Gaurav JethwaniThe Problem
Posting record revenues of over US$650 million in footballing history (for the Financial Year 2021-2022), Manchester City have gradually grown to dominate the Premier League over the last half-decade.
Ever since the Manchester club’s takeover by the Abu Dhabi United Group (ADUG) from former Thailand Prime Minister Thaksin Shinawatra in 2008, a trend has emerged of state-owned groups buying controlling interest in football clubs to take them from having a local fanbase to achieving global dominance. Nasser Al-Khalefi-led Qatari Sports Investments (QSI) became the sole owner of French club Paris Saint-Germain (PSG) in March 2012, while more recently, Saudi Arabia’s Public Investment Fund (PIF) completed the takeover of Newcastle United—historically, a big English club—last year.
For Man City, investment has been relentless in order to build a global fanbase and dominate the sport. The club have employed top sporting professionals both on and off the pitch to achieve league success over the years, having gone on to become league champions six times in the last decade.
However, the problem lies in the source of the investment. The Club Financial Control Body (CFCB) of UEFA has kept Man City on a watchlist for the primary reason of investigating whether they inflate their revenues through sponsorships to match Financial Fair Play’s (FFP) break-even regulations. And while UEFA has been keeping a close eye on Man City, other clubs have proved to breach the rules as well.
Investigation
The Break Even (BE) concept of the FFP allows football clubs to spend a certain amount of what they earn in revenue from matchday sales, merchandising and licensing, player transfers, prize money and sponsorships.
Man City, in particular, have spent more than US$1.5 billion since 2008. There have been leaked internal emails “proving” Man City of inflating their sponsorship revenue from Emirati sponsors like Etisalat and Etihad Airways, with the money allegedly provided by ADUG owner Sheikh Mansour himself.
As a consequence of a higher amount of “allowed expenditure”, there has been an exponential inflation rate in transfer fees and player wages. We, the football fans, saw that firsthand with Neymar’s transfer from FC Barcelona to PSG for approximately US$225 million — the highest a club has paid to attain a player to date.
In 2014, PSG and Man City were both fined US$60 million for breaking UEFA’s FFP rules. To combat these regulations, there have been accusations that clubs like them create shell companies that become “partners” of the club, aiding to inflate sponsorship revenue, which allows them to have an increased expense budget. A strong link between a “sponsor” and the owner(s) of a club can, therefore, result in a breach of FFP rules.
Case in point, in November 2021, Man City announced a cryptocurrency startup called “3Key” (started in 2020) as their regional partner. There was no mention of which region, location and/or what kind of partnership it was going to foster into. The only available information to the public were the executives on 3Key’s website and Man City’s official statement: “We are excited to partner with 3Key in their journey to simplify the decentralised finance (DeFi) trading analysis user experience through the power of football to engage with our fans with a range of content and activations.”
When fans all over the world scoured the internet to find digital footprint of the named 3Key executives and could not do so, it raised eyebrows. Examining 3Key’s Twitter handle, we see that it has only 24 tweets, with the first one posted on October 5, 2021, a very basic landing page, with its partnership with Man City announced on November 15, 2021 and the Twitter handle last tweeting on November 21, 2021. As more and more media eyeballs started coming their way, Man City cancelled their partnership with 3Key just two months into the company’s existence.
Another prime example is PSG’s acquisition of Neymar Jr (US$225 million) and Kylian Mbappe (US$165 million) in the summer of 2017 that led to economic instability throughout the footballing world. After an inquiry from UEFA, PSG explained that they had an annual sponsorship deal worth US$220 million with the Qatar Tourism Authority that offset their summer spending. Der Spiegel, however, reported that in exchange for the hysterical sum of money, PSG did not have adequate deliverables.
“The agreement with the Qatar Tourism Authority consisted of a mere five pages and obligated Paris Saint-Germain to advertise for Qatar and ‘participate annually, at the request of Qatar, in its promotion activities’. Otherwise, the team had to do nothing for QTA: It didn’t have to put the company’s logos on its jerseys, it didn’t have to put up advertising in its stadium, it didn’t even have to put a link on the club home page.”
Coming back to Man City, who recently announced gambling company 8XBet as their Asian regional betting partner. 8XBet’s deal has similarities with that of 3Key.
Legendary English footballer Teddy Sheringham is a brand ambassador for the company. In the image below, he can be seen posing with who is supposedly an 8XBet executive.
However, this detailed Twitter thread from Nick Harris of Sporting Intelligence explains that this “executive” is actually an actress/online cam girl who was in all likelihood paid to do the shoot. The thread also explains that 8XBet’s executives are actually leading separate lives with different jobs. When Harris contacted Jet Zhu, the CEO of 8XBet’s marketing firm QOO, he remained coy and eluded answering any questions.
Let’s look at 8XBet’s Twitter account: joined Twitter in January 2022, only 68 followers, tweeted only 195 times, and the most popular tweet from the account is actually about Cristiano Ronaldo and not Man City. A web analysis showed that less than 170 people visited 8XBet’s site daily. Isn’t all of this surprising for a company that claims to be a sponsor of one the biggest clubs in football?
New Conclusion
Reading everything, it feels like evading FFP regulations is not that difficult. To some, it may seem like these clubs are blatantly performing a circus act by creating what looks like shell companies. To others, it may be smart business. Either way, it is undeniable that state-owned clubs have majorly disrupted the footballing ecosystem through inflated sponsorships, revenues and transfer fees.
A positive example here would be of English club Fulham, who cancelled their partnership with Titan Capital Partners (announced in September 2022) after it was revealed that Australian authorities were investigating the company over licensing issues. Responsibility was taken by the club and they acted upon it immediately.
While some clubs like Fulham have taken some responsibility for their actions, there are others who have fought cases in European courts to get off scot-free. UEFA itself has been constantly criticised for allegedly being a fundamentally corrupt organisation.
Year after year we are seeing that football is becoming a sport of commercial gain. With the Saudi PIF already owning Newcastle United, it has been recently reported that the Investment Corporation of Dubai is looking to buy Manchester United.
Surprising? Not really.
