This Soccer Club’s American Owners Are Either Geniuses or Fools
When the 2024-25 season of the English Premier League kicked off earlier this month, the rules of soccer still allowed each side to field only 11 players. Chelsea started the campaign with 42, including reserves.
The bloated squad reflects the unorthodox strategy of the West London club’s new owners. But cracking the code of how to make money with European soccer is hard and, in this case, very expensive. Unlike a U.S. sports team that grabs headlines through record-shattering deals for a superstar at the peak of his abilities like the $700 million the Los Angeles Dodgers shelled out for Shohei Ohtani, Chelsea has made many smaller bets on players with great potential.
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In 2022, Chelsea FC was bought for a record 4.3 billion pounds, or $5.5 billion, by a group of American investors. They include Dodgers part-owner Todd Boehly and private-equity firm Clearlake Capital, whose co-founder Behdad Eghbali has become the most visible face of the club. They have since forked out almost $1 billion in net transfer fees.
Historically, clubs have delivered dismal returns because stars—and middlemen—claim most of the pie. Extracting value tends to come at the expense of performance on the pitch. Most trophies are claimed by clubs with spendthrift owners obsessed with prestige, such as Manchester City, controlled by a Middle Eastern billionaire who is deputy prime minister of the United Arab Emirates.
Nevertheless, U.S. private-investment firms have descended upon European soccer over the past few years, eager to apply models that have worked in finance. They emphasize using statistical performance models to identify undervalued players—an approach that first spread across Major League Baseball. The movement was highlighted by the 2003 book by Michael Lewis, “Moneyball.” A key example is New York-based RedBird Capital Partners, which owns AC Milan, Toulouse FC and a minority stake in Liverpool FC.
Boehly and Clearlake are going way beyond that approach, though. In the 2022-23 season, they disbursed $700 million on up-and-coming stars, including Enzo Fernández and Mykhaylo Mudryk, to whom they offered eight-and-a-half year deals. Chelsea has remained a net buyer since, building up a roster more reminiscent of the early stage of a talent show than a typical soccer team.
The accounting works similarly to when a manufacturer tools up for a new model by spending huge sums upfront. Like a riveting machine, soccer stars are accounted for as assets and transfers are investments, not costs. The drag on earnings comes as the value of those players is amortized over the life of their contracts.
The key difference is that brand-new machines get run down, but well-spotted young players theoretically get more valuable over time. This is why Chelsea has been scooping up promising 20-year-olds and tying them down with extra-long contracts that spread out amortization expenses—a trick that, financially, does bear similarity to the Ohtani deal. Chelsea has by far the largest squad in the Premier League, and the youngest one, according to specialized site Transfermarkt.
Some Americanization of European soccer was inevitable. The UEFA Champions League’s format left money on the table, which is why it has been revamped. Financial fair-play rules, which limit overspending, now fulfill some of the functions of U.S.-style revenue sharing and spending caps. And British-owned clubs such as Brighton & Hove Albion and Brentford FC have shown that applying “Moneyball” to soccer can work.
However, Chelsea’s approach seems disconnected from the on-the-ground reality of the sport. The market value of its overall squad was just 12% lower than that of Premier League standing champions Manchester City, as estimated by Transfermarkt. But the game only allows for 11 starters plus five substitutions, so spreading the same amount of money over more players leads to less of it being on the pitch. This is why the starting team that Chelsea fielded against City on Sunday had a larger 27% gap in value. It lost 0-2.
The idea is that a casting process involving so many 20-year-olds should eventually yield an unbeatable 11. But that requires playing time, and is dependent on how each player links up with others. Mind-bogglingly, Chelsea’s current squad allows for about 12 million possible combinations. The club has since trimmed its roster to 39 players, but the other problem is lack of continuity in what it expects them to do: Enzo Maresca, who was appointed in July, is the sixth manager of the new Chelsea era.
Poor performance has kept Chelsea out of the top European competitions, denting revenue. In the 2022-23 season, player amortizations rose to a Premier League record of ￡203 million, leading to deep losses. Figures were probably in the red last season too, raising the risk of eventually breaching the league’s profit and sustainability rules and being forced to fire-sale players.
They might be worth less than believed, because players who aren’t certain starters tend to devalue. Indeed, this seems to have happened to most of the young players bought by Chelsea, according to Transfermarkt. And under long amortization schedules, it can take an eternity before they can be sold without booking a loss. Mudryk is tied to the club until 2031, but is worth 42% less than when he signed.
Chelsea has made money through sales of homegrown players, which it books as full profits. But this can mean disposing of the squad’s few known quantities, such as midfielder Conor Gallagher.
The ultimate problem with Boehly’s and Clearlake’s strategy is that, while it allows for bold long-term moves, it reduces any ability to course correct. Talented young players could lead the team to the top one day, but outcomes in sports are even harder to predict than in your typical industry. So far, it looks like an expensive own goal.
Write to Jon Sindreu at [email protected]