being picked. If there is a transfer value, it doubles on the first cap.

The international game is the pinnacle.

We invest in the grass roots. Look at project A we did in this inner city, project B we did in Gabon for pitches.

Our mandate is to foster and grow the sport, not maximise a financial return.

A national stadium gives a massive return in history and prestige. That famous Library of Memories. Italy doesn’t have a national stadium and they all talked about the magic of playing at mythical Wembley. It’s a cost, but

consider it like a flagship store in Bond Street. It’s image and brand.

Don’t talk to me about too many internationals.

Try and do less summer tours to Asia.

Mr Smith from the Lancashire Schools FA has given his life to the game. How dare you insult him as a nobody?

He knows 100 times more than you and is respected globally”.

We don’t do gimmicks and fireworks.

Would Gareth Edwards want any of that? TikTok streaming?

So yes, we will take whatever players we want from you, when we want. For free. You will say nothing, as you know as well as i do that your employees want to play for their countries. They understand the glory of sport. Now go and talk about return on capital on your yachts. We can’t afford one coz

we are still paying for your fuck-ups in 2008, when the ordinary Joe had to bail out merchant bankers like you.

You can never be excellent in life and business until you can argue the other person’s side with conviction! Here it is.

Ladies and gentlemen, this argument will never find common ground. So what’s the end game.

It’s LIV, superleagues (football, triathlon, cricket, swimming, lacrosse et al). All of these people have one thing in common.

They can’t be arsed anymore trying to win the argument. Trying to breach the Maginot Line. So they’ll just go through Holland instead.

Which is a crying shame.

The big finance guys like Gekko are often neither nice, nor worthy. Especially in the last 20 years, they have lost all high moral ground over the merits of competitive destructive capitalism. It is now crony capitalism far too often. Manipulated markets.

And the performance of CVC in rugby also doesn’t shout out “ we are the answer”.

The hero of Wall Street was Charlie’s on and off screen dad. The union leader of the airline.

Let me say this, there are these people also in sports governance. Good people. Smart people.

We need to find them, empower them, before the Barbarians at the Turnstiles, out of sheer frustration, sweep it all away like a charging elephant.


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