THE BREAKDOWN: AC Milan’s Multi Billion Gamble, The Power of the Tour de France, & Tennis Player’s Limp ‘Boycott’ (E26)

30:48And that was partially led on the Olympic track where the emergence of lottery money to fund British Olympic sports, a lot of that was ploughed into cycling. And it was determined this was a sport where Britain could pick up a lot of medals in the Olympics. and they started testing youngsters for just, you know, specifically the traits that would make them track cyclists. And that was very successful. And then for a time, the road cycling, which is what the tours are, also took off. And that was under the guise of something called Team Sky, which was overseen by a man called David Brailsford, now Sir Dave Brailsford, which came into the historic cycling world at an upstart English team coming into the established EU cycling scene and bringing what famously became known as the accumulation of marginal gains, which was Braille's sporting philosophy, which said if you pay very minute attention to every single element of a sport, in this case cycling, that those will add up over time into a big advantage.

31:57and Team Sky as a result of that became the dominant cycling team during the 2010s and you saw you know British cycling greats like Bradley Wiggins and Chris Froome and actually Gerard Thomas winning the Tour de France and Team Sky being the dominant team on top of that. Of course as we'll come on to that was all clouded by a doping controversy which almost came out a bit subsequent to a lot of that success. We can come on to that in a moment. And that team in time was bought by Ineos, so Jim Ratcliffe. And really, since Ineos took it over, it's, it ends into a sort of, a bit of a death spiral, that team, and has never quite been the same again.

32:43Anyway, so that's a sort of landscape view. But Charlie, you've been looking into the economics of it as well. What do you make of it? Well, firstly, what I make of it is it's all very secretive. and that of course comes and sorry secretive from a financial standpoint so everything that you look at is reported figures and that's because the amory family which is french family the owners of l 'équipe the french newspaper sports publication the tour was actually built out from newspapers you know it was it was created to to sell newspapers in the early 1900s when the boom of cycling really took off and there's a few really cool videos on youtube that i highly recommend going going and watching just about those early years of the tour because it's fascinating to see how it's developed but the audience and the fanfare around it even in those early 1900s was absolutely incredible and so clearly very early on you know there was a massive demand and a product that fans were were deeply engaged with but what it ensured really was that the structure was very central and so the Amory family L 'Equipe basically controlled the majority of the tour and and their kind of sports organization aso is you know the the kind of majority controller the big problem with that charlie and we've seen it in a lot of sports is that with so much control then comes um centralized decision making that doesn't necessarily benefit the growth of the event or the total sport it actually operates quite similar to something like a masters they don't maximize the commercial opportunity um and therefore the numbers that have come out suggest that the tour despite having 12 million or so people that line the streets or the road sides throughout the three-week event which is you know a huge number none of them pay for tickets all of the money really is driven by the commercial value and the broadcast right so broadcast is about they think between 50 to 70 percent sponsorship let's say 40 30 40 percent and then you have some host fees as well at about five but the estimate is anywhere up to 150 million euros that's generated throughout the tour which is you know a lot of money um a significant amount of money but is it a huge amount of money when you look at the number of people engaged in it when you look at the value uh attributed to some of the teams the prize money sitting around two million i think charlie for for the winner which is actually you know a tiny amount of money when some of the top teams budgets um you mentioned in eos uae uh which is where tati begatcha who you know is going for his fifth you mentioned the people that have won five Pogacar is going for his fifth Tour de France this year they spend up to about 50 to 60 million euros that's their budgets now the great if you're right at the top of it but then you have teams also around 20 million so you have a big spread but also if those teams aren't earning from the success in the tour you get a business model trying to figure out where the value really lies commercially is is is where it really nets out for the teams um you mentioned Sky there I mean the value for the tour has always been your sky you buy the inventory you put your badge everywhere and hopefully for three weeks you are front and center um but there are some quite cool stories of and i didn't really think about this charlie but they were saying you know if you're maybe let's say a slightly lesser team whose brand doesn't get as much value you'll suddenly see someone break from the peloton and they'll just have a charge and for half an hour there's a helicopter above them they are on tv for that whole time and that is full sponsor time for that person now really from a sporting sense there's no need for that rider to do that it's not helping his race but it helps drive the value for the brand because he's been on tv for the last 30 minutes and they can trade that in their next negotiation um so charlie a long way around of saying i think that there's a fascinating model here there's one that um has solid numbers behind it you know yes good broadcast yes good commercial there's one that has no ticketing revenue which is very strange for a sporting event but at the same time with significant amount of control sitting in one family and a significant amount of the sport of cycling reliant on a lot of the interest generated by the tour and some of the money generated by the tour how has the sport of cycling positioned itself to move forward and develop and as we talk about every week this ever-competitive sporting environment and that's where I think a lot of the questions that we've got on the tour have come about it's when looking at all these various sports when looking at the golfs the smaller sports the places where things have broken away in the last few years.

36:59How does cycling sit on that? And so that was something that I just found fascinating taking a look at this. It's a great summary, Charlie. I don't disagree with a word you've just said. I think what one is in danger of underestimating is the extent to which the Amory family are guardians of their own event, just like the Masters Committee are guardians of their own event. and because they don't have to satisfy higher paymasters in terms of optimising every single little bit of revenue, part of what they're doing here is they're maintaining the spirit of the tour. So if you were to start looking at ticketing people who were just standing by the side of the road, you would lose some of the essence of what the tour is and I think the Amory family, I can't speak on their behalf, but I would speculate that they think that, look, we do really well out of this, right?

37:55We created it as a family to basically market newspapers. It's grown into this amazing thing unto itself, which makes us a profit of about 30 to 40 million euros a year. That's enough. We don't need to do more than that because actually we're just a family and we care about the spirit of what we've created. In fact, maybe even commercially, we might potentially endanger that going down the track if people start to perceive that it's not what it was. And the net result of that is it's one of these events which is conspicuously almost exactly the same as it always has been. As you say, you can watch YouTube tours from the 1950s and it's essentially the same.

38:38Now, I know in the detail, people will say, well, in the detail of what the teams are doing in terms of the engineering around the bikes, in terms of the physical side around the players and around the riders, I should say, and so on and so forth. of course that has all moved and changed but from a spectator point of view it is really the same as when benarino was the sort of the great global hero and i think that is something precious which is it is very um easy to lose if one does try and squeeze it for every last pick and in terms of the profile of cycling personally i would say the last 20 years has been probably cycling's most high profile period, certainly of my lifetime, it's been very, very high profile.

39:21So I don't think one can really say that cycling has got a problem and the Tour is the problem. I would look at it the other way around and say cycling has become very high profile and the Tour de France remaining is this pristine sort of, you know, spirit of the Tour type thing is fantastic. Now, we can't avoid the non-pristine bit, which is doping problems. And by the way, that is as much part of tour history as any other part, right? So you go back to the 1960s and you find, I'm trying to remember the name, I think it was Tommy Simpson, the British rider who died during the tour. That was also an era where riders were taking substances.

40:04This has been going on an awful long time. Now, obviously, like other sports, There is extensive doping testing that goes on, but it's such a big part of the history of cycling that the suspicion has always been that there are some people who are pushing the boundaries beyond where the testers can really get to. and I think it is just worth reflecting on the Ineos scandal because it is very much related to that era when Team Sky was dominant within the sport and this was when effectively the then medical director of that team, Richard Freeman, I'm just speaking a bit from memory here, but there was a sort of incident where effectively he was carrying a parcel, including certain elements, certain substances, those to the team.

41:02Anyway, there was a long sort of scandal, sporting scandal went on over this, because this was in the team. This was in the era when Wiggins and Froome were at their peak. and very much Brailsford and co have been marketing themselves and had been marketed as the clean face of cycling, of road racing. And this came along and really blindsided people because it then threw question marks over those victories which had been won previously by this team. And in the end, Richard Freeman was, I think actually he was stripped of his medical license, certainly for a while. so effectively there was you know an acceptance by the sport that that had gone wrong and then of course predating that going back 20 years into the lance armstrong era when it became clear that not just lance armstrong himself but the other riders who'd been riding at the front of the peloton had been um involved in various substances which were either fully illegal against the rules or pushing the boundaries in various different ways.

42:11So I just don't think we can have a discussion about cycling without acknowledging the fact that this is a sport that has been significantly blighted by doping scandals. And of course, when that happens, it's an image problem and an image problem is the damage to the money that will be spent on it by brands and the associations that they want to have. And really, when a huge amount of the development of your sport is dependent on the commercial development of your sport, that is a significant problem. because the team side fascinates me you know you mentioned there and i agree to an extent about you know the need to maximize it but at the same time when you're asking teams or you're giving you know huge uh cost of entries budgets to teams to spend and you're giving very little back at some point there's going to be a point where a team or an owner turns around and goes well i'm going to want more for my investment than a few million quid for winning it and that's why you know so if you're looking at those kind of 50 million spends there eventually needs to be a point of return and something that the uh confidence one of the team's boss said that i thought was quite interesting we do like a quote um this is a quote directly from him he said a football club owns a stadium a share of league tv money and a transfer asset base a cycling team owns a logo on a jersey and a prayer that the sponsor re-signs that's the whole balance sheet so for these teams building a business model on something as fragile as that which as you've highlighted can come crashing down for various reasons that as a sports entity as an investment as a decision making um moment to decide well where do i want to put my money i think i think it's an interesting question to to ask well it is a range of we just come from a discussion about tennis players pay um and we're coming on to this now and i guess so first of all the moment which it becomes a strategic question for the Amory family is when they don't have enough teams entering.

44:04Yeah. So if there are enough teams entering, then de facto it's not a problem. If they don't have enough teams entering, then it is a problem. And then they have to start looking at whether more of their profits of 30 to 40 million a year need to be recycled back into the teams. I would say that for teams to complain, they may need to have a look at their own cost structures. you know these cyclists are very very very well paid i don't know if you had a look at this but um or pogaccia gets about eight to ten million a year i think and and i think quite a lot of the teams and correct me if i'm wrong are spending 60 percent at least some some more on their wages and staff costs they are and and that even an average professional cyclist is being paid the thick end of a million bucks a year or million pounds yeah i think it's 700 000 pounds a year on average is the average that includes those who just ride down in the peloton just domestiques who are just sort of part of the sort of making up the back end of the team and the question i think i would ask the teams is okay perhaps you need to on the one hand be speaking to the amory family but on the other hand you need to be you need to be discussing about amongst yourselves about having a better cost cap system i mean if this is a sport that doesn't generate a vast amounts of revenue then what on earth are you doing pain-leaning practitioners the thick end of 10 million a year.

45:24I mean, 10 million a year is absolutely colossal. There are world-leading golfers who don't own that in a sport that's, frankly, much more widespread and has much bigger TV rights revenue. So I think, you know, the bottom line is, at the moment, it seems there are enough teams. Obviously, they are, if not happy, then capable to meet their bills in one way, shape, or form. At the moment, the whole ecosystem is working. But I do take your point that, ultimately, it looks quite creaky and it looks like it's over dependent on commercial revenue and whilst we discussed this as CellGP a couple of weeks ago but CellGP is heavily dependent on commercial revenue but equally the whole cost structure is very very controlled and limited whereas what you're looking at here is a situation where you're entirely dependent on commercial revenue and your cost control system is not really there and that is a dangerous place to be i think well charlie you're getting into a formula one type um discussion you know and again reading a lot of the commentary of the people that are big fans and and very much in the know more so than than i am um you know we're pointing towards the predictability problem attached to the spend problem so pogac's team the uae team basically all conquering one of the biggest budgets the best rider potentially of all time makes it predictable and the tour's always had an element of unpredictability which has been a huge part of the appeal and if you start getting success tied to the biggest budget teams and you have teams on 17 million not 50 million and you lose some of that competitive edge based on the finances and the structures of the sport commercially then they do need to probably have a look at it because that's a danger to the product and again you know if you look at the big moments that change something like a formula one bringing something that you know was just losing huge huge amounts of money because there was an ability to spend whatever you wanted creating a competitive environment where everyone felt that they could attribute x amount of cash to develop a really competitive entity was was the turning point now if you did something like this in a cycling environment and encourage those people to invest because of that as you said because the teams had better discipline and controls in place would it attract more and look just finally on the teams you know it's interesting you see the UAE involved Bahrain Kazakhstan are involved you know the types of team owners have shifted from you know maybe a type of sky brand to now you're getting more kind of countries involved similar to as you've seen in other sports um charlie i don't know if you've ever seen uh the the bits on one cycling but you know to this is always interesting because people are always in the market for new opportunity new ip and new ideas as we know and when you've got a legacy product that's quality but maybe not optimizing itself effectively on the business side generally there's someone sniffing around looking to do something better one cycling is um a kind of vision that's come out of pif or surge investments it's basically the latest i don't want to live golf it because it's just a cheap way of saying it but it's a challenge should we say to the existing uh structures at cycling to try and build something that is really commercially viable that does give it a future in ways that the tour that more they see the tour doesn't um and really tries to maximize a commercial output in ways where the tour leaves money on the table uh they've naturally struggled to move the needle a huge amount in this because of the governance challenges that exist and again the control the amory family have of the organization and the tour obviously being the key legacy product again you can't just take people out and ignore the fact that the tour is going to be the thing that everyone wants to ride in but we've started to see moves over the last kind of couple of years of people trying to disrupt the space yeah um it's going to be interesting to see i think you know as we've been clear all along our belief is that it's exceedingly difficult and expensive to disrupt the big legacy sports events for all sorts of different reasons.

49:09Just leave on one last point to do with Ineos and the demise of that team under the leadership of Jim Ratcliffe. There are just a few little warning signs there about how his management style works within sport. When Tom Pidcock, who's the leading British rider right now, ranked, I think, fifth or sixth in the world, when he left the team well before the end of his contract, he sort of made some sort of reference to the management style being pretty corporate, corporate in style. Yeah. And I think it's just a really interesting thing that I'm a great believer that sports needs sports performance and needs professionalizing.

49:54People need to look at things in a systematic way, but it still needs to feel like you're in a sporting organization, not a corporate organization. It's that sort of balance. And it just feels like on the INEOS side that what they had at Sky was something quite entrepreneurial, quite sort of free-winning and quite innovative, leading aside some of the corporate problems we've mentioned already. And they've moved into something where there's more centralized control, more sort of corporate style sort of speak. There's one former rider who is unnamed, who had a recent article about the demise of INEOS said things were good with sky but with inios there is too much structure compliance and trying to act like a big corporation and it's just gonna be interesting for me to see over the next few years what happens at manu because that very much is what he's trying to do there as well right he's trying to make manu act like a big corporation and i think there's always just got to be a little question mark over whether that really works in sport yeah we shall see we shall see um so let's see what happens indeed um let's move on to um we finish off with some ac milan yes we're gonna look at ac milan ac milan um one of the giants of european football and for my youth the dominant european football team during that period they were miles ahead of clubs like real and these types of people.

51:21They won what was then the European Cup, now the Champions League, multiple, multiple times. Their captain, Paolo Maldini, was a sort of global football icon. They were owned by Mr. Bunga Bunga, Silvio Berlusconi. And the whole thing was, you know, just ultra glamorous in one of the most sophisticated, cool cities in the world. And since then, since those days, and of course part of that was tied to Serie A itself flying high in the 80s and 90s. But the last 20-25 years have been a much more troubled time for AC Milan and the direction they're headed in right now is something which I think we need to look at in some detail.

52:03But perhaps it's best if we start off by you laying out why we're approaching this topic right now. What's the news hook? Well, we had a conversation because I was surprised at seeing a news. Goncalo Ramos, the Portuguese striker who's moving from PSG to AC Milan for 74 million euros. And that just kind of stoked an immediate point of conversation because those types of transfers at that size aren't ones that we associate with Italian football of recent. You know, there's been a huge amount and a huge amount of the player trading model in Italy now is really the core element of the club's businesses because they are not generating enough from the media, right, from the commercial side.

52:39They don't have the infrastructure opportunities because a lot of revenues that you're seeing from your Madrid's and the Spurs and all of that. So player trading has become a really, really important, well, integral part of the business model of many Italian teams, no matter how big they are. And so seeing the money go out on the other side, it just was something when the Fabrizio Romano thing flashes up on your phone, really, really caught my attention. And then that was also off the back of Ruben Amorim, of course, recently being appointed as their manager. So there was a couple of things on the football side, of course, not our key element, but driven by what was going on behind the scenes and the question really in the shift.

53:15And I know you're nicely well-versed in some of this and I know you have a huge passion for Italian football as anyone that's watched the show before and knows your kind of years growing up in the 80s and maybe if we're generous, the 90s, as you've highlighted. And so a question mark around whether this was an indication of a willingness to spend a little bit more. And of course, you know, the state of the contract will still be amortized over five years, I'm sure. So it's a 14-ish million a year deal, really. They have sold a huge number of players. They sold to Gianni Rinders last year to City.

53:46They sold Tonali, of course. And now I'd imagine they have a bit of a sell on clause maybe for Tonali, which if he's gone for 100 million from Newcastle to Spurs, they may well pick up 15 or so million from that. Rafa Liao will likely leave on big cash as well. So I'm not saying there's a shift in that player trading model. I was just interested in it coming through. And Charlie, I think there's another reason why as well. Well, there's a couple of reasons. However small, they posted three years of profit, six four and three million euros they are also in a really interesting stage now where them and inter milan have created an spv which has bought the sancero site so they are going to be redeveloping with inter milan the stadium which you know is a huge move they have also refinanced finally their debt to get elliot management uh out of the club giving redbird shall i say from an optics perspective full control redbird being the owners jerry cardinale um is is the guy that came and bought AC Milan off earlier.

54:45We can give a quick overview of what's happened on the ownership side. But let's just say the financing of that now and giving clarity of ownership maybe comes into some of this discussion in the first place. And so, yeah, I mean, I guess, Charlie, that's a really long-winded way of me saying, I think there was something quite interesting to have a look at here. Everything you've just said sounds great, right? So what would you say if I was to tell you that this club is an absolute shambles? I'd say why? Let's just do a little bit of history here. So AC Milan was owned for a very, very, very, very long time by Silvio Berlusconi, obviously, as many of us know, the former prime minister of Italy, but also the biggest media tycoon in Italy, right?

55:27So he was a huge businessman, billionaire businessman who owned AC Milan during its glory years and into the era when Serie A ceased to become the best league in Europe. but it was always just a part of the Berlusconi Empire. It was never the main thing, right? It was purchased from Berlusconi, who is now the late Berlusconi, but at the time was still alive. It was purchased from Berlusconi in 2017, I think I'm right in saying, by a Chinese owner called Li Yongchong. Li Yongchong purchased this with debt. largely with debt, and the debt was provided by a US hedge fund, a famously aggressive US hedge fund called Elliott.

56:20And a year later, when it became clear that Li Yong Yong was unable to meet the terms of the loan, by which we presumably mean paying the interest, effectively, on his purchase of AC Milan, Elliott effectively repoed Milan. They just said, okay, fine, you can't pay us, so we're now just going to take the asset off your hands. So effectively, Elliott got it off Lee for chips, really, because it was just the value of their loan, and he had, of course, put some equity in to start with anyway. So Elliott never really intended to be the owners of a European football club or an Italian football club.

57:02They inherited it as a bad debt. they then sent one of their seniorish people, a guy called Giorgio Fellani, who was an Italian from Milan, was sent in there as a sort of operating partner to try and make sure that the thing was running on behalf of Elliott. But from that moment on, effectively the club was always going to be for sale because Elliott are not long-term football club owners. They're a hedge fund, right? So Fellani's job basically was batten down the hatches get the losses under control and put us in a situation where we can sell the club and I have to say and he's a very nice man he also did a very good job in my view for somebody who had not really been working professionally in football before he surrounded himself with good people he got the losses under control and look during that period for the most part they didn't they weren't that great on the pitch they won a title right they won syria at the end of that period in the last year they actually won a title which was in season 22 23 i think it was um and this was the moment at which elliot with immaculate timing sold the club to redberg capital which is chaired by this very um extrovert american guy called Jerry Cardinale.

58:27So how did they sell the club? Well, they sold the club to Cardinale, including what we call a vendor loan. So that's when the seller lends money to the purchaser to enable them to buy the club. Sold the house, but kept the mortgage. Basically, yes. And that vendor loan was pretty large. I think it was about£500 million. Yeah. And the club as a whole was valued at a billion. So effectively, Redbird put in£500 million and they took on a£500 million debt from Elliott in the process, which, bearing in mind this is happening in 2022. So it was actually 21-22 was the title they won. So the takeover happened just as they were basically winning Serie A under Fulani and with Paolo Maldini as the technical director.

59:27So Cardinale and co crash in there in 2022, August 2022, so four years ago. And gradually, Maldini, I think, left in 2023. so a year after they won the league, after disagreements with Redbird, so on and so forth. And the mood music was that the rest of the management that had been inherited from the Elliott era, led by Giorgio Fellani, were also not happy. But the whole ship sort of kept going in a rather unhappy way for a while until in May of this year, after they failed to qualify for the Champions League, Fulani, the head coach Allegri, the technical director Jeffrey Moncada were all fired.

1:00:14And the sporting director Iglesias Tare as well. Basically, everyone was fired except for one person. And that one person is important here because that one person was appointed the year before by Jerry Cardinale. And that person is Zlatan Ibrahimović. So what has happened here is that Cardinale has come in. He's got his feet under the table. He's fallen out with Maldini. Okay, that can happen. And he's then thought, I want my own guy. I want my own guy to tell me how to run this club or to help me run this club. And he's appointed the recently retired player, Zlatan Ibrahimovic, as a partner in Redbird Capital to then put him in charge of the Milan investment.

1:01:01Right? So Ibrahimovic, for the last year and a half, has been the Redbird guy in charge of Milan. And therefore, effectively, Ibrahimovic has advised Cardinale to fire all of these people. Now, in the meantime, as you say, they have refinanced the loan from Elliott. What do we mean by refinanced? What we mean is, effectively, they have gone to a new borrower to borrow new money to pay off the Elliott loan. So Elias are now out of that. And it was a great deal from their perspective. They've done well overall out of this whole situation. $130 million,$40 million in interest alone, I think. Yeah.

1:01:41Now, the new loan, instead of being$500 million, is$650 million. And it's been organized by a company called Convest Credit. And instead of an interest rate of 8%, the interest rate is believed to be 10.5%. And instead of being an interest plus repayment loan, this, Charlie, and this will be very familiar to you and Chelsea fans, is done in pick notes. Right. God makes us nervous every time we hear it. This is a five-year loan in pick notes. Pick notes, just to remind people, are payment in kind notes. So it's a loan where you don't pay the interest. Every year, the interest gets added to the amount that you owe, and then you pay interest on the combined amount of how much you owe plus the interest you haven't paid.

1:02:30And this rolls up over time. So what does this mean? I just did the mathematics on this. And what this means is that the original 650 million loan that they took out from Convest is going to end up being 950 million by 2031. Okay? So just bear that in mind. This is an asset that was bought for a billion, which by the time that the loan matures in 2031, Redbird will be carrying debt of basically a billion on an asset they originally bought for a billion. Okay. Now, let's have a look at the new stadium. Because just like Madrid and just like Barcelona effectively, and just like Man United, we discussed this recently, they're going into a moment of needing to pay for a big new stadium when the entity which which owns Milan.

1:03:26And it's important to say this debt, as with Chelsea, is being held at holding company level, not at club level. So the club itself is not at risk here. It's important to say that in case of any Milan fans listening to this who don't know the situation. Milan itself is not carrying the debt. It's the holding company that's carrying the debt. So now they need to develop the San Siro. So they and Inter Milan, who obviously co-lease the San Siro at the moment, have acquired the land that needed to be done for them to then develop it, because they weren't going to spend vast amounts of money at developing a stadium they didn't even own.

1:04:05So they'd acquired the land, which for memory was about€253 million, something like that. And now, in a JV, they need to go about building the new stadium. And the building of that new stadium, as we know from discussing these things with Man United and so on, looks like being at least a billion. So let's just back up our packet numbers. Redbird's equity and loan contributions, that will need to be 50%. So 500 million. So by the end of this entire process, which will presumably come at around the same time as the loan matures in 2031, the total borrowings of Redbird in connection with AC Milan look like being around about one and a half billion.

1:04:57Right. Now, the question is, is what will AC Milan be worth at that moment in time? Because Redbird is a fund, so it needs to exit investments. It can't just sit on them like a family office might do or just a wealthy billionaire or whatever it might be, then they have to sell to generate funds to pay back to their investors, to then encourage their investors to invest with them again. So at some point, they're going to need to sell. And 2031 seems like about the right moment, right? Because they entered this whole situation in 2022. 2031 is nine years after entering the investment. And we discussed before in relation to Chelsea how that is at the long end of what a private equity fund might want to hold an asset for.

1:05:44And of course, they've got the broader challenge, right, of also operating. We said you can do so much with an asset and you can build value individually, but also if you sit in a system which is also not particularly appealing, that's going to significantly hamper you. And as we have discussed before, Italian football is not smelling of roses at the moment. Correct. I spoke to the great sage of Como, Roger Mitchell, who sits there half an hour away from Milan and keeps a very close eye on those big Italian clubs. And, you know, I said to Roger, I said, look, you know, do people in the Italian market think that AC Milan is going to be worth one and a half billion in four years' time?

1:06:26And he was like, no, no one thinks that. I mean, no one thinks that the Italian clubs are going to be worth those types of numbers because their media rights revenue that they acquired through Serie A is so much lower than the English leagues and even the Spanish and German leagues that, frankly, you're non-competitive on an international level. So what you're buying is prestige and history and obviously good matchday revenues. If and when the new stadium gets up and running, there'll be really good matchday revenues. But the Italian league is just a few years behind where the French league has been, right?

1:07:05So if you look at a club like, you know, You see Nice, which is owned by Jim Ratcliffe, the aforementioned Jim Ratcliffe. You know, a few years ago, people were talking about Nice being worth 400 million. And now it's on the market at about 100 million. Why? Because the French League has lost its TV revenues. And selling sports assets in leagues and competitions where there's no TV rights revenue is extremely difficult because you then just become effectively a multiple of your commercial and matchday revenue. and that's just never going to add up to the same kind of thing. So if you just track it back, Charlie, and say, okay, let's just say that you apply, you're really generous, and you say, right, we're going to apply a multiple revenue of two and a half X, okay?

1:07:51So what revenues would AC Milan need to generate to be worth two billion, right? Which is what would then make a profit of the investment for Redbird. Not a massive profit, by the way, by their standards, but nonetheless, it would do okay. To be worth$2 billion, they're going to need to be doing revenues of$800 million. Currently, the only clubs in the world who do$800 million are Barca and Real. Even Man United, even with all the Premier League's TV rights revenue, etc., don't do anything close to that. AC Milan, from memory, are doing something like$350 ,000,$500 ,000. They did five last year, but it was their record, and it was significantly propped up by player trading.

1:08:40So, again, your business model is not built on anything of consistency there, right? It's a football lottery business model. So, really, the revenue I was referring to was the non-player trading revenue, because it's very hard to persuade new owners to buy clubs based on player sales that have happened in the past. That's a very hard thing to do. So, let's just say it's native revenue is$400, right? Native revenue,$400. And you're asking someone to pay$2 billion. That's 5x revenue, and that's just not a revenue multiple that anyone's going to be willing to buy. So I think the other big red flashing light here is a lot of competent people have left that club, right?

1:09:19Maldini was an outstanding technical director, as in everything he does. Fellani turned out to be a very shrewd appointment by Elliott and is widely respected in the industry for having run a business like Shipp, and also somebody who football people found they could deal with, Polanyi, even though he himself was not a football person, he was somebody who football people seemed to get along with well. A rare breed, yeah. And the other people around him on the football side managed to, during this period when they were having a break-even, as you say, construct a good player trading model, right?

1:09:53So the whole thing was being run away that Elliott would want it to be run. so Cardinale comes in all of those super smart super experienced people leave and the club's now being run by Zlatan Ibrahimovic and a new chief executive who has no background in football whatsoever who comes from Redbird itself and whose previous sporting experience was with the ATP yeah so Charlie if I'm so if we're talking about the reasons why as you said we started talking about it it was purely on an interest on the performance side with two notable names Ramos and Amorim going in if we're associating spend on the pitch and looking to put in place a manager that's still vastly unproven in Ruben Amaro yeah do you think I mean is it telling us anything well I think what it's telling us is that this is turning into a big bet just like Chelsea this is turning into a big bet right we're going to give Zlatan Ibrahimovic his head I'm going to give him because effectively you look at this loan that they've taken from Convest, it pays off Elliott plus a bit.

1:11:01So my instinct is that plus a bit is what's being used here to fund an increase in player trading activity on that side. So this is a bet that under Ibrahimovic, the club can go back up to winning Serie A, qualifying for Champions League, big things happening, new stadium, blah, blah, blah, telling this big news story. but it's placing a vast reliance on somebody in Ibrahimovic who has no technical background working in the sport. He was a player until three years ago, was it? Yeah. Something like that. I mean, it's an extraordinary appointment when you look at the experience that's walked out the door to say that this is the guy who's going to be in charge of this immensely complex beast, and then to put a CEO in who does it from a football club background that comes from a non-football background.

1:11:50It just strikes me that Cardinali is up to his neck in this investment and is almost saying, kind of go big or go home here, right? I can't just sit here and let the thing bump along. If I'm going to make sense out of it, I'm going to have to throw everything at it. I'm just not sure looking at the decisions that he's made, those are sensible decisions. Really agree. Fascinating. Good look at a great club. So thank you, Charlie. I think it's cricket time. I think it's cricket time. So if you want to come and join us for that, I have no doubt you'll enjoy it if you've been following any of the last conversations we've had.

1:12:27Come over to Substack. As I said, the link is going to be below in the bio. So come and join us. But if not, thank you so much as always and we'll see you next week. Thank you, Charlie.

1:12:38Thank you so much as always for joining us this week. There is a huge amount to discuss off the back of the cricket. And as I said at the beginning, if you do want to go and check that out, it will be live on our Substack this afternoon. however there is plenty in here to generate a lot of discussion and in particular I think something will develop over the next couple of weeks will probably be developing from the Tennyson from Wimbledon particularly with the show with Craig Tiley on the main show on the interview show next week so I would love to hear your thoughts on that and I would love to develop that as a discussion point throughout the summer thank you again as always for tuning in and we'll see you next week this show has a number of ambitions education sits at the heart of it no one does a better job or has a better success rate of providing the tools to access the opportunities to work in sports than the global institute of sport.

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