What does the FIFA private investment plan mean for football? | The Football Boardroom

0:00Henry:Wow, we have the ultimate money power politics story this week. Gianni Infantino's plan to sell a stake in the World Cup to a member of Donald Trump's family. What does it mean? What's actually going on here? And how do we think it's going to play out? We hope you like the show.

0:22Christian, I can't believe my contempt for the FIFA president Gianni Infantino could have risen after the World Cup. and having seen what happened out there with the political interference in the integrity of the disciplinary process over Balogun, having seen the commercial interference with the hydration breaks, which were then sponsored. And now, 10 days after, what was a fantastic tournament? We are looking at one of the darkest days in the history of world football, which is, what, 96 years old in terms of the World Cup and this divisive, dangerous plan that he's come up with to sell off the World Cup.

1:00This is the World Cup. This is not some, I don't know, ball-bearing company in Baltimore that these venture capitalists are taking a punt on and a stake in. You understand this world. You're a football fan, like me. I'm sure you have your reservations, but can you explain to me, is there any logic? Is there any sort of non-moral element to this?

1:27Henry:That's a really good question, and I think we should try and separate the emotion. And I would suggest, Stach, we need to try. This is not easy, but we should try and separate some of the personal aspects associated with worldwide suspicion about the president of FIFA and everything around the American World Cup that made people feel so uncomfortable, I'm talking about. the proximity of his relationship to the president, all that stuff associated with Gianni Infantino. Let me just start by stripping back what this proposal seems to be about and see if there is any logic or merit to it. What has been described is to take essentially the revenue generating activities of FIFA, the hosting and organization of a World Cup, the enormous broadcast rights from selling that World Cup, the huge sponsorship dollars that flow for the World Cup, all of that income and put it into a newly created subsidiary of World Cup.

2:45Henry:and for that subsidiary to be opened up to external ownership for professional investors to take a minority stake in that FIFA commercial subsidiary. And as it's been described in the FIFA statement, and you can be quite sure that is an extremely carefully worded and spun statement, that FIFA subsidiary will raise purely financial investment, no operational involvement, no managerial input, just money being raised by the sale of that minority stake. Or put another way, that FIFA and FIFA's management will have complete control over that subsidiary. And the rationale, the very simple rationale, is that is indeed this incredible, I described it at the time as the anything goes, fill your boots World Cup.

3:52Henry:Let's test every single way that we can make money from this World Cup. I thought so that next time round at the next World Cup, Infantino and his management team could really max out on the rights values and the revenues next time round. It now seems as though there was another agenda. It was actually to showcase to the investment world just what a staggeringly revenue generating commercial proposition this World Cup is, maybe for the purposes of raising money from professional investors. Can you talk me through the money? I mean, I read Martin Ziegler's very good scoop in The Times yesterday and the outrage that it's triggered in many parts of the world, not in simply the most expected areas like Europe and CONCACAF have now released a statement questioning the process.

4:46The Football Association of England has released a statement questioning the process. UEFA were first out the traps, quickly followed by our new prime minister, who's an Everton fan, who was, you know, raging against it as well.

4:59Henry:He said the World Cup's not a product for sale. Yeah, well, it's not even a product. It is the World Cup. I mean, you know, we have to remember that the history, the soul, everything about it is it's not a product. it shouldn't be for sale. I'm not sure that's true. Well. I mean, it is, we've just described. We'll put a figure on it then. If everything comes down to money, put a figure on what it's worth. Okay, well, we know what it's worth because the victory lap that Infantino and his management team have done in the wake of the World Cup is that in the four years, they measure their revenues over four-year periods, the cycle up to the tournament.

5:40Henry:This World Cup generated north of$15 billion of income. So, you know, I can understand where the Prime Minister's coming on, but it's wrong-headed. This is the most attractive broadcast sports product in the world. I agree with you. A notch up from the Olympics, a notch up from the NFL, a notch up from the Champions League, a notch up from our own Premier League. This is the most elite live sports product in the world. And FIFA's one payday in that four year cycle, effectively. I mean, obviously they make money from other tournaments, but it's particularly this one they have to sweat. Well, this is the technical point around what this proposal is really doing, Henry.

6:29Henry:So they have their 15 billion dollars of income and they've got some costs associated with that. But this is a the most lucrative cycle in the history of FIFA. And that means the 211 member associations, all of whom ultimately are due their share of those proceeds, are going to be getting record levels of distribution from from FIFA HQ in the coming weeks and months. But this idea is to, to use the business word, literally capitalise on that commercial value by selling an equity interest in those commercial rights. And that equity interest will be sold for a multiple of that revenue. We are being told that this commercial subsidiary is going to be valued at about$20 billion.

7:27Henry:I'll tell you how I think they get to that number. I don't think it's that complicated. let's take that 15 billion dollars of revenue over four years let's spread it over four years and say it's plus or minus four billion dollars a year that's what we're being told the commercial rights to the world cup generate what is a reasonable multiple that media investors will pay for live sports content, what do people buy NFL teams for? What do people buy Premier League teams for? Answer, let's say five times that revenue. So somebody, probably an investment banker I read today, maybe JP Morgan, are saying to Infantino and his management team, we think if you sell a stake in your commercial rights vehicle, it should get sold about five times its revenue.

8:22Henry:And if you sell 25 % of that stake, that gets you to your$5 billion payday. But I think what we need to explore is what changes. I noticed the very, very last four words of FIFA's press release describing this idea was, for FIFA, nothing changes. Nothing could be less true. Because when a 96-year-old association, a Swiss-domiciled not-for-profit organisation, that really was conceived as the custodian of the global game, yes, managing this wonderful tournament every four years and that tournament certainly generating an ever-increasing revenue pool for distribution to the global game, that's always been true.

9:17Henry:But now having external professional capital in the ownership of FIFA, albeit in a minority stake, albeit in this commercial vehicle, everything changes. So you have some understanding slash sympathy for what Infantino is doing? Well, let's let's let's unpick that question. It is indisputable that this World Cup proved beyond any doubt the staggering commercial power of this FIFA tournament and everything associated with it. OK, we know for the last 20 years that live sports properties, particularly in the club game, have seen a staggering increase in their value and huge amounts of new investment.

10:11Henry:How many times we talked on this show about sophisticated global investors buying up our Premier League? OK, so if we strip away the personal element, the infantino factor, let's paint a counterfactual. Let's imagine that last week FIFA received a visit from two of the world's most credible investment banks. And let's say that the CEO or president or head of FIFA is a person of unimpeachable reputation. somebody we all trust and know 100 % has only the interests of global football. If you've got any suggestions, please pass them on. I don't, but let's say the Pope or Prince William or somebody who is just universally trusted and respected.

11:01Henry:Just go with me on this counterfactual. And the two biggest investment banks say in the world, it is staggering what you have demonstrated at the recent World Cup as to the commercial value of the World Cup. you are missing a trick. We think we could structure a transaction where you put all those commercial revenues into a FIFA subsidiary. You completely control them. You're not giving away any managerial independence. But we think we could sell minority stake in that vehicle for a valuation of$20 billion. We think we could raise$5 billion tomorrow of new money. you still retain complete control you could have every one of your 211 members take a stake okay in that vehicle if they want to sell that stake and get another payday they can do so and then one day when that investment needs a return this that stake will be floated on a global stock exchange you sound quite excited by the whole prospect i'm simply painting i'm painting a purely business argument why generating meaningful wealth for 211 member associations to suddenly get not four or five million, but 20 million, 40 million dollars.

12:20Henry:If you're sitting in Cabo Verde, you're sitting in Curacao, you're sitting in Papua New Guinea, you're sitting in New Zealand. Smaller federations are going to look at that and think, I can build a lot of pitches for grassroots football. I can build stadia with that level. I can transform football in my country. Those of us who are sort of slightly sceptical about Infantino's motives will say this is a brilliant way of ensuring that he gets everyone to vote for him or the majority to vote for him in March when the next presidential election comes around. Well, we thought, didn't we, that during the World Cup that that's what we were seeing.

12:53Henry:We were seeing the Anything Goes World Cup, huge revenues, brilliant, brilliant increases in the distributions to each of those 211 countries. to remember, crucial thing for our audience to understand, I think most do, that there's no weighting, I mean E-I-G-H-T weighting, there's no weighting of power and money according to, for example, the number of footballers playing in the World Cup or the number of TV audiences in the World Cup. Every single member association, all 200 level, have one vote and all of them get an equal weighting in distribution. And so guess what? These small countries getting these huge paychecks from FIFA, they think the FIFA management team led by Gianni Infantino is doing a brilliant job.

13:42But do we trust Infantino? What are his motives? He has just been in a country where the commissioners of their major sports there, some of them are on 50 million dollars 50-60 million dollars yeah absolutely and the latest FIFA accounts show that Infantino's salary is about I think about 3 million dollars and then bonuses for tournaments say another 2 million on top so his salary is absolutely dwarfed by the great commissioners of the game so do you think

14:15Henry:he wants to move into that realm this is this is this is obviously the overarching concern that I think people have. The traditional view and the status quo is that in effect FIFA is a not-for-profit association domiciled in Switzerland which most of us would view as being rather like public service. It's rather like a huge global charity organisation. Yes it It has fantastic revenue generating capability around tournaments, but fundamentally it's run rather like positions of public service you'd expect to be run. Custodians. With, yes, with, you know, that kind of level of remuneration for the people running it.

15:04Henry:And I am sure that the principal driver, I think, of the staggeringly negative reaction in the last 24 hours to this news breaking is people sensing that Gianni Infantino is looking at his term limits, is looking at his relatively modest pay, has probably spent rather a lot of time around. Relatively modest. He is on$5 million a year. Yeah, but as you just pointed out, I'm sure people in and around the president of the United States, people in and around US sports investors have been pointing out, you know, you're running a bigger sport than the NFL and you're earning 10 % of what the head of the NFL is running.

15:46Henry:And by the way, you're out of a job in 31. So you've done all this work creating this brilliant property and you should be getting paid for it. And, you know, maybe even Don is saying, you know, my God, you know, this is a beautiful thing. You should be getting paid a whole lot more for this, Gianni. Who knows what conversations have happened with those two big buddies in the room. And by the way, the President of the United States, you know, people will raise an eyebrow that the lead investor who is going to structure this minority investment is in effect the brother of the President's son-in-law.

16:18Henry:So pretty closely associated with the Trump family. That, if that is true, is raising a lot of eyebrows. So I'm trying to land... Raising eyebrows or suspicions? Well, this is the point, OK? Given FIFA's past, OK, and I'm here talking about, you know, the terrible corruption scandals that culminated in 2015 with, in effect, the FBI gripping a series of FIFA officials, you would have thought that the new management regime would go out of their way to avoid any suspicion, any accusation of putting self-aggrandizement, personal enrichment as being seen as a possible motivation. And I have to say, again, just to finish my explanation of what a strategic minority stake in FIFA by global media investors, what that ultimately means.

17:23Henry:Firstly, they will demand continuity of management. OK. And so as we read in that FIFA statement, let me have a look. I wrote this down. I'm sorry to. No, it's good that you're doing that. And one thing while you're looking for it. Here we go. No, let me read it to you. FIFA president and administrative staff have a duty to control the development of the project. So, you know, there it is in black and white. The project to sell a minority stake to create value for those investors in the commercialisation of the World Cup. The FIFA president has a duty to oversee that. You know, that sounds to me like a putting my hand up.

18:07Henry:I will be running this commercial vehicle. And as you know, night follows day, Henry. those investors would expect the person managing now that investment, OK, whose job it is to grow the commercial value of their investment. And we should come back, by the way, to what sort of things might happen with a pressure to grow the commercial value from outside investors. But it's basically saying we need to know who's in charge. And that person, as night follows day, They will say, well, I need to be paid the commercial rate for running the world's most viable, valuable media sports proposition. So he's going to go effectively straight from being president in 31.

18:50Yeah.

18:51Henry:On your three million dollars for being a public servant. Straight to being CEO of a media company on 60 million dollars. That's what people are concerned about. And it doesn't seem that outlandish a concern, does it? No, I think it's absolutely disgusting. I don't think he should be using the FIFA platform to prepare for that element ahead. Do you take my point that if the person running FIFA was unimpeachable and a person of immense trust and they brought forward a proposition to use effectively the huge investor appetite around the world for valuable sports media properties to generate a windfall set of profits for small countries around the world?

19:39Henry:Do you think it would be seen with so much suspicion? Well, first, I take your point that it's Infantino. So inevitably, the sirens are ringing in the background with being down this slightly troubled road before, where I would absolutely dispute that even if you put the cleanest pair of hands, a proper custodian in there, I still think there would be a similar reaction. And the reaction is the moment you open up FIFA, even a FIFA subsidiary to external influence to people who are there. And this is your world. You know, the motives of these people. I imagine it's money, power, politics, commercial, strict.

20:15OK, strictly commercial. Fantastic. So what are we going to get? A game of eight, well, eight, eights or whatever. The my maths is terrible. You're the maths man. What are they going to do? We're going to break up games even more. we've seen the political interference we've seen the commercial interference at the World Cup over the last two months what are they going to do? the commercial element, the broadcast element the fact we would immediately go for a 64 team World Cup because of the potential for more broadcast revenue it'll be interesting to see what the players make about that on a welfare front given the number of games for the elite players Roger has already spoken about it before a previous tournament.

20:58So it cannot be right. Whatever you think of Infantino, remove Infantino from the equation. The process, the plan has to be fought as well as Infantino.

21:10Henry:I agree with you. But you quite like the plan. No, I didn't say I like the plan. You asked me to explain what's behind the plan. And the answer is global media investment appetite for elite sports properties and the ability to sell equity in any of those sorts of properties at huge multiples of revenue. So that's behind it. And do not underestimate the attraction to all those member associations of that payday. Now you're talking, what are the strings? What are the unintended consequences of opening the door to external ownership investment? Where does it stop with those commercial interests job one would absolutely be to grow the value if if these investors have bought into fifa a valuation of 20 billion dollars why have they done so they've done so because they hope expect require in five years that it's worth 40 billion dollars how do you do that you grow the revenue how do you grow the revenue more tournaments more teams in the tournaments more sponsorship dollars more advertising revenue a bigger club World Cup we said in the World Cup I said on this show three weeks ago there's no way that our domestic games going to allow hydration breaks to keep in so that effectively football comes a game of four quarters not two halves I think you can safely assume if you had commercial interest controlling FIFA it's there forever so yes there are implications for the way the game is actually staged and run from having those commercially interested parties involved.

22:45Henry:Where is the resistance going to come from? The only people who can stop this are the most powerful and influential federations by which I mean probably in no particular order you know if you know if Spain if Spain it has to go a level below UEFA if if Spain Germany France Italy, England, Portugal, those six country federations that represent the majority of elite international footballers who play in those tournaments. If those countries aren't having this and exert their influence. And that means, by the way, Henry, being willing to really stand up and exert their influence. But that means a boycott.

23:32Can you genuinely see them boycotting the next World Cup, which, by the way, is in Spain and Portugal?

23:37Henry:I can't. I can't. But what do they exist for if not to exert their influence, to use their voice? What concrete actions can these federations take to to to head this off? Well, we've talked about the fact that this is obviously very, very closely associated with Gianni Infantino. You know, I think probably the opportunity for these federations is to try and use it to isolate him. He's investing a lot of political capital in this initiative. So, Christian, come on, what happens next? Well, I think it's a really interesting conundrum because whoever you are in those member associations, if this proposal has real substance, i.e., you know, real investors, real money, $20 billion on a subsidiary no strings attached Infantino can construct an argument that there are total guardrails and protections in place to protect against some of the concerns you've expressed Henry whether it's excessive commercialisation political interference you name it that it's essentially a windfall for everybody saying no to billions of dollars for the member associations, tens of millions of dollars for countries, federations around the world who are used to getting a million dollars.

25:07Henry:That's a big call. I sense that this is the ultimate example of money power politics. UEFA's real concern actually here is, is FIFA really treading on their toes? Does a fully enriched FIFA now with really powerful commercial interests behind it, with deeply, you know, fully financed business plan, does that just embolden FIFA and Infantino to go even harder on incursions into the club game, into the calendar, into making the Club World Cup, in effect, the preeminent club competition and eating the lunch of UEFA's? marquee tournament, which is the Champions League. That's the politics of this.

25:59Henry:They will couch it in this whole political issue around personalising it, Infantino, is it a bid to try and get himself a big commercial job when his term runs out? Is it a chance to get rich? But in reality, empowering FIFA, bringing in new money to FIFA really threatens UEFA's preeminence in the club game. so I think they will take a stand it won't go towards you know we're not going to cooperate we're not going to play in your tournaments but I think it's going to be a pretty intense civil war in the coming weeks and months and I think it's too close to call I think it's really difficult when you've got you're going to have 150 to 200 associations saying we think this is the greatest idea in the history of sport we can't wait to get our hands on that 20 million dollars so we can transform grassroots in our country and you're going to have UEFA and the biggest European federations arguing this is not right we have to stop this.

26:59My concern Christian and where I think it absolutely has to be blocked and why I'm enduring the resistance from UEFA from number 10 from the fans from the FA to an extent from CONCACAF to to an extent and broader than that is that the moment you open the door to FIFA, even via a subsidiary, is to commercial partners, that is the start of a long, slippery slope which damages the game.

27:30Henry:Well, for what it's worth, I completely agree with you. I think it's a really, a really good analogy. I've explained to you, you can construct an argument that this is a ring-fenced commercial subsidiary, fully controlled guardrails, all that stuff. But money talks. Those commercial interests are investing to make a return. They will therefore influence the direction of travel commercially for the sport. They'll need an exit. That exit might be the World Cup listed on the stock exchange in five years. And then what happens, maybe even, Henry, we see the World Cup commercial vehicle taken over by one of the Magnificent Seven, Amazon, Netflix, by the commercial vehicle of the World Cup one day and all of the commercial implications that that might have.

28:22Henry:It is the slipperiest of slippery slopes. I think a lot of people are going to try and stop it. And we shall see how it plays out. it used to be about sport money power politics boy that's why we started the podcast and what a week and on that note on that note back to Blighty I mean that was all about the future of the world game and we've seen some stories from someone you know very well Mark Kleiman at Sky has been writing about the potential for a new deal which is something you and I have discussed. I know that you've been involved in it and the discussions basically about how much the Premier League should give of its very large broadcast revenue to the EFL.

29:15But it basically seems that there are meetings this week, Premier League meetings with the EFL and interestingly the regulator and then maybe a Premier League meeting to discuss whether they should come up with this new deal? Is that to do with the regulator? Is it to do with a football fan at number 10 bringing a little bit to bear, focusing minds? Can you explain it to me and to our audience exactly what's been going on and whether this new deal, which will be an old deal by the time it comes through because we've been waiting what, two, three years for this, actually will come to fruition?

29:54Henry:Well, what I think Mark Lyman and Sky is telling us is that after on-off talks for over four years, in fact, between the Premier League and the EFL about updating the economic relationship between the Premier League and the EFL, it has always been true that a proportion of Premier League revenue is distributed down through the pyramid to the EFL in something called Henry Solidarity Payments, which amount, by the way, to currently to about four and a half million pounds per championship club. And as everybody who's followed this subject knows, ever since Tracy Crouch's fan-led review, there has been pressure brought to bear on the Premier League to increase those payments.