G2 Strategic's Marshall Glickman Talks European Sports Business
Consulting firm G2 Strategic, whose clients include La Liga and the EuroLeague, recently helped the European basketball league launch a club services division called Business Operations & Club Services. The BOCS program, which is modeled after the NBA's Team Marketing & Business Operations department, is one of a number of initiatives G2 Owner & CEO Marshall Glickman has helped his clients launch. The former president of the NBA Portland Trail Blazers, Glickman founded his consulting firm in '04 after a stint as a consultant with the EuroLeague. He recently spoke to SBD Global about the keys to success for foreign owners investing in clubs overseas, when he expects to see more clubs in Europe implement programs like the NBA's TMBO and which clubs have impressed him in recent years from a business standpoint. Below are his responses:
Q: What do you see as the common threads between the success stories we have seen among foreign -- particularly U.S. and Asian -- owners of European clubs?
Marshall Glickman: The answer is complicated, but fundamentally, it is cultural. Most of the outside owners have naively thought that you can simply follow a U.S. model and export it to a European club. The reality is that culture, history, economics, infrastructure and, especially, mentality are critical factors. Those that adapt can do well ... those that do not, fail. I would note that AS Roma is owned by Americans. Ligue 1 side Bordeaux is likely to be acquired by an American (1848 Capital Partners/Joseph DaGrosa), and Olympique Marseille was acquired by famed former MLB L.A. Dodgers Owner Frank McCourt (most were skeptical, including me, but they are so far doing a great job turning things positive for France’s other "big" club). The other issue is the systems and structures in Europe -- very little invested in business HR; over 90% of budgets go to players, following the belief that winning is a business strategy, which of course it is not. It is very difficult to convince club presidents to invest in high-quality business leadership and to staff up with outside sales, customer service, etc. -- partly because of labor laws that make it very difficult to terminate employees, but mostly because of the mentality that winning will create "natural demand." It is not the case, but I have to struggle against this perspective every time I am with our clients. That said, things are changing, but slowly. Most club presidents are older, white men ... as millennials take over, things will change.
Q: Do you expect to see more European leagues following the example of the EuroLeague’s BOCS program? Does it seem to you that there’s a willingness across Europe to emulate the type of business structure that top U.S. teams and leagues adopted so many years ago?
Glickman: BOCS is an outcome of G2’s engagement with Euroleague for 16 years -- it took a very long time to convince them to think of the league as a service organization for its clubs. However, that was not because of resistance, per se, but instead because EuroLeague changed the competition structure. Before, there were 24 clubs, so at least eight clubs were relegated and promoted each year. Now, there are 16 clubs, and 11 have a “permanent” license to play in EuroLeague, regardless of their results in the domestic league, meaning EuroLeague is moving in the direction of a semi-closed league, which provides stability and allows business to be conducted in a normal matter. La Liga, which has been a G2 client for the past two years (we expect a third extension will soon be signed) would like to move in this direction, and then I think everybody will follow.
But, in Europe, many clubs play in two leagues -- domestic and European. There is no salary cap, although there is some effort due to Financial Fair Play, that links revenues to expenses. League-generated revenues are not equally distributed as in the U.S. leagues and there is no draft or other mechanism that seeks to create parity over time. The result is the "big" clubs get virtually all the money, so they are really bigger than the leagues, which makes it hard to emulate a U.S.-style business structure. But, as noted before, things are changing. Real Madrid just hired Dave Hopkinson as their Chief Commercial Officer -- Dave comes from Maple Leaf Sports & Entertainment, where he was CRO. He does not speak Spanish and, so far, is not familiar with Spanish culture -- so, in this case, Real Madrid is adapting themselves and purposely recruiting a North American sports business model, with North American leadership, recognizing this is the next step. Others will follow, no doubt.
Q: What are some of the best examples of top-flight European football or basketball clubs that have dramatically improved and developed their business infrastructure over the past five years or so?
Glickman: La Liga side Real Betis, Paris St. Germain, Lithuanian basketball club Zalgiris, Ligue 1 side Olympique Lyonnais and Spanish football club Mallorca.
Real Betis has fully embraced transforming their culture, understanding that a winning on the pitch requires optimizing business results. This club was facing a debt crisis only five years ago, and is now a shining example of how strong leadership on the business side is just as important as the sports side. They are focused on fan engagement, customer service, nurturing new markets (women, millennials, GenZ, small businesses, families), price scale and product mix, outside sales (rather than simply hoping people buy tickets) and utilizing new tools to increase occupancy (a big problem in Spain, as 75%-plus seats are sold as season tickets, motivated by deep discounts vs. single-game tickets, resulting in fans often attending only the “big” games), business planning and adapting global best practices on a daily basis. When I ask Ramón Alarcón, [the club's director general of business], what it is Betis is selling, he says “happiness, social gathering and sharing.” His response is music to G2 Strategic’s ears -- precisely consistent with the mentality we have been preaching to our clients for many years.
PSG: The perception is that because of 1) huge player budget, 2) big name stars like Neymar and 3) being in Paris, the club enjoys "natural demand" that fills their stadium. The reality is that they have something like 12 outside sales people (new customer acquisition) and seven or eight inside sales people (retention) and have a professional structure that resembles big U.S. clubs. This club has recognized the incredible potential of premium seating, creating a social experience and a place of high status, which is key, as they generate the majority of their gate receipts from a minority of capacity.
Zalgiris, the “small” basketball club, located in Kaunas, Lithuania, is a historical club of legends, including Arvydas Sabonis and Sarunas Jasikevicius. They are one of the few clubs (basketball or football) in Europe that actually operate their venue, the 15,000-seat-plus Zalgiris Arena, which is as close to an American-style venue as I have seen. This allows the club to diversify well beyond sports, and to constantly improve the experience for their patrons with innovative premium and non-premium seating concepts. The club is not in the main city (Kaunas is 103km from the capital, Vilnius), yet leads EuroLeague in attendance (just under 14,000 per game). They do a fantastic job adapting North American sports business best practices to a market that is vastly different than any North American market as far as economics, culture and mentality. And unlike any club I know in Europe, they have several senior executives who are women.
Olympique Lyonnais -- of course, they are a "big" club historically, and play in a stadium (Groupama) built for Euro 2016 that they control and operate, but what I like about this club is their business leadership under Harry Moyal, a former senior analyst at consulting company McKinsey & Company. Moyal has brought common sense, deep analytics and excellent management skills to a club that is publicly-owned, a rarity.
Mallorca is a “small” club on a small island that has two clubs, and two years ago was relegated from the second to third division (like going from Triple A to Single A baseball), yet they have managed to be incredibly innovative in spite of working with a baby budget. For example, you cannot sell or consume alcohol in most European stadiums and arenas, but they have put together a pre-match party just outside the gates where people gather and have a great time before entering. This club is owned by NBA Phoenix Suns Owner Robert Sarver, plus Steve Nash, but they were smart enough not to try to cut and paste American ways of doing things, but instead give the rope to their CEO, Maheta Molango -- which may not seem like a big deal, but in European sports club culture, the president is typically quite authoritarian with their management style. In this case, they inspire, but do not micro-manage. Following relegation, unlike all other clubs, this club did not lower ticket prices and actually saw an increase in gate receipts. Now they are back to the Spanish second division, because they generated the resources necessary to win.