The proposed European “Super League” could be dead in the water by the time this piece appears in Just Two Things, but then again, it may have just been a negotiating ploy that backfired.

If you’ve been on a retreat since Sunday, the story in brief is that 12 leading European clubs—six from England, three from Italy, three from Spain—announced plans to create a “Super league” outside of the governing body which wouldn’t have relegation. The plan was for 20 teams in all, of which a further three would be permanent members and five invited from year to year.

Players and managers

It is the kind of proposal that owners and finance directors like, at least on the inside of the magic circle, and fans of sport would hate. And players and managers too: Jurgen Klopp of Liverpool and Pep Guardiola of Manchester City, unconsulted, made their distaste as clear as they could when asked, as did both Liverpool players and the Manchester United player Marcus Rashford.

Well, as I learnt when I was a financial journalist a long time ago: when you don’t know what’s going on, follow the money.

Financial bet

The financial bet that the owners are making is that television networks globally will stump up for a diet of games in which Juventus plays Arsenal or Manchester City plays Atletico, over and over. Local fans will care quite a lot less.

And to this extent it’s probably being driven by a combination of the debts that many of these clubs have amassed during the pandemic (and before), the apparent plateauing of the revenues from pay-TV markets in Europe, and the fact that participation in UEFA’s European competitions—even though rigged heavily in favour of the larger rich clubs (and under the latest proposals even more so)—still involves an element of competition, both to qualify and to progress to the more lucrative final stages.

Monopolists

In this sense, the proposals are a reminder of the observation by venture capitalist Peter Thiel that capitalists and investors prefer monopoly to competition.

They are also a reminder that this proposal is the logical development of trends in football ever since the English Premier League broke from the Football League in the early 1990s to capture more of the revenues from the new pay-TV sports market created by BSkyB. (But they still had to live with the risk of relegation.)

Following the money, however, actually takes us to the American investment bank JPMorgan. It is JPMorgan that has raked up the €3.25 billion investment pool (laughably described as an “infrastructure grant” in the proposals) from which the clubs will also get their “welcome bonus” of several hundred million Euros. On closer inspection, this “bonus” turns out to be an advance against future revenues (this might even be described as “a loan”) which will be repaid at rates of 2-3% a year at a time when interest rates are under water. JPMorgan is also in line for some hefty fees.

Reputational risk

So that all sounds like nice work if you can get it. But here’s the thing. As Matt Levine reported on Bloomberg, JPMorgan has a committee that is supposed to evaluate reputational risk, and it looked at this deal:

JPMorgan’s goodness/badness committee did take a look at this financing, but I suppose the goodness/badness committee is focused on more traditional risks and not full of soccer fans:

“JPMorgan’s involvement was vetted by its internal reputation committee, which assesses high-profile and potentially controversial assignments, according to people briefed on the decision. But that committee didn’t fully expect the emotional reaction from sports fans that has flooded the airwaves around the world, these people added.”

Traders and guardians

And there is a reason for this. JPMorgan are traders, and football fans are guardians. This is Jane Jacobs’ distinction in her book Systems for Survival,

between systems based on territory (‘guardians’) and systems based on exchange (‘traders’). Most human societies need both. But when we get the distinctions between them blurred, breakdown and corruption follows.

They are complementary systems that shouldn’t get mixed up.

Fans for life

But the consequence of huge amounts of loose capital floating around the global economy, and the endless decline in productivity, means that it is difficult to make easy returns on investment on productive business, so finance instead looks to make money by turning the public sphere into markets.

Football fans, generally, are fans for life; they are morel likely to change their partner than their club allegiance. While they spend a lot of money on their clubs (for tickets, merchandise, etc), this is also about personal and local identity. It is not a transactional relationship.

Surprises

So if you’re sitting in JPMorgan in New York, in a culture of franchised owner-driven sport, it’s easy to overlook this detail. The owners also seem to have been surprised. They have been surprised that the big German clubs (which are fan controlled) haven’t joined in, nor Paris St Germain, which made a statement about the value of competition in sport.

They have been surprised by the vehemence of the reaction from fans—at time of writing, it seems that this has persuaded Chelsea and Manchester City to withdraw from the plan. And they have been surprised by the vehemence of the British government, which perhaps opportunistically announced that they would oppose the breakaway league by all means possible.

Two days in, with the clubs that went in pulling out as quickly as they can, it looks like a miscalculation. UEFA had to postpone today’s (Wednesday) vote until April on the new European competition rules, but if it wants to, it could now push back. Rule one of negotiation is never to carry out a threat unless you know you can go through with it.

Disaster

As Sports Illustrated observed of the whole Super League saga:

The lack of planning seems extraordinary. There have been no detailed financial projections, no explanation of who might be prepared to broadcast the league, no information as to what solidarity payments to non-Super League clubs may comprise. Although Pérez and others have made bullish statements about the legality of the Super league, UEFA and the existing leagues seemed skeptical.

As a PR operation, it has also been a disaster. The war was lost within a few minutes. There seemed to be no strategy for coping with the backlash from fans and no positive vision was ever set out.

There’s another rule here, and maybe it’s more a rule for life: just because an investment bank thinks something is possible, you don’t have to think that it is a good idea.

A shorter version of this post also appeared on my Just Two Things newsletter.