RICH PICKINGS: A league of their own

Soccer is the latest billionaire's plaything, with some of the world's richest snapping up some of the world's most valuable football clubs. But will too many millions spoil the sport?

Forget the luxury boat, the private island and the sports car. The latest accessory for any rich entrepreneur is a soccer team. From Perth to Portsmouth, wealthy investors are buying a slice of the world game and, in some cases, turning soccer into a giant spending competition.

While the bulk of the world’s most valuable sporting clubs are located in England, Australia’s fledgling A-League soccer competition – just three years old – has quickly become a rich man’s playground.

Mining baron Tony Sage owns a large slice of Perth Glory, investor Geoff Lord holds a big stake in Melbourne Victory and billionaire Frank Lowy owns a stake in Sydney FC. Lowy is also chairman of the Football Federation of Australia.

Billionaire Clive Palmer has just backed the establishment of a team on the Gold Coast, which will enter the league next year. Media mogul Bruce Gordon is apparently set to back the establishment of a new club in his home town of Wollongong.

But these are reasonably modest investments – the Australian clubs are worth around $10 million at the most.

England’s Premier League competition, which generates revenue of $4 billion a year, is where the zillionaires of the world really come to play.

Last month, Abu Dhabi United Group finalised its $477 million takeover of Premier League club Manchester City.

Dr Sulaiman Al-Fahim, the leader of the United Arab Emirates investment giant, has promised Man City manager Mark Hughes he will invest a staggering $1.3 billion to buy 18 new players for the club. Al-Fahim’s aims are to win the Champion’s League within three years, make City of Europe’s biggest clubs and put Abu Dhabi on the map.

Al-Fahim has already rocked the football world by paying $72.3 million for Brazilian star Robinho. When the European transfer window – a month-long period during which clubs can buy and sell players – opens on January 1, Man City is expected to launch another buying spree. The club’s chief target is Manchester United star Cristiano Ronaldo. The mooted purchase price? A whopping $290 million.

Al-Fahim is the latest in a long line of wealthy private investors to purchase Premier League clubs in the last five years.

The procession started with Russian billionaire Roman Abramovich (worth an estimated $30 billion), who bought London club Chelsea in 2003 for about $133 million in a deal which valued it at nearly $100 million. Two years later, American tycoon, Malcolm Glazer (fortune: $2.9 billion) paid $1.8 billion to buy the world’s most famous club, Manchester United.

The last two years have seen a takeover spree. In 2006, US sports tycoons George Gillett and Tom Hicks (fortune: $2.3 billion) paid $390 million for Liverpool, Russian-born French national Alexandre Gaydamak (fortune: $1.2 billion) bought Portsmouth for $71 million and a consortium led by Icelandic businessman Eggert Magnusson bought West Ham for $190 million.

In July 2007, former Thai Prime Minister Thaksin Shinawatra (fortune: $380 million) bought Manchester City for $181 million before selling it to Abu Dhabi United Group. American billionaire Randy Lerner acquired Aston Villa last September for $140 million.

But while the arrival of wealthy investors has helped many of these clubs buy new players, improve their performance and generally please their supporters, not everyone is happy with the influx of money into the game and particularly the aggressive stance taken by Chelsea’s Roman Abramovich and Manchester City’s Sulaiman Al-Fahim.

For starters, the mammoth size of these investments appears difficult to justify. According to the latest Annual Review of Football Finance from accounting firm Deloitte, total revenue for the Premier League from broadcast rights, ticket sales and merchandise sales is about $4 billion. On the other side of the ledger, the clubs spend around $2.2 billion on player wages and $1.1 billion on transfer fees for new players.

That doesn’t exactly leave much for the operating costs of actually running 20 football clubs and their entire infrastructure, including stadiums, training facilities and administration staff. No wonder only eight of the 20 premier league clubs are profitable and the net debt of the league is $5.5 billion ($1.3 billion of which is attributed to Manchester United and $1.4 billion to Chelsea).

Australia’s A-League (like most of the big sporting leagues in Australia) tries to ensure the viability of its clubs through the imposition of strict salary caps.

While the A-Leauge’s salary cap has a big drawback – the best Australian soccer players usually leave the country early in their careers to chase the big dollars in Europe – it does help safeguard the competitiveness of the competition. No one team can buy up the all the best players.

The EPL has no such salary cap and already some club managers, including Arsenal’s Arsene Wenger, have questioned whether it is healthy that some clubs can simply spend their way to the top of their league, leaving less wealthy clubs in their wake.

This is not just a matter of club rivalry – having a handful of clubs dominate year in, year out could also be bad for business.

If the league was to become uncompetitive, with only a handful of clubs contending for the title each year, television audiences could switch off and the value of the EPL’s main revenue source – broadcast rights – could start to fall.

If that happens, the bubble economy that is British soccer could well burst – and a lot of wealthy investors could lose a lot of money.