The collapse of the European Soccer League, less than 50 hours after it was announced, should serve as a warning sign to global policymakers, investors and chief executives who support the movement of ideas, capital and people across borders to expand opportunity and prosperity. “The time of extreme globalization is in the rearview mirror,” RSM US chief economist Joe Brusuelas said.
The populist uprising that occurred last week, leading to the demise of the ESL, felt familiar in a way. This new league, so clearly delineating the haves from the have-nots, brought on feelings of being left behind by the elites, as countless fans saw their identities relegated to second-tier status with the formation of a breakaway league. As Brusuelas explained it, “You’ve allowed technology to diminish our jobs; you’ve asked us to subsume our identities to avoid another repeat of the middle of the 20th century; and now [our] teams are not good enough to play in the league. Whether it is Brexit, the rise of Trump or the Reddit Bros trying to overthrow Wall Street, it is this sense that we’ve been left behind again [that was behind the resistance].”
Our Take: To be clear, there is still plenty of room for globalization within team sports (obviously, individual sports like tennis and golf are already global). It just needs to occur within leagues where the fan base has not adopted their favorite club as a substitute for the loss of nation, state or religion (as is sometimes the case in Europe). “The sport most likely to succeed in terms of globalization is basketball, where [Olympics aside], it is not organized around national teams; where the NBA and FIBA have worked together to create this league driven by true global talent,” Brusuelas said. That does not mean NBA fans are less passionate about the game than those in Europe are about soccer. However, much of the NBA fan’s attention is on the stars as opposed to the teams themselves.
Team owners looking to globalize would also be well suited to bring their fellow clubs along to share in the prosperity (money they need to compete). Part of the problem with the Super League was that its construction played right into the critique nationalists have with globalism. “It was fixed for the wealthy, educated and technologically savvy [and slanted against the have-nots],” Brusuelas said. The absence of relegation for those founding members meant those teams would always reap the benefits of the league’s lucrative broadcast rights without necessarily having earned it, and those left on the outside would likely see their revenues decrease.
The idea for a Super League has been percolating for nearly 40 years, but one has to think dreams of a closed-door system that would concentrate capital for the world’s most prominent clubs is now dead. So, it’s reasonable to wonder how investors who were banking on an initial windfall worth between 300 and 400 million Euros and larger payouts moving forward will manage to generate the returns sought. Brusuelas said the best way for club owners to grow revenues and profits “is to stay put, adopt profit-sharing and a salary cap [within their domestic league] and create the conditions for a level playing field.” By making the leagues more equitable, the sport will thrive long-term. Jack Ablin (chief investment officer, Cresset Capital Management) agreed saying, “The Super League is really a symptom of a lopsided system. What they need is a bit more parity in their league like we have in the NFL.” The UEFA Champions League seems to be a suitable avenue to greater revenues, too, Brusuelas noted.
Several founding Super League clubs are heavily levered and will now have to do without the bailout they anticipated. Brusuelas suggested balance-sheet rehabilitation is their solution. “Owners who are over-leveraged may choose to seek exits or they may choose to expand their brand identities into North America and Asia,” he added. Doing so would not upset the team’s fans as they will still be able to retain their identity, leagues and sport as it has always existed.
It’s possible the Americanization of European soccer will be slowed in the wake of the Super League collapse. “The Americans were blamed for this right off the bat, so in the near-term you may see less American investment in European sports [as they won’t be wanted by the fans],” Brusuelas said. But Ablin did not suspect the Super League collapse would be the end of U.S. investment in overseas teams. “While [European fans] can vote with their feet, I don’t see any let-up occurring unless it is controlled [by a regulatory body] in some way.”
The are implications from the past week’s events beyond Europe. If teams rooted in the identity of their communities need to have a chance to compete at the highest level and share in the sport’s overall prosperity, then the prospect of a college football Super League (as has been discussed seemingly as an inevitability) should be a non-starter. “The powers that be inside college sports should learn a very valuable lesson here,” Brusuelas said. “You cannot cleave off preferred status in a gravy train at the expense of the conference and sport partners. If the Power 5 [or a portion of the P5] really intends to create a space just for their teams, they will end up diminishing college sports in general and college football in particular. Why does the NCAA tournament resonate? It’s the idea teams have to play in, and even [the smallest schools] have a shot.”
For the record, Brusuelas believes the Super League model would have hurt the sport in the long term. The lack of pro/rel means less passion among fans of Super League teams (since there is no risk of being sent down) and a loss of interest among those rooting for teams on the outside. It would have also increased the gap between the haves and have-nots. As it currently stands, he reminded, “One of four teams is pretty much going to win every year.”