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European Super League: JP Morgan to Provide GBP 4.6 billion Funding

The announcement of a new breakaway league within European football has been met with widespread disapproval from football fans, as well as UK Prime Minister Boris Johnson, the Duke of Cambridge, UEFA and the Premier League. The proposal of the European Super League (ESL) was announced on Sunday 18th April, as it’s revealed that the UK Government is currently liaising with football authorities to prevent the plans from going ahead.

The controversial statement was followed by yesterday’s news that the share prices of the founding football club had taken a notable jump. Juventus saw the biggest price increase of 18%, whilst Manchester United’s share price saw 11% growth. Investors ignored the backlash from the announcement, instead focusing on the potentially substantial revenues that the ESL’s founding clubs could generate.

Immediately, there were raised questions as to how the new ESL  would be funded, as reports confirm that JP Morgan, America’s largest bank, will provide the funding. The bank, which holds over USD 3 trillion worth of assets, is reportedly offering GBP 4.6 billion worth of financial support to back the new controversial league.

Whilst a spokesperson for JP Morgan has confirmed that a deal for the ESL is currently being negotiated, they failed to provide any specific details at this time. The transaction looks to be the most substantial football deal of 2021, as Tim Bridge, a director at Deloitte, labels the funding as “a pretty seismic shift.”

JP Morgan launched their sports financing team division during the late 1990s, having established valuable business relationships with notable football team owners. Their most significant client is Stan Kroenke, owner of Arsenal FC, as well as the Los Angeles Rams and the Denver Nuggets. One of the most notable transactions between JP Morgan and Mr Kroenke was a USD 2 billion deal to fund the Rams’ Inglewood stadium project.

The history of JP Morgan’s sporting transactions further highlights the significance of the looming ESL deal and the financial implications this could create within European football.

Super League

What is the European Super League?

The European Super League consists of 12 clubs, including the UK’s ‘Big Six’; Arsenal, Chelsea, Liverpool, Manchester City, Manchester United and Tottenham Hotspur, though recent headlines have referred to the group as ‘the shameless six’ in condemnation of the move. Despite the accusations from fans, the Big Six have all stated their commitment to the Premier League.

The Big Six will join AC Milan, Atletico Madrid, Barcelona, Inter Milan, Juventus and Real Madrid for a new midweek competition, with the tournament intended to commence as soon as possible.

The proposed competition aims to rival the UEFA Champions League as it’s revealed that the 14 Premier League football clubs who are not involved in the arrangement will hold a conference call to discuss the plans with Premier League CEO Richard Masters today.

What is the proposed format for the European Super League?

It has been outlined that there will be 20 football clubs that will compete in the European Super League annually. The 12 mentioned clubs are currently confirmed as founding members, though there will be 15 in total, all guaranteed to play in the ESL each season.

Another five clubs can qualify to play in the ESL based on domestic performances, with midweek fixtures set to continue for all clubs in their relevant national leagues.

The tournament is anticipated to commence in August each year, with clubs taking part in 2 groups of 10. Eight clubs will then progress to the quarterfinals, with the final to take place in May. There are also plans to have a women’s version of the competition.

Why is the European Super League controversial?

The European Super League will not consist of a tiered league system with relegations and promotions and will instead include the same teams each year. Whilst this football league structure is similar to American football, which contains fixed teams, the system is unusual for European football.

Football fans and authorities in the UK have voiced their frustrations over the proposal, with many stating that the structure of the league removes the fundamental competitive element of the sport, lacking sporting merit and driven by greed.

Boris Johnson stated that the proposal could be very damaging for UK football. The UK prime minister’s primary concern was that the ESL would remove the connection that football teams have with their fans, local towns and communities. “The clubs involved must answer to their fans and the wider footballing community before taking any further steps”, Mr Johnson said.

Culture Secretary Oliver Dowden has also expressed disapproval, stating that the UK Government will do everything to protect the national game. The government will examine competition laws and regulations surrounding work permits and taxation to prevent the proposal from going ahead. The prospect of fan-owned clubs and reducing financial support for the clubs is also being discussed.

Whilst the UK Government continues to find ways of curtailing the plans for the ESL, a researcher from the University of Twente in the Netherlands has claimed that the European Union (EU) is under obligation to end the league proposal, believing it to violate competition law. Tsjalle van der Burg claims that the ESL would be illegal under European competition law as clubs compete with one another for consumers at a national level. Mr van der Burg stated, “consequently, as far as the end products of the football industry are concerned, the ‘relevant markets’ are the national markets.”

French President Emmanuel Macron praised the fact that no French football teams agreed to be part of the new league, with UEFA stating that they would remain united in their opposition to the breakaway league.

The European Club Association (ECA) made clear that they were strongly opposed to the ESL, whilst the Football Supporters’ Association (FSA) stated that the new league proposal was motivated by nothing but cynical greed.

Why is the European Super League being proposed now?

The fundamental reason for the proposal of the ESL all seems to come down to financial assurance. With the COVID-19 pandemic having such an impact on the sporting industry, particularly football who rely significantly on revenue generated from ticket holders, the ESL proposal aims to provide financial stability to all clubs involved.

The founding clubs will receive EUR 3.5 billion upon joining the league, with the funds intended to support the club’s infrastructure investment plans, offsetting the negative financial impacts that the COVID-19 pandemic has had on them.

With JP Morgan providing GBP 4.6 billion of financial backing, there is the opportunity for losing teams to earn GBP 130 million, with the champions who win every game able to claim up to GBP 212 million.

Tim Bridge from Deloitte highlighted that it was understandable why the proposal would appeal to football club owners, given that it would provide investment security. When football clubs do not qualify for specific tournaments, such as the Champions League, the team takes a significant hit on revenue throughout the season.

However, playing in a competition such as the European Super League guarantees that the clubs will play, provides financial security and maintains the investment value.

Bridge acknowledged that whilst the clubs involved had the potential to generate significant revenue from the ESL; he noted that there would also be risks. A fundamental issue is that organisers are developing a brand-new competition and one which many people are against.

Placing Europe’s goliath clubs into one competition may seem like a valuable prospect from an investment perspective but, with sporting merit removed, fans will continue to question the true worth of the proposal.

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