New Deals Link U.S. to World-Class Soccer Soccer is bridging the Atlantic in new ways: American investors are buying British soccer teams; and in July, David Beckham will make his debut with the Los Angeles Galaxy. Stefan Fatsis, sportswriter for The Wall Street Journal, tells Michele Norris, the trend is keyed by opportunities for merchandise and marketing.
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New Deals Link U.S. to World-Class Soccer

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New Deals Link U.S. to World-Class Soccer

New Deals Link U.S. to World-Class Soccer

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The Italian soccer team AC Milan beat Liverpool in the final of Europe's prestigious champions league this week. The score was two to one. Now that's fine, you might be saying. But what's the American angle on this? Well, here it is. Liverpool, one of Europe's premier teams, is owned by Americans. Joining us, as he does most Fridays, to talk about this is sportswriter Stefan Fatsis of the Wall Street Journal. Hello, Stefan.

Mr. STEFAN FATSIS (Sportswriter, Wall Street Journal): Hey, Michele.

NORRIS: Now two years ago, you and I talked about the first takeover of an English soccer team by an American. That was Malcolm Glazer's purchase of the storied team Manchester United. It seems like this has begun a trend.

FATSIS: Yeah, Glazer was first, then you had Tom Hicks and George Gillett, two investors who own North American baseball and hockey teams, buying Liverpool who we mentioned just a few months ago; Randy Lerner, who owns the Cleveland Browns bought Aston Villa; and now you've got billionaire Stan Kroenke who owns teams in the NFL, the NBA and Major League Soccer last month increasing a stake in Arsenal to 12 percent, and he could attempt a full takeover, then you've got several other Americans who are in the market for teams.

NORRIS: Now Stefan, you work for the Wall Street Journal, so I don't need to tell you that the exchange rate between the dollar and the pound is pretty awful right now. So what's prompting Americans to buy all these English soccer teams?

FATSIS: Availability is one thing, then you've got this recognition that U.S. sports don't have the global appeal that soccer does. Teams like Arsenal and Man United and Liverpool can much more easily build fan bases in places like China than American sports teams can. You've got the worldwide growth of sponsorships and merchandise and TV contracts. The English Premier League's deal in Europe is worth about $5.5 billion for three years, about the same perk club as NFL TV deals. But what's really interesting is that all of this is happening even though these teams, unlike most U.S. sports teams, just don't make much or any money.

NORRIS: Why don't they make money? Why aren't they profitable?

FATSIS: Well, the cost of doing business is higher. One reason is that there are no controls on player spending. There's no revenue sharing among teams the way we have in almost every major U.S. sports league. Second is that soccer has the system of relegation. The bottom teams in leagues are demoted to a lower division. And that's a huge risk for an investor in every team except for the very top ones. The cost of getting demoted from the Premier League in England to the next lower division has been put at nearly $80 million a year in revenue. Now the threat of that forces teams at the bottom of the league to spend a lot money on players to avoid relegation. That trickles up to the top teams and they spend even more money so that they can stay at the very top of European football. There's a terrific economist in England named Stephan Semansky(ph) and he argues that new American investors must see the growing need for cost controls in English football and they want to be positioned now to capitalize when that happens.

NORRIS: So Stefan, since we've been talking about American inroads into European soccer, I have to ask you about David Beckham. When do we think he's going to arrive in the U.S.?

FATSIS: The schedule is July. He'll join the Los Angeles Galaxy of Major League Soccer. That would be great news for the paparazzi. It could be great news for soccer fans too. He has played very well in recent weeks for Real Madrid, his team in Spain, and there reports that tomorrow, it might be announced that Beckham is doing so well that he'll be called up to play once again for England's national team.

NORRIS: Thank you, Stefan.

FATSIS: Thanks, Michele.

NORRIS: Have a good weekend. That was Stefan Fatsis of the Wall Street Journal.

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