José Mourinho “Please don't call me arrogant, but I'm European champion […] and I think I am a special one.” José Mourinho, introductory press conference at Chelsea FC, June 2004 “He takes over a club, briskly populates the trophy cabinet, captivates neutrals with his seething intelligence, then departs amid faltering performances and a foul atmosphere of his own creation. Chelsea from 2004 to 2007, then Inter Milan until 2010, then Real Madrid until 2013, now Chelsea again: a life of glory and transience.”i Janan Ganesh, political columnist for the Financial Times [What’s Mourinho’s biggest strength?] “Charisma!”ii Patrick Barclay, Mourinho’s biographer When in May 2016, José Mourinho was appointed as Manchester United’s manager many rejoiced at the prospect of seeing the most successful coach of the 21st century at the helm of a team that is still viewed as one of the most powerful in the world, in spite of falling out of grace since Sir Alex Ferguson’s dynasty came to an end in 2011. Others thought differently, they doubted Mourinho could adapt to Manchester United’s culture. Mourinho is, of course, the mythical coach capable of bringing teams of average and often relegated players to glory, as he did with both FC Porto and FC Internazionale Milano (Inter). Still, he never reached the European summit when managing some of the most expensive squads ever assembled while at Chelsea FC and Real Madrid (see Exhibit 1). By the time he arrived at Manchester United he had had an illustrious 16- year long career. He had won multiple domestic leagues in Portugal, Italy, Spain and England, one UEFA Cup and two Champions Leagues. He had always led his teams to success in relatively short spells, never staying more than three years, and had always brought about controversy. This was something he seemed to cherish and use to his team’s advantage. Before Manchester, Mourinho’s teams have borne his distinctive style, doing whatever it takes to win, often playing a fearless defensive style and scoring through well- designed fast counter attacks. Can he continue to win without destroying his club’s culture and allow two strong identities to coexist? Will Mourinho finally be able to settle This case study was prepared by Miguel Pina e Cunha and Pedro Sena-Dias. José Mourinho into a long-term relationship and focus on creating long-term value for his shareholders, by both changing and becoming part of the structure or will he continue to work on his own terms, acting as a sort of a short-term consultant?i The Business of Footballiii… and its A product, the English Premier League With a few notable exceptions, the same small group of teams has consistently dominated the main European football leagues (see Exhibit 2). This is why Leicester’s consecration as 2016 English Premier League (EPL) champion was picked by some as the most surprising sport upset of all timeiv. At the beginning of the season, Leicester City FCv was given 5000 to 1 odds of winning the title. According to ESPN, the team was put together with only €65mvi in transfer fees, a fraction of the cost of the runners- upvii. What made Leicester victory particularly unexpected is that it took place at a time when Europe’s giant teams (see Exhibit 3) have an unsurpassed access to money: via new ownership funds, via mega TV and sponsorship deals, or via merchandise sales in a truly globalized world in which fans anywhere can follow and support any team. In 2014/2015, the biggest football league in the world, the EPL (see Exhibit 4), generated around €4.1bnviii, still far behind the NFL, the American Football League, and the MLB, the American Baseball League, in terms of overall revenues generated (see Exhibit 5). But, in terms of media average earnings per club, the Premier League is expected to surpass the NFL in 2017/2018ix, which attests to its global marketability. The fantastic growth of the league’s media deal, which for the triennial starting in 2016/2017 will surpass €6bn, a 70% increase, is finally bringing widespread profits to almost all Premier League clubs, after decades of league losses from 1999 to 2015ix, and should place all 20 Premier League clubs among the 30 biggest revenue generators in Europex. In fact, around 80% of EPL clubs’ revenue is associated with the domestic leaguexi. The more glamorous Champions League’s serves to boost clubs’ worldwide appeal rather than to provide financial gain. Since the early 2000s, financial attractiveness and a certain trend have made it more common for billionaires to acquire sports teams, especially in the Premier League (see Exhibit 6). The power pendulum is thus kept away from teams who maintain stable ownership without a fresh influx of cash from eager new owners, as happened with Manchester City, Chelsea, Manchester United and Liverpool (see Exhibit 7). A fresh cash inflow has been behind the purchases of some of the biggest stars, which generate bigger merchandise and sponsorship deals, further concentrating dominance in the hands a few selected teams (see Exhibit 8). 2 José Mourinho There are a few different revenue streams: tickets and other stadium revenues, media and TV deals, merchandise and sponsorship deals, and potentially players’ trade revenue. Overall EPL revenue has grown 65% in the past five years and revenues are expected to increase 20% in 2016/2017 to over €5.2bnxii (see Exhibit 9). Players’ wages, which constitute by far clubs’ biggest running cost, have increased hand in hand with revenue, exceeding €2.4bn, around 61% of revenue (see Exhibit 10). In spite of a disproportionate revenue increase going to the top clubs, profitability is widespread in the EPL, partly because of fairly recent UEFA fair play rules. The new rules do not impose strict salary caps or spending caps. Instead, clubs may not spend more than their combined revenue in a three-year periodxiii. The revenue increase for top clubs has consolidated the dominance of a financial elite and we are starting to hear plans of a Super Champions Leaguexiv in which the traditionally rich clubs would obtain preferential access in order to boost broadcasting revenues even further. That would certainly go against a more egalitarian vision of football, making it even less likely for teams such as Leicester to become the Premier League champion or for a team like FC Porto, to win the Champions League as they did in 2004 (see Exhibit 11). What’s in a manager’s job description? Spending by new owners has changed the way teams traditionally compete. Ferguson’s old Manchester United won both in England and in Europe using a mix of home-grown and talented players acquired at reasonable prices (see Exhibit 12), while keeping a certain play culture and style. Currently, teams compete fiercely during the off-season for the best players, spending enormous sums on players and agents (see Exhibit 13). In fact, total transfer EPL spending has almost doubled since 2010/2011, while agent fees grew by 80%. This has somewhat changed the role of a coach. Some new owners demand immediate results: win fast or leave. Others manage in a more business-oriented manner and look for different ways to grow their business value with a sustainable model that requires time and stable leadership. How important is winning? Football, arguably the biggest sport in the world, has become a global business. Big European clubs dominate the global marketplace using proficient marketing machines to sell their products in every corner of the world, expanding access live games or merchandise. In spite of management’s increased sophistication, we still see strong ownership influence in the day-to-day running of football clubs. In particular, owners themselves 3 José Mourinho often choose and replace coaches. For some, replacing the coach is an annual affair, while others look for long-term relationships. Arsenal, for example, has seen its revenue grow hugely without winning and has kept the same coach for over 20 years. Chelsea on the other hand has seen its debt increase massively (see Exhibit 14) but has recently won championships under two different coaches. Nonetheless, Arsenal’s value has increased 140% in the past 10 years, about the same increase as Manchester United, who in the meanwhile has won five domestic titles and a Champions League. How did the role of the manager change? While it took Ferguson six years to transform Manchester United and win its first title in 26 years, it took Mourinho only one year to make Chelsea the Premier League champion, for the first time in more than 50 years. Arsenal and Liverpool, in turn, have not won any Premier League titles in more than 10 years but continue to be in the top 10 clubs in terms of revenue. Arsène Wenger has kept his job, in spite of failing to win since 2003/04. So, it appears that the role of the coach is highly dependent on the club’s culture and ownership. Winning is not always the highest priority on the job description and losing can be acceptable under certain circumstances. Often the coach is expected to play an external role, acting somewhat as a spokesperson, discussing game plans, results, and acquisitions. He stands for the product’s long-term vision. This can be important at different levels: it motivates and directs employees but also aligns fans/clients with the club’s vision, managing expectations and keeping the club’s unity. Internally, he of course needs to oversee all the technical aspects of the team he coaches, but he can also play a role in making strategic decisions involving players’ trading (which in many cases includes some budgetary responsibilities), be involved in the development of the youth teams, and long-term strategy.