Melbourne Heart FC buy out - Man City, Melbourne City FC, etc.

[Red or Dead]

 

 

Agree 100%. the MCFC brainstrust are not stupid at all. They will quickly sum up the situation and the level of support the club has. The more we turn out and show support for the team and our colours the less likely they'll tamper with it. Why upset the solid supporter base when it's these very people you need to create the match day experience! However other aspects of the club, wheelie bins, etc are likely to be consigned to the dust bin of history. And not a moment too soon.

 

I dont mind a name change, But dont mess with the colors - the message on the weekend was simple and hopefully effective - they are all smart people i dont see a home color change on the cards

 

Agree and it's promising to hear of City's fan consultation but still won't be convinced until we're running out in red/white next season.

 

On another note, has much been mentioned of Etihad Stadium (Melbourne Docklands) and a possible link with the new club identity? You'd assume Heart/City would be committed to AAMI but stranger moves have happened.

 

Despite all their money and don't get me wrong its great they have invested in our club, I think they are smart enough to know our message is clear - change what you want expect the colours (home kit)

 

I think you mean "except the colours" - what you've written has the opposite meaning! Lol

[carpiste]

My last post stated there were some ungrateful bastards here.I admit that was a little strong but banners and insulting chants won`t go down well.Remember our owners will be watching what`s going on here and on any other forums relating to Heart.They will take into account all your feelings.They may well think,as I do, that there are a few ungrateful sods here.

For all of you who are going to jump down my throat and call me a twat,or whatever, please,please have another look at our website. Take a look at all the changes that have happened to the club.You cannot be anything other than impressed by our owners.

If you like to watch good football, want to be part of a successful,attractive footballing team then leave the owners to it.

They will make decisions based on what you guys believe and what they believe to be the best for Heart,

If that means a name change and colours change they will do it regardless.They will bring success of that I have no doubt whatsoever.

Have faith in them, don`t insult them or your man city brothers.

For you rag fans here, yes, carry on and call me whatever you like but City are THE biggest club in Manchester.We will be the biggest club in Europe before too long.LIve with it!     

[MUTD/MLBHRT/ESSNDON]

I totally agree with everything apart for the last couple of lines. Bigest club in Manchester...? When I was in Manchester three seasons ago, you guys were giving out 10,000 free tickets to a Europa League match and your stadium was still half empty. As a Utd fan I can take it on the chin and say, yes you play the best football in England and your team has class in every position... But take it real easy with the bigest team in Manchester buddy!

[M13]

Ah Carpiste..relax a second

Loyalty is praiseworthy but as far as fans go I´ll say that we still got a long way to go before we match Uniteds fanbase, not that I care really..tickets are hard enough to get anyway if you want to bring a mate.
But anyway, it´s not about Manchester.. It´s about CFG (which actually is a London based holding company) and their plans and ambitions for Melbourne

[Petercrouch]

Given that Storm got 20% of this venture and .. What´s in it for them really?

I'd imagine so city have a good Australian based consortium who has made a local team successful in a market foreign to them (city that is).

Also any profits we make they get 20% of as part-owners... Given the trend that we generally have made more than we have spent it's a win/win for them if said trend continues

[M13]

I don´t know much about the Storm OG I must admit, the New York venture depends very much on local financial and political clout hence a team like NY Yankees was a perfect partner. From what I have seen about the function of this Storm partnership there are just indications that they will handle back-office stuff.. makes me curious

[belaguttman]

I think that Sorm is hoping for access to some City admin,  medical and training expertise.

[carlings]

up the stormers!!

[MHFCROB24]

 

 

 

Agree 100%. the MCFC brainstrust are not stupid at all. They will quickly sum up the situation and the level of support the club has. The more we turn out and show support for the team and our colours the less likely they'll tamper with it. Why upset the solid supporter base when it's these very people you need to create the match day experience! However other aspects of the club, wheelie bins, etc are likely to be consigned to the dust bin of history. And not a moment too soon.

 

I dont mind a name change, But dont mess with the colors - the message on the weekend was simple and hopefully effective - they are all smart people i dont see a home color change on the cards

 

Agree and it's promising to hear of City's fan consultation but still won't be convinced until we're running out in red/white next season.

 

On another note, has much been mentioned of Etihad Stadium (Melbourne Docklands) and a possible link with the new club identity? You'd assume Heart/City would be committed to AAMI but stranger moves have happened.

 

Despite all their money and don't get me wrong its great they have invested in our club, I think they are smart enough to know our message is clear - change what you want expect the colours (home kit)

 

I think you mean "except the colours" - what you've written has the opposite meaning! Lol

 

haha good pick up, Was half asleep when i posted this, Basically Melbourne is red and white!!

[SF33]

I think that Sorm is hoping for access to some City admin,  medical and training expertise.

 

That and they're purchasing a stake in the club when it was at absolute rock bottom with regards to performance and support. The would fully expect to double their money (and that's very conservative) like Sidwell did and barely having to lift a finger to do so.

 

 

 

I think we made the point well on Friday. I don't think insulting the new owners is really appropriate given they've said nothing yet about changing colours, and have said they will listen to supporters. Right now, they're taking a good look at all aspects of the club before making changes. And I trust we'll have the chance to express an opinion before anything happens.

 

 

Spot on. No-one that really matters has said anything about changing the red and white stripes to sky blue, the Manchester City people have said all the right things and shown us nothing but respect and our response will be to say 'GFYs'? Seriously?

 

I think Friday night's banner is about the limit of what I'd like to see, with regards to getting on the front foot and that more aggressive gestures will have exactly the opposite effect to the one that was intended. The people involved with Manchester City and now Heart, have shown themselves to be absolute top-notch performers; I think the least we could do is return the courtesy they've shown towards us.

[belaguttman]

An interesting article on the Man City accounts and why we should expect a substantial 'payment' from MHFC to MCFC for branding rights and facility use, image rights etc. as Man City try to balance their books to within the Fair Play regulations.

[DieHardRed]

My last post stated there were some ungrateful bastards here.I admit that was a little strong but banners and insulting chants won`t go down well.Remember our owners will be watching what`s going on here and on any other forums relating to Heart.They will take into account all your feelings.They may well think,as I do, that there are a few ungrateful sods here.

For all of you who are going to jump down my throat and call me a twat,or whatever, please,please have another look at our website. Take a look at all the changes that have happened to the club.You cannot be anything other than impressed by our owners.

If you like to watch good football, want to be part of a successful,attractive footballing team then leave the owners to it.

They will make decisions based on what you guys believe and what they believe to be the best for Heart,

If that means a name change and colours change they will do it regardless.They will bring success of that I have no doubt whatsoever.

Have faith in them, don`t insult them or your man city brothers.

For you rag fans here, yes, carry on and call me whatever you like but City are THE biggest club in Manchester.We will be the biggest club in Europe before too long.LIve with it!     

Typical "Bitter Blue" 

Starts off with some common sense , then cant help himself but drop one of those we are bigger than Utd crap, 

Heard it over and over again - Yawn . You will never be Bigger and you know it. Yes you are currently Better ( far better) 

But Money spent well can do that and despite the Chelsea result this morning City are still the best and most attacking team in the league and will win the league - 

Get over yourself Carpiste , Your comments can cause a divide amongst Heart fans.... 

Its also silly, some Heart Fans on here have never experienced what you & Chelsea fans have in recent years they will look at tit for tat as the future, due to the new owners Trillions and comments of buying success from other teams supporters.

Getting back to The Heart , cos that what this Football Forum is about - Not Manchester Blue or Red

My concern on the comment .."If that means a name change and colours change they will do it regardless." 

That is arrogance - Melbourne Heart Fans do not want to hear this . 

Or are your comments just a wind up - I wonder 

[United]

Agree with the last few posts. There is no need for insulting or provocative chants and banners. This buyout brings so many positives. The new owners are incredibly professional and will already know the prevailing sentiments. We will gain far more credibility if we just keep turning up in red and white and supporting the team with our "come on you boys in red" etc

I think this is the best way to approach the situation, if they still go on to change the colours and name, then we can talk about the consequences.

[Kiro Kompiro]

There's nothing stopping fans and active fans from rocking up in red and white stripes, regardless what the owners choose to do.

[Murfy1]

A pretty interesting development at NYCFC regarding their badge:

 

 

New York City F.C. to debut crest through the fans

 

Dave Martinez

 

February 4, 2014

 

[an image NYCFC tweeted through their offical twitter account]

 

New York City F.C. are preparing to debut their crest – and fans will play a big part in the reveal.

 

The club is set to release a “crest generator” tool on their website, allowing fans to submit their shield ideas. Each crest will then become a pixel in a “badge of badges” mosaic, depicting the club’s new shield as part of a grand unveiling expected to happen on March 10th.

 

“New York City FC will be a Club for its fans, which is why they should have a hand in creating its identity,” said New York City FC Chief Executive Officer Ferran Soriano. “We want the badge to be an authentic representation of New York City’s spirit and personality. This design tool will enable fans throughout the City and the world to send in their concepts and to be part of the creation of New York City FC.”

 

This is the first part of a three-step process for the club’s shield. After fan submissions, NYCFC will reveal two potential shields for fans to vote for based on designs by a hired outside part. Those will likely be revealed in the final week of February. On March 10th, the entire campaign comes to a head with the shield unveiling and the presentation of the “badge of badges” mosaic.

 

The generator will have template options for fans to choose from, but will also allow for uploads of original designs and photos. The “badge of badges” mosaic shield will be viewable online, allowing fans to zoom in on their original artwork, while a “physical manifestation” of the piece is expected to be displayed in the Clubs’ permanent facilities once that has been secured.

 

“As a former player, I know the pride an athlete feels when wearing the badge of their club,” NYCFC Head Coach Jason Kreis says. “In this case, I feel it will be all the more special having had the fans participate in it in such a meaningful way.”

 

http://www.empireofsoccer.com/debut-crest-through-22915/

Edited February 5, 2014 by Murfy1

[tigerou812]

A pretty interesting development at NYCFC regarding their badge:

 

 

New York City F.C. to debut crest through the fans

 

Dave Martinez

 

February 4, 2014

 

[an image NYCFC tweeted through their offical twitter account]

 

New York City F.C. are preparing to debut their crest – and fans will play a big part in the reveal.

 

The club is set to release a “crest generator” tool on their website, allowing fans to submit their shield ideas. Each crest will then become a pixel in a “badge of badges” mosaic, depicting the club’s new shield as part of a grand unveiling expected to happen on March 10th.

 

“New York City FC will be a Club for its fans, which is why they should have a hand in creating its identity,” said New York City FC Chief Executive Officer Ferran Soriano. “We want the badge to be an authentic representation of New York City’s spirit and personality. This design tool will enable fans throughout the City and the world to send in their concepts and to be part of the creation of New York City FC.”

 

This is the first part of a three-step process for the club’s shield. After fan submissions, NYCFC will reveal two potential shields for fans to vote for based on designs by a hired outside part. Those will likely be revealed in the final week of February. On March 10th, the entire campaign comes to a head with the shield unveiling and the presentation of the “badge of badges” mosaic.

 

The generator will have template options for fans to choose from, but will also allow for uploads of original designs and photos. The “badge of badges” mosaic shield will be viewable online, allowing fans to zoom in on their original artwork, while a “physical manifestation” of the piece is expected to be displayed in the Clubs’ permanent facilities once that has been secured.

 

“As a former player, I know the pride an athlete feels when wearing the badge of their club,” NYCFC Head Coach Jason Kreis says. “In this case, I feel it will be all the more special having had the fans participate in it in such a meaningful way.”

 

http://www.empireofsoccer.com/debut-crest-through-22915/

Nice idea. Further shows that the new owners look like they want to keep it's supporters happy.

[wombegongal]

A pretty interesting development at NYCFC regarding their badge:

 

 

New York City F.C. to debut crest through the fans

 

Dave Martinez

 

February 4, 2014

 

[an image NYCFC tweeted through their offical twitter account]

 

New York City F.C. are preparing to debut their crest – and fans will play a big part in the reveal.

 

The club is set to release a “crest generator” tool on their website, allowing fans to submit their shield ideas. Each crest will then become a pixel in a “badge of badges” mosaic, depicting the club’s new shield as part of a grand unveiling expected to happen on March 10th.

 

“New York City FC will be a Club for its fans, which is why they should have a hand in creating its identity,” said New York City FC Chief Executive Officer Ferran Soriano. “We want the badge to be an authentic representation of New York City’s spirit and personality. This design tool will enable fans throughout the City and the world to send in their concepts and to be part of the creation of New York City FC.”

 

This is the first part of a three-step process for the club’s shield. After fan submissions, NYCFC will reveal two potential shields for fans to vote for based on designs by a hired outside part. Those will likely be revealed in the final week of February. On March 10th, the entire campaign comes to a head with the shield unveiling and the presentation of the “badge of badges” mosaic.

 

The generator will have template options for fans to choose from, but will also allow for uploads of original designs and photos. The “badge of badges” mosaic shield will be viewable online, allowing fans to zoom in on their original artwork, while a “physical manifestation” of the piece is expected to be displayed in the Clubs’ permanent facilities once that has been secured.

 

“As a former player, I know the pride an athlete feels when wearing the badge of their club,” NYCFC Head Coach Jason Kreis says. “In this case, I feel it will be all the more special having had the fans participate in it in such a meaningful way.”

 

http://www.empireofsoccer.com/debut-crest-through-22915/

 

Wow that's pretty crazy. Seems like they are keen to impress.

[wombegongal]

There's nothing stopping fans and active fans from rocking up in red and white stripes, regardless what the owners choose to do.

 

 

My thoughts exactly.

 

If you look at our crowd half of them wear blue shirts anyway so if we changed it shouldn't be that big of a deal.

[malloy]

There's nothing stopping fans and active fans from rocking up in red and white stripes, regardless what the owners choose to do.

My thoughts exactly.

If you look at our crowd half of them wear blue shirts anyway so if we changed it shouldn't be that big of a deal. Wrong

Edited February 5, 2014 by malloy

[kingofhearts]

 

There's nothing stopping fans and active fans from rocking up in red and white stripes, regardless what the owners choose to do.

 

 

My thoughts exactly.

 

If you look at our crowd half of them wear blue shirts anyway so if we changed it shouldn't be that big of a deal.

 

It wouldn't exactly be Melbourne heart anymore though would it? We would be supporting a different club.

[chesterguy]

An interesting article on the Man City accounts and why we should expect a substantial 'payment' from MHFC to MCFC for branding rights and facility use, image rights etc. as Man City try to balance their books to within the Fair Play regulations.

 

This guy is an idiot.  He has set up himself as some sort of expert on Financial Fair Play (FFP) which has been introduced by UEFA in Europe but he hasnt got a clue.  I and others have tried to put him right and he actually came on bluemoon and he was humiliated by some of the posters so sont take any notice of what he says or thinks

 

I would suggest this article gives more of an insight on the philosophy of how your club may be run

 

http://leopoldmethod.com.au/the-management-philosophy-of-ferran-soriano/

 

The recent announcement of a Manchester City-led consortium purchasing Melbourne Heart has led to much speculation as to the future direction of the club. Journalists and fans alike have been examining the how the club’s new owners have rebuilt the English club into one of the world’s powerhouses in a relatively short period of time.

The injection of large sums of money is the most simplistic way to explain Manchester City’s meteoric rise. However, much of the strategic decisions will be based around the philosophy of their CEO, Ferran Soriano, who was recruited by the club’s Emirati owners in 2012. What attracted the owners of Manchester City to hire Soriano was his financial track record of increasing revenues during his time at FC Barcelona, as Vice-President and General Manager, from €123 million (€73m loss) in 2003 to €308m (€88m profit) in 2008.

How does one learn how Soriano operates a football club? Simple, he has written a book about it titled ‘Goal: The ball doesn’t go in by chance’, a strategy book based on his time at the Catalonian club.

The Product

Melbourne Heart fans can expect their new owners to focus on improving the product, that is, the football played on the pitch.  Craig Foster examined the possibilities on how the product can be improved, mainly through knowledge transfer, investment in technical expertise, specialised training facilities and also the use of Manchester City’s extensive scouting network. As Soriano explains in his book:

“So if you want a champion team, a team with a chance of regularly winning championships, you need to work consistently to have a big club that generates enough revenues to able to sign the best football talent available.”

The multiplier effect of winning titles is increasing attendances, memberships, merchandise sales, sponsorship, media attention, etc. It is what Soriano terms the ‘virtuous circle’:

“To continue to grow, signing the best players, winning championships, and bringing in more money that would allow them once again to sign the best and so win again.”

What Soriano understands is that sport is about entertainment. It competes with time and money with other leisure pursuits. What Soriano argues is the importance of winning in sport as part of its uniqueness in the market:

“There is still a fundamental difference between football and other forms of mass entertainment: and that is that the fans want to win more than they want to enjoy themselves. In other words, winning comes first, followed by enjoyment.”

One must bear in mind that these statements are made from someone who has operated large successful clubs where football is the dominant sport. Can success on the field rapidly increase attendances in the A-League? Academics Hans Westerbeek and Ramon Spraaij argues that AFL’s dominance is built from the competitive advantage it has is that all of the best players are right here in Australia – no other country plays the sport at elite level. Spectators want to see the best players. It explains the revenues the giant clubs such as FC Barcelona, Real Madrid and Manchester United generate; and the popularity of the English Premier League.

Also, the A-League is a somewhat unique competition when it comes to the correlation between attendances and results.  Melbourne Victory’s strong average attendances were birthed from the inaugural season whilst coming one place above the foot of the table. Sydney FC and Newcastle Jets had their highest aggregate and average attendance in Season 8, even though they finished 7th and 8th respectively. Also Adelaide United, Brisbane Roar and Perth Glory’s peak season in the stands, was not from the results on the field. Observing the data, winning helps sustain crowd levels. Will Soriano’s ‘virtuous circle’ principle work in the A-League?

Whilst Manchester City is launching a franchise in the US with New York City FC in the 2015 season, this is the first time the club will be operating under a competitive balance model that is a salary cap. It will be interesting to see how the club builds a continuous winning side under a system designed to give all of the participating clubs an ‘equal’ chance of winning a title. Will the strategies proposed in Foster’s column be the secret to ongoing success within a competitive balance model? Time will tell.

The Market

After the developing the product (the football played on the pitch), Soriano discusses the market a club should target and the size:

“You want to know how big it is and the current business models, their evolution, and their perspectives for growth.”

Soriano discusses three models for expanding into other markets: playing matches and selling television rights to overseas markets, opening football academies in foreign countries, or creating (or in Melbourne Heart’s case, buying) franchises in other leagues. The decision to enter these markets is based on three variables:

• How big is the demand?
• How much disposable income do the fans have?
• What local competition is there?

There are many variables that impact on the size of a club in regards to average attendance and memberships – population size, football population, price, socio-demographic, star power, connection with community, stadium atmosphere, etc.

With a population of over 4.1 million, and the second largest football participants to Sydney, Melbourne provides a sizable market for the club to establish itself in. Year-to-date the combined average attendance of the two Melbourne clubs is 32,650, which provides plenty of scope for growth. Disposable income is not so much an issue in Australia, but the local competition – Melbourne Victory and the other codes – is where the challenge lies.

Manchester City has already made the right noises in regards to recruitment of players and star power (international and local marquee). Melbourne Heart’s has been known for their local community engagement. If Soriano’s ‘virtuous circle’ principle works in the A-League, then stadium atmosphere at AAMI Park should dramatically improve.

However, Melbourne Heart is clearly the city’s number two football team. Soriano provides some sanguine advice on how to compete in this situation:

“When you are responsible for managing a company that is not a market leader, especially when the market leader is twice as big as you are, it cannot do you any harm to learn from it and even to copy something it is doing better than you are.”

Whether Melbourne Heart copy their larger neighbour’s strategies, transfer all of the knowledge base from their new owners, or both, will be interesting to see. Clearly Soriano believes that the club should find its competitive advantage – what makes Melbourne Heart different – something the club has historically grappled with. Once this is advantage is found, it is up to the club to leverage this to outperform Melbourne Victory, and other clubs in the A-League.

Revenue and Costs

Soriano likes to keep things simple and focus on three major sources of revenue and costs.

Revenue sources are derived from:

1. The stadium: Ticket sales, memberships and corporate packages.
2. Broadcasting rights
3. Marketing: Sponsorship, merchandising and friendly matches.

Broadcasting rights and marketing are the two largest growth areas for football clubs. It would be fair to say that Manchester City did their due diligence in understanding how television rights cover the salary cap. Melbourne Heart have done well to keep a major sponsor since its inception, but Soriano would be counting on the ‘virtuous circle’ to drive marketing revenue.

In an example comparing Manchester United, AC Milan and FC Barcelona (in 2009-10), Soriano explains how much each of these clubs derive revenue from these three main sources. The largest variation between the clubs was in regards to revenue generated from their respective stadiums. Manchester United generating €123 million and FC Barcelona €98 million, whilst AC Milan €31 million. The difference is the control over the stadium, rather than being a tenant, is key to driving revenues for the clubs. The clubs that have control can make the adequate investments to improve the facilities in line with their financial objectives.

Much speculation has been made about whether the new owners will build a stadium for Melbourne Heart. However, many things will need to be taken into consideration in whether this will provide an adequate return-on-investment. Is there enough critical mass to support the idea of building a stadium? Is there enough football content (i.e. games) to make it financially viable? A 27 round, 10-team competition, with 13 homes games is probably not the strongest cost-benefit analysis to be put in front of a financial controller. Some Asian Champions League and FFA Cup games could add to the content, but not substantially. Income generated from FC Barcelona and Manchester City FC have turned their stadiums into tourist and entertainment centres, but will Melbourne Heart stadium be able to do the same?

Manchester City recently announced a loss of £52m for the year to 31 May 2013, a reduction from the £98m loss made the previous year. In a statement made by Soriano:

“Growing revenues and controlled expenses are bringing the club to break even in the immediate future, and profitability thereafter.”

Growing revenues is the central to Soriano’s management beliefs – sport is a top line driven business. In controlling costs, he again focuses on three key areas:

1. Salaries (mainly player’s wages)
2. Amortization
3. Operating Costs

Soriano explains that the benchmark for salaries in the football industry, should be between 50-65% of total revenues:

“The salaries/revenue ratio is an accepted indicator of the good management and financial health of football clubs.”

Salaries are by far the largest single cost for a club. The second is amortization costs, which is basically transfer fees. The video clip below shows how it is calculated.

If Soriano was reading Simon Hill’s yesterday’s article he would have learnt:

“That the net spend on transfer fees for all ten A-League clubs during the window, was…zero.”

Welcome to the A-League.

In examining Melbourne Heart’s books, Soriano would of seen that transfer fees have been used a source of revenue generation. Whilst Westerbeek and Spaaij lamented on why the A-League will never take over AFL as the top sport (but has the ability to be a ‘vibrant’ and ‘well attended’ league), they did draw comparisons with the Dutch Eredivisie:

“Like the Dutch competition, the A-League will remain an incubator of talent, feeding to the English, Spanish and German top competitions.”

If this is true, will Manchester City continue the practice of selling talented Melbourne Heart players to overseas clubs, or will they remain as part of the English giant’s player pool? Watch this space.

Building a Winning Team

Like a lot of management authors, Soriano could not help himself but to devise his own formula. Simplifying the complex is somewhat of a difficult task, but it does not stop many from trying. Soriano’s ‘winning formula’ is commitment multiplied by balance, raised to the power of talent. Seems self-explanatory.

More interesting was the analysis work done by FC Barcelona’s management on developing talent in-house, which has the potential produce players at a lower costs than buying them in, and also a higher rate of success. Soriano further explains:

“One of the first analyses we made when we started managing the club in 2003 was to calculate, based on the data from the ten previous years, the average cost of each player in the youth teams who eventually played in the first team, adding together all of the training costs of all the teams and categories and dividing them by the number of players who had played in the first team. This turned out be €2 million per player. That’s very good business.”

Conclusion

Until Melbourne Heart’s new owners make major announcements, or their actions become evident, much speculation will continue. In reading Ferran Soriano’s text, and examining his actions in operating football clubs, many patterns can be seen – the philosophy is guiding the actions. Focusing on improving the football played on the pitch, to develop a winning side, is central to Soriano’s principles in driving football club’s revenue.

This philosophy has worked well in cultures where football is the dominant sport. Whether it will be successful here remains the question.

[billyheart]

An interesting article on the Man City accounts and why we should expect a substantial 'payment' from MHFC to MCFC for branding rights and facility use, image rights etc. as Man City try to balance their books to within the Fair Play regulations.

This guy is an idiot. He has set up himself as some sort of expert on Financial Fair Play (FFP) which has been introduced by UEFA in Europe but he hasnt got a clue. I and others have tried to put him right and he actually came on bluemoon and he was humiliated by some of the posters so sont take any notice of what he says or thinks

I would suggest this article gives more of an insight on the philosophy of how your club may be run

http://leopoldmethod.com.au/the-management-philosophy-of-ferran-soriano/

The recent announcement of a Manchester City-led consortium purchasing Melbourne Heart has led to much speculation as to the future direction of the club. Journalists and fans alike have been examining the how the club’s new owners have rebuilt the English club into one of the world’s powerhouses in a relatively short period of time.

The injection of large sums of money is the most simplistic way to explain Manchester City’s meteoric rise. However, much of the strategic decisions will be based around the philosophy of their CEO, Ferran Soriano, who was recruited by the club’s Emirati owners in 2012. What attracted the owners of Manchester City to hire Soriano was his financial track record of increasing revenues during his time at FC Barcelona, as Vice-President and General Manager, from €123 million (€73m loss) in 2003 to €308m (€88m profit) in 2008.

How does one learn how Soriano operates a football club? Simple, he has written a book about it titled ‘Goal: The ball doesn’t go in by chance’, a strategy book based on his time at the Catalonian club. The Product

Melbourne Heart fans can expect their new owners to focus on improving the product, that is, the football played on the pitch. Craig Foster examined the possibilities on how the product can be improved, mainly through knowledge transfer, investment in technical expertise, specialised training facilities and also the use of Manchester City’s extensive scouting network. As Soriano explains in his book:

“So if you want a champion team, a team with a chance of regularly winning championships, you need to work consistently to have a big club that generates enough revenues to able to sign the best football talent available.”

The multiplier effect of winning titles is increasing attendances, memberships, merchandise sales, sponsorship, media attention, etc. It is what Soriano terms the ‘virtuous circle’:

“To continue to grow, signing the best players, winning championships, and bringing in more money that would allow them once again to sign the best and so win again.”

What Soriano understands is that sport is about entertainment. It competes with time and money with other leisure pursuits. What Soriano argues is the importance of winning in sport as part of its uniqueness in the market:

“There is still a fundamental difference between football and other forms of mass entertainment: and that is that the fans want to win more than they want to enjoy themselves. In other words, winning comes first, followed by enjoyment.”

One must bear in mind that these statements are made from someone who has operated large successful clubs where football is the dominant sport. Can success on the field rapidly increase attendances in the A-League? Academics Hans Westerbeek and Ramon Spraaij argues that AFL’s dominance is built from the competitive advantage it has is that all of the best players are right here in Australia – no other country plays the sport at elite level. Spectators want to see the best players. It explains the revenues the giant clubs such as FC Barcelona, Real Madrid and Manchester United generate; and the popularity of the English Premier League.

Also, the A-League is a somewhat unique competition when it comes to the correlation between attendances and results. Melbourne Victory’s strong average attendances were birthed from the inaugural season whilst coming one place above the foot of the table. Sydney FC and Newcastle Jets had their highest aggregate and average attendance in Season 8, even though they finished 7th and 8th respectively. Also Adelaide United, Brisbane Roar and Perth Glory’s peak season in the stands, was not from the results on the field. Observing the data, winning helps sustain crowd levels. Will Soriano’s ‘virtuous circle’ principle work in the A-League?

Whilst Manchester City is launching a franchise in the US with New York City FC in the 2015 season, this is the first time the club will be operating under a competitive balance model that is a salary cap. It will be interesting to see how the club builds a continuous winning side under a system designed to give all of the participating clubs an ‘equal’ chance of winning a title. Will the strategies proposed in Foster’s column be the secret to ongoing success within a competitive balance model? Time will tell. The Market

After the developing the product (the football played on the pitch), Soriano discusses the market a club should target and the size:

“You want to know how big it is and the current business models, their evolution, and their perspectives for growth.”

Soriano discusses three models for expanding into other markets: playing matches and selling television rights to overseas markets, opening football academies in foreign countries, or creating (or in Melbourne Heart’s case, buying) franchises in other leagues. The decision to enter these markets is based on three variables:

• How big is the demand?
• How much disposable income do the fans have?
• What local competition is there?

There are many variables that impact on the size of a club in regards to average attendance and memberships – population size, football population, price, socio-demographic, star power, connection with community, stadium atmosphere, etc.

With a population of over 4.1 million, and the second largest football participants to Sydney, Melbourne provides a sizable market for the club to establish itself in. Year-to-date the combined average attendance of the two Melbourne clubs is 32,650, which provides plenty of scope for growth. Disposable income is not so much an issue in Australia, but the local competition – Melbourne Victory and the other codes – is where the challenge lies.

Manchester City has already made the right noises in regards to recruitment of players and star power (international and local marquee). Melbourne Heart’s has been known for their local community engagement. If Soriano’s ‘virtuous circle’ principle works in the A-League, then stadium atmosphere at AAMI Park should dramatically improve.

However, Melbourne Heart is clearly the city’s number two football team. Soriano provides some sanguine advice on how to compete in this situation:

“When you are responsible for managing a company that is not a market leader, especially when the market leader is twice as big as you are, it cannot do you any harm to learn from it and even to copy something it is doing better than you are.”

Whether Melbourne Heart copy their larger neighbour’s strategies, transfer all of the knowledge base from their new owners, or both, will be interesting to see. Clearly Soriano believes that the club should find its competitive advantage – what makes Melbourne Heart different – something the club has historically grappled with. Once this is advantage is found, it is up to the club to leverage this to outperform Melbourne Victory, and other clubs in the A-League. Revenue and Costs

Soriano likes to keep things simple and focus on three major sources of revenue and costs.

Revenue sources are derived from:

• The stadium: Ticket sales, memberships and corporate packages.
• Broadcasting rights
• Marketing: Sponsorship, merchandising and friendly matches.

Broadcasting rights and marketing are the two largest growth areas for football clubs. It would be fair to say that Manchester City did their due diligence in understanding how television rights cover the salary cap. Melbourne Heart have done well to keep a major sponsor since its inception, but Soriano would be counting on the ‘virtuous circle’ to drive marketing revenue.

In an example comparing Manchester United, AC Milan and FC Barcelona (in 2009-10), Soriano explains how much each of these clubs derive revenue from these three main sources. The largest variation between the clubs was in regards to revenue generated from their respective stadiums. Manchester United generating €123 million and FC Barcelona €98 million, whilst AC Milan €31 million. The difference is the control over the stadium, rather than being a tenant, is key to driving revenues for the clubs. The clubs that have control can make the adequate investments to improve the facilities in line with their financial objectives.

Much speculation has been made about whether the new owners will build a stadium for Melbourne Heart. However, many things will need to be taken into consideration in whether this will provide an adequate return-on-investment. Is there enough critical mass to support the idea of building a stadium? Is there enough football content (i.e. games) to make it financially viable? A 27 round, 10-team competition, with 13 homes games is probably not the strongest cost-benefit analysis to be put in front of a financial controller. Some Asian Champions League and FFA Cup games could add to the content, but not substantially. Income generated from FC Barcelona and Manchester City FC have turned their stadiums into tourist and entertainment centres, but will Melbourne Heart stadium be able to do the same?

Manchester City recently announced a loss of £52m for the year to 31 May 2013, a reduction from the £98m loss made the previous year. In a statement made by Soriano:

“Growing revenues and controlled expenses are bringing the club to break even in the immediate future, and profitability thereafter.”

Growing revenues is the central to Soriano’s management beliefs – sport is a top line driven business. In controlling costs, he again focuses on three key areas:

• Salaries (mainly player’s wages)
• Amortization
• Operating Costs

Soriano explains that the benchmark for salaries in the football industry, should be between 50-65% of total revenues:

“The salaries/revenue ratio is an accepted indicator of the good management and financial health of football clubs.”

Salaries are by far the largest single cost for a club. The second is amortization costs, which is basically transfer fees. The video clip below shows how it is calculated.

If Soriano was reading Simon Hill’s yesterday’s article he would have learnt:

“That the net spend on transfer fees for all ten A-League clubs during the window, was…zero.”

Welcome to the A-League.

In examining Melbourne Heart’s books, Soriano would of seen that transfer fees have been used a source of revenue generation. Whilst Westerbeek and Spaaij lamented on why the A-League will never take over AFL as the top sport (but has the ability to be a ‘vibrant’ and ‘well attended’ league), they did draw comparisons with the Dutch Eredivisie:

“Like the Dutch competition, the A-League will remain an incubator of talent, feeding to the English, Spanish and German top competitions.”

If this is true, will Manchester City continue the practice of selling talented Melbourne Heart players to overseas clubs, or will they remain as part of the English giant’s player pool? Watch this space. Building a Winning Team

Like a lot of management authors, Soriano could not help himself but to devise his own formula. Simplifying the complex is somewhat of a difficult task, but it does not stop many from trying. Soriano’s ‘winning formula’ is commitment multiplied by balance, raised to the power of talent. Seems self-explanatory.

More interesting was the analysis work done by FC Barcelona’s management on developing talent in-house, which has the potential produce players at a lower costs than buying them in, and also a higher rate of success. Soriano further explains:

“One of the first analyses we made when we started managing the club in 2003 was to calculate, based on the data from the ten previous years, the average cost of each player in the youth teams who eventually played in the first team, adding together all of the training costs of all the teams and categories and dividing them by the number of players who had played in the first team. This turned out be €2 million per player. That’s very good business.” Conclusion

Until Melbourne Heart’s new owners make major announcements, or their actions become evident, much speculation will continue. In reading Ferran Soriano’s text, and examining his actions in operating football clubs, many patterns can be seen – the philosophy is guiding the actions. Focusing on improving the football played on the pitch, to develop a winning side, is central to Soriano’s principles in driving football club’s revenue.

This philosophy has worked well in cultures where football is the dominant sport. Whether it will be successful here remains the question.

You had me at hello.

[wombegongal]

 

 

There's nothing stopping fans and active fans from rocking up in red and white stripes, regardless what the owners choose to do.

My thoughts exactly.

If you look at our crowd half of them wear blue shirts anyway so if we changed it shouldn't be that big of a deal. Wrong

 

 

It was a tongue in cheek comment fyi. But it bears some consideration if I was on the outside looking in and saw people in every other colour professing their love for red and white I'd think that sometimes actions speak louder than words. Now i'm not suggesting that is true but certainly it's worth considering.

 

Also wall of text after article dominated me.

[jw1739]

Yes, long article, but well worth reading. Manchester City did not go into this without doing their due diligence, so they are aware of the various limitations on the A-League that do not apply in the EPL. But they've still gone ahead, so it's going to be fascinating to see how Soriano's theories will be tweaked for Heart and how they will work out. And we are not going to have to wait long. The end of the current season will see a host of moves and changes, some of which are going to be surprising and others exciting. Maybe one or two are going to be disappointing.

 

I think I'm generally a bit of a pessimist, but I'm really optimistic about our future, and the future for the game in Australia.

[mulhollanddrive]

Major points:

 

- Despite all the money they have, their main off field priority is to generate more revenue.

- Will appoint a CEO who has business skills to do this.

- Still need good business measures and viability, revenue to salaries ratio etc....

- To be the best you have to buy the best, this achieved by on field results and off field commercial success.

- Youth development is cost effecient, and happy to put money into it.

- Handicaps of A-League is new, so it sounds like youth, training, staff (football department spend) will be invested in.

 

I would honestly be surprised if we got a game changer coach or marquee in the first season.  It sounds like they want the right people for a fair price with their access to a wide pool.  They will change off field a lot more, training, marketing etc...

[AussieAguero93:20]

I see ed(case) has found his way to Melbourne

[MUTD/MLBHRT/ESSNDON]

Victory in talks with Liverpool, for 30% buy in. FFS!

[MUTD/MLBHRT/ESSNDON]

Have to say our logo looks fkn sick!

[Falastur]

Major points:

 

- Despite all the money they have, their main off field priority is to generate more revenue.

- Will appoint a CEO who has business skills to do this.

- Still need good business measures and viability, revenue to salaries ratio etc....

- To be the best you have to buy the best, this achieved by on field results and off field commercial success.

- Youth development is cost effecient, and happy to put money into it.

- Handicaps of A-League is new, so it sounds like youth, training, staff (football department spend) will be invested in.

 

I would honestly be surprised if we got a game changer coach or marquee in the first season.  It sounds like they want the right people for a fair price with their access to a wide pool.  They will change off field a lot more, training, marketing etc...

 

I see what you're saying, but while you are correct that City are trying to make money back in England, buying the Heart isn't about potential revenue. There's not enough potential profit to be yielded from an A-League club right now to make any serious impact on City's balance sheets. This is all about making a network of footballing teams/communities, and dare I say it, "spreading the brand", much as I don't like using that phrase. I wouldn't expect City to be trying to run the Heart for profit. I can't guarantee a world-shaking marquee this summer, but I absolutely would expect at least a reasonably big-name signing. The bigger limiting factor here, to my mind, is not so much City trying to save money and more Soriano's promise not to just fill the marquee player slots with players who would've retired if they had stayed in Europe but are just looking for one last pay-day.

[M13]

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

 

And WSW are still on the market I guess?

[Jestr]

And WSW are still on the market I guess?

I hope Zoopla buys them

[Falastur]

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

 

And WSW are still on the market I guess?

 

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.

[n i k o]

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

 

And WSW are still on the market I guess?

 

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.

Capital 'I' doesn't need a dot

[theresonlyonebzamora]

 

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

 

And WSW are still on the market I guess?

 

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.

 

 

cross the t's and lower case j's?

[n i k o]

Lower case t crosses, upper case T intersects

[malloy]

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

And WSW are still on the market I guess?

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.

cross the t's and lower case j's?

If you are gonna try and be funny atleast get what you are saying right....

[theresonlyonebzamora]

 

 

 

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.

And WSW are still on the market I guess?

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.

cross the t's and lower case j's?

If you are gonna try and be funny atleast get what you are saying right....

 

 

lol sorry, missed a word there. was in a hurry to get it out

[n i k o]

Think this Liverpool story is a dead end or they are looking at another club.. What they are actually saying is that they are not interested in buying Victory, I remember City stating that "they had no intention of buying WSW at all.." when the rumours was out.And WSW are still on the market I guess?

Possibly. City also denied that they were bidding for an MLS team, about 5 months before announcing for real that they had created NYCFC, so it could just be a ruse to throw the media off the scent while they dot Is and cross Ts.cross the t's and lower case j's?If you are gonna try and be funny atleast get what you are saying right....

Checkmate lol

[mjake1234]

 

And WSW are still on the market I guess?

I hope Zoopla buys them

 

The latest is that the "Football Federation Australia's board is due to meet on February 15 when it should be able to give final approval of the $12 million sale to a consortium led by Primo Smallgoods boss Paul Lederer, Pirtek founder Peter Duncan and Jefferson Cheng, president of Philippine Airport Ground Support Solutions".

[Murfy1]

NYC FC coach Kreis says team can have 4 Man City players on loan: http://www.mlssoccer.com/news/article/2014/02/05/new-york-city-fc-head-coach-jason-kreis-says-team-can-bring-four-manchester-?utm_source=Twitter&utm_medium=referral&utm_content=News&utm_campaign=Unpaid

 

Kreis said "We have a very big interest in bringing some City players over to join us in New York".

 

Also 'Kreis said the new team would also look to fill all three Designated Player [i.e. marquees] roster spots'.

 

If we see both of these developments at Heart I'd be pretty pleased, but maybe not so many players on loan though.

Edited February 6, 2014 by Murfy1