How City Football Group is redefining soccer club ownership
This article was originally published on April 29th, 2020.
City Football Group (CFG) is no ordinary soccer club owner, but that is because it never set out to be one in the traditional sense. The aim from the outset was to do things differently.
“Innovation has always been a key component of our strategy, whether it’s innovating in terms of the business model, or even on the pitch,” notes Omar Berrada (below, right), chief operating officer at CFG. “It’s always something that we’ve tried to do as we’ve grown over the last years.”
To say that such an approach is paying off would be an understatement. Established in 2013, CFG now boasts a valuation of US$4.8 billion – the biggest for an organisation of its kind – after Silicon Valley-based technology investment firm Silver Lake bought a ten per cent stake in the company late last year. For those at CFG, Silver Lake did more than hand over a US$500 million cheque; it also provided the biggest endorsement to date that the various pieces of the organisation’s global puzzle are falling into place.
“They’ve decided to invest in us because they see the CFG model as a platform that in football is different,” Berrada declares. “[It’s] unique, innovative and has generated an enormous amount of value for our club shareholders, and will continue to generate that value over the coming years.
“Their background is mostly in technology, but in general as a firm they’ve been very successful. So for somebody with those credentials to come in and invest in City Football Group is a testament to the work that has been done over the years.”
When Berrada speaks of that progress, he rattles off accomplishments that would suggest CFG’s rise has been decades in the making. But while its ubiquity and swift success might give the impression of a company that has been part of soccer’s furniture for some time, the truth is that – in sporting terms – much of that growth has been achieved overnight.
But with that in mind, it is worth considering what, exactly, convinced a company like Silver Lake – the self-described global leader in technology investing that counts Chinese ecommerce giant Alibaba and agency behemoth Endeavor among US$43 billion worth of combined assets – to make CFG its first investment in soccer.
Premier League champions Manchester City are the crown jewel of City Football Group's club investment portfolio
To think of CFG is of course to think of Manchester City, a once modest English soccer club who blended into the crowd, but who have morphed into a finely-tuned, title-winning machine since being taken over by Abu Dhabi in 2008. The reigning Premier League champions remain CFG’s crown jewel, but the organisation has grown its portfolio to include eight teams, most recently planting flags in China and India to add to clubs in the United States, Australia, Japan, Uruguay and Spain. It is an acquisition strategy that knows no equal in the world of soccer, and one more closely aligned to the art of multiple franchise ownership seen commonly in North America.
When CFG announced its investments in third-tier Chinese outfit Sichuan Jiuniu FC – a deal that was aided by CFG’s minority shareholder China Media Capital - and Indian Super League (ISL) side Mumbai City FC, it completed an important triangle. In the world’s most populous countries – ones with gargantuan economies and burgeoning tech markets - CFG now considers itself precisely where it needs to be.
“When we set out as City Football Group, the three big markets we always had in mind were the US, China and India, right from the beginning,” Berrada reveals. “For the most part we were able to go to the US very quickly. We then thought about China and India, but ultimately we didn’t want to go to those markets without having the right partner.
“We’ve got into a position now where we’re very comfortable with the people that we’re working with in such key markets, markets that have grown so quickly over the last years from an economic perspective and have interesting socio-demographics. The interest in football is also growing very fast, so if you look at the combination, we think the idiosyncrasies are very interesting, and now being able to have a physical presence there, to be able to help and continue to develop football in those territories, is fascinating.
CFG's investment empire spans five continents
“It will also continue to help us to grow our partnerships. A lot of departments that we have been speaking to for, I would say the last six years, have been asking: ‘what are you doing in the US? What are you doing in China? What are you doing in India? How does that look for the future?’. And now we have a clear vision in those territories.
“So I think we’ve created a network of clubs that gives us an ability to develop our commercial presence, our fan engagement ability, as well as our football platform.”
To think of CFG, then, is also to think of a business that leans on technology more than most – with over 2,000 employees and 1,500 players around the world, it would be fair to say that it has to. And given the rate at which the organisation has spread its tentacles since being established, it is unsurprising that technology has come to underpin an intricate global network whose influence now spans various continents and time zones.
When we set out as City Football Group, the three big markets we always had in mind were the US, China and India.
“It’s absolutely critical,” Berrada says of technology’s role from an operational standpoint. “We have eight clubs, so we are a thoroughly complex football organisation – I would say more complex than most. We approach our businesses in terms of what kinds of technology can help us manage this business where we have eight clubs, multiple offices around the world, a large network of scouts and consultants, and commercial and marketing team members based all over the world serving these different clubs.
“So the usage of technology helps us to stay connected to our staff, to our partners, to our fans, and we really have made an effort to find the right partners that can help us develop those tools to be able to do everything.”
CFG announced its investment in Mumbai City FC in November
As the 2020s dawn, it is hardly groundbreaking for a high-ranking executive working in top-level sport to highlight the mounting significance of technology, but in this case Berrada is able to point to several examples of that in action. A far-reaching deal signed in October with Cisco was completed with the intention of enhancing connectivity at five of CFG’s clubs. Prior to that, at the end of 2018, Manchester City penned a multi-year partnership with cloud software company Acronis that is designed to better manage and protect the performance and operational data collected by the club. Every deal, it seems, is signed to improve performance on and off the pitch.
“Given our strategic positioning and our focus on innovation and technology, I think we’ve created a platform that is very attractive for top brands to be able to roll out their technologies and work with us to continue developing them,” Berrada declares. “At the same time, primarily it is about using those technologies to create the best experiences for our fans, to be as efficient as we can in terms of managing our systems internally.
We’ve created a platform that is very attractive for top brands to be able to roll out their technologies and work with us to continue developing them.
“What we want is genuine integration with our partners, so that when they’re out there talking about the benefits of working with us, it’s based on real case studies both on and off the pitch, so I think that’s been a key component of our commercial success. And also, through the fact that we’re finding these top brands and top partners are working with us, it’s also helping us a little bit on the pitch, because they’re able in some cases to create that added benefit and incremental improvement in our performances.”
With that last point in mind, Berrada is particularly keen to draw attention to a sponsorship deal with German software specialist SAP, whose equipment is regularly used by City manager Pep Guardiola, his coaching staff and players.
“If we talk about SAP, there are three areas of the relationship, so we say from the boardroom to the pitch,” he explains. “On the one hand we’re using their business systems, their ERP systems, for our finance partners, for our business management tools, etc, to help us become a lot more effective and efficient.
“The second element of the partnership is around football. There has been a lot of focus on using data to maximise the performance of our players, so we work with SAP to generate the best insights from the data that has been generated to help find the incremental upside in the performance of our players and coaches.
A Manchester City coach gives winger Riyad Mahrez instructions using SAP technology
“Then, finally, the third element of the SAP relationship is a fan component, so how we can use the data that has been generated – whether it’s around what’s happening on the pitch or outside the pitch – to improve the experience for our fans either using digital platforms such as our app, or in-bowl.”
For CFG, though, its interest now extends far beyond simply taking advantage of the technologies that are already out there. At the start of 2019, the group was named as the anchor investor in Sapphire Sport, a new US$115 million venture capital fund launched by Sapphire Ventures. Focused on technology and digital sports, the fund plans to make between five and six startup investments of between US$3 million and US$7 million each year.
The fund launched with an existing portfolio including live streaming platform Mycujoo, digital sports network Overtime, and gaming studio Phoenix Labs. Berrada notes that it has already allowed CFG to explore “very interesting areas” such as esports, digital health and fitness, and next-generation media.
It’s giving us a really first-hand insight and the ability to be first movers in the world of tech and entertainment. We want to be part of that, we want to be at the forefront of that.
“It’s definitely helped us open our minds up to the different ideas, technologies around,” he adds. “Say, ticketing solutions that actually make sense. Things like data analytics clearly are things we’ve been looking at for a few years now, but that doesn’t mean there aren’t new services and new approaches that are different to what we’ve already adopted. So I would say it’s a mixture of areas that we had already been looking at, but looking for new ideas in those sectors, and at the same time opening our minds up to new technologies that we hadn’t considered initially.”
As Berrada talks SportsPro through CFG’s various technology interests, it becomes easier to connect the dots. At the very top level, CFG will now benefit from the entrepreneurial expertise of Silver Lake, whose managing director Egon Durban has become the organisation’s ninth board member. Berrada points out that while the relationship with Silver Lake “is still very young”, the partnership will allow CFG “to tap into their knowhow of the tech industry” and “also into their contacts”, noting that its new investor will “be able to suggest and put us in touch with people that fit in well with what we’re trying to do”.
Then, at the other end of the scale, are initiatives like Sapphire Sports, allowing CFG to “actively participate as investors”, Berrada says, and potentially take ownership of what he describes as “hopefully the next big idea in the world of sports and entertainment”. Then there remains everything in between.
“It’s giving us a really first-hand insight and the ability to be first movers in the world of tech and entertainment,” Berrada explains. “If you think about how that’s starting to merge and the experience it’s creating for fans all over the world, it’s absolutely fascinating, and we want to be part of that, we want to be at the forefront of that.
Fans pose with the Premier League trophy during Manchester City's visit to Yokohama in July 2019
“The combination of having the likes of China Media Capital, Silver Lake, as well as our investments in Sapphire, puts us in a really good position to be able to tap into their knowhow network, and really get a close insight on those technologies, services and tools that will help us on and off the pitch over the coming years.”
As has already been well documented elsewhere, CFG’s path to this point was mapped out some time ago in a 2009 book by Ferran Soriano, then fresh from a stint as vice president of Spanish soccer giants FC Barcelona. In it Soriano, who is now CFG’s chief executive, prophesised the transformation of soccer clubs into global entertainment businesses more akin to Disney or Warner Bros., money-making vehicles that could convert success into merchandise sales and their stadiums into theme park equivalents. And, as Soriano was seemingly all too aware, Disney is nothing without its content – that is, after all, the root from which all other branches of the media giant’s business have grown.
It is therefore unsurprising to find that Manchester City in particular have drastically evolved their content offering under CFG’s watch. They were the first soccer club to feature in an Amazon ‘All or Nothing’ docuseries, a move Berrada describes as “bold and brave”, and one he says “probably set the bar in terms of what football clubs will be doing for the next years”. The past year has also seen the club launch its own over-the-top (OTT) streaming subscription service and partner with Intel to trial the company’s True View immersive viewing technology, while they most recently became the first team to create their own channel on YouTube Kids.
“We want to make football more accessible for more people around the world, and that goes beyond just what happens on the pitch,” says Berrada. “We want to ensure that our clubs are able to compete and win as many trophies as possible, playing a specific style of football, beautiful football that is attractive for our fans around the world.
“We’ll continue making sure that we use all the different digital platforms available to us - whether it’s the club app, whether it’s launching the recent OTT service, we want to make sure that we are as ubiquitous as possible in terms of reaching out to our fans.
“We have millions and millions of followers around the world, and most of them will never have a chance to come to the Etihad Stadium, or to watch a game in New York or in Yokohama, but they’re still very much engaged with us, so we spend a lot of time thinking about how we can provide that content that creates that emotional connection, that creates that conversation, that dialogue, both between our clubs and our fans, but also between our fans, so that’s what we try to do – we try to create content that’s good for them, that is meaningful.”
We are maybe becoming more similar to Disney than to traditional football clubs.
There is little doubt, then, that CFG sees itself as a soccer organisation of the future. At a time when many sports team owners may wish to avoid referring to their clubs as money-making, global entertainment businesses, those at CFG are under no illusion as to what the end goal is.
“I think we’re definitely getting there,” Berrada observes, when asked whether CFG is close to achieving Soriano’s target of operating more like a company in the mould of Disney.
“If you think about the global nature of football, the number of people that watch the game, that participate in the game, that play it, it’s the number one sport in the world. The beauty of the City Football Group model or organisation is that we are present in so many different territories and so many different platforms that, really, football is happening in one shape or another every single day of the year - whether it’s the game, whether it’s a trophy tour, a fan viewing session, an activation with some of our partners, there’s something going on everyday within City Football Group and across the world.
“So I think in that sense, yes, we are maybe becoming more similar to Disney than to traditional football clubs – we are an entertainment group in that sense because we are able to provide entertainment on and off the pitch across the globe.”