Manchester City Exposed-Chapter 4: A Global Empire

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It’s football capitalism in its purest form: Manchester City pays exorbitant salaries and turns a profit, while the City Football Group controls affiliates on all continents. Executives even used an Arab club for secret payments to the man who is now the coach of Italy’s national team. By DER SPIEGEL Staff

Editor’s Note: This is the third chapter in a four-part series on the Manchester City football team that will be published Monday through Thursday of this week. You can read the first chapter here, the second chapter here and the third chapter here.

On a Saturday in October 2018, Manchester City had a match against Burnley F.C., a rather harmless team from a smallish city in northern England. It was a match in which losing was not an option and could hardly be seen as an indicator as to whether Man City was on its way to another Premier League championship. But in the 58th minute, relieved applause broke out in Etihad Stadium, even though the home team was already leading 3:0. Kevin De Bruyne had taken the field following a two-month injury layoff.

His trainer Pep Guardiola calls the Belgian player “one of the best players I’ve ever seen in my life.” De Bruyne, he says, can do “absolutely everything.” Back in February, as Manchester was continuing its record-breaking domination of the Premier League, the Sun wrote that without his goals and assists, City would have had 20 fewer points.

De Bruyne is a team leader who takes over games. In 2015, he helped VfL Wolfsburg win the league cup in Germany. After that, the team could no longer hide him from top European clubs. For months, transfer rumors surrounding the star midfielder dominated football news. And as documents from the Football Leaks trove show, Manchester City was willing to do whatever it took to get him.

“Excellent start of the season, the team is in good shape,” wrote team CEO Ferran Soriano in August 2015 to fellow Man City executives. The club had started the season with three victories and already boasted a goal differential of 8:0.

But Soriano still wasn’t satisfied. “We will still invest 50m more to improve it,” he wrote. But he noted that he was having trouble striking a deal with Wolfsburg, a team intricately linked with VW, which is headquartered in the city. “They still do not want to sell at 50m,” he wrote. “We are putting lots of pressure and hope we will get it done … against their will. Wolfsburg (Volkswagen) say they do not want the money!”

When City decides it wants a player no matter how high the price, even an automobile manufacturer with sales of 200 billion euros eventually buckles. Ultimately, Wolfsburg received a transfer fee of 75 million — and absent De Bruyne, plummeted in the standings. The Belgian star has been plying his trade in Manchester since September 2015.

Success at any price: There is no better description for the strategy pursued by Man City executives. Bayern Munich, Germany’s wealthiest team, was apparently unable to make a better offer to De Bruyne, nor were they able to secure the services of German national team player Leroy Sané. When the native of Essen, Germany moved to Manchester a year after De Bruyne, the team made him a promise: If Sané earned less than 24.5 million pounds in his first three years with the club, City would wire him the difference. In other words, Sané — a 20-year-old at the time — was guaranteed a salary of the equivalent of 28 million euros for three seasons. Germany’s top league doesn’t stand a chance.

Manchester City benefited from the fact that club executives were able to increase and back-date sponsoring contracts with companies from Abu Dhabi at will. And that they systematically flouted UEFA’s Financial Fair Play rules without any real penalty. Behind the club is the authoritarian ruling family from the United Arab Emirates, which uses its football investment as an international calling card to lend it more weight on the international stage.

But the emirate is not solely to blame for the deep divide between the haves and the have-nots in the world of football. The amount of money the Premier League now generates from the sale of broadcast rights has completely changed the football landscape in Europe. Last year, the league sent the equivalent of 170 million euros to Man City — a sum that was 75 percent higher than FC Bayern received from the German league. According to Football Leaks documents, such generous payouts helped make it possible for the club to pay German star Ilkay Gündogan a salary of almost 11 million euros last year, and striker Sergio Agüero more than 18 million. Player salaries paid by Manchester are among the highest in the Premier League.

Despite the high spending, however, the football project in Manchester is now profitable, which doesn’t necessarily go without saying, as an internal Man City document from 2012 makes clear. “The football industry is a very fragmented one,” the paper reads, “and clubs are the least profitable part of the value chain.” The clubs have to buy the rights to players and pay their salaries, the document notes, with better players earning higher salaries. Football associations, media companies and merchandizing firms — along with players and their advisers — the document makes clear, have a much better chance at high profits.

To ensure Manchester City got its piece of the money pie, however, team executives designed a structure that the football world had never seen before: a global empire. It was no longer enough to own just one club. A global network of subsidiaries makes it easier to bring in profits — a lesson Man City has been aware of since 2009.

That year, the Italian trainer Roberto Mancini signed two contracts on the same day: one as the new trainer for the Premier League team Manchester City, and the other as an adviser to the Al Jazira Sports and Cultural Club in the Arabian Gulf League. Sheikh Mansour is behind both clubs. And the numbers in the two contracts were astounding: Al Jazira had committed to pay Mancini, who is today the Italian national team trainer, a higher base salary than Manchester City: The Premier League team would be paying him 1.45 million pounds, before bonuses and incentives, while he would receive a base salary of 1.75 million from the Abu Dhabi club. Annually.

“We have some payments that require to be made by Al Jazira,” a City executive in Manchester wrote in September 2011 to his colleagues, clearly explaining what was to take place: “We will need to send monies to ADUG and ADUG will then pass on to Al Jazira with payment instruction.” ADUG is the Abu Dhabi United Group, the holding company that owns Manchester City. Its directors are Sheikh Mansour and Mohamed Rashed Mubarak Salem Al Ketbi. ADUG is at the center of all Manchester City efforts to circumvent the Financial Fair Play rules and secretly subsidizes sponsorship deals the club has with companies in Abu Dhabi.

At this time, in other words, a portion of Roberto Mancini’s trainer salary was apparently being directed through Al Jazira. The alleged “consulting” contract with the Arab club was seemingly just a pretext. In 2011, at least, money destined for Mancini made its way from Manchester to Al Jazira and then into a discrete offshore shell company in Mauritius named Sparkleglow Holdings.

Neither Al Jazira nor Mancini answered questions submitted by the European Investigative Collaborations (EIC) network of journalists. The club stated it would not respond to the questions. “The attempt to damage the Club’s reputation is organized and clear,” a spokesperson wrote.

Without systematic rules violations, hidden payments and secret cash injections, Manchester City’s success story would not have been possible.

Once a local club, Manchester City is now a global brand, one of several held by the City Football Group (CFG). Just as it is possible to drink the same Starbucks coffee in identical branches, out of identical cups and at the identically exorbitant prices from Seattle to Singapore, Manchester City football affiliates have likewise sprung up on all continents. Manchester City, New York City and Melbourne City, the three flagships, play in sky-blue jerseys and advertise for Abu Dhabi’s Etihad airline. But in addition to these teams, Man City owns stakes in league teams in Uruguay, Spain and Japan and has cooperation agreements with clubs in Scandinavia and with an African youth academy.

An internal presentation from 2016 outlines the team’s strategy for the Torque farm team in the Uruguayan capital of Montevideo: “Uruguay is an attractive location due to the concentration of quality footballers & limited budgets of local teams,” the presentation notes. In other words: the City Football Group hoped to pick off relatively cheap talent and develop them for their use. The presentation notes Torque is “preferable to MCFC” and that “it’s local & should lower player acquisition costs.” A further positive, according to the documents, is that City didn’t need to pay any taxes on profits from player transfers.

The investment in the Spanish club Gironi is also explained in the concept paper: “It’s crucial for Academy players development to play in competitive men’s football.” It argues that this is difficult in England because Manchester City’s squad is already too strong. “Means CFG needs to develop other pathways to provide Academy players the opportunity to play.” The solution: A Spanish team where the talent can get playing time.

The football subsidiaries function as a place to both park players until they are ready and to test new talent. The global business network is to ensure that the managers discover promising players first and bring them into the CFG system early on so they can have full control of their careers.

Only a small number of actors in the global football business can keep up with this expansion strategy. Sheikh Mansour and the sponsors from Abu Dhabi have invested over 2 billion euros into Manchester City within 10 years. The team is now profitable, but the economic success is rooted in rules violations. And last season, the profit was merely 10 million pounds — not a great return on the multibillion investment, particularly given that Mansour is continuing to dig deep into his wallet for expensive new players.

From a sporting perspective, the project has succeeded. In its first season under CFG leadership, recently promoted Girona proved itself by finishing in the middle of the pack in the first Spanish league while Torque in Uruguay immediately won promotion. The affiliate club in Melbourne won its first title three years after the CFG takeover.

Sheikh Mansour bought Manchester City in 2008 for 100 million pounds. In 2015, Chinese media mogul Li Ruigang invested 265 million pounds in CFG via a company that is registered in the Cayman Islands, giving him a 13 percent stake. The value of Manchester City has increased by a factor of at least 10 in seven years.

Manchester City Director Khaldoon Al Mubarak has described the involvement of His Highness as follows: “Sheikh Mansour is an astute businessman, who believes you can create a value from football that has not yet been accomplished.” His managers haven’t just turned Manchester City upside down, but flooded the football world with money and forced it to globalize. The City Football Group represents football capitalism in its purest and most successful form.

In football, it’s not just survival of the fittest, it’s also survival of the richest.

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